DEPARTMENT OF THE TREASURY 

W ASH I N G T O N , D . C . 

 

 

February 16, 2023

A Message from the Secretary of the Treasury

During fiscal year 2022, the American economy continued its historically strong recovery from 

the pandemic amid serious global economic headwinds, including spillovers from Russia’s 

illegal war against Ukraine and continued COVID-19 disruptions abroad. Our labor market 

remained exceptionally strong, with the unemployment rate at around 50-year lows.

Meanwhile, the Administration and Congress have enacted a historic package of legislation to 

strengthen the nation’s long-term economic growth. The Bipartisan Infrastructure Law is our 

generation’s most significant investment in America’s transportation system and digital 

infrastructure. The CHIPS and Science Act is strengthening our economic resilience by 

expanding semiconductor manufacturing in the United States. And the Inflation Reduction Act is 

our nation’s most aggressive action to tackle the climate crisis, while also providing funding for 

fairer enforcement of our tax code and improved taxpayer service.

The Administration is also taking complementary actions alongside the Federal Reserve to tackle 

high inflation, which remains our top economic priority, while also advancing policies to lower 

costs for American families.

The annual Financial Report of the United States Government provides the American people 

with a comprehensive view into the nation’s finances and fiscal outlook. In these pages, you will 

find information about our current financial position, including a decrease in the federal budget 

deficit and increase in tax and other receipts relative to the previous fiscal year. You will also see 

long-term fiscal projections, including for our critical social insurance programs.

It is my duty and pleasure to present the Fiscal Year 2022 Report to the American people, which 

demonstrates the government’s steadfast commitment to accountability and transparency in 

managing the nation’s finances.

Janet L. Yellen
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Contents

A Message from the Secretary of the Treasury

Executive Summary........................................................................................... 1

Management’s Discussion and Analysis.......................................................... 12

Statement of the Comptroller General of the United States.......................... 42

Financial Statements

 Introduction ....................................................................................................... 52

 Statement of Net Cost........................................................................................ 59

 Statement of Operations and Changes in Net Position ...................................... 61

 Reconciliations of Net Operating Cost and Budget Deficit............................... 63

 Statements of Changes in Cash Balance from Budget and Other

 Activities ........................................................................................................... 64

 Balance Sheets................................................................................................... 65

 Statements of Long-Term Fiscal Projections..................................................... 66

 Statements of Social Insurance.......................................................................... 67

 Statement of Changes in Social Insurance Amounts......................................... 70

Notes to the Financial Statements

 Note 1. Summary of Significant Accounting Policies....................................... 72

 Note 2. Cash and Other Monetary Assets.......................................................... 84

 Note 3. Accounts Receivable, Net..................................................................... 85

 Note 4. Loans Receivable, Net and Loan Guarantee Liabilities........................ 86

 Note 5. Inventory and Related Property, Net .................................................... 90

 Note 6. General Property, Plant, and Equipment, Net....................................... 92

 Note 7. Investments........................................................................................... 93

 Note 8. Investments in Government-Sponsored Enterprises............................. 97

 Note 9. Advances and Prepayments.................................................................. 101

 Note 10. Other Assets........................................................................................ 102

 Note 11. Accounts Payable................................................................................ 103

 Note 12. Federal Debt and Interest Payable ...................................................... 104

 Note 13. Federal Employee and Veteran Benefits Payable ............................... 107

 Note 14. Environmental and Disposal Liabilities.............................................. 118

 Note 15. Benefits Due and Payable ................................................................... 120

 Note 16. Insurance and Guarantee Program Liabilities..................................... 121

 Note 17. Advances from Others and Deferred Revenue.................................... 122

 Note 18. Other Liabilities.................................................................................. 123

 Note 19. Collections and Refunds of Federal Revenue ..................................... 125

 Note 20. Commitments...................................................................................... 128

 Note 21. Contingencies ..................................................................................... 131

 Note 22. Funds from Dedicated Collections...................................................... 138

 Note 23. Fiduciary Activities............................................................................. 144

 Note 24. Long-Term Fiscal Projections............................................................. 147

 Note 25. Social Insurance.................................................................................. 153

 Note 26. Stewardship Property, Plant, and Equipment...................................... 162

 Note 27. Disclosure Entities and Related Parties .............................................. 163

 Note 28. Public-Private Partnerships................................................................. 169

 Note 29. COVID-19 Activity ............................................................................ 170
 Note 30. Subsequent Events ............................................................................. 172

Required Supplementary Information (Unaudited)

 The Sustainability of Fiscal Policy.................................................................... 174

 Social Insurance ................................................................................................ 185

 Social Security and Medicare .......................................................................... 185

 Railroad Retirement, Black Lung, and Unemployment Insurance .................. 200

 Deferred Maintenance and Repairs ................................................................... 202

 Other Claims for Refunds.................................................................................. 202

 Tax Assessments ............................................................................................... 203

 Federal Oil and Gas Resources.......................................................................... 203

 Federal Natural Resources Other than Oil and Gas........................................... 205

 Land and Permanent Land Rights ..................................................................... 206

Other Information (Unaudited)

 Tax Burden........................................................................................................ 208

 Tax Gap ............................................................................................................. 209

 Tax Expenditures............................................................................................... 210

 Unmatched Transactions and Balances............................................................. 211

Appendices

 Appendix A: Reporting Entity........................................................................... 212

 Appendix B: Glossary of Acronyms.................................................................. 216

U.S. Government Accountability Office Independent Auditor’s Report...... 222

For a complete listing of frequently used acronyms found 

throughout the Financial Report, please refer to the Glossary 

of Acronyms located in Appendix B.
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1 EXECUTIVE SUMMARY TO THE 2022 FINANCIAL REPORT OF THE U.S. GOVERNMENT
EXECUTIVE SUMMARY TO THE 2022 FINANCIAL REPORT OF THE U.S. GOVERNMENT 2

Executive Summary to the FY 2022 

Financial Report of the United States Government

The FY 2022 Financial Report presents the U.S. government’s current financial position and condition, and 

discusses key financial topics and trends. The Financial Report is produced by Treasury in coordination with 

OMB, which is part of the Executive Office of the President. The table on the preceding page presents several key 

indicators of the government’s financial position and condition, which are discussed in this Executive Summary 

and, in greater detail, in the Financial Report. The Secretary of the Treasury, the Director of OMB, and the 

Comptroller General of the U.S. at the GAO believe that the information discussed in this Financial Report is 

important to all Americans.

This Financial Report addresses the government’s financial activity and results as of and for the fiscal years 

ended September 30, 2022, and 2021. Note 30—Subsequent Events discusses events that occurred after the end of 

the fiscal year that may affect the government’s financial position and condition.

Results in Brief

The “Nation by the Numbers” table on the preceding page and the following summarize key metrics about 

the federal government’s financial position for and during FY 2022:

• The budget deficit decreased by $1.4 trillion (50.4 percent) to $1.4 trillion and net operating cost 

increased by $1.1 trillion (34.8 percent) to $4.2 trillion.

• Net operating cost increased due largely to significant increases in non-cash costs (primarily losses 

stemming from changes in assumptions affecting cost and liability estimates for the government’s 

employee and veteran benefits programs). These amounts do not affect the current year deficit.

• The government’s gross costs of $7.4 trillion, less $531.1 billion in revenues earned for goods and 

services provided to the public, plus $2.2 trillion in net losses from changes in assumptions yields the 

government’s net cost of $9.1 trillion.

• Tax and other revenues increased by $670.0 billion to $4.9 trillion. Deducting these revenues from net 

cost yields the federal government’s “bottom line” net operating cost of $4.2 trillion referenced above.

• Comparing total government assets of $5.0 trillion (including $1.4 trillion of loans receivable, net and 

$1.2 trillion of PP&E) to total liabilities of $39.0 trillion (including $24.3 trillion in federal debt and 

interest payable, and $12.8 trillion of federal employee and veteran benefits payable) yields a negative net 

position of $34.1 trillion.

• The Statement of Long-Term Fiscal Projections (SLTFP) shows that the present value (PV) of total noninterest spending, over the next 75 years, under current policy, is projected to exceed the PV of total 

receipts by $79.5 trillion (total federal non-interest net expenditures from the table on the previous page). 

• The debt-to-GDP ratio was approximately 97 percent at the end of FY 2022. Under current policy and 

based on this report’s assumptions, it is projected to reach 566 percent by 2097. The projected continuous 

rise of the debt-to-GDP ratio indicates that current policy is unsustainable. 

• The Statement of Social Insurance (SOSI) shows that the PV of the government’s expenditures for Social 

Security and Medicare Parts A, B and D, and other social insurance programs over 75 years is projected 

to exceed social insurance revenues by about $75.9 trillion, a $4.9 trillion increase over 2021 social 

insurance projections.

• This Financial Report includes discussion and analysis of the continued effect of the federal 

government’s response to the COVID-19 pandemic on the government’s financial position during FY 

2022.
3 EXECUTIVE SUMMARY TO THE 2022 FINANCIAL REPORT OF THE U.S. GOVERNMENT

Where We Are Now 

The Federal Government’s Response to the Pandemic

On March 11, 2020, a novel strain of the Coronavirus (COVID-19) was declared a pandemic by the WHO

and precipitated a severe global health and economic crisis. A national emergency was declared in the U.S. on 

March 13, 2020. Since then, the federal government has taken broad action, including enacting multiple laws 

providing approximately $4.5 trillion across the government, to protect public health and economic stability from 

the effects of the unprecedented pandemic.

The corresponding financial effects of the government’s response to the COVID-19 pandemic were broad, 

impacting many agencies in a variety of ways and to varying degrees. The Financial Report includes discussion 

and analysis of the continued effect of the federal government’s response to the COVID-19 pandemic on the 

government’s financial statements for FY 2022. Additional information can be obtained from individual agency 

financial statements.

Comparing the Budget and the Financial Report 

The Budget and the Financial Report present complementary perspectives on the government’s financial 

position and condition.

• The Budget is the government’s primary financial planning and control tool. It accounts for past 

government receipts and spending and includes the President’s proposed receipts and spending plan. 

Receipts are cash received by the U.S. government and spending is measured as outlays, or payments 

made by the federal government to the public or entities outside the government. In simple terms, when 

total receipts exceed outlays, there is a budget surplus; conversely, if total outlays exceed total receipts, 

there is a budget deficit.

• The Financial Report includes the government’s costs and revenues, assets and liabilities, and other 

important financial information. It compares the government’s revenues (amounts earned, but not 

necessarily collected), with costs (amounts incurred, but not necessarily paid) to derive net operating cost.

Chart 1 compares the government’s budget deficit (receipts vs. outlays) and net operating cost (revenues vs. 

costs) for FYs 2018 - 2022. During FY 2022:

• A $550.0 billion decrease in outlays 

combined with an $850.1 billion 

increase in receipts resulting in a $1.4 

trillion (50.4 percent) decrease in the 

budget deficit from $2.8 trillion to 

$1.4 trillion. 

• Net operating cost increased $1.1 

trillion or 34.8 percent from $3.1 

trillion to $4.2 trillion, due mostly to a 

$1.7 trillion or 23.8 percent increase in 

net cost which more than offset a 

$670.0 billion or 15.7 percent increase 

in tax and other revenues.

The $2.8 trillion difference between the 

budget deficit and net operating cost is 

primarily due to accrued costs (incurred but not necessarily paid) that are included in net operating cost, but not 

the budget deficit, primarily costs related to increases in estimated federal employee and veteran benefits 

liabilities, particularly at VA. Significant estimated benefits cost increases are also the primary reason why net 

operating cost increased during FY 2022. These amounts do not affect the current year budget deficit. Other 
EXECUTIVE SUMMARY TO THE 2022 FINANCIAL REPORT OF THE U.S. GOVERNMENT 4

sources of differences include but are not limited to decreases in taxes receivable, increases in advances and 

deferred revenue received by the federal government from others, decreases in advances and prepayments made 

by the federal government, as well as timing differences related to the recording of credit reform costs.

Costs and Revenues 

The government’s “bottom line” net operating cost increased $1.1 trillion (34.8 percent) during FY 2022 to 

$4.2 trillion. It is calculated as follows:

• Starting with total gross costs of $7.4 

trillion, the government subtracts 

earned program revenues (e.g., 

Medicare premiums, national park 

entry fees, and postal service fees) and 

adjusts the balance for gains or losses 

from changes in actuarial assumptions 

used to estimate future federal 

employee and veteran benefits 

payments to derive its net cost before 

taxes and other revenues of $9.1 

trillion (see Chart 2), an increase of 

$1.7 trillion (23.8 percent) from FY 

2021. This net increase is the 

combined effect of many offsetting 

increases and decreases across the 

government, including the ongoing effects of the federal government’s response to the pandemic. For 

example:

o Entities administering federal employee and veteran benefits programs, including the OPM, VA, and 

DOD employ a complex series of assumptions to make actuarial projections of their long-term 

benefits liabilities. These assumptions include but are not limited to interest rates, beneficiary 

eligibility, life expectancy, and medical cost levels. Changes in these assumptions can result in either 

losses (net cost increases) or gains (net cost decreases). Across the government, these net losses from 

changes in assumptions amounted to $2.2 trillion in FY 2022, a loss increase (and a corresponding net 

cost increase) of $1.7 trillion compared to FY 2021.

o In particular, VA net costs increased $1.2 trillion due largely to changes in benefits program 

experience and assumptions as referenced above, including, but not limited to assumptions underlying 

VA’s Veterans’ compensation plan participation and benefit level distribution rates (increasing 

eligibility assumptions), decreasing mortality rates assumptions, and future long-term COLA.

o DOD net costs increased $568.4 billion due primarily to a $444.2 billion loss increase from changes 

in assumptions referenced above. However, the majority of DOD’s net costs included military 

operations, readiness and support, procurement, personnel, and R&D, which also collectively 

increased.

o A $303.9 billion decrease in net costs at the SBA is largely attributable to substantially lower 

pandemic-related loan and loan guarantee activity.

o A $304.4 billion decrease in Treasury net costs largely due to a significant decrease (from $569.5 

billion in FY 2021 to $13.1 billion in FY 2022) in EIP disbursements made to eligible recipients as 

part of pandemic relief efforts. 

o A $354.4 billion decrease at DOL, much of which is attributable to a $348.6 billion decrease in 

Income Maintenance programs costs, primarily due to decreases in unemployment benefits from the 

September 2021 expiration of COVID-19 unemployment programs and fewer unemployment claims.
5 EXECUTIVE SUMMARY TO THE 2022 FINANCIAL REPORT OF THE U.S. GOVERNMENT

o A $152.1 billion net cost increase at HHS primarily due to a $111.1 billion increase across the 

Medicare and Medicaid benefits programs, including an increase in Medicaid grants to states to 

continue COVID-19 relief efforts. 

o Education net costs increased $330.9 billion due largely to a $337.3 billion upward cost modification 

for Education’s direct loan program associated with announced broad-based student debt relief.

o SSA net costs increased $100.3 billion due largely to a 1.9 percent increase in the number of OASI 

beneficiaries, combined with a 5.9 percent COLA provided to beneficiaries in 2022. 

o Interest costs related to federal debt securities held by the public increased by $104.5 billion due 

largely to increases in inflation adjustments, interest rates, and outstanding debt held by the public.

• The government deducts tax and other revenues from net cost (with some adjustments) to derive its FY 

2022 “bottom line” net operating cost 

of $4.2 trillion.

o From Chart 3, total government tax 

and other revenues increased by 

$670.0 billion (15.7 percent) to 

about $4.9 trillion for FY 2022 due 

primarily to growth in individual 

income tax collections and tax 

withholdings. 

o Together, individual income tax 

and tax withholdings, and 

corporate taxes accounted for about 

89.2 percent of total tax and other 

revenues in FY 2022. Other 

revenues include Federal Reserve 

earnings, excise taxes, and customs 

duties.

Assets and Liabilities 

Chart 4 summarizes the assets and liabilities that the government reports on its Balance Sheet. As of 

September 30, 2022:

• More than three-fourths of the federal 

government’s total assets ($5.0 

trillion) consist of: 1) $877.8 billion in

cash and monetary assets; 2) $406.9 

billion in inventory and related 

property; 3) $1.4 trillion in net loans 

receivable (primarily student loans); 

and 4) $1.2 trillion in net PP&E.

o Cash and monetary assets ($877.8 

billion) is comprised largely of the

operating cash of the U.S. 

government. Operating cash held 

by Treasury increased $418.6 

billion (211.0 percent) to $617.0 

billion during FY 2022 due to

Treasury cash position decisions.
EXECUTIVE SUMMARY TO THE 2022 FINANCIAL REPORT OF THE U.S. GOVERNMENT 6

That is, during 2021, debt ceiling constraints forced Treasury to maintain a significantly lower

operating cash balance. When the debt ceiling was increased in December 2021, Treasury was able to

restore the operating cash balance to its one-week prudent policy level.

o Inventory and Related Property ($406.9 billion) is comprised of: 1) inventory, which is tangible 

personal property that is either held for sale, in the process of production for sale, or to be consumed in 

the production of goods for sale or in the provision of services for a fee; 2) OM&S, or tangible 

personal property to be consumed in normal operations (e.g., spare and repair parts, ammunition, and 

tactical missiles); and 3) stockpiles, or strategic and critical materials held due to statutory 

requirements for use in national defense, conservation, or local/national emergencies.

o Loans receivable, net ($1.4 trillion) is comprised of loans provided by multiple agencies, including 

SBA and Education, to promote the nation’s welfare by making financing available to segments of the 

population not served adequately by non-federal institutions or otherwise providing for certain 

activities or investments. The government’s direct loan portfolio decreased by $216.9 billion (13.1

percent) during FY 2022. Education’s Federal Direct Student Loans, net decreased $288.2 billion as 

Education announced broad-based debt relief. This decrease was partially offset by a $76.2 billion 

increase in SBA direct disaster COVID-19 EIDL-funded loans. 

o Federal government general PP&E includes many of the physical resources that are vital to the federal 

government’s ongoing operations, including buildings, structures, facilities, equipment, internal use 

software, and general-purpose land. DOD comprises approximately 68.0 percent of the government’s 

reported general PP&E of $1.2 trillion as of September 30, 2022.

o Other significant government resources not reported on the Balance Sheet include the government’s 

power to tax and set monetary policy, natural resources, and stewardship assets. Stewardship assets, 

including heritage assets and stewardship land, benefit the nation as a whole (e.g., national 

monuments, national parks) and are intended to be held indefinitely.

• Total liabilities ($39.0 trillion) consist mostly of: 1) $24.3 trillion in federal debt and interest payable; and 

2) $12.8 trillion in federal employee and veteran benefits payable.

o Federal debt held by the public is debt held outside of the government by individuals, corporations, 

state and local governments, FRB, foreign governments, and other non-federal entities.

o The government borrows from the public (increases federal debt levels) to finance deficits. During FY 

2022, federal debt held by the public increased $2.0 trillion (8.9 percent) to $24.3 trillion.

o The government also reports about $6.7 trillion of intra-governmental debt outstanding, which arises 

when one part of the government borrows from another. For example, government funds (e.g., Social 

Security and Medicare Trust Funds) typically must invest excess annual receipts, including interest 

earnings, in Treasury-issued federal debt securities. Although not reflected in Chart 4, these securities 

are included in the calculation of federal debt subject to the debt limit.

o Federal debt held by the public plus intra-governmental debt equals gross federal debt, which, with 

some adjustments, is subject to a statutory debt ceiling (“debt limit”). Congress and the President most 

recently increased the debt limit by $2.5 trillion in December 2021 with the enactment of P.L. 117-73. 

At the end of FY 2022, debt subject to the statutory limit was $30.9 trillion. On January 19, 2023, 

Treasury began taking extraordinary measures to meet the government’s obligations as they come due 

without exceeding the debt limit (see Note 30—Subsequent Events). Increasing or suspending the debt 

limit does not increase spending or authorize new spending; rather, it permits the government to 

continue to honor pre-existing commitments.

o Federal Employee and Veteran Benefits Payable ($12.8 trillion) represents the amounts of benefits 

payable by agencies which administer the government’s pension and other benefit plans for its military 

and civilian employees.

See Note 29—COVID-19 Activity, as well as the referenced agencies’ FY 2022 financial statements for 

additional information about the financial effects of the federal government’s response to the pandemic. See Note 
7 EXECUTIVE SUMMARY TO THE 2022 FINANCIAL REPORT OF THE U.S. GOVERNMENT

30—Subsequent Events for information about events that occurred after the end of the fiscal year that may affect 

the government’s financial results.

Key Economic Trends 

An analysis of U.S. economic performance provides useful background when evaluating the government’s 

financial statements. During the last two fiscal years, the economy’s performance has been deeply affected by the 

COVID-19 global pandemic as well as the U.S. government’s extensive measures to provide fiscal support. Over 

the course of FY 2022, the economy grew below trend, following the brisk recovery of the previous fiscal year. 

These and other economic and financial developments are discussed in greater detail in the Financial Report.

An Unsustainable Fiscal Path 

An important purpose of this Financial Report is to help citizens understand current fiscal policy and the 

importance and magnitude of policy reforms necessary to make it sustainable. A sustainable fiscal policy is 

defined as one where the ratio of debt held by the public to GDP (the debt-to-GDP ratio) is stable or declining 

over the long term. GDP measures the size of the nation’s economy in terms of the total value of all final goods 

and services that are produced in a year. Considering financial results relative to GDP is a useful indicator of the 

economy’s capacity to sustain the government’s many programs. This report presents data, including debt, as a 

percent of GDP to help readers assess whether current fiscal policy is sustainable. The debt-to-GDP ratio was 

approximately 97 percent at the end of FY 2022, down from approximately 100 percent at the end of FY 2021. 

The long-term fiscal projections in this report are based on the same economic and demographic assumptions that

underlie the SOSI.

The current fiscal path is unsustainable. To determine if current fiscal policy is sustainable, the projections 

based on the assumptions discussed in the Financial Report assume current policy will continue indefinitely.1The 

projections are therefore neither forecasts nor predictions. Nevertheless, the projections demonstrate that policy 

changes need to be enacted for the actual financial outcomes to differ from those projected.

Receipts, Spending, and the Debt 

Chart 5 shows historical and current policy projections for receipts, non-interest spending by major category, 

net interest, and total spending expressed 

as a percent of GDP.

• The primary deficit is the 

difference between non-interest 

spending and receipts. The ratio 

of the primary deficit to GDP is 

useful for gauging long-term 

fiscal sustainability.

• The primary deficit-to-GDP ratio 

increased during the financial 

crisis of 2008 and the COVID-19 

pandemic. Spending remained 

elevated in 2021 due to 

additional funding to support 

economic recovery, but 

increased receipts reduced the 

primary deficit-to-GDP ratio to 

10.8 percent. The primary deficit-to-GDP ratio in 2022 was 3.6 percent, decreasing by 7.1 percentage 

points from 2021 as spending attributable to the pandemic winds down.

1 Current policy in the projections is based on current law, but includes extension of certain policies that expire under current law but are routinely extended 

or otherwise expected to continue.
EXECUTIVE SUMMARY TO THE 2022 FINANCIAL REPORT OF THE U.S. GOVERNMENT 8

• The persistent long-term gap between projected receipts and total spending shown in Chart 5 occurs 

despite the projected effects of the PPACA2 on long-term deficits.

o Enactment of the PPACA in 2010 and the MACRA in 2015 established cost controls for Medicare 

hospital and physician payments whose long-term effectiveness is still to be demonstrated fully.

o There is uncertainty about the extent to which these projections can be achieved and whether the 

PPACA’s provisions intended to reduce Medicare cost growth will be overridden by new legislation. 

Table 1 summarizes the status and projected trends of the government’s Social Security and Medicare Trust 

Funds.

The primary deficit projections in Chart 5, along with those for interest rates and GDP, determine the debtto-GDP ratio projections in Chart 6.

• The debt-to-GDP ratio was 

approximately 97 percent at the 

end of FY 2022, and under 

current policy and based on this 

report’s assumptions is projected 

to reach 566 percent in 2097.

• The debt-to-GDP ratio rises 

continuously in great part because 

primary deficits lead to higher 

levels of debt. The continuous 

rise of the debt-to-GDP ratio 

indicates that current fiscal policy 

is unsustainable.

• These debt-to-GDP projections 

are lower than both the 2021 and 

2020 Financial Report

projections.

2 The PPACA refers to P.L. 111-148, as amended by P.L. 111-152. The PPACA expands health insurance coverage, provides health insurance subsidies for 

low-income individuals and families, includes many measures designed to reduce health care cost growth, and significantly reduces Medicare payment rates 

relative to the rates that would have occurred in the absence of the PPACA. (See Note 25 and the RSI section of the Financial Report, and the 2022

Medicare Trustees Report for additional information).
9 EXECUTIVE SUMMARY TO THE 2022 FINANCIAL REPORT OF THE U.S. GOVERNMENT

The Fiscal Gap and the Cost of Delaying Fiscal Policy Reform

• The 75-year fiscal gap is a measure of how much primary deficits must be reduced over the next 75 years 

in order to make fiscal policy sustainable. That estimated fiscal gap for 2022 is 4.9 percent of GDP 

(compared to 6.2 percent for 2021). 

• This estimate implies that making fiscal policy sustainable over the next 75 years would require some 

combination of spending reductions and receipt increases that equals 4.2 percent of GDP on average over 

the next 75 years. The fiscal gap represents 26.0 percent of 75-year PV receipts and 21.2 percent of 75-

year PV non-interest spending.

• The timing of policy changes to make fiscal policy sustainable has important implications for the wellbeing of future generations as is shown in Table 2.

o Table 2 shows that, if reform begins in 2033 or 2043, the estimated magnitude of primary surplus 

increases necessary to close the 75-year fiscal gap is 5.7 percent and 7.0 percent of GDP, respectively. 

The difference between the primary surplus increase necessary if reform begins in 2033 or 2043 and 

the increase necessary if reform begins in 2023, an additional 0.9 and 2.1 percentage points, 

respectively, is a measure of the additional burden policy delay would impose on future generations. 

o The longer policy action to close the fiscal gap is delayed, the larger the post-reform primary surpluses 

must be to achieve the target debt-to-GDP ratio at the end of the 75-year period. Future generations are 

harmed by a policy delay because the higher the primary surpluses are during their lifetimes, the 

greater is the difference between the taxes they pay and the programmatic spending from which they 

benefit.

Conclusion

• Projections in the Financial Report indicate that the government’s debt-to-GDP ratio is projected to rise 

over the 75-year projection period and beyond if current policy is kept in place. The projections in this 

Financial Report show that current policy is not sustainable.

• If changes in fiscal policy are not so abrupt as to slow economic growth and those policy changes are 

adopted earlier, then the required changes to revenue and/or spending will be smaller to return the 

government to a sustainable fiscal path.

Reporting on Climate Change

As stated in EO 14008, Tackling the Climate Crisis at Home and Abroad “the United States and the world 

face a profound climate crisis...Domestic action must go hand in hand with United States international leadership, 

aimed at significantly enhancing global action.” In response, the administration has enacted key legislation and 

issued important policy actions. As summarized in the Financial Report, many of the 24 CFO Act agencies have 

leveraged their FY 2022 financial statements to discuss a wide range of topics concerning how their agencies are 

responding to the climate crisis, including providing links to agency Climate Adaptation and Resilience Plans. 
EXECUTIVE SUMMARY TO THE 2022 FINANCIAL REPORT OF THE U.S. GOVERNMENT 10

Find Out More

The FY 2022 Financial Report and other information about the nation’s finances are available at:

• Treasury, https://www.fiscal.treasury.gov/fsreports/rpt/finrep/fr/fr_index.htm and

https://fiscaldata.treasury.gov/americas-finance-guide/;

• OMB’s Office of Federal Financial Management, https://www.whitehouse.gov/omb/management/officefederal-financial-management/; and

• GAO, https://www.gao.gov/federal-financial-accountability.

The GAO audit report on the U.S. government’s consolidated financial statements can be found beginning on page 222

of the full Financial Report. GAO was unable to express an opinion (disclaimed) on these consolidated financial 

statements for the reasons discussed in the audit report.
11 EXECUTIVE SUMMARY TO THE 2022 FINANCIAL REPORT OF THE U.S. GOVERNMENT

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MANAGEMENT’S DISCUSSION AND ANALYSIS 12

MANAGEMENT’S DISCUSSION AND 

ANALYSIS 

Introduction 

The FY 2022 Financial Report provides the President, Congress, and the American people with a comprehensive view 

of the federal government’s financial position and condition, and discusses important financial issues and significant 

conditions that may affect future operations, including the need to achieve fiscal sustainability over the long term.

Pursuant to 31 U.S.C. § 331(e)(1), Treasury, in cooperation with OMB, must submit an audited (by GAO) financial 

statement for the preceding fiscal year, covering all accounts and associated activities of the executive branch of the U.S.

government1 to the President and Congress no later than six months after the September 30 fiscal year-end.

The Financial Report is prepared from the financial information provided by 164 federal consolidation entities (see 

organizational chart on the next page and Appendix A). As it has for the past 25 years, GAO issued a disclaimer of opinion 

on the accrual-based, consolidated financial statements for the fiscal years ended September 30, 2022, and 2021. GAO also 

issued a disclaimer of opinion on the sustainability financial statements, which consist of the 2022 and 2021 SLTFP; the 

2022, 2021, 2020, 2019, and 2018 SOSI; and the 2022 and 2021 SCSIA. A disclaimer of opinion indicates that sufficient 

information was not available for the auditors to determine whether the reported financial statements were fairly presented in 

accordance with GAAP. In FY 2022, 332 of the 40 most significant entities earned unmodified (“clean”) opinions on their 

financial statements.

The FY 2022 Financial Report consists of: 

• MD&A, which provides management’s perspectives on and analysis of information presented in the Financial 

Report, such as financial and performance trends;

• Financial statements and the related notes to the financial statements;

• RSI and Other Information; and

• GAO’s audit report. 

This Financial Report addresses the government’s financial activity and results as of and for the fiscal years ended 

September 30, 2022, and 2021. Note 30—Subsequent Events discusses events that occurred after the end of the fiscal year 

that may affect the government’s financial position and condition.

In addition, the Executive Summary to this Financial Report provides a quick reference to the key issues in the 

Financial Report and an overview of the government's financial position and condition.

Mission & Organization

The government’s fundamental mission is derived from the Constitution: “...to form a more perfect union, establish 

justice, insure domestic tranquility, provide for the common defense, promote the general welfare and secure the blessings of 

liberty to ourselves and our posterity.” The government’s functions have evolved over time to include health care, income 

security, veterans benefits and services, housing and transportation, security, and education. Exhibit 1 provides an overview 

of how the U.S. government is organized.

1 The Government Management Reform Act of 1994 has required such reporting, covering the executive branch of the government, beginning with financial 

statements prepared for FY 1997. The consolidated financial statements include the legislative and judicial branches. 2 The 33 entities include the HHS, which received disclaimers of opinion on its 2022, 2021, 2020, 2019, and 2018 SOSI and on its 2022 and 2021 SCSIA.
13 MANAGEMENT’S DISCUSSION AND ANALYSIS

Exhibit 1 

EXECUTIVE BRANCH

THE PRESIDENT

THE VICE PRESIDENT

EXECUTIVE OFFICE OF THE PRESIDENT

White House Office

Office of the Vice President

Council of Economic Advisers

Council on Environmental Quality

National Security Council

Office of Administration

Office of Management and Budget

Office of National Drug Control Policy

Office of Policy Development

Office of Science and Technology Policy

Office of the U.S. Trade Representative

LEGISLATIVE BRANCH

THE CONGRESS

SENATE HOUSE

Architect of the Capitol

U.S. Botanic Garden

Government Accountability Office

Government Publishing Office

Library of Congress

Congressional Budget Office

U.S. Capitol Police

JUDICIAL BRANCH

THE SUPREME COURT 

OF THE U.S.

U.S. Courts of Appeals

U.S. District Courts

Territorial Courts

U.S. Court of International Trade

U.S. Court of Federal Claims

Administrative Office of the U.S. Courts

Federal Judicial Center

U.S. Sentencing Commission

CHIEF FINANCIAL OFFICERS ACT AGENCIES (24)

DEPARTMENT OF AGRICULTURE DEPARTMENT OF TRANSPORTATION

DEPARTMENT OF COMMERCE DEPARTMENT OF THE TREASURY

DEPARTMENT OF DEFENSE DEPARTMENT OF VETERANS AFFAIRS

DEPARTMENT OF EDUCATION ENVIRONMENTAL PROTECTION AGENCY

DEPARTMENT OF ENERGY GENERAL SERVICES ADMINISTRATION

DEPARTMENT OF HEALTH AND HUMAN SERVICES NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

DEPARTMENT OF HOMELAND SECURITY NATIONAL SCIENCE FOUNDATION

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT OFFICE OF PERSONNEL MANAGEMENT

DEPARTMENT OF THE INTERIOR SMALL BUSINESS ADMINISTRATION

DEPARTMENT OF JUSTICE SOCIAL SECURITY ADMINISTRATION

DEPARTMENT OF LABOR U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT

DEPARTMENT OF STATE U.S. NUCLEAR REGULATORY COMMISSION

SIGNIFICANT CONSOLIDATION ENTITIES (16)

EXPORT-IMPORT BANK OF THE U.S. PENSION BENEFIT GUARANTY CORPORATION

FARM CREDIT SYSTEM INSURANCE CORPORATION RAILROAD RETIREMENT BOARD

FEDERAL COMMUNICATIONS COMMISSION SECURITIES AND EXCHANGE COMMISSION

FEDERAL DEPOSIT INSURANCE CORPORATION SECURITY ASSISTANCE ACCOUNTS 

GENERAL FUND OF THE U.S. GOVERNMENT SMITHSONIAN INSTITUTION

MILLENNIUM CHALLENGE CORPORATION TENNESSEE VALLEY AUTHORITY

NATIONAL CREDIT UNION ADMINISTRATION U.S. INTERNATIONAL DEVELOPMENT FINANCE CORP

NATIONAL RAILROAD RETIREMENT INVESTMENT TRUST U.S. POSTAL SERVICE

OTHER CONSOLIDATION ENTITIES LISTED IN APPENDIX A OF THIS FINANCIAL REPORT (124)

THE UNITED STATES GOVERNMENT

THE CONSTITUTION
MANAGEMENT’S DISCUSSION AND ANALYSIS 14

The Government’s Financial Position and Condition 

This Financial Report presents the government’s financial position at the end of the fiscal year, explains how and why 

the financial position changed during the year, and discusses the government’s financial condition and how it may change in 

the future. 
15 MANAGEMENT’S DISCUSSION AND ANALYSIS

Table 1 on the previous page and the following summarize the federal government’s financial position:

• This Financial Report includes discussion and analysis of the effects that the federal government’s response to the 

COVID-19 pandemic continued to have on the government’s financial position during FY 2022. 

• During FY 2022, the budget deficit decreased by $1.4 trillion (50.4 percent) to $1.4 trillion and net operating cost 

increased by $1.1 trillion (34.8 percent) to $4.2 trillion. 

• Net operating cost increased due largely to significant increases in non-cash costs (primarily losses stemming from 

changes in assumptions affecting cost and liability estimates for the government’s employee and veteran benefits 

programs). These amounts do not affect the current year budget deficit.

• The government’s gross costs of $7.4 trillion, less $531.1 billion in revenues earned for goods and services provided 

to the public (e.g., Medicare premiums, national park entry fees, and postal service fees), plus $2.2 trillion in net 

losses from changes in assumptions (e.g., interest rates, inflation, disability claims rates) yields the government’s net 

cost of $9.1 trillion, an increase of $1.7 trillion or 23.8 percent compared to FY 2021.

• Deducting $4.9 trillion in tax and other revenues results in a “bottom line” net operating cost of $4.2 trillion for FY

2022, an increase of $1.1 trillion or 34.8 percent compared to FY 2021.

• Comparing total FY 2022 government assets of $5.0 trillion (including $1.4 trillion of loans receivable, net and $1.2 

trillion of PP&E) to total liabilities of $39.0 trillion (including $24.3 trillion in federal debt and interest payable3

, 

and $12.8 trillion of federal employee and veteran benefits payable) yields a negative net position of $34.1 trillion. 

• The budget deficit is primarily financed through borrowing from the public. As of September 30, 2022, debt held by 

the public, excluding accrued interest, was $24.3 trillion. This amount, plus intra-governmental debt ($6.7 trillion) 

equals gross federal debt, which, with some adjustments, is subject to the statutory debt limit. As of September 30, 

2022, the government’s total debt subject to the debt limit was $30.9 trillion. Congress and the President most 

recently increased the debt limit by $480.0 billion in October 2021 and by $2.5 trillion in December 2021.

This Financial Report also contains information about projected impacts on the government’s future financial condition. 

Under federal accounting rules, social insurance amounts as reported in both the SLTFP and in the SOSI are not considered 

liabilities of the government. From Table 1:

• The SLTFP shows that the PV4 of total non-interest spending, including Social Security, Medicare, Medicaid, 

defense, and education, etc., over the next 75 years, under current policy, is projected to exceed the PV of total 

receipts by $79.5 trillion (total federal non-interest net expenditures from Table 1). 

• The SOSI shows that the PV of the government’s expenditures for Social Security and Medicare Parts A, B and D, 

and other social insurance programs over 75 years is projected to exceed social insurance revenues5 by about $75.9 

trillion, a $4.9 trillion increase over 2021 social insurance projections.

• The Social Insurance and Total Federal Non-Interest Net Expenditures measures in Table 1 differ primarily because 

total non-interest net expenditures from the SLTFP include the effects of general revenues and non-social insurance 

spending, neither of which is included in the SOSI. 

The government’s current financial position and long-term financial condition can be evaluated both in dollar terms and 

in relation to the economy as a whole. GDP is a measure of the size of the nation’s economy in terms of the total value of all

final goods and services that are produced in a year. Considering financial results relative to GDP is a useful indicator of the 

economy’s capacity to sustain the government’s many programs. For example:

• The budget deficit decreased from $2.8 trillion in FY 2021 to $1.4 trillion in FY 2022. The deficit-to-GDP ratio 

similarly decreased from 12.4 percent in FY 2021 to 5.5 percent in 2022. 

• The budget deficit is primarily financed through borrowing from the public. As of September 30, 2022, the $24.3 

trillion in debt held by the public, excluding accrued interest, equates to 97.0 percent of GDP.

• The 2022 SOSI projection of $75.9 trillion net PV excess of expenditures over receipts over 75 years represents 

about 4.3 percent of the PV of GDP over 75 years. The excess of total projected non-interest spending over receipts 

of $79.5 trillion from the SLTFP represents 4.2 percent of GDP over 75 years. As discussed in this Financial 

Report, changes in these projections can, in turn, have a significant impact on projected debt as a percent of GDP. 

• To prevent the debt-to-GDP ratio from rising over the next 75 years, a combination of non-interest spending 

reductions and receipts increases that amounts to 4.9 percent of GDP on average is needed (6.2 percent of GDP on 

average in the 2021 projections). The fiscal gap in the 2022 projections represents 26.0 percent of 75-year PV

receipts and 21.2 percent of 75-year PV non-interest spending. 

3 On the government’s Balance Sheet, federal debt and interest payable consists of Treasury securities, net of unamortized discounts and premiums, and 

accrued interest payable. The “public” consists of individuals, corporations, state and local governments, FRB, foreign governments, and other entities 

outside the federal government.

4 PVs recognize that a dollar paid or collected in the future is worth less than a dollar today because a dollar today could be invested and earn interest. To 

calculate a PV, future amounts are thus reduced using an assumed interest rate, and those reduced amounts are summed. 5 Social Security is funded by the payroll taxes and revenue from taxation of benefits. Medicare Part A is funded by the payroll taxes, revenue from taxation 

of benefits, and premiums that support those programs. Medicare Parts B and D are primarily financed by transfers from the General Fund, which are 

presented, and by accounting convention, eliminated in the SOSI. For the FYs 2022 and 2021 SOSI, the amounts eliminated totaled $47.5 trillion and $43.2 

trillion, respectively. 
MANAGEMENT’S DISCUSSION AND ANALYSIS 16

FY 2022 Financial Statement Audit Results

For FY 2022, GAO issued a disclaimer of audit opinion on the accrual-based, government-wide financial statements, as 

it has for the past 25 years, due to certain material weaknesses in internal control over financial reporting and other 

limitations on the scope of its work. In addition, GAO issued a disclaimer of opinion on the sustainability financial 

statements due to significant uncertainties primarily related to the achievement of projected reductions in Medicare cost 

growth and certain other limitations. GAO’s audit report on page 222 of this Financial Report, discusses GAO’s findings.

In FY 2022, 20 of the 24 entities required to issue audited financial statements under the CFO Act received unmodified 

audit opinions, as did 13 of 16 additional significant consolidation entities (see Table 10 and Appendix A).6

The Government-wide Reporting Entity

This Financial Report includes the financial status and activities of the executive, legislative, and judicial branches of 

the federal government. SFFAS No. 47, Reporting Entity, provides criteria for identifying organizations that are 

consolidation entities, disclosure entities, and related parties. Such criteria are summarized in Note 1.A, Significant 

Accounting Policies, Reporting Entity, and in Appendix A, which lists the entities included in this Financial Report by these 

categories. The assets, liabilities, results of operations, and related activity for consolidation entities are consolidated in the

financial statements.

Fannie Mae and Freddie Mac meet the criteria for disclosure entities and, consequently, are not consolidated into the 

government’s financial statements. However, the values of the investments in such entities, changes in value, and related 

activity with these entities are included in the consolidated financial statements. The FR System and the SPVs are disclosure 

entities and are not consolidated into the government’s financial statements. See Note 1.A and Note 27—Disclosure Entities 

and Related Parties for additional information. In addition, per SFFAS No. 31, Accounting for Fiduciary Activities, fiduciary 

funds are not consolidated in the government financial statements.7

Most significant consolidation entities prepare financial statements that include financial and performance related 

information, as well as Annual Performance Reports. More information may be obtained from entities’ websites indicated in 

Appendix A and at https://www.performance.gov/.

The following pages contain a more detailed discussion of the government’s financial results for FY 2022, the budget, 

the economy, the debt, and a long-term perspective about fiscal sustainability, including the government’s ability to meet its 

social insurance benefits obligations. The information in this Financial Report, when combined with the Budget, collectively 

presents information on the government’s financial position and condition.

Accounting Differences Between the Budget and the Financial 

Report 

Each year, the Administration issues two reports that detail the government’s financial results: the Budget and this 

Financial Report. The exhibit on the following page provides the key characteristics and differences between the two 

documents.

Treasury generally prepares the financial statements in this Financial Report on an accrual basis of accounting as 

prescribed by GAAP for federal entities.8 These principles are tailored to the government’s unique characteristics and 

circumstances. For example, entities prepare a uniquely structured “Statement of Net Cost,” which is intended to present net 

government resources used in its operations. Also, unique to government is the preparation of separate statements to 

reconcile differences and articulate the relationship between the budget and financial accounting results.

6 The 20 entities include the HHS, which received disclaimers of opinions on its 2022, 2021, 2020, 2019, and 2018 SOSI and its 2022 and 2021 SCSIA. The 

13 entities include the FDIC, the NCUA, and the FCSIC, which operate on a calendar year basis (December 31 year-end). Statistic reflects 2021 audit results 

for these organizations if 2022 results are not available. 

7 See Note 23—Fiduciary Activities. 8 Under GAAP, most U.S. government revenues are recognized on a ‘modified cash’ basis, (see Financial Statement Note 1.B). The SOSI presents the PV of 

the estimated future revenues and expenditures for scheduled benefits over the next 75 years for the Social Security, Medicare, RRP; and 25 years for the 

Black Lung program. The SLTFP presents the 75-year PV of the projected future receipts and non-interest spending for the federal government. 
17 MANAGEMENT’S DISCUSSION AND ANALYSIS

Budget of the U.S. Government Financial Report of the U.S. Government

Prepared primarily on a “cash basis”

• Initiative-based and prospective: focus on 

current and future initiatives planned and 

how resources will be used to fund them.

• Receipts (“cash in”), taxes and other 

collections recorded when received.

• Outlays (“cash out”), largely recorded when 

payment is made.

Prepared on an “accrual basis” and “modified cash basis”

• Entity-based and retrospective – prior and present 

resources used to implement initiatives.

• Revenue: Tax revenue (more than 90.0 percent of total 

revenue) recognized on modified cash basis (see Financial 

Statement Note 1.B). Remainder recognized when earned, 

but not necessarily received.

• Costs: recognized when incurred, but not necessarily paid.

Budget Deficit vs. Net Operating Cost

Three key components of the U.S. budget process are: 1) appropriations; 2) obligations; and 3) outlays. An

appropriation is a provision of law authorizing the expenditure of funds for a given purpose. Rescissions and cancellations 

are reductions in law of budgetary resources. They are considered permanent reductions unless legislation clearly indicates 

that the reduction is temporary. Once funds are appropriated by Congress, Treasury issues warrants that officially establish 

the amounts available to be obligated and spent (i.e., expended or outlayed) by each agency. An agency’s obligation of funds 

is a binding agreement to outlay funds for a particular purpose immediately or in the future. The budget deficit is measured as 

the excess of outlays, or payments made by the government, over receipts, or cash received by the government. 

Net operating cost, calculated on an accrual basis, is the excess of costs (what the government has incurred but has not 

necessarily paid) over revenues (what the government has collected and expects to collect but has not necessarily received). 

As shown in Chart 1, net operating cost typically exceeds the budget deficit due largely to the inclusion of cost accruals 

associated with increases in estimated liabilities for the government’s postemployment benefit programs for its military and 

civilian employees and veterans as well as environmental liabilities. 

The government’s 

primarily cash-based9 budget 

deficit decreased by $1.4 

trillion (50.4 percent) from 

approximately $2.8 trillion in 

FY 2021 to about $1.4 trillion 

in FY 2022 due to an increase 

in receipts combined with a

decrease in outlays in FY 2022. 

The $850.1 billion (21.0 

percent) increase in receipts can 

be attributed primarily to higher 

individual and corporation 

income tax collections and 

social insurance and retirement 

receipts, along with increases in 

most other sources of receipts. 

Outlays decreased $550.0 

billion (8.1 percent). The 

decrease in part reflects 

reductions in COVID-19

related spending, including 

unemployment insurance and SBA programs. Outlays for some other categories of spending increased, including student

loans, Medicare, and net interest. 10

With some adjustments, Treasury’s September 2022 MTS provides fiscal year-end receipts, spending, and deficit 

information for this Report. The MTS presents primarily cash-based spending, or outlays, for the fiscal year in a number of 

ways, including by month, by entity, and by budget function classification. The federal budget is divided into approximately 

20 categories, or budget functions, as a means of organizing federal spending by primary purpose (e.g., National Defense, 

9 Interest outlays on Treasury debt held by the public are recorded in the budget when interest accrues, not when the interest payment is made. For federal 

credit programs, outlays are recorded when loans are disbursed, in an amount representing the PV cost to the government, commonly referred to as credit 

subsidy cost. Credit subsidy cost excludes administrative costs.

10 10/21/22 press release – Joint Statement of Janet L. Yellen, Secretary of the Treasury, and Shalanda D. Young, Director of the Office of Management and 

Budget, on Budget Results for Fiscal Year 2022. Note that some amounts in this Financial Report reflect updates subsequent to publication of the press 

release. 
MANAGEMENT’S DISCUSSION AND ANALYSIS 18

Transportation, and Health). Multiple entities may contribute to one or more budget functions, and a single budget function 

may be associated with only one entity. For example, DOD, DHS, DOE, and multiple other entities administer programs that 

are critical to the broader functional classification of National Defense. DOD, OPM, and many other entities also administer 

Income Security programs (e.g., retirement benefits, housing, financial assistance). By comparison, the Medicare program is 

a budget function category unto itself and is administered exclusively at the federal level by HHS. Federal spending 

information by budget function and other categorizations may be found in the September 2022 MTS.11

The government’s largely accrual-based net operating cost increased by $1.1 trillion (34.8 percent) to $4.2 trillion 

during FY 2022. As explained below, net operating costs are affected by changes in both revenues and costs.

The Reconciliation of Net Operating Cost and Budget Deficit statement articulates the relationship between the 

government’s accrual-based net operating cost and the primarily cash-based budget deficit. The difference between the 

government’s budget deficit and net operating cost is typically impacted by many variables. For example, from Table 2, 

nearly 95 percent of the $2.8 trillion net difference for FY 2022 is attributable to a $2.6 trillion net increase in liabilities for 

federal employee and veteran benefits payable (see Note 13—Federal Employee and Veteran Benefits Payable). Other 

differences include: 1) a $45.2 billion increase in advances from others and deferred revenue (see Note 17—Advances From 

Others and Deferred Revenue); 2) a $71.3 billion decrease in advances and prepayments made by the federal government (see 

Note 9—Advances and Prepayments); 3) a $65.5 billion decrease in net taxes receivable (see Note 3—Accounts Receivable, 

Net); and 4) a $58.5 billion timing difference between when credit reform costs are recorded in the budget versus net 

operating cost (see Note 4—Loans Receivable, Net and Loan Guarantee Liabilities).

Net operating cost increased due largely to significant increases in non-cash costs (primarily losses stemming from

changes in assumptions affecting cost and liability estimates for the government’s employee and veteran benefits programs). 

These amounts do not affect the current year budget deficit.

The Government’s Net Position: “Where We Are”

The government’s financial position and condition have traditionally been expressed through the Budget, focusing on 

surpluses, deficits, and debt. However, this primarily cash-based discussion of the government’s net outlays (deficit) or net 

receipts (surplus) tells only part of the story. The government’s accrual-based net position, (the difference between its assets 

and liabilities, adjusted for unmatched transactions and balances), and its “bottom line” net operating cost (the difference 

between its revenues and costs) are also key financial indicators. 

Financial Effects of the Federal Government’s Pandemic Response

On March 11, 2020, a novel strain of the Coronavirus (COVID-19) was declared a pandemic by the WHO and 

precipitated a severe global health and economic crisis. A national emergency was declared in the U.S. on March 13, 2020. 

Since then, the federal government has taken broad action, including enacting multiple laws providing approximately $4.5

trillion across the government, to protect public health and economic stability from the effects of the unprecedented 

pandemic. These actions have included but are not limited to:

• Treasury funding has supported several efforts, including provision of refundable tax credits (recovery rebates or 

EIP), payments to state, local, territorial, and tribal governments to cover eligible costs, and investments in SPVs 

11 Final MTS for FY 2022 through September 30, 2022 and Other Periods.
19 MANAGEMENT’S DISCUSSION AND ANALYSIS

established by the Federal Reserve Board through the FRBNY and FRBB to enhance the liquidity of the U.S. 

financial system.

• SBA funding provided emergency and immediate economic relief and assistance through disaster response programs 

funded by COVID-19 appropriations. These programs include: 1) PPP; 2) CARES Act Debt Relief; 3) EIDL grants;

4) the Business Loan Fee Waiver and Debt Relief program; 5) the Targeted EIDL and Supplemental EIDL Advance 

programs; 6) the Restaurant Revitalization program; 7) the Shuttered Venue Operators Grants program; and 8) the 

Community Navigator Pilot program.

• HHS’s COVID-19 appropriations provided support testing, contact tracing, containment, mitigation, to monitor and 

suppress the spread of COVID-19, as well as support for COVID-19 vaccination programs and addressing 

disparities in obtaining quality healthcare. Programs also assisted households with paying for drinking water and 

wastewater services, and provide direct payment to participating eligible pharmacies and healthcare providers for up 

to eight free over-the-counter COVID-19 tests.

• Education has provided a variety of pandemic-oriented programs primarily through grants. COVID-19 relief 

legislation and administrative actions also provided support for student loan borrowers primarily by temporarily 

suspending nearly all federal loan payments, followed by announced broad-based debt relief.

• Several DOT programs received COVID-19 appropriations in support of maintaining and continuing the operations 

and business needs of various transportation systems.

• DHS’s COVID-19 appropriations provided funding for several programs serviced by the Customs and Border 

Protection, Cybersecurity and Infrastructure Security Agency, Countering Weapons of Mass Destruction Office, and 

FEMA.

The corresponding financial effects of the government’s response to the pandemic have been broad, impacting many 

agencies in a variety of ways and to varying degrees. The following include brief discussions of some of the continuing

effects of the pandemic on the government’s financial results for FY 2022. Please refer to Note 29—COVID-19 Activity and 

other disclosures in this Financial Report, as well as in the individual entities’ financial statements for more information. 

Costs and Revenues

The government’s Statement of Operations and Changes in Net Position, much like a corporation’s income statement, 

shows the government’s “bottom line” and its impact on net position (i.e., assets net of liabilities, adjusted for unmatched

transactions and balances). To derive the government’s “bottom line” net operating cost, the Statement of Net Cost first 

shows how much it costs to operate the federal government, recognizing expenses when incurred, regardless of when 

payment is made (accrual basis). It shows the derivation of the government’s net cost or the net of: 1) gross costs, or the costs 

of goods produced and services rendered by the government; 2) the earned revenues generated by those goods and services 

during the fiscal year; and 3) gains or losses from changes in actuarial assumptions used to estimate certain liabilities. This 

amount, in turn, is offset against the government’s taxes and other revenue reported in the Statement of Operations and 

Changes in Net Position to calculate the “bottom line” or net operating cost.

Table 3 shows that the government’s “bottom line” net operating cost increased $1.1 trillion (34.8 percent) during 2022 

from $3.1 trillion to $4.2 trillion. This increase is due mostly to a $1.7 trillion (23.8 percent) increase in entity net costs, 

which more than offset a $670.0 billion (15.7 percent) increase in tax and other revenues over the past fiscal year as discussed 

in the following.

Gross Cost and Net Cost 

The Statement of Net Cost starts with the government’s total gross costs of $7.4 trillion, subtracts revenues earned for 

goods and services provided (e.g., Medicare premiums, national park entry fees, and postal service fees), and adjusts the 

balance for gains or losses from changes in actuarial assumptions used to estimate certain liabilities, including federal 

employee and veteran benefits to derive its net cost of $9.1 trillion, a $1.7 trillion (23.8 percent) increase compared to FY 

2021.
MANAGEMENT’S DISCUSSION AND ANALYSIS 20

Typically, the annual change in the government’s net cost is the result of a variety of offsetting increases and decreases 

across entities. As referenced earlier, these amounts continue to be affected by the ongoing federal government’s response to 

the COVID-19 pandemic and the related economic recovery. Including these amounts, offsetting changes in federal entity net 

cost during FY 2022 included: 

• Entities administering federal employee and veteran benefits programs employ a complex series of assumptions,

including but not limited to interest rates,

beneficiary eligibility, life expectancy, and 

medical cost levels, to make actuarial 

projections of their long-term benefits 

liabilities. Changes in these assumptions 

can result in either losses (net cost 

increases) or gains (net cost decreases). 

Across the government, these net losses 

from changes in assumptions amounted to 

$2.2 trillion in FY 2022, a net loss 

increase (and a corresponding net cost 

increase) of $1.7 trillion compared to FY 

2021. The primary entities that administer 

programs impacted by these assumptions –

typically federal employee pension and 

benefit programs – are the OPM, DOD, 

and VA. All three of these entities 

recorded losses from changes in 

assumptions in the amounts of $148.2 billion, $527.0 billion, and $1.5 trillion, respectively. These actuarial

estimates and the resulting gains or losses from changes in assumptions can sometimes cause significant swings in 

total entity costs from year to year. For example, for FY 2022, changes in net cost at OPM ($102.8 billion increase), 

DOD ($568.4 billion increase), and VA ($1.2 trillion increase) were significantly impacted by the changes in losses 

from assumption changes at these entities.

• A $1.2 trillion increase in VA net cost was impacted largely by a $1.2 trillion increase in losses referenced above 

due to updates in actuarial assumptions underlying VA’s Veterans’ compensation plan participation and benefit 

level distribution rates, mortality rates and methodology for setting future long-term COLA. The increase in plan 

participation and benefit level distribution rates, based on an experience study, reflect the impact of various 

legislation and VA policy changes in prior years that expanded eligibility. The mortality rates decreased, which 

indicate Veterans are living longer with their disabilities. The projected COLA rate was updated to the long-term 

rate of inflation used by SSA.

• Most of the $568.4 billion increase in DOD net costs is primarily due to a $444.2 billion loss increase from changes 

in assumptions as referenced above. However, the majority of DOD’s net costs included military operations, 

readiness, and support; procurement; military personnel; and R&D, which also collectively increased

• A $303.9 billion decrease in SBA net costs due in large part to substantially lower pandemic-related loan activity. 

The SBA approved more than 11 million PPP loan applications and provided for over $799 billion in lending over 

the lifetime of the program. The program ended in May 2021, and existing borrowers may be eligible for PPP loan 

forgiveness, As of September 2022, over 10 million applications had been submitted requesting PPP loan 

forgiveness with nearly $753 billion total forgiveness paid.

• The $304.4 billion decrease in Treasury net costs is largely due to a significant decrease in disbursements of EIP

made to eligible recipients as part of pandemic relief efforts to help stimulate the economy, from $569.5 billion in 

FY 2021, to $13.1 billion during FY 2022. EIP amounts are reflected as offsets to net custodial revenue in the 

Treasury’s financial statements. This decrease is partially offset by a $109.1 billion net cost increase in FY 2022 that

is attributable to a decrease in GSE net revenue from $112.0 billion in FY 2021 to $2.9 billion in FY 2022. The 

decrease in GSE revenue is driven by FV changes to Treasury’s GSE investments and changes in liquidation 

preference of the GSEs senior preferred stock.

• A $152.1 billion net cost increase at HHS was driven largely by $111.1 billion total increases in Medicaid and 

Medicare HI and SMI costs. Notably, Medicaid benefit expense increased $66.4 billion due to higher grant awards 

to states to continue COVID-19 relief efforts.

• A significant portion of the $354.4 billion decrease at DOL is attributable to a $348.6 billion decrease in Income 

Maintenance programs costs, primarily due to decreases in unemployment benefits from the September 2021 

expiration of COVID-19 unemployment programs and fewer unemployment claims. DOL costs related to the 

COVID-19 pandemic were $9.7 billion and $313.0 billion in FYs 2022 and 2021, respectively; FY 2021 costs were

comprised mostly of unemployment benefit expenses for COVID-19 programs implemented in FY 2020 and 

extended into FY 2021, whereas FY 2022 costs reflect a decrease in benefit expenses due to the expiration of the 

COVID-19 unemployment benefit programs.
21 MANAGEMENT’S DISCUSSION AND ANALYSIS

• A $330.9 billion increase at Education, 

due largely to a $337.3 billion upward 

cost modification to its direct loan 

program. COVID-19 relief legislation 

and administrative actions provided 

support for student loan borrowers by

temporarily suspending nearly all 

federal student loan payments interest 

free. Education has announced broadbased debt relief in continued response 

to the pandemic to help borrowers at 

highest risk of delinquencies or default 

once payments resume. 

• A $100.3 billion increase at SSA, due 

to a 1.9 percent increase in the number 

of OASI beneficiaries, combined with 

a 5.9 percent COLA provided to 

beneficiaries in 2022. Total benefit 

expenses increased by $99.8 billion or 

8.5 percent.

• A $104.5 billion increase in interest on debt held by the public due largely to an increase in inflation adjustments, 

interest rates, and outstanding debt held by the public.

Chart 2 shows the composition of the government’s net cost for FY 2022. In FY 2022, approximately 87 percent of the 

federal government’s total net cost came from only six agencies (VA, HHS, DOD, SSA, Education, and Treasury), and 

interest on the debt. The other 150-plus entities included in the government’s FY 2022 Statement of Net Cost accounted for a 

combined 13 percent of the government’s total net cost for FY 2022. Chart 3 shows the five-year trend in these costs, 

illustrating the significant impact that the pandemic had on certain agency costs, particularly during FY 2020 and 2021. SBA

and DOL are included in Chart 3 above to further illustrate the recent effect of the pandemic on the government’s total costs. 

Aside from pandemic relief costs, as discussed above, HHS and SSA net costs for FY 2022 ($1.7 trillion and $1.3 trillion, 

respectively) are largely attributable to major social insurance programs administered by these entities. VA net costs of $1.9 

trillion support health, education and other benefits programs for our nation’s Veterans. DOD net costs of $1.5 trillion relate 

primarily to operations, readiness, and support; personnel; research; procurement; and retirement and health benefits. 

Treasury net costs of $526.4 billion support a broad array of programs that promote conditions for sustaining economic 

growth and stability, protecting the integrity of our nation’s financial system, and effectively managing the U.S. 

government’s finances and resources. Education net costs of $539.5 billion are largely associated with federal student loan 

programs. SBA net costs of $43.5 billion support agency programs and services that enable the establishment and vitality of 

small businesses and by providing assistance in the economic recovery of communities after disasters. DOL net costs of 

$42.4 billion support DOL’s mission to foster, promote, and develop the welfare of the wage earners, job seekers, and retirees 

of the U.S.; improve working conditions; advance opportunities for profitable employment; and assure work-related benefits 

and rights. 
MANAGEMENT’S DISCUSSION AND ANALYSIS 22

Tax and Other Revenues 

As noted earlier, tax and other revenues from the Statement of Operations and Changes in Net Position are deducted 

from total net cost to derive the government’s 

“bottom line” net operating cost. Chart 4 shows that 

total tax and other revenue increased by $670.0 

billion or 15.7 percent to $4.9 trillion for FY 2022. 

This increase is attributable mainly to an overall 

growth in individual income taxes collections and 

tax withholdings, as well as changes in taxes 

receivable. Earned revenues from Table 3 are not 

considered “taxes and other revenue” and, thus, are 

not shown in Chart 4. Individual income tax and tax 

withholdings and corporate income taxes accounted 

for about 81.5 percent and 7.8 percent of total 

revenue, respectively in FY 2022; other revenues 

from Chart 4 include Federal Reserve earnings, 

excise taxes, unemployment taxes, and customs 

duties.

As previously shown in Table 3, the increase 

in tax and other revenue was more than offset by

the increase in net cost, yielding a $1.1 trillion increase to the government’s bottom line net operating cost to $4.2 trillion for 

FY 2022.

Please refer to Note 29—COVID-19 Activity, as well as the FY 2022 entities financial statements for additional 

information about the pandemic’s effects on the federal government’s costs and revenues.

Tax Expenditures

Tax and other revenues reported reflect the effects of tax expenditures, which are special exclusions, exemptions,

deductions, tax credits, preferential tax rates, and tax deferrals that allow individuals and businesses to reduce taxes they may

otherwise owe. Tax expenditures may be viewed as alternatives to other policy instruments, such as spending or regulatory 

programs. For example, the government supports college attendance through both spending programs and tax expenditures. 

The government uses Pell Grants to help low- and moderate-income students afford college and allows certain funds used to 

meet college expenses to grow tax free in special college savings accounts. Tax expenditures may include deductions and 

exclusions which reduce the amount of income subject to tax (e.g., deductions for personal residence mortgage interest). Tax 

credits, which reduce tax liability dollar for dollar for the amount of credit (e.g., child tax credit), are also considered tax 

expenditures. Tax expenditures may also allow taxpayers to defer tax liability.

Receipts in the calculation of surplus or deficit, and tax revenues in the calculation of net position, reflect the effect of 

tax expenditures. As discussed in more detail in the Other Information section of this Financial Report, tax expenditures will 

generally lower federal government receipts although tax expenditure estimates do not necessarily equal the increase in 

federal revenues (or the change in the budget balance) that would result from repealing these special provisions.

Tax expenditures are reported annually in the Analytical Perspectives of the Budget. In addition, current and past tax 

expenditure estimates and descriptions can be found at the following location from Treasury’s Office of Tax Policy: 

https://home.treasury.gov/policy-issues/tax-policy/tax-expenditures.

Assets and Liabilities

The government’s net position at the end of the fiscal year is derived by netting the government’s assets against its 

liabilities, as presented in the Balance Sheet (summarized in Table 4).12 The Balance Sheet does not include the financial 

value of the government’s sovereign powers to tax, regulate commerce, or set monetary policy or value of nonoperational 

resources of the government, such as national and natural resources, for which the government is a steward. In addition, as is 

the case with the Statement of Operations and Changes in Net Position, the Balance Sheet includes a separate presentation of 

the portion of net position related to funds from dedicated collections. Moreover, the government’s exposures are broader 

than the liabilities presented on the Balance Sheet. The government’s future social insurance exposures (e.g., Medicare and 

Social Security) as well as other fiscal projections, commitments and contingencies, are reported in separate statements and 

disclosures. This information is discussed later in this MD&A section, the financial statements, and RSI sections of this 

Financial Report.

12 As shown in Table 4, the government’s Balance Sheet includes an adjustment for unmatched transactions and balances, which represent unresolved 

differences in intra-governmental activity and balances between federal entities. These amounts are described in greater detail in the Other Information 

section of this Financial Report. 
23 MANAGEMENT’S DISCUSSION AND ANALYSIS

Assets 

From Table 4, as of September 30, 2022, more than three-fourths of the government’s $5.0 trillion in reported assets is 

comprised of: 1) cash and other monetary assets ($877.8 billion); 2) inventory and related property, net ($406.9 billion); 3)

loans receivable, net ($1.4 trillion); and 4) net PP&E ($1.2 trillion).13 Chart 5 compares the balances of these and other 

Balance Sheet amounts as of September 30, 2022, and 2021, some of which were substantially impacted by the pandemic 

response. 

Cash and other monetary assets ($877.8 billion) is comprised largely of the operating cash of the U.S. government. 

Operating cash held by Treasury increased $418.6 billion (211.0 percent) to $617.0 billion during FY 2022 due to Treasury

investment and borrowing policy decisions to manage the balance and timing of the government’s cash position. During 2021

the debt ceiling constraints forced Treasury to maintain a significantly lower operating cash balance. When the debt ceiling

was increased in December 2021, Treasury was able to bring the operating cash balance back to its one-week prudent policy

level (see Note 2—Cash and Other Monetary Assets). 

Inventory and Related Property is comprised of inventory, OM&S, and stockpiles. Inventory is tangible personal 

property that is either held for sale, in the process of production for sale, or to be consumed in the production of goods for 

sale or in the provision of services for a fee (e.g., raw materials, finished goods, spare and repair parts, clothing and textiles, 

and fuels). OM&S consists of tangible personal property to be consumed in normal operations (e.g., spare and repair parts, 

ammunition, and tactical missiles). Stockpile materials are strategic and critical materials held due to statutory requirements 

for use in national defense, conservation, or local/national emergencies. DOD comprises approximately 82.9 percent of the 

government’s inventory and related property, net, as of September 30, 2022. Other contributing agencies include DOE, 

Treasury, DHS, and HHS (see Note 5—Inventory and Related Property, Net).

13 For financial reporting purposes, other than multi-use heritage assets, stewardship assets of the government are not recorded as part of PP&E. Stewardship 

assets are comprised of stewardship land and heritage assets. Stewardship land primarily consists of public domain land (e.g., national parks, wildlife 

refuges). Heritage assets include national monuments and historical sites that among other characteristics are of historical, natural, cultural, educational, or 

artistic significance. See Note 26—Stewardship PP&E.
MANAGEMENT’S DISCUSSION AND ANALYSIS 24

The federal government’s direct loans and loan guarantee programs are used to promote the nation’s welfare by making

financing available to segments of the

population not served adequately by

non-federal institutions, or otherwise

providing for certain activities or

investments. For those unable to afford

credit at the market rate, federal credit

programs provide subsidies in the form

of direct loans offered at an interest

rate lower than the market rate. For

those to whom non-federal financial

institutions are reluctant to grant credit

because of the high risk involved,

federal credit programs guarantee the

payment of these non-federal loans and

absorb the cost of defaults. For 

example, Education supports 

individuals engaged in education 

programs through a variety of student 

loan, grant and other assistance programs. USDA administers loan programs to support the nation’s farming and agriculture 

community. HUD loan programs support affordable homeownership, as well as the construction and rehabilitation of housing 

projects for the elderly and persons with disabilities. SBA loan programs enable the establishment and vitality of small 

businesses and assist in the economic recovery of communities after disasters. The federal government’s direct loan portfolio 

decreased by $216.9 billion (13.1 percent) to $1.4 trillion during FY 2022, with Education and SBA together accounting for 

nearly 80 percent of the total. The outstanding loan guarantee liability decreased by $224.3 billion. Significant changes to the 

federal government’s loans receivable, net, and loan guarantees liability, as discussed in Note 4, include:

• Education has loan programs that are authorized by Title IV of the Higher Education Act of 1965. The William D. 

Ford Federal Direct Loan Program (referred to as the Direct Loan Program), was established in FY 1994 and offered 

four types of educational loans: Stafford, Unsubsidized Stafford, Parent Loan for Undergraduate Students, and 

consolidation loans. While Education direct loan disbursements to eligible borrowers increased during FY 2022 

from approximately $104.8 billion to approximately $120.4 billion, Education’s direct loans receivable, net 

decreased during the same period from $1.1 trillion to $816.6 billion (56.9 percent of total loans receivable, net).

The COVID-19 relief legislation and administrative actions provided support for student loan borrowers by 

temporarily suspending nearly all federal student loan payments interest free. In addition, all federal wage 

garnishments and collections actions for borrowers with federally held loans in default were halted. Education 

announced broad-based debt relief during FY 2022 to address the financial harms of the pandemic by smoothing the 

transition back to repayment and helping borrowers at highest risk of delinquencies or default once payments 

resume. Borrowers with loans held by Education who received a Pell Grant in college and meet the specified income 

limits are eligible for up to $20,000 in debt relief, while non-Pell Grant recipients who meet the specified income 

limits are eligible for up to $10,000 in relief. A federal court order stayed the implementation of the debt relief; the 

matter is currently under review before the U.S. Supreme Court. See Note 30—Subsequent Events for more 

information.

• SBA’s credit program receivables comprise business and disaster direct loans and defaulted business loans 

purchased per the terms of SBA’s loan guaranty programs, offset by an allowance for related program subsidy costs. 

The CARES Act provides funding for SBA to offer low-interest EIDL for working capital to small businesses 

suffering substantial economic injury as a result of COVID-19 that can be used to pay fixed debts, payroll, accounts 

payable and other bills that cannot be paid because of the disaster’s impact. SBA’s credit program receivables 

increased $76.1 billion to $321.5 billion during FY 2022, stemming from a $117.8 billion increase in direct disaster 

loans as a direct result of CARES Act-funded loans. The loan guarantee PPP provides loan forgiveness for amounts 

used for eligible expenses for payroll and benefit costs, interest on mortgages, and rent, and utilities, worker 

protection costs related to COVID-19, uninsured property damage costs caused by looting or vandalism during 

2020, and certain supplier costs and expenses for operations. The loan guarantee liability for Small Business Loan 

Programs which includes the PPP decreased by $202.1 billion primarily due to PPP loan forgiveness to lenders.

Refer to SBA’s financial statements for additional information on each specific loan program.

Federal government general PP&E includes many of the physical resources that are vital to the federal government’s 

ongoing operations, including buildings, structures, facilities, equipment, internal use software, and general-purpose land. 

DOD comprises approximately 68.0 percent of the government’s reported general PP&E of $1.2 trillion as of September 30, 

2022. See Note 6—General Property, Plant, and Equipment, Net. 

“Other” assets of $1.0 trillion in Table 4 and Chart 5 includes: 1) $356.3 billion in accounts receivable, net; 2) $298.1 

billion in “Advances and Prepayments”; and 3) $223.7 billion in investments in GSEs. Treasury comprises approximately 
25 MANAGEMENT’S DISCUSSION AND ANALYSIS

Prior to 1917, Congress approved each debt issuance. In 1917, to facilitate planning 

in World War I, Congress and the President established a dollar ceiling for federal 

borrowing. With the Public Debt Act of 1941 (P.L. 77-7), Congress and the 

President set an overall limit of $65 billion on Treasury debt obligations that could 

be outstanding at any one time. Since then, Congress and the President have enacted 

a number of measures affecting the debt limit, including several in recent years. 

Congress and the President most recently increased the debt limit by $2.5 trillion in 

December 2021 with the enactment of P.L. 117-73. It is important to note that 

increasing or suspending the debt limit does not increase spending or authorize new 

spending; rather, it permits the U.S. to continue to honor pre-existing commitments 

to its citizens, businesses, and investors domestically and around the world. 

66.8 percent of the government’s reported accounts receivable, net, mostly in the form of reported taxes receivable, which 

consist of unpaid assessments due from taxpayers, unpaid taxes related to IRC section 965, and deferred payments for 

employer’s share of FICA taxes pursuant to the CARES Act. Taxes receivable, net, decreased by $65.5 billion during FY 

2022, primarily due to the 50 percent year one installment payment of the deferred employer portion of FICA Social Security 

taxes. (See Note 3—Accounts Receivable, Net). Advances and Prepayments represent funds disbursed in contemplation of 

the future performance of services, receipt of goods, the incurrence of expenditures, or the receipt of other assets. The $71.2

billion decrease in this amount was largely attributable to: 1) additional liquidation by Treasury of advances paid to state, 

local, territorial, and tribal governments pursuant COVID-19 legislation; and 2) collections by HHS of COVID-19 

Accelerated & Advance Payment program advances (See Note 9—Advances and Prepayments). Investments in GSEs refers 

to actions taken by Treasury in the wake of the 2008 financial crisis to maintain the solvency of the GSEs (Fannie Mae and 

Freddie Mac) so they can continue to fulfill their vital roles in the mortgage market while the Administration and Congress 

determine what structural changes should be made to the housing finance system. (See Note 8—Investment in GSEs). 

Please refer to Note 29—COVID-19 Activity, as well as the FY 2022 entities’ financial statements for additional 

information about the pandemic’s continued effects on the federal government’s assets and liabilities over the past fiscal year.

In addition, as indicated earlier, Note 30—Subsequent Events, discusses the financial effects of significant events that 

occurred following the end of the fiscal year, but prior to issuance of this Financial Report. These and other subsequent 

events and their effects are discussed in Note 30.

Liabilities 

As indicated in Table 4 and Chart 6, of the 

government’s $39.0 trillion in total liabilities, the 

largest liability is federal debt and interest payable, 

the balance of which increased by $2.0 trillion (8.9 

percent) to $24.3 trillion as of September 30, 2022.

The other major component of the 

government’s liabilities is federal employee and 

veteran benefits payable (i.e., the government’s 

pension and other benefit plans for its military and 

civilian employees), which increased $2.6 trillion 

(25.8 percent) during FY 2022, to about $12.8 

trillion. This total amount is comprised of $3.1 

trillion in benefits payable for the current and 

retired civilian workforce, and $9.7 trillion for the 

military and veterans. OPM administers the largest 

civilian pension plan, covering nearly 2.8 million 

active employees, including the Postal Service, and 

more than 2.7 million annuitants, including 

survivors. The DOD military pension plan covers 

about 2.1 million current military personnel (including active service, reserve, and National Guard) and approximately 2.4

million retirees and survivors.

Federal Debt

The budget surplus or deficit is the difference between total federal spending and receipts (e.g., taxes) in a given year. 

The government borrows from the public (increases federal debt levels) to finance deficits. During a budget surplus (i.e., 

when receipts exceed spending), the government typically uses those excess funds to reduce the debt held by the public. The 

Statement of Changes in Cash Balance from Budget and Other Activities reports how the annual budget surplus or deficit 

relates to the federal 

government’s borrowing and 

changes in cash and other 

monetary assets. It also explains 

how a budget surplus or deficit 

normally affects changes in debt 

balances. 

The government’s federal 

debt and interest payable 

(Balance Sheet liability), which is 

comprised of publicly-held debt 

and accrued interest payable, 

increased $2.0 trillion (8.9 

percent) to $24.3 trillion as of September 30, 2022. It is comprised of Treasury securities, such as bills, notes, and bonds, net 

of unamortized discounts and premiums issued or sold to the public; and accrued interest payable. The “public” consists of 
MANAGEMENT’S DISCUSSION AND ANALYSIS 26

individuals, corporations, state and local governments, FRB, foreign governments, and other entities outside the federal 

government. As indicated above, budget surpluses have typically resulted in borrowing reductions, and budget deficits have 

conversely yielded borrowing increases. However, the government’s debt operations are generally much more complex. Each 

year, trillions of dollars of debt matures and new debt is issued to take its place. In FY 2022, new borrowings were $17.5 

trillion, and repayments of maturing debt held by the public were $15.7 trillion, both decreases from FY 2021. The $2.0 

trillion increase in publicly held debt and accrued interest payable is largely attributable to the need to finance the 

government’s operations, including support of economic relief and COVID-19 recovery efforts.

In addition to debt held by the public, the government has about $6.7 trillion in intra-governmental debt outstanding, 

which arises when one part of the government borrows from another. It represents debt issued by Treasury and held by 

government accounts, including the Social Security ($2.8 trillion) and Medicare ($345.4 billion) trust funds. Intragovernmental debt is primarily held in government trust funds in the form of special nonmarketable securities by various 

parts of the government. Laws establishing government trust funds generally require excess trust fund receipts (including 

interest earnings) over disbursements to be invested in these special securities. Because these amounts are both liabilities of 

Treasury and assets of the government trust funds, they are eliminated as part of the consolidation process for the 

government-wide financial statements (see Financial Statement Note 12). When those securities are redeemed, e.g., to pay 

Social Security benefits, the government must obtain the resources necessary to reimburse the trust funds. The sum of debt 

held by the public and intra-governmental debt equals gross federal debt, which (with some adjustments), is subject to a 

statutory ceiling (i.e., the debt limit). Note that when intra-governmental debt decreases, debt held by the public will increase 

by an equal amount (if the general account of the U.S. government is in deficit), so that there is no net effect on gross federal 

debt. At the end of FY 2022, debt subject to the statutory limit was $30.9 trillion14 (see sidebar).

The federal debt held by the public measured as a percent of GDP (debt-to-GDP ratio) (Chart 7) compares the country’s 

debt to the size of its economy, making this 

measure sensitive to changes in both. Over time, 

the debt-to-GDP ratio has varied widely:

• For most of the nation’s history, 

through the first half of the 20th century, 

the debt-to-GDP ratio has tended to 

increase during wartime and decline 

during peacetime.

• Chart 7 shows that wartime spending 

and borrowing pushed the debt-to-GDP 

ratio to an all-time high of 106 percent 

in 1946, soon after the end of World 

War II, but it decreased rapidly in the 

post-war years. 

• The ratio grew rapidly from the mid1970s until the early 1990s. Strong 

economic growth and fundamental 

fiscal decisions, including measures to 

reduce the federal deficit and 

implementation of binding PAYGO 

rules (which require that new tax or 

spending laws not add to the deficit), generated a significant decline in the debt-to-GDP ratio, from a peak of 48 

percent in FYs 1993-1995, to 31 percent in 2001.

• During the first decade of the 21st century, PAYGO rules were allowed to lapse, significant tax cuts were 

implemented, entitlements were expanded, and spending related to defense and homeland security increased. By 

September 2008, the debt-to-GDP ratio was 39 percent of GDP. 

• PAYGO rules were reinstated in 2010, but the extraordinary demands of the 2008 economic and financial crisis and 

the consequent actions taken by the federal government, combined with slower economic growth in the wake of the 

crisis, pushed the debt-to-GDP ratio up to 74 percent by the end of FY 2014.

14 Beginning in FY 2021 and continuing into FY 2022, Treasury faced a delay in raising the statutory debt limit that required it to depart from its normal debt 

management procedures and to invoke legal authorities to avoid exceeding the statutory debt limit. During these periods, extraordinary measures taken by 

Treasury have resulted in federal debt securities not being issued to certain federal government accounts with the securities being restored including lost 

interest to the affected federal government accounts subsequent to the end of the delay period. A delay in raising the statutory debt limit occurred from 

August 1, 2021, through September 30, 2021. During the period of August 2, 2021, through September 30, 2021, Treasury departed from their normal debt 

management operations and undertook extraordinary measures to avoid exceeding the statutory debt limit. On October 14, 2021, P.L. 117-50 was enacted 

which raised the statutory debt limit by $480.0 billion, from $28,401.5 billion to $28,881.5 billion. Even with this increase, extraordinary measures

continued in order for Treasury to manage below the debt limit. On December 16, 2021, Congress and the President increased the debt limit by $2.5 trillion

to $31.4 trillion with the enactment of P.L. 117-73. On this date, Treasury discontinued its use of extraordinary measures and resumed normal debt 

management operations. On January 19, 2023, Treasury began taking extraordinary measures. See Note 12—Federal Debt and Interest Payable and Note 

30—Subsequent Events for additional information.
27 MANAGEMENT’S DISCUSSION AND ANALYSIS

• The debt was approximately 97.0 percent of GDP at the end of FY 2022. This ratio decreased during FY 2022

because GDP15, which increased as the economy continued to recover from the effects of the pandemic, grew faster 

than the debt.16 From Chart 7, since 1940, the average debt-to-GDP ratio is 50 percent.

The Economy in FY 2022 

A consideration of U.S. economic 

performance provides useful context when 

evaluating the government’s financial 

statements. Over the last three fiscal years, the 

economy has been deeply affected by the 

COVID-19 global pandemic. But in the most 

recent fiscal year, Russia’s illegal invasion of 

Ukraine in late February 2022 also caused 

significant disruption in commodities markets, 

including a sizeable run-up in energy prices.

With the help of the U.S. government’s 

extensive measures to protect consumers and 

businesses and restore growth, the number of 

payroll jobs at the end of FY 2022 exceeded the 

level in February 2020. In addition,

employment growth continued to be strong and 

activity in the current economic expansion has 

continued after a brisk recovery, albeit 

accompanied by price pressures. The disruption 

in commodities markets contributed to inflation, but actions by the Administration, including release of oil from the Strategic 

Petroleum Reserve, helped to mitigate energy price inflation.

After contracting in FY 2020, the economy bounced back in FY 2021, supported by the $2.2 trillion CARES Act, the 

widespread distribution of vaccines, and the reopening of industries that were hardest hit by the pandemic. Another economic 

aid package of roughly $900 billion was passed in December 2020, which funded smaller EIPs and a second draw of PPP 

loans for small businesses. Then early in calendar year 2021, the ARP provided an additional $1.9 trillion in economic aid, 

primarily through EIPs and direct aid to economically vulnerable low-to middle-income families. It also assisted state and 

local governments, provided additional funding for addressing COVID-19 infections and vaccinating the population, created 

new loans and grants for small businesses, and ended the deadline for PPP applications. As a result, households’ balance 

sheets were healthy, and real (i.e., inflation-adjusted) GDP rose 5.0 percent over the four quarters of FY 2021, the strongest 

pace of growth since FY 1984.

In FY 2022, the economy displayed remarkable resilience in the wake of the additional challenges posed by Russia’s 

invasion of Ukraine. As summarized in Table 5, the real GDP grew by 1.9 percent over the four quarters of FY 2022.

Business fixed investment and PCE continued to support growth in FY 2022, while inventory investment and net 

exports rebounded, making strong contributions as well. But after supporting growth in the previous fiscal year, residential 

investment and government spending all declined. Over the four quarters of FY 2022, business fixed investment expanded by 

3.5 percent, slowing from a gain of 7.6 percent over the previous four quarters. PCE grew 2.1 percent, returning to a more 

normal pace after outsized gains in the previous two fiscal years due to support from multiple federal financial programs. 

Inventory investment contributed 0.6 percentage points to growth in FY 2022, following a drag of 0.3 percentage points in 

FY 2021, as firms rebuilt depleted inventories. Net exports added 0.2 percentage points to growth in FY 2022, after 

subtracting 1.1 percentage points in FY 2021.

After providing strong support to the economy over the previous two fiscal years, residential investment growth turned 

negative in FY 2022, as rising mortgage rates and double-digit increases in home price indexes weighed on housing 

affordability. Residential investment declined 12.9 percent in FY 2022, after rising by 7.5 percent the previous fiscal year. As 

pandemic-related financial support programs continued to unwind, government spending declined 0.5 percent in the latest 

fiscal year, after increasing by 0.7 percent in FY 2021.

In labor markets, the economy recovered the number of jobs lost during March and April 2020. At that time, the 

imposition of stay-at-home orders and mandated business closures contributed to a loss of more than 22 million payroll jobs 

and an increase in the unemployment rate to a post-World War II high of 14.7 percent. Over the ensuing months and years 

job creation was unexpectedly robust, and in the latest fiscal year, labor markets have tightened to a historic degree, as labor 

15 GDP, in this context, refers to nominal GDP. 16 The increase in debt of $2.0 trillion was greater than the FY 2022 deficit of $1.4 trillion primarily because of increases in the government’s cash balance, 

as well as the restoration of uninvested principal as discussed in Note 12—Federal Debt and Interest Payable. 
MANAGEMENT’S DISCUSSION AND ANALYSIS 28

supply remained constrained and labor demand, as measured by job openings, surged to new heights. On average, the 

economy added 473,000 payroll jobs per month in FY 2022, nearly matching the monthly average of 475,000 in FY 2021. By 

the end of FY 2022, the unemployment rate had dropped 11.2 percentage points from the peak to 3.5 percent, returning to the 

half-century and pre-pandemic low.

Although inflation had slowed in FY 2020 at the headline and core (which excludes food and energy) levels, both 

accelerated in FY 2021. In the latest fiscal year, inflation picked up more, reflecting in part higher demand for durable goods 

and supply-chain disruptions that reduced the availability of goods. Later in the year, demand for services started to recover, 

though the full rotation to the pre-pandemic balance between goods and services remains elusive, and food and energy price 

pressures increased related to Russia’s invasion of Ukraine. The CPI rose 8.2 percent over the 12 months of FY 2022, picking 

up from the 5.4 percent pace during the previous fiscal year. Core inflation was 6.6 percent over the fiscal year ending 

September 2022, accelerating from the 4.0 percent pace during FY 2021.

Higher inflation offset solid gains in nominal income and wages, eroding purchasing power in real terms. Real 

disposable personal income decreased 3.3 percent over the 12 months of FY 2022, after declining 1.4 percent during the 

previous fiscal year. The pace of nominal average hourly earnings growth for production and non-supervisory workers was 

relatively strong in FY 2021 at 5.9 percent, and the gain remained steady at 5.8 percent in the latest fiscal year. But faster 

inflation more than offset the gain, resulting in an outright drop in real wages. Overall, real average hourly earnings declined 

2.5 percent during FY 2022, after a slight decline of 0.1 percent the previous fiscal year. Nonfarm labor productivity 

decreased 1.2 percent over the four quarters of FY 2022, after declining 0.2 percent during FY 2021. The latest fiscal year 

saw a 3.4 percent advance in hours worked as employment continued to pick up, which more than offset a 1.9 percent 

increase in output. Over the four quarters of FY 2021, gains in hours worked and output were about the same, each in excess 

of 6.0 percent.

An Unsustainable Fiscal Path 

An important purpose of the Financial Report is to help citizens understand current fiscal policy and the importance and 

magnitude of policy reforms necessary to make it sustainable. This Financial Report includes the SLTFP and a related Note 

Disclosure (Note 24). The Statements display the PV of 75-year projections of the federal government’s receipts and noninterest spending17 for FY 2022 and FY 2021. 

Fiscal Sustainability 

A sustainable fiscal policy is defined as one where the debt-to-GDP ratio is stable or declining over the long term. The 

projections based on the assumptions in this Financial Report indicate that current policy is not sustainable. This report 

presents data, including debt, as a percent of GDP to help readers assess whether current fiscal policy is sustainable. The 

debt-to-GDP ratio was approximately 97 percent at the end of FY 2022, and was approximately 100 percent at the end of FY 

2021. The long-term fiscal projections in this report are based on the same economic and demographic assumptions that 

underlie the 2022 SOSI, which is as of January 1, 2022.18 As discussed below, if current policy is left unchanged and based 

on this report’s assumptions, the debt-to-GDP ratio is projected to exceed 200 percent by 2046 and reach 566 percent in 

2097. Preventing the debt-to-GDP ratio from rising over the next 75 years is estimated to require some combination of 

spending reductions and revenue increases that amount to 4.9 percent of GDP over the period. While this estimate of the “75-

year fiscal gap” is highly uncertain, it is nevertheless nearly certain that current fiscal policies cannot be sustained 

indefinitely.

Delaying action to reduce the fiscal gap increases the magnitude of spending and/or revenue changes necessary to 

stabilize the debt-to-GDP ratio as shown in Table 6 below.

The estimates of the cost of policy delay assume policy does not affect GDP or other economic variables. Delaying 

fiscal adjustments for too long raises the risk that growing federal debt would increase interest rates, which would, in turn, 

reduce investment and ultimately economic growth.

The projections discussed here assume current policy19 remains unchanged, and hence, are neither forecasts nor 

predictions. Nevertheless, the projections demonstrate that policy changes must be enacted to move towards fiscal 

sustainability.

The Primary Deficit, Interest, and Debt

17 For the purposes of the SLTFP and this analysis, spending is defined in terms of outlays. In the context of federal budgeting, spending can either refer to: 

1) budget authority – the authority to commit the government to make a payment; 2) obligations – binding agreements that will result in either immediate or 

future payment; or 3) outlays, or actual payments made. 

18 The 2022 long-term fiscal projections are not adjusted for the more current near-term economic information (e.g., higher inflation and lower real growth). 19 Current policy in the projections is based on current law, but includes certain adjustments, such as extension of certain policies that expire under current 

law but are routinely extended or otherwise expected to continue (e.g., reauthorization of the Supplemental Nutrition Assistance Program).
29 MANAGEMENT’S DISCUSSION AND ANALYSIS

The primary deficit – the difference between non-interest spending and receipts – is the determinant of the debt-to-GDP 

ratio over which the government has the greatest control (the other determinants include interest rates and growth in GDP). 

Chart 8 shows receipts, non-interest spending, and the difference – the primary deficit – expressed as a share of GDP. The 

primary deficit-to-GDP ratio spiked during 2009 through 2012 due to the 2008-09 financial crisis and the ensuing severe 

recession, as well as the effects of the government’s response thereto. These elevated primary deficits resulted in a sharp 

increase in the ratio of debt to GDP, which rose from 39 percent at the end of 2008 to 70 percent at the end of 2012. As an 

economic recovery took hold, the primary deficit ratio fell, averaging 2.1 percent of GDP over 2013 through 2019. The 

primary deficit-to-GDP ratio again spiked in 2020, rising to 13.3 percent of GDP in 2020, due to increased spending to 

address the COVID-19 pandemic and lessen the economic impacts of stay-at-home and social distancing orders on 

individuals, hard-hit industries, and small businesses. Spending remained elevated in 2021 due to additional funding to 

support economic recovery, but increased receipts reduced the primary deficit-to-GDP to 10.8 percent. 

The primary deficit-to-GDP ratio in 2022 was 3.6 percent, decreasing by 7.2 percentage points from 2021 as spending 

attributable to the pandemic winds down. The primary deficit-to-GDP ratio is projected to fall to 2.2 percent in 2023, based 

on the technical assumptions20 in this report, and then average 3.0 percent through 2029. After 2029, however, increased 

spending for Social Security and health programs due to the ongoing retirement of the baby boom generation and increases in 

the price of health care services is projected to result in increasing primary deficit ratios that peak at 4.8 percent of GDP in 

2044. Primary deficits as a share of GDP gradually decrease beyond that point, as aging of the population continues at a 

slower pace, and reaches 3.5 percent of GDP in 2097, the last year of the projection period.

Trends in the primary deficit are heavily influenced by tax receipts. The receipt share of GDP was markedly depressed

in 2009 through 2012 because of the recession and tax reductions enacted as part of the ARRA and the Tax Relief, 

Unemployment Insurance Reauthorization, and Job Creation Act of 2010. The share subsequently increased to 18.0 percent

of GDP by 2015, before falling below the 30-year average of 17.2 percent in 2018, after enactment of the TCJA.

Receipts were 19.6 percent of GDP in 

2022, 1.5 percentage points above 2021.

Receipts are projected to fall to 17.7 

percent of GDP in 2023 and then further 

decrease to 17.1 percent of GDP in 2025. 

Receipts are projected to be 18.1 percent of 

GDP in 2032 when corporation income tax 

and other receipts stabilize as a share of 

GDP. After 2032, receipts grow slightly 

more rapidly than GDP over the projection 

period as increases in real (i.e., inflationadjusted) incomes cause more taxpayers 

and a larger share of income to fall into the 

higher individual income tax brackets.21

On the spending side, the non-interest 

spending share of GDP was 23.2 percent in 

2022, 5.8 percentage points below the share 

of GDP in 2021, which was 28.9 percent. 

The ratio of non-interest spending to GDP 

is projected to fall to 19.9 percent in 2023 

and then rise gradually, reaching 23.8 

percent of GDP in 2078. The ratio of noninterest spending to GDP then declines to 23.3 percent in 2097, the end of the projection period. Beginning in 2025, these

increases are principally due to faster growth in Social Security, Medicare, and Medicaid spending (see Chart 8). The aging

of the baby boom generation, among other factors, is projected to increase the spending shares of GDP of Social Security and 

Medicare by about 0.9 and 1.5 percentage points, respectively, from 2023 to 2040. After 2040, the Social Security and 

Medicare spending shares of GDP continue to increase in most years, albeit at a slower rate, due to projected increases in 

health care costs and population aging, before declining toward the end of the projection period. 

On a PV basis, deficit projections reported in the FY 2022 Financial Report decreased in both present-value terms and

as a percent of the current 75-year PV of GDP. As discussed in Note 24, the largest factor affecting the projections is an 

adjustment to the model’s technical assumptions, which decreases the imbalance by 0.7 percent of the 75-year PV of GDP

($11.9 trillion). In last year’s projections, discretionary spending grew from the 2022 baseline estimate in the President’s 

Budget. As discussed below, discretionary spending in this year’s projections grows with GDP from actual budget results 

20 Projections for discretionary and mandatory programs – other than Social Security, Medicare, and Medicaid – exclude COVID-19-related spending judged 

to be temporary. The primary deficit-to-GDP ratio would likely be higher in the near-term if projections assumed outlays of remaining COVID-19 relief 

funding. See Note 24 for more detail on technical assumptions for the long-term fiscal projections. 21 Other possible paths for the receipts-to-GDP ratio and the projected debt held by the public are illustrated in the “Alternative Scenarios” section.
MANAGEMENT’S DISCUSSION AND ANALYSIS 30

following an adjustment to remove outlays of supplemental funding22 provided in response to the COVID-19 pandemic. This 

adjustment prevents inflating projections with spending considered temporary. The second largest factor is the effect of new 

Social Security, Medicare, and Medicaid program-specific actuarial assumptions, which decrease this imbalance as a share of 

the 75-year PV of GDP by 0.3 percentage points ($5.0 trillion). The third largest factor affecting the projections – decreasing 

the imbalance as a share of the 75-year PV of GDP by 0.2 percentage points ($4.6 trillion) – is attributable to actual budget 

results for FY 2022 and baseline estimates published in the FY 2023 President’s Budget, and changes to spending and 

receipts from legislation enacted toward the end of the fiscal year.

23 This improvement in the fiscal position is primarily due 

to a lower 75-year PV of spending for mandatory programs other than Social Security, Medicare, and Medicaid. That 

decrease in spending is partially offset by a lower 75-year PV of individual income taxes receipts and other receipts (includes 

excise taxes, estate and gift taxes, customs duties, and miscellaneous receipts). The fourth factor was the update of economic

and demographic assumptions. While the 75-year PV of receipts less non-interest spending deteriorated by $1.5 trillion and 

appears to worsen the fiscal position, the imbalance decreased by 0.2 percentage points as a share of the 75-year PV of GDP. 

The 75-year PV of GDP for this year’s projections is $1,872.9 trillion, greater than last year’s $1,724.4 trillion. That increase 

in GDP exceeds the increase in the imbalance of receipts less non-interest spending, and thus improves the fiscal position as a

percent of GDP. Larger GDP is attributable to updates that raised the level of GDP for 2022 and higher growth rates near the 

start of the projection period. The last factor, the change in reporting period – the effect of shifting calculations from 2022

through 2096 to 2023 through 2097 – increases the imbalance of the 75-year PV of receipts less non-interest spending by 

$2.1 trillion, which has a negligible effect on the 75-year PV of GDP.

One of the most important assumptions underlying the projections is that current federal policy does not change. The 

projections are therefore neither forecasts nor predictions, and do not consider large infrequent events such as natural 

disasters, military engagements, or economic crises. By definition, they do not build in future changes to policy. If policy 

changes are enacted, perhaps in response to projections like those presented here, then actual fiscal outcomes will be different 

than those projected. Another important assumption is the future growth of health care costs. As discussed in Note 25, these 

future growth rates – both for health care costs in the economy generally and for federal health care programs such as 

Medicare, Medicaid, and PPACA exchange subsidies – are highly uncertain. In particular, enactment of the PPACA in 2010 

and the MACRA in 2015 established cost controls for Medicare hospital and physician payments whose long-term 

effectiveness of which is not yet clear. The Medicare spending projections in the long-term fiscal projections are based on the

projections in the 2022 Medicare Trustees Report, which assume the PPACA and MACRA cost control measures will be 

effective in producing a substantial slowdown in Medicare cost growth. As discussed in Note 25, the Medicare projections 

are subject to much uncertainty about the ultimate effects of these provisions to reduce health care cost growth. Certain 

features of current law may result in some challenges for the Medicare program including physician payments, payment rate 

updates for most non-physician categories, and productivity adjustments. Payment rate updates for most non-physician 

categories of Medicare providers are reduced by the growth in economy-wide private nonfarm business total factor 

productivity although these health providers have historically achieved lower levels of productivity growth. Should payment 

rates prove to be inadequate for any service, beneficiaries’ access to and the quality of Medicare benefits would deteriorate

over time, or future legislation would need to be enacted that would likely increase program costs beyond those projected 

under current law. For the long-term fiscal projections, that uncertainty also affects the projections for Medicaid and 

exchange subsidies, because the cost per beneficiary in these programs is assumed to grow at the same reduced rate as 

Medicare cost growth per beneficiary. The projections in the Medicaid Actuarial Report, which end in 2027, are adjusted to 

accord with the actual Medicaid spending in FY 2022. Actual Medicaid spending includes temporary spending increases due 

to changes in enrollment and other temporary measures related to the pandemic. The amounts related to these temporary 

spending increases cannot be identified, which adds uncertainty to the projections. After 2027, the projections assume no 

further change in State Medicaid coverage under the PPACA, and the numbers of aged beneficiaries (65-plus years) and nonaged beneficiaries (less than 65 years) are expected to grow at the same rates as the aged and non-aged populations, 

respectively. The most recent Social Security and Medicare Trustees Reports were released in June 2022. See Note 24—

Long-Term Fiscal Projections for additional information.

As discussed in Note 24 of the FY 2022 Financial Report, other key assumptions include, but are not limited to the 

following. For receipts, individual income taxes are based on the share of individual income taxes of salaries and wages in 

the current law baseline projection in the FY 2023 President’s Budget, and the salaries and wages projections in the Social 

Security 2022 Trustees Report. That baseline accords with the tendency of effective tax rates to increase as growth in income 

per capita outpaces inflation (also known as “bracket creep”) and the expiration dates of individual income and estate and gift 

tax provisions of the TCJA. Effects of recent legislation enacted toward the end of FY 2022 are added to projections based on 

CBO estimates and assumed to continue through the projection period. After falling to 19 percent of wages and salaries in

2024, individual income taxes increase gradually to 29 percent of wages and salaries in 2097 as real taxable incomes rise over 

22 Discretionary outlays of supplemental funding provided in response to COVID-19 are identified using Disaster Emergency Fund Code attributes in budget 

execution data for the following laws: the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020 (P.L. 116-123); Families First 

Coronavirus Response Act (P.L. 116-127); the CARES Act (P.L. 116-136); the Paycheck Protection Program and Health Care Enhancement Act (P.L. 116-

139); and the CAA (P.L. 116-260, Division M). 23 Legislation enacted toward the end of FY 2022 includes: An act making appropriations for Legislative Branch for the fiscal year ending September 30, 

2022, and for other purposes (P.L. 117-167); PACT Act (P.L. 117-168); and an act to provide for reconciliation pursuant to title II of S.Con.Res. 14 (P.L. 

117-169). 
31 MANAGEMENT’S DISCUSSION AND ANALYSIS

time and an increasing share of total income is taxed in the higher tax brackets. Through the first ten years of the projections,

corporation tax receipts as a percent of GDP reflect the economic and budget assumptions used in developing the FY 2023 

President’s Budget ten-year advance baseline budgetary estimates plus estimated effects of recent legislation. After this time, 

corporation tax receipts grow at the same rate as nominal GDP. Other receipts also reflect FY 2023 President’s Budget

baseline levels as a share of GDP throughout the budget window, plus estimated effects of recent legislation, and grow with 

GDP outside of the budget window. Corporation tax receipts peak at 1.8 percent of GDP in 2024 before falling to 1.3 percent 

of GDP in 2032, where they stay for the remainder of the projection period. The ratio of other receipts, including excise 

taxes, estate and gift taxes, customs duties, and miscellaneous receipts, to GDP is estimated to be 1.3 percent in 2023, after 

which it gradually declines to 1.1 percent by 2032 where it remains through the projection period. Projections for the other 

categories of receipts and spending are consistent with the economic and demographic assumptions in the Trustees Reports 

and include updates for actual budget results for FY 2022 or budgetary estimates from the FY 2023 President’s Budget. 

Where possible, those budget totals are adjusted before spending is projected to remove outlays for programs or activities that 

are judged to be temporary, such as spending related to the COVID-19 pandemic and economic recovery. Such an adjustment 

is not possible for increased Medicaid outlays under the COVID-19 Public Health Emergency, resulting in higher projections 

of future spending, increasing the uncertainty surrounding the projections. See Note 24—Long-Term Fiscal Projections for 

additional information about the assumptions used in this analysis.

The primary deficit-to-GDP projections in Chart 8, projections for interest rates, and projections for GDP together

determine the debt-to-GDP ratio projections shown in Chart 9. That ratio was approximately 97 percent at the end of FY

2022 and under current policy is 

projected to exceed the historic high of 

106 percent in 2029, rise to 200 percent 

by 2046 and reach 566 percent by 2097. 

The change in debt held by the public 

from one year to the next generally 

represents the budget deficit, the 

difference between total spending and 

total receipts. The debt-to-GDP ratio 

rises continually in great part because 

primary deficits lead to higher levels of 

debt, which lead to higher net interest 

expenditures, and higher net interest 

expenditures lead to higher debt.24 The 

continuous rise of the debt-to-GDP ratio 

indicates that current policy is 

unsustainable.

These debt-to-GDP projections are 

lower than the corresponding 

projections in both the 2021 and 2020 

Financial Reports. For example, the last 

year of the 75-year projection period used in the FY 2020 Financial Report is 2095. In the FY 2022 Financial Report, the 

debt-to-GDP ratio for 2095 is projected to be 552 percent, which compares with 692 and 623 percent for the 2095 projection 

year in the FY 2021 Financial Report and the FY 2020 Financial Report, respectively.25

The Fiscal Gap and the Cost of Delaying Policy Reform

The 75-year fiscal gap is one measure of the degree to which current policy is unsustainable. It is the amount by which 

primary surpluses over the next 75 years must, on average, rise above current-policy levels in order for the debt-to-GDP ratio 

in 2097 to remain at its level in 2022. The projections show that projected primary deficits average 4.2 percent of GDP over 

the next 75 years under current policy. If policies were adopted to eliminate the fiscal gap, the average primary surplus over 

the next 75 years would be 0.6 percent of GDP, 4.9 percentage points higher than the projected PV of receipts less noninterest spending shown in the basic financial statements. Hence, the 75-year fiscal gap is estimated to equal 4.9 percent of 

GDP. This amount is, in turn, equivalent to 26.0 percent of 75-year PV receipts and 21.2 percent of 75-year PV non-interest 

spending. This estimate of the fiscal gap is 1.4 percentage points smaller than was estimated in the FY 2021 Financial Report

(6.2 percent of GDP).

In these projections, closing the fiscal gap requires running substantially positive primary surpluses, rather than simply 

eliminating the primary deficit. The primary reason is that the projections assume future interest rates will exceed the growth 

24 The change in debt each year is also affected by certain transactions not included in the budget deficit, such as changes in Treasury’s cash balances and the 

nonbudgetary activity of federal credit financing accounts. These transactions are assumed to hold constant at about 0.3 percent of GDP each year, with the 

same effect on debt as if the primary deficit was higher by that amount. 25 See the Note 26 of the FY 2021 Financial Report of the U.S. Government for more information about changes in the long-term fiscal projections between 

FYs 2021 and 2020.
MANAGEMENT’S DISCUSSION AND ANALYSIS 32

rate of GDP. Achieving primary balance (that is, running a primary surplus of zero) implies that the debt grows each year by 

the amount of interest 

spending, which under 

these assumptions would 

result in debt growing 

faster than GDP.

Table 6 shows the 

cost of delaying policy

reform to close the fiscal 

gap by comparing policy 

reforms that begin in three 

different years. Immediate 

reform would require

increasing primary surpluses by 4.9 percent of GDP on average between 2023 and 2097 (i.e., some combination of reducing

spending and increasing revenue by a combined 4.9 percent of GDP on average over the 75-year projection period). Table 6 

shows that delaying policy reform forces larger and more abrupt policy reforms over shorter periods. For example, if policy 

reform is delayed by 10 years, closing the fiscal gap requires increasing the primary surpluses by 5.7 percent of GDP on 

average between 2033 and 2097. Similarly, delaying reform by 20 years requires primary surplus increases of 7.0 percent of 

GDP on average between 2043 and 2097. The differences between the required primary surplus increases that start in 2033

and 2043 (5.7 and 7.0 percent of GDP, respectively) and that which starts in 2023 (4.9 percent of GDP) is a measure of the 

additional burden that delay would impose on future generations. Future generations are harmed by policy reform delay,

because the higher the primary surplus is during their lifetimes the greater the difference is between the taxes they pay and 

the programmatic spending from which they benefit.

Conclusion

The debt-to-GDP ratio is projected to rise over the 75-year projection period and beyond if current policy is unchanged, 

based on this report’s assumptions, which implies that current policy is not sustainable and must ultimately change. If policy 

changes are not so abrupt as to slow economic growth, then the sooner policy changes are adopted to avert these trends, the 

smaller the changes to revenue and/or spending that would be required to achieve sustainability over the long term. While the 

estimated magnitude of the fiscal gap is subject to a substantial amount of uncertainty, it is nevertheless nearly certain that 

current fiscal policies cannot be sustained indefinitely.

These long-term fiscal projections and the topic of fiscal sustainability are discussed in further detail in Note 24 and the 

RSI section of this Financial Report. The fiscal sustainability under alternative scenarios for the growth rate of health care 

costs, interest rates, discretionary spending, and receipts are illustrated in the “Alternative Scenarios” section within the RSI.

Social Insurance 

The long-term fiscal projections reflect government receipts and spending as a whole. The SOSI focuses on the 

government’s “social insurance” programs: Social Security, Medicare, Railroad Retirement, and Black Lung.26 For these 

programs, the SOSI reports: 1) the actuarial PV of all future program revenue (mainly taxes and premiums) - excluding 

interest - to be received from or on behalf of current and future participants; 2) the estimated future scheduled expenditures to 

be paid to or on behalf of current and future participants; and 3) the difference between 1) and 2). Amounts reported in the 

SOSI and in the RSI section in this Financial Report are based on each program’s official actuarial calculations.

This year’s projections for Social Security and Medicare are based on the same economic and demographic assumptions

that underlie the 2022 Social Security and Medicare Trustees Reports27 and the 2022 SOSI, while comparative information

presented from last year’s report is based on the 2021 Social Security and Medicare Trustees Reports and the 2021 SOSI.

Table 7 summarizes amounts reported in the SOSI, showing that net social insurance expenditures are projected to be $75.9 

trillion over 75 years as of January 1, 2022 for the open group, an increase of $4.9 trillion over net expenditures of $71.0 

trillion projected in the FY 2021 Financial Report.28 The current-law 2022 amounts reported for Medicare reflect the 

physician payment levels expected under the MACRA payment rules and the PPACA-mandated reductions in other Medicare 

26 The Black Lung Benefits Act provides for monthly payments and medical benefits to coal miners totally disabled from pneumoconiosis (black lung 

disease) arising from their employment in or around the nation's coal mines. See https://www.dol.gov/owcp/regs/compliance/ca_main.htm. RRB’s 

projections are based on economic and demographic assumptions that underlie the 28th Actuarial Valuation of the Assets and Liabilities Under the Railroad 

Retirement Acts as of December 31, 2019 with Technical Supplement and the 2022 Annual Report on the Railroad Retirement System required by Section 

502 of the Railroad Retirement Solvency Act of 1983 (P.L. 98-76). 27 These assumptions were developed based on data primarily as of January 1, 2022. Subsequent to January 1, 2022, inflation and interest rates increased 

faster than previously expected. The SOSI projections are not adjusted for the more current near-term economic information. 28 Closed group and open group differ by the population included in each calculation. From the SOSI, the closed group includes: 1) participants who have 

attained eligibility; and 2) participants who have not attained eligibility. The open group adds future participants to the closed group. See ‘Social Insurance’ 

in the RSI section in this Financial Report for more information. 

 
33 MANAGEMENT’S DISCUSSION AND ANALYSIS

payment rates, but not the payment reductions and/or delays that would result from trust fund depletion.29 Similarly, currentlaw projections for Social Security do not reflect benefit payment reductions and/or delays that would result from fund 

depletion. By accounting convention, the transfers from the General Fund to Medicare Parts B and D are eliminated in the 

consolidation of the SOSI at the government-wide level and as such, the General Fund transfers that are used to finance 

Medicare Parts B and D are not included in Table 7. For the FYs 2022 and 2021 SOSI, the amounts eliminated totaled $47.5 

trillion and $43.2 trillion, respectively. SOSI programs and amounts are included in the broader fiscal sustainability analysis 

in the previous section, although on a slightly different basis (as described in Note 24). 

The amounts reported in the SOSI provide perspective on the government’s long-term estimated exposures for social 

insurance programs. These amounts are not considered liabilities in an accounting context. Future benefit payments will be 

recognized as expenses and liabilities as they are incurred based on the continuation of the social insurance programs' 

provisions contained in current law. The social insurance trust funds account for all related program income and expenses. 

Medicare and Social Security taxes, premiums, and other income are credited to the funds; fund disbursements may only be 

made for benefit payments and program administrative costs. Any excess revenues are invested in special nonmarketable 

U.S. government securities at a market rate of interest. The trust funds represent the accumulated value, including interest, of 

all prior program surpluses, and provide automatic funding authority to pay cover future benefits.

29 MACRA permanently replaces the Sustainable Growth Rate formula, which was used to determine payment updates under the Medicare physician fee 

schedule with specified payment updates through 2025. The changes specified in MACRA also establish differential payment updates starting in 2026 based 

on practitioners’ participation in eligible APM; payments are also subject to adjustments based on the quality of care provided, resource use, use of certified 

electronic health records, and clinical practice improvement.
MANAGEMENT’S DISCUSSION AND ANALYSIS 34

Table 8 identifies the principal 

reasons for the changes in projected 

social insurance amounts during 2022 

and 2021.

The following briefly 

summarizes the significant changes for 

the current valuation (as of January 1, 

2022) as disclosed in Note 25—Social 

Insurance. Note 25 is compiled from 

disclosures included in the financial 

statements of those entities 

administering these programs, 

including SSA and HHS. See Note 25 

for additional information.

• Change in valuation period 

(affects both Social Security 

and Medicare): This change 

replaces a small negative net 

cash flow for 2021 with a 

much larger negative net cash 

flow for 2096. As a result, the 

PV of the estimated future net 

cash flows decreased (became more negative) by $0.7 trillion and $1.0 trillion for Social Security and Medicare, 

respectively. 

• Changes in demographic data, assumptions, and methods (affects both Social Security and Medicare): There was 

one notable change in demographic methodology. An improvement was made to put more emphasis on recent 

mortality data by increasing the weights for the most recent years in the regressions used to calculate the starting 

rates of improvement and starting death rates. This change decreased the PV of the estimated future net cash flows.

In addition, the starting demographic values and the way these values transition to the ultimate assumptions were 

changed. Final birth rate data for calendar year 2020 indicated slightly lower birth rates than were assumed in the 

prior valuation. Death rates increased significantly for 2020 and 2021. Overall, changes to these assumptions caused 

the PV of the estimated future net cash flows to decrease (became more negative) by $0.3 trillion and $0.5 trillion 

for Social Security and Medicare, respectively.

• Changes in economic data and assumptions (affects Social Security only): Several changes were made to the 

ultimate economic assumptions since the last valuation period. Economic starting values and near-term growth 

assumptions were updated to reflect the stronger-than-expected recovery from the pandemic-induced recession. In 

addition to these changes in ultimate economic assumptions, the starting economic values and the way these values 

transition to the ultimate assumptions were changed. Near-term real interest rates are assumed to be slightly higher 

on average than those for the prior valuation. Economic starting values and near-term growth assumptions were 

updated to reflect the stronger-than-expected recovery from the pandemic-induced recession. The level of potential 

GDP for years 2021 and later is assumed to be about 1.1 percent higher than the level in the prior valuation, 

reflecting the strong recovery and the expectation of a permanent level shift in total economy labor productivity.

There were no additional notable changes in economic methodology. Overall, changes to economic data, 

assumptions, and methods caused the PV of the estimated future net cash flows to decrease (became more negative) 

by $0.2 trillion for Social Security.

• Changes in law or policy (affects both Social Security and Medicare): The monetary effect of the changes in law or 

policy on the PV of estimated future net cash flows of the OASDI and Medicare programs was not significant at the 

consolidated level. Please refer to SSA’s and HHS’s financial statements for additional information related to the 

impact of the changes in law or policy on the PV of estimated future net cash flows of the OASDI and Medicare 

programs.

• Changes in methodology and programmatic data (affects Social Security only). Several methodological 

improvements and updates of program-specific data are included in the current valuation (beginning on January 1, 

2022). The most significant are as follows: The ultimate disability incidence rate was lowered from 5.0 per thousand 

exposed in the prior valuation to 4.8 in the current valuation. The current valuation is updated using a 10.0 percent 

sample of all newly entitled worker beneficiaries to project average benefit levels of retired-worker and disabledworker beneficiaries. Recent data and estimates provided by the Office of Tax Analysis at Treasury indicate higher 

near-term and ultimate levels of revenue from taxation of OASDI benefits than projected in the prior valuation. 

Updates were made to the post-entitlement benefit adjustment factors. These factors are used to account for changes 

in benefit levels, primarily due to differential mortality by benefit level and earnings after benefit entitlement. 
35 MANAGEMENT’S DISCUSSION AND ANALYSIS

Overall, changes to programmatic data and methods caused the PV of the estimated future net cash flows to increase 

by $0.6 trillion for Social Security.

• Changes in economic and healthcare assumptions (affects Medicare only): The economic assumptions used in the 

Medicare projections are the same as those used for the OASDI (described above) and are prepared by the Office of 

the Chief Actuary at SSA. In addition to the economic assumptions changes described above, the healthcare 

assumptions are specific to the Medicare projections. Changes to these assumptions in the current valuation include: 

high projected spending growth for outpatient hospital services and for physician-administered drugs; and slower 

price growth and higher direct and indirect remuneration. Overall, these changes decreased the PV of estimated 

future net cash flow by $5.3 trillion for Medicare.

• Change in Projection Base (affects Medicare only): Actual income and expenditures in 2021 were different than 

what was anticipated when the 2021 Medicare Trustees Report projections were prepared. For Part A and Part B 

income and expenditures in 2021 were lower than estimated based on experience. Part D income and expenditures 

were higher than estimated based on actual experience. Actual experience of the Medicare Trust Funds between 

January 1, 2021, and January 1, 2022, is incorporated in the current valuation and is more than projected in the prior 

valuation. Overall, the net impact of Part A, B, and D projection base change is an increase in the estimated future 

net cash flows by $2.5 trillion for Medicare.

As reported in Note 25, uncertainty remains about whether the projected cost savings and productivity improvements 

will be sustained in a manner consistent with the projected cost growth over time. Note 25 includes an alternative projection 

to illustrate the uncertainty of projected Medicare costs. As indicated earlier, GAO disclaimed opinions on the 2022, 2021, 

2020, 2019 and 2018 SOSI because of these significant uncertainties.

Costs as a percent of GDP of both Medicare and Social Security, which are analyzed annually in the Medicare and 

Social Security Trustees Reports, are projected to increase substantially through the mid-2030s because: 1) the number of 

beneficiaries rises rapidly as the baby-boom generation retires; and 2) the lower birth rates that have persisted since the baby 

boom cause slower growth in the labor force and GDP.30 According to the Medicare Trustees Report, spending on Medicare 

is projected to rise from its current level of 3.9 percent of GDP to 6.2 percent in 2046 and to 6.5 percent in 2096.31 As for 

Social Security, combined spending is projected to generally increase from its current level of 5.0 percent of GDP to a peak 

of 6.2 percent for 2077, and then decline to 5.9 percent by 2096. The government collects and maintains funds supporting the 

Social Security and Medicare programs in trust funds. A scenario in which projected funds expended exceed projected funds 

received, as reported in the SOSI, will cause the balances in those trust funds to deplete over time. Table 9 summarizes 

additional current status and projected trend information, including years of projected depletion, for the Medicare HI and 

Social Security Trust Funds.

As previously discussed and as noted in the Trustees Reports, these programs are on a fiscally unsustainable path. 

Additional information from the Trustees Reports may be found in the RSI section of this Financial Report.

Reporting on Climate Change 

As stated in EO 14008, Tackling the Climate Crisis at Home and Abroad “the United States and the world face a 

profound climate crisis...Domestic action must go hand in hand with United States international leadership, aimed at 

30 A Summary of the 2022 Annual Social Security and Medicare Trust Fund Reports, page 12. 31 Percent of GDP amounts are expressed in gross terms (including amounts financed by premiums and state transfers).
MANAGEMENT’S DISCUSSION AND ANALYSIS 36

significantly enhancing global action.” Among other things, the EO “directs each federal agency to develop a plan to increase 

the resilience of its facilities and operations to the impacts of climate change and directs relevant agencies to report on ways 

to expand and improve climate forecast capabilities – helping facilitate public access to climate related information and 

assisting governments, communities, and businesses in preparing for and adapting to the impacts of climate change.” As a 

corollary to EO 14008, EO 14030, Climate-Related Financial Risk, is intended to help the American people understand how 

climate change could impact their financial security, to strengthen the U.S. financial system so that climate change does not 

affect the system’s stability, and to inform federal government decision-making to mitigate the risks of climate change. 

Section 5(a) of EO 14030 specifically tasks OMB and the National Economic Council, in consultation with Treasury, to 

develop recommendations to integrate climate-related financial risk into financial management and reporting, with a focus on 

the climate-related financial risk of lending programs. Section 5(a) directs the recommendations to include an evaluation of 

changes to accounting standards where appropriate for federal financial reporting. As required by EO 14030, in October

2021, the National Economic Council issued a report32 laying out a government-wide strategy to address the financial risk 

that climate change poses to the government and the U.S. economy. Finally, on December 8, 2021, EO 14057, Catalyzing 

Clean Energy Industries and Jobs Through Federal Sustainability, was issued. Among other things, this EO directs agencies 

to develop plans, processes, and analytic tools that will allow federal agencies and programs to adapt to climate change.

In November 2021, President Biden signed a $1 trillion bipartisan infrastructure bill, the IIJA that, in part, included 

historic funding to protect the country against the detrimental effects of climate change, including expanded access to clean 

drinking water, programs that help reduce flood risk and damage investments in clean energy transmissions and electric 

vehicle infrastructure, electrifying thousands of school and transit buses across the country, and creating a new Grid 

Deployment Authority to build a resilient, 21st century electric grid. Less than a year later, President Biden signed legislation 

that made the largest climate investment in U.S. history: IRA provides tax incentives and other clean energy initiatives to 

reduce energy costs for consumers and small businesses, including investments in underserved communities and historic 

energy communities. For example, the IRA provides a range of tax incentives to accelerate the build-out of a clean energy 

economy, as well as direct consumer rebates and tax incentives to purchase more efficient appliances and electric vehicles.

These investments have put America on track to decrease greenhouse gas emissions by about 40 percent below 2005 levels in 

2030.33

Many of the 24 CFO Act agencies have leveraged their FY 2022 financial statements to discuss a wide range of topics 

concerning how their agencies are responding to the climate crisis. The form of the required financial statement climaterelated reporting is at the discretion of each agency, so the content varies across the reports, but taken in combination, the 

following summary provides a broad picture of the many efforts in effect across the 24 CFO Act agencies. 

More than half of CFO Act agency heads cited climate change in their financial statements’ transmittal messages. For 

example: 

• The Secretary of the Interior referenced the BIL as having made a major investment in the conservation and 

stewardship of America’s public lands, including several provisions that invest in DOI initiatives, such as restoring 

critical habitats, addressing the drought crisis, assisting with wildlife management, and helping communities prepare 

for extreme weather events. 

• The Secretary of Agriculture stated that USDA has embarked on a department-wide effort to enact climate-smart 

agriculture, forestry, and rural clean energy policies that are voluntary, flexible, and producer-led. In service of this 

goal, USDA announced the new Partnerships for Climate-Smart Commodities Program, which finances pilot 

projects for U.S. agriculture and forestry products that use climate-smart practices. 

• The NASA Administrator stated that NASA contributes significantly to what is known about Earth’s changing 

climate and cited recent agency efforts related to climate change, disaster mitigation, fighting forest fires, and 

improving real-time agricultural processes.

• The GSA Administrator stated that accelerating clean energy and innovation was a priority area, noting that GSA 

manages the largest civilian vehicle fleet in the country which it is working to electrify, as well as to build to the 

infrastructure to support it. GSA is advancing clean energy through its buildings portfolio, including through the 

IRA, which has historic investments for low carbon materials, emerging clean technology, and more. 

All but one of the CFO Act agencies referenced their climate action and adaptation plans, or sustainability reports,

including:

• State’s plan focuses on three goals: 1) protect the health and safety of personnel; 2) adapt department facilities, 

operations, and mission-critical services to be more resilient to the impacts of climate change; and 3) lead by 

example through showcasing climate adaptation and resilience solutions.

• Commerce’s sustainability reports contain information regarding the department’s performance toward energy and 

sustainability goals in the following categories: facility energy use, water use, renewable energy, facility efficiency 

investments, high performance sustainable buildings, fleet petroleum and alternative fuel, and greenhouse gas 

emissions.

32 The report can be found here: A ROADMAP TO BUILD A CLIMATE-RESILIENT ECONOMY (whitehouse.gov). 33 DOE Projects Monumental Emissions Reduction From Inflation Reduction Act
37 MANAGEMENT’S DISCUSSION AND ANALYSIS

• EPA’s Sustainability Report and Implementation Plan identifies targets for reducing agency-wide greenhouse gas 

emissions and outlines steps to reduce energy, water, waste, and other resource use. 

• Referencing its Climate Action Plan and Office of the Chief Sustainability Officer, SSA notes that it has identified 

five priority areas at delegated facilities located in four of the ten climate regions identified in the National Climate 

Assessment Report. 

Several agencies, including State indicated that their plans include discussions of climate-related financial risk and 

efforts to manage that risk, using a framework developed by the global Task Force on Climate-Related Financial Disclosures

– Governance, Strategy, Risk Management, and Metrics. 

Approximately two-thirds of CFO Act agencies discussed climate change in the context of their strategic and 

performance goals. For example:

• Many of DOI’s strategic goals and objectives reference climate change remediation efforts, including Strategic Goal 

2 – “conserve, protect, manage, and restore natural and cultural resources in the face of climate change and other 

stressors”. Efforts supporting this goal includes DOI’s Wildland Fire Management Program, featuring a suite of 

activities, including preparedness, suppression, fuels management, burned area rehabilitation, and science.

• EPA’s strategic goals include a new goal focused exclusively on tackling the climate crisis and an unprecedented 

strategic goal to advance environmental justice and civil rights.

• Treasury’s strategic goals include “Combat Climate Change”, supported by four objectives: 1) to demonstrate global 

leadership through reengagement with international partners; 2) to promote the flow of capital towards clean and 

renewable investments; 3) to identify and mitigate climate-related financial risks through improved measuring and 

monitoring of climate impacts; and 4) to reduce greenhouse gas emissions. 

• DOE’s strategic plan includes two climate-oriented goals: 1) “Drive U.S. Energy Innovation and Deployment on a 

Path to Net-Zero Emissions by 2050”, which is supported by DOE’s Office of Clean Energy Demonstrations; and 2)

“Strengthen the Nation’s Energy, Security, Resilience, Affordability, and Reliability”. Each of DOE’s objectives 

within this goal are aimed at fulfilling the mission of the National Climate Strategy to keep America on track to 

achieve a clean energy economy with net-zero emissions by 2050. Efforts include: supporting major breakthroughs

in the development of cost-effective electric heat pumps to help decarbonize the building sector; completing field 

development activities for carbon storage; and accelerating deployment of clean technologies at scale and pace.

• DOT’s discussion of agency performance includes Agency Priority Goal 5: Joint U.S./DOE Electric Vehicle 

Charging Infrastructure Deployment under the BIL. The BIL invests in the deployment of a national network of 

electric vehicle chargers as one of many important ways to address the climate crisis across DOT, DOE, and their 

newly formed Joint Office of Energy and Transportation. All three entities will support building a national network 

of electric vehicle chargers. 

Approximately one-third of the CFO Act agencies discussed climate change as part of the forward-looking content of 

their MD&A. 

• State’s Special Presidential Envoy for Climate leads diplomatic engagement on the climate crisis, exercises climate 

leadership in international fora, increases international climate ambition and ensures that climate change is 

integrated into all elements of the Administration’s foreign policy-making process.

• SBA reports that for every $1 spent on hazard mitigation, can save up to $6 in future disaster recovery costs. In 

2022, SBA spotlighted the promotion of its disaster mitigation loan option through an Agency Priority Goal to drive 

increased awareness of this option and encourage businesses and homeowners to invest in their own preparedness.

• HHS’s Office of Climate Change and Health Equity will launch the Inter-agency Working Group to Decrease Risk 

of Climate Change to Children, the Elderly, People with Disabilities, and the Vulnerable in 2023 in addition to 

updating the Sustainable and Climate Resilient Healthcare Facilities Toolkit.

• HUD’s Strategic Plan prioritizes the sustainable, inclusive development of American communities, with added 

emphasis on furthering social equity and environmental justice. Overarching priorities include increasing social 

equity throughout all HUD programs and operations, as well as prioritizing the needs of vulnerable populations and 

underserved communities. HUD also discusses its roles under the National Disaster Recovery Framework, wherein 

HUD has both coordinating and primary roles in the housing recovery function after a declared disaster. 

• VA discussed its primary climate vulnerabilities being built, infrastructure and burdens placed on its health care 

delivery systems, and interruptions in the supply of energy and material. VA has identified specific adaptation 

actions to decrease its vulnerability to the impacts of climate change, including implementing changes to building 

design and resilience standards, and updating sustainable building certification requirements. 

A few CFO Act agencies discussed the financial effects of their climate-related efforts by relating those efforts to the 

budgetary expenses and/or financial costs incurred to execute these important programs. For example:

• USAID identifies the net costs associated with its program areas focused on climate change, including sustainable 

landscapes, clean energy, and adaptation, and provides detail of those costs by USAID’s many bureaus. 

• State indicates that it budgeted a total of $658.3 million in 2021 for climate change programming to reduce the 

federal government’s exposure to climate related financial risks. Funding supported a variety of projects, including 

those to improve energy efficiency and resilience, such as the installation of on-site renewable energy storage 
MANAGEMENT’S DISCUSSION AND ANALYSIS 38

systems, for maintenance and repairs to department facilities, and for tools to analyze potential for future climate 

risks. 

• DOI’s Net Cost of Operations links DOI net costs with its four mission areas, including two climate-oriented areas:

1) “Conserve, Protect, Manage, and Restore Natural and Cultural Resources in the Face of Climate Change and 

Other Stressors” ($7.0 billion); and 2) “Sustainably Balance the Use of Resources While Supporting Communities

and the Economy” ($8.0 billion). A related note disclosure provides additional detail presenting these net costs by 

bureau or responsibility segment (e.g., BIA, BLM, etc.). 

Approximately one-third of the Inspectors General from CFO Act agencies identified climate change as a management 

challenge. 

• Treasury’s OIG added a new Management Challenge in FY 2022, Tackling the Climate Crisis at Home and Abroad, 

stating that Treasury will play a significant role working with other federal agencies, foreign governments, and 

international financial institutions to stimulate global action on addressing climate change.

• DOD’s OIG includes Adapting to Climate Change, Accelerating Resilience, and Protecting the Environment among 

DOD’s Management Challenges. DOD’s response to this effort addresses three lines of effort of DOD’s Climate 

Adaptation Plan – making climate-informed decisions, training and equipping a climate-ready force, and building 

resilient installations and infrastructure. Key to this challenge is expanding climate literacy and training, integrating 

climate effects into operations, and addressing installations’ maintenance and improvement backlog.

• DOT’s OIG identified executing federal priorities related to the impact of climate change, advancing equity, and 

promoting resilience in infrastructure as among the top management challenges facing the agency. A primary 

challenge for DOT will be balancing these goals and priorities with the need to execute IIJA projects timely, costeffectively, and in a manner that provides value. 

EO 14008 established the Justice40 Initiative a whole of government effort with the goal that 40 percent of the overall 

benefits of certain federal investments flow to disadvantaged communities that are marginalized, underserved, and 

overburdened by pollution. The Justice40 investment categories are: climate change, clean energy and energy efficiency, 

clean transit, affordable and sustainable housing, training and workforce development, remediation and reduction of legacy 

pollution, and the development of critical clean water and wastewater infrastructure. Several agencies referenced their 

Justice40 or environmental justice efforts in their financial statements, including DOE, DOT, EPA, and HUD. 

The diversity of climate-related risks reported in agency financial statements is an indicator of the emergent and 

evolving nature of these efforts and the significant challenge that climate change presents to the nation. 

Financial Management 

Grants

In FY 2022, the federal government obligated over $1.1 trillion for grants and cooperative agreements, according to

USAspending.gov. This figure does not include obligations for other types of financial assistance, such as loans or direct

appropriations. A large portion of grant funding went to support the nation’s response to the pandemic through the ARP, the

CARES Act, and other COVID-19 funding. Improving access to key financial assistance data continues to be a priority for

OMB and was highlighted in OMB Memorandum M-22-02, New Financial Assistance Transparency Reporting

Requirements, which requires agencies to report additional information to USAspending.gov. M-22-02 also supports efforts

to improve the financial management of grants and other forms of financial assistance.

On November 15, 2021, President Biden signed into law the IIJA and subsequently OMB issued two memoranda to

provide guidance to agencies regarding IIJA program implementation. First, OMB issued M-22-08, Identification of Federal

Financial Assistance Infrastructure Programs Subject to the Build America, Buy America Provisions of the Infrastructure

Investment and Jobs Act, which required agencies to identify all existing infrastructure programs. Second, OMB issued M22-11, Initial Implementation Guidance on Application of Buy America Preference in Federal Financial Assistance

Programs for Infrastructure, which required that by May 14, 2022, agencies take actions to ensure that “none of the funds

made available for a federal financial assistance program for infrastructure, including each deficient program, may be

obligated for a project unless all of the iron, steel, manufactured products, and construction materials used in the project are

produced in the United States.”

Also in FY 2022, OMB issued M-22-12, Advancing Effective Stewardship of Taxpayer Resources and Outcomes in the

Implementation of the Infrastructure Investment and Jobs Act, which provided initial implementation guidance to agencies to

ensure proper governance and management of IIJA programs both within and across agencies and to ensure regular

engagement by agencies with the oversight community, including the Inspectors Generals and the GAO. The Memorandum

also provided guidance on program planning, design, and execution; managing risk; public reporting of financial, award, and

post-award data; and hiring and managing workforce needs.

On May 12, 2022, OMB issued the FY 2022 Compliance Supplement, which was the earliest the Supplement has been

issued in 15 years. The Supplement provides audit guidance for federal grant programs and for FY 2022 included five new

programs that are funded by ARP.
39 MANAGEMENT’S DISCUSSION AND ANALYSIS

Payment Integrity

Preventing improper payments in the federal government continues to be a management priority. To be successful in 

preventing improper payments, there must be a focus on systemic enhancements intended to make payments correctly the 

first time with an emphasis on minimizing monetary loss. The federal government, through the CFO community, continues to

develop strategies to better analyze and prevent monetary loss.

Agencies with programs reporting more than $100.0 million in monetary loss provide a quarterly scorecard at 

PaymentAccuracy.gov. These scorecards provide information on the actions taken and progress made on preventing improper 

payments that would result in monetary loss to the government. Details, including FY 2022 improper payment data, for 

programs with more than $100.0 million in monetary loss can also be found at PaymentAccuracy.gov. PaymentAccuracy.gov

also includes payment integrity information that had previously been reported in agency financial reports, allowing

information about program compliance, corrective actions, and accountability mechanisms to be provided in a consistent 

format across all programs.

OMB will continue to work with agencies, the CFO Council, and other stakeholders to improve the identification of the 

root causes of improper payments that result in monetary loss and to promote data analytic methods that take a 

comprehensive view of an agency’s payment lifecycle. 

Agency Financial Report Audits 

Since the passage of the CFO Act, the federal financial community has made significant progress in financial 

accounting and reporting. As shown in Table 10, for FY 2022, 20 of the 24 CFO Act agencies obtained an unmodified 

opinion from the independent auditors on their financial statements.34 In addition, 50 auditor-identified material weaknesses 

were identified for FY 2022, three more than in FY 2021. Twenty-eight of these are associated with DOD. The other 22

material weaknesses are associated with non-DOD agencies. Although virtually all federal agencies have adopted and 

maintained disciplined financial reporting operations, implemented effective internal controls over financial reporting, and 

integrated transaction processing with accounting records, weaknesses in financial management practices continue to prevent 

the government as a whole from achieving an audit opinion.

34 The 20 entities include HHS, which received an unmodified (“clean”) opinion on all statements except the SOSI and the SCSIA.
MANAGEMENT’S DISCUSSION AND ANALYSIS 40

Financial Management Systems

Federal agencies improved, but continue to face challenges, in implementing financial management systems that meet 

federal requirements. The number of CFO Act agencies reporting lack of substantial compliance with one or more of the 

three Section 803(a) requirements of the FFMIA decreased to seven in FY 2022, and the number of auditors reporting lack of 

substantial compliance with one or more of the three Section 803(a) FFMIA requirements decreased to eight in FY 2022.

Because of the federal government’s size and diversity, its financial management infrastructure consists of both legacy 

and modernized systems and standardized and customized systems. Treasury works closely with agencies to manage systems 

for collecting and disbursing the government’s cash and financing disbursements when necessary, recording and reporting on 

those collections and disbursements, and reporting on all government revenues, expenses, assets, and liabilities. 

Treasury was designated as the Financial Management Systems QSMO in 2020 and continues to pursue financial 

management improvement strategies that have government-wide implications. These strategies include standing up a 

financial management systems marketplace and developing system standards, standardized processes, system requirements, 

and system interfaces. These efforts are providing a path to the decommissioning of legacy systems and migration to updated 

systems, leveraging modernized technologies. In addition, agencies continue to coordinate with the Treasury QSMO to 

improve their financial management and financial reporting systems as described in their financial reports, congressional

budget justifications, and performance plans. DOD continues to address its material weaknesses in financial reporting, and is 

bringing its financial systems into compliance with federal financial management systems requirements, including the 

FFMIA.

HHS was designated as the Grants QSMO in 2021 and continues working to modernize and streamline the

government’s vast and aging legacy grants management systems. The goal of this effort is to allow agencies to successfully

manage grants through the entire award cycle and allow grants management systems to interface with agency financial

management systems.
41 MANAGEMENT’S DISCUSSION AND ANALYSIS

Internal Controls

Federal managers are responsible for developing and maintaining effective internal controls. Internal controls help to 

ensure effective and efficient operations, reliable financial reporting, and compliance with applicable laws and regulations. 

Safeguarding assets is a goal of each of these three objectives.

OMB Circular No. A-123 implements the requirements of 31 U.S.C. 3512 (c) and (d) (commonly known as the Federal 

Managers’ Financial Integrity Act) by providing agencies a framework for assessing and managing risks strategically and 

tactically. The Circular reflects GAO’s Standards for Internal Control in the Federal Government and contains multiple 

appendices that address one or more of the objectives of effective internal control. 

• Appendix A provides for agencies to use a risk-based approach to assess, document, test, and report on internal 

controls over reporting and data integrity; 

• Appendix B requires agencies to maintain internal controls that reduce the risk of fraud, waste, and error in 

government charge card programs; 

• Appendix C implements the requirements for effective estimation and remediation of improper payments; and 

• Appendix D defines requirements for determining compliance with the FFMIA that are intended to reduce the cost,

risk, and complexity of financial system modernizations.

As noted above, the total number of reported material weaknesses for CFO Act agencies was 50 for FY 2022, three 

more than in FY 2021. Effective internal controls are a challenge at the agency level and at the government-wide level, with 

GAO reporting that at the government-wide level, material weaknesses resulted in ineffective internal control over financial 

reporting. While progress is being made at many agencies and across the government in identifying and resolving internal 

control deficiencies, additional work is needed.

Legal Compliance

Federal agencies are required to comply with a wide range of laws and regulations, including appropriations, 

employment, and health and safety, among others. Responsibility for compliance rests with agency management and 

compliance is addressed as part of agency financial statement audits. Agency auditors test for compliance with selected laws 

and regulations related to financial reporting and certain individual agency audit reports contain instances of noncompliance. 

None of these instances were material to the government-wide financial statements; however, GAO reported that its work on 

compliance with laws and regulations was limited by the material weaknesses and scope limitations discussed in its report.

Conclusion 

The federal government has seen significant progress in financial management since the passage of the CFO Act more 

than 30 years ago, but significant challenges remain to realizing the intended financial management reforms of the act. The 

issues that the federal government faces today require financial managers to improve both the efficiency and effectiveness of

financial management activities, which includes moving toward integrated government operations with standardized business 

processes, systems, and data. Together with Treasury and OMB, agencies are building on tools and capabilities to improve 

financial accountability and transparency.

Additional Information

This Financial Report’s Appendix contains the names and websites of the significant government agencies included in 

the U.S. government’s consolidated financial statements. Details about the information in this Financial Report can be found 

in these agencies’ financial statements. This Financial Report, as well as those from previous years, is also available at 

Treasury, OMB, and GAO websites at: 

https://www.fiscal.treasury.gov/reports-statements/; https://www.whitehouse.gov/omb/management/office-federal-financialmanagement/; and https://www.gao.gov/federal-financial-accountability respectively. Other related government resources

include, but are not limited to the: 

• Budget of the United States Government, 

• Treasury Bulletin, 

• Monthly Treasury Statement of Receipts and Outlays of the United States Government, 

• Monthly Statement of the Public Debt of the United States, 

• Your Guide to America’s Finances,

• Economic Report of the President, and 

• Trustees Reports for the Social Security and Medicare Programs.
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
FINANCIAL STATEMENTS 52

Financial Statements

of the United States Government

for the Fiscal Years Ended September 30, 

2022, and 2021

The consolidated financial statements of the U.S. government were prepared using GAAP. These statements include the 

accrual-based financial statements and the sustainability financial statements, which are discussed in more detail below, and 

the related notes to the consolidated financial statements. Collectively, the accrual-based financial statements, the 

sustainability financial statements, and the notes represent basic information that is deemed essential for the consolidated 

financial statements to be presented in conformity with GAAP. 

ACCRUAL-BASED FINANCIAL STATEMENTS

The accrual-based financial statements present historical information on what the federal government owns (assets) and 

owes (liabilities) at the end of the year, what came in (revenues) and what went out (net costs) during the year, and how 

accrual-based net operating costs of the federal government reconcile to the budget deficit and changes in its cash balance 

during the year. The following sections discuss each of the accrual-based financial statements.

Statements of Net Cost 

These statements present the net cost of the government operations for FYs 2022 and 2021. Costs and earned revenues 

are categorized on the Statement of Net Cost by significant entity, providing greater accountability by showing the 

relationship of the entities’ net cost to the government-wide net cost. Costs and earned revenues are presented in this 

Financial Report on an accrual basis, while the budget presents outlays and receipts, generally on a cash basis. The focus of 

the Budget is by entity. In reporting the Statement of Net Cost by entity, we are assisting the external users in assessing the

operating performance, budget integrity, stewardship, and systems and controls of the government.

The Statements of Net Cost contain the following four components:

• Gross cost—is the full cost of all the departments and entities excluding (gain)/loss from changes in assumptions. 

These costs are assigned on a cause-and-effect basis, or reasonably allocated to the corresponding entities.

• Earned revenue—is exchange revenue resulting from the government providing goods and services to the public at a 

price.

• (Gain)/loss from changes in assumptions—is the gain or loss from changes in long-term assumptions used to 

measure the liabilities reported for federal civilian and military employee pensions, OPEB, and ORB, including 

veterans’ compensation.

• Net cost—is computed by subtracting earned revenue from gross cost, adjusted by the (gain)/loss from changes in 

assumptions.

Individual entity net cost amounts will differ from the entity’s financial statements primarily because of reallocations 

completed at the government-wide level which are listed below. 

• Employee benefit costs.

• Intra-governmental eliminations, as adjusted for buy/sell costs and related revenues.

• Imputed costs.

Because of its specific function, most of the employee benefit costs originally associated with the OPM have been 

reallocated to the user entities for government-wide reporting purposes. The remaining costs for OPM on the Statements of 

Net Cost are the administrative operating costs, the expenses from prior costs from health and pension plan amendments, and 

the actuarial gains and losses, if applicable.

With regard to intra-governmental buy/sell costs and related revenues, the amounts recognized by each entity are added 

to, and subtracted from, respectively, the individual entity non-federal net cost amounts in order to allocate the costs to the 
 53 FINANCIAL STATEMENTS

entities that incurred the costs. GSA is the primary provider of goods and services to federal entities. GSA’s net cost is 

adjusted for its intra-governmental buy/sell costs and related revenues. The remaining costs for GSA on the Statements of 

Net Cost are administrative operating costs. 

In addition, the intra-governmental imputed costs recognized for the receipt of goods and services, financed in whole or 

part by the providing entities, are added to the individual entity non-federal net cost amounts. The most significant types of 

imputed costs that are recorded relate to post-retirement and health benefits, FECA, and Treasury’s Judgment Fund. The 

consolidated Statements of Net Cost is intended to show the full cost for each entity, therefore, the amount of these imputed 

costs are added back to the reporting entities’ gross cost line item and subtracted from the applicable administering entities’ 

gross cost line item. These imputed costs have a net effect of zero on the Statements of Net Cost in the Financial Report.

The interest on securities issued by Treasury and held by the public is reported on Treasury’s financial statements, but 

because of its importance and the dollar amounts involved, it is reported separately in these statements. 

Statements of Operations and Changes in Net Position

These statements report the results of government operations (net operating costs). They include non-exchange 

revenues, which are generated from transactions that do not require a government entity to give value directly in exchange for 

the inflow of resources. The government does not “earn” the non-exchange revenue. These are generated principally by the 

government’s sovereign power to tax, levy duties, and assess fines and penalties. These statements also include the net cost

reported in the Statements of Net Cost. They further include certain adjustments and unmatched transactions and balances 

that affect the net position. These statements present information for funds from dedicated collections and funds other than 

those from dedicated collections. Each of these types are presented on a consolidated basis whereby transactions within each 

fund type are eliminated. In order to present the activity on a government-wide basis, transactions between funds from 

dedicated collections and funds other than those from dedicated collections are eliminated. 

Revenue

Inflows of resources to the government that the government demands or that it receives by donations are identified as 

non-exchange revenue. The inflows that it demands include individual income tax and tax withholdings, corporate income 

taxes, excise taxes, unemployment taxes, custom duties, and estate and gift taxes. The non-exchange revenue is recognized 

when collected and adjusted for the change in amounts receivable.

Individual income tax and tax withholdings include FICA/SECA taxes and other taxes. 

Individual income tax and tax withholding and corporate income tax include the TCJA, which imposed a one-time tax 

on previously unrepatriated foreign earnings at a reduced rate that taxpayers may elect to pay over an eight-year installment 

schedule.

Excise taxes consist of taxes collected for various items, such as airline tickets, gasoline products, distilled spirits and 

imported liquor, tobacco, firearms, and other items. 

Other taxes and receipts include FRBs earnings, tax related fines, penalties and interest, and railroad retirement taxes.

Miscellaneous earned revenues consist of earned revenues received from the public with virtually no associated cost. 

These revenues include rents and royalties on the Outer Continental Shelf Lands resulting from the leasing and development 

of mineral resources on public lands.

Intra-governmental revenue represents interest earned from the investment of surplus dedicated collections, which 

finance the deficit spending of all other fund’s non-dedicated operations. These investments are recorded as intragovernmental debt holdings and are included in Note 12—Federal Debt and Interest Payable, in the table titled Intragovernmental Debt Holdings: Federal Debt Securities Held as Investments by Government Accounts. These interest earnings 

and the associated investments are eliminated in the consolidation process.

Net Cost of Government Operations

The net cost of government operations—gross cost (including gains/losses from changes in assumptions) less earned 

revenue—flows through from the Statements of Net Cost. 
FINANCIAL STATEMENTS 54

Intra-governmental Transfers

Intra-governmental transfers are transfers between funds other than those from dedicated collections and funds from 

dedicated collections, such as intra-governmental interest and amounts required by statute to be transferred from the General 

Fund to funds from dedicated collections. These intra-governmental transfers include appropriations, transfers, and other 

financing sources. These amounts are labeled as “other changes in fund balance” in Note 22—Funds from Dedicated 

Collections. 

Net Operating Cost 

The net operating cost equals revenue less net cost of government operations (that flows from the Statement of Net 

Cost).

Net Position, Beginning of Period

The net position, beginning of period, reflects the amount reported on the prior year’s Balance Sheet as of the end of 

that fiscal year. 

Adjustments to beginning net position may include corrections of material errors or changes in accounting principles. 

See Note 1.U—Changes in Accounting Principle and Note 1.V—Correction of Errors for additional information.

Unmatched transactions and balances are adjustments needed to bring the change in net position into balance due 

primarily to unresolved intra-governmental differences. See Note 1.T—Unmatched Transactions and Balances for additional 

information.

The unmatched transactions are to make the sum of net operating costs and adjustments to beginning net position for the 

year equal to the change in net position balance. The unmatched balances are included in the net position, funds other than 

those from dedicated collections on the Balance Sheet.

Net Position, End of Period

The net position, end of period, reflects the amount as of the end of the fiscal year. The net position for funds from 

dedicated collections is separately shown.

Reconciliations of Net Operating Cost and Budget Deficit

These statements reconcile the results of operations (net operating cost) on the Statements of Operations and Changes in 

Net Position to the budget deficit (result of outlays exceeding receipts during a particular fiscal year). The premise of the 

reconciliation is that accrual accounting and budgetary accounting often share much of the same transactional data. However, 

some transactions differ between the two bases of accounting and are presented as reconciling items from the net operating 

cost to the budget deficit. 

Receipts and outlays in the budget are measured primarily on a cash basis and differ from the accrual basis of

accounting used in the Financial Report. Refer to Note 1.B—Basis of Accounting and Revenue Recognition for additional 

information on the accrual basis of accounting. These statements begin with the net results of operations (net operating cost) 

and report activities where the basis of accounting for the components of net operating cost and the budget deficit differ.

Some presentations of the budget deficit make the distinction between on-budget and off-budget totals. On-budget totals 

reflect the transactions of all government entities, except those excluded from the budget by law. Off-budget totals reflect the 

transactions of government entities that are excluded from the on-budget totals by law. Under current law, the off-budget 

totals include the Social Security trust funds and USPS. The budget deficit, as presented in the Financial Report, combines 

the on-budget and off-budget totals to derive consolidated totals for federal activity. 
 55 FINANCIAL STATEMENTS

Components of Net Operating Cost Not Part of the Budget Deficit

This information includes the operating components, such as the changes in benefits payable for veterans, military and 

civilian employees, environmental and disposal liabilities, and depreciation expense, not included in the budget results.

Components of the Budget Deficit Not Part of Net Operating Cost

This information includes the budget components, such as the acquisition of capital assets (that are recorded as outlays 

in the budget when cash is disbursed and reflected in net operating cost through depreciation expense over the useful life of 

the asset) and increases in other assets that are not included in the operating results. 

Statements of Changes in Cash Balance from Budget and Other 

Activities

The primary purpose of these financial statements is to report how the annual budget deficit relates to the change in the 

government’s cash and other monetary assets, as well as federal debt. It explains why the budget deficit normally would not 

result in an equivalent change in the government’s cash and other monetary assets.

These statements reconcile the budget deficit to the change in cash and other monetary assets during the fiscal year. 

They also serve to explain how the budget deficits were financed. These statements show the adjustments for non-cash

outlays included in the budget, and items affecting the cash balance not included in the budget, to explain the change in cash

and other monetary assets.

The budget deficit is primarily financed through borrowings from the public. When receipts exceed outlays, the 

difference is a surplus. The budget treats borrowing and debt repayment as a means of financing, not as receipts and 

outlays. The budget records outlays for the interest on the public issues of Treasury debt securities as the interest accrues, 

not when the cash is paid.

Non-cash flow amounts in the budget related to loan financing account activity also reflect intra-governmental 

transactions such as interest expense paid or interest revenue received from Treasury, entity year-end credit reform 

subsidy reestimates, and the receipt of subsidy expense from program accounts. Cash flow from non-budget activities 

related to loan financing account activity includes all cash flows to and from the public, including direct loan 

disbursements/default payments to lenders, fees collected, principal and interest repayments, collections on defaulted 

guarantee loans, and sale proceeds of foreclosed property. The budget totals exclude the transactions of the financing 

accounts because they are not a cost to the government. However, since loan financing accounts record all credit cash 

flows to and from the public, they affect the means of financing a budget deficit.

Balance Sheets

The Balance Sheets show the government’s assets, liabilities, and net position. When combined with stewardship 

information, this information presents a more comprehensive understanding of the government’s financial position. The net 

position for funds from dedicated collections is shown separately.

Assets

Assets included on the Balance Sheets are resources of the government that remain available to meet future needs. The 

most significant assets that are reported on the Balance Sheets are loans receivable, net, general PP&E, net; accounts 

receivable, net; and cash and other monetary assets. There are, however, other significant resources available to the 

government that extend beyond the assets presented in these Balance Sheets. Those resources include stewardship PP&E in 

addition to the government’s sovereign powers to tax and set monetary policy.
FINANCIAL STATEMENTS 56

Liabilities and Net Position

Liabilities are obligations of the government resulting from prior actions that will require financial resources. The most 

significant liabilities reported on the Balance Sheets are federal debt and interest payable and federal employee and veteran 

benefits payable. Liabilities also include environmental and disposal liabilities, benefits due and payable, loan guarantee 

liabilities, as well as insurance and guarantee program liabilities.

As with reported assets, the government’s responsibilities, policy commitments, and contingencies are much broader 

than these reported Balance Sheet liabilities. They include the social insurance programs reported in the SOSI and disclosed 

in the unaudited RSI—Social Insurance section, fiscal long-term projections of non-interest spending reported in the SLTFP, 

and a wide range of other programs under which the government provides benefits and services to the people of this nation, 

as well as certain future loss contingencies.

The government has entered into contractual commitments requiring the future use of financial resources and has 

unresolved contingencies where existing conditions, situations, or circumstances create uncertainty about future losses. 

Commitments and contingencies that do not meet the criteria for recognition as liabilities on the Balance Sheets, but for 

which there is at least a reasonable possibility that losses have been incurred, are disclosed in Note 20—Commitments and 

Note 21—Contingencies. 

Unmatched transactions and balances are adjustments needed to reconcile differences between assets and liabilities, that 

are primarily due to unresolved intra-governmental differences. See Note 1.T—Unmatched Transactions and Balances for 

additional information. 

The collection of certain taxes and other revenue is credited to the corresponding funds from dedicated collections that 

will use these funds to meet a particular government purpose. If the collections from taxes and other sources exceed the

payments to the beneficiaries, the excess revenue is invested in Treasury securities or deposited in the General Fund; 

therefore, the trust fund balances do not represent cash. An explanation of the trust funds for social insurance is included in 

Note 22—Funds from Dedicated Collections. That note also contains information about trust fund receipts, disbursements, 

and assets.

Due to its sovereign power to tax and borrow, and the country’s wide economic base, the government has unique access 

to financial resources through generating tax revenues and issuing federal debt securities. This provides the government with 

the ability to meet present obligations and those that are anticipated from future operations and are not reflected in net 

position.

The net position is the residual difference between assets and liabilities, adjusted for unmatched transactions and 

balances reported in the Balance Sheet, and is the cumulative results of operations since inception. For detailed components 

that comprise the net position, refer to the section “Statement of Operations and Changes in Net Position.” 

SUSTAINABILITY FINANCIAL STATEMENTS

The sustainability financial statements are comprised of the SLTFP, covering all federal government programs, and the 

SOSI and the SCSIA, covering social insurance programs (Social Security, Medicare, Railroad Retirement, and Black Lung 

programs). The sustainability financial statements are designed to illustrate the relationship between projected receipts and

expenditures if current policy is continued over a 75-year time horizon.1 In preparing the sustainability financial statements, 

management selects assumptions and data that it believes provide a reasonable basis to illustrate whether current policy is 

sustainable. Current policy is based on current law but includes several adjustments. In the SLTFP, notable adjustments to 

current law are: 1) projected spending, receipts, and borrowing levels assume raising or suspending the current statutory limit 

on federal debt; 2) continued discretionary appropriations are assumed throughout the projections period; 3) scheduled Social 

Security and Medicare Part A benefit payments are assumed to occur beyond the projected point of trust fund depletion; and 

4) many mandatory programs with expiration dates prior to the end of the 75-year projection period are assumed to be 

reauthorized. In the SOSI, the one adjustment to current law is that scheduled Social Security and Medicare Part A benefit 

payments are assumed to occur beyond the projected point of trust fund depletions. Assumptions underlying such 

sustainability information do not consider changes in policy or all potential future events that could affect future income, 

future expenditures, and, hence, sustainability. The projections do not reflect any adverse economic consequences resulting 

from continuously rising debt levels. A large number of factors affect the sustainability financial statements and future events 

and circumstances cannot be estimated with certainty. Therefore, even if current policy is continued, there will be differences 

1 With the exception of the Black Lung program, which has a rolling 25-year projection period that begins on the September 30 valuation date each year.
 57 FINANCIAL STATEMENTS

between the estimates in the sustainability financial statements and actual results, and those differences may be material. The 

unaudited RSI section of this report includes PV projections using different assumptions to illustrate the sensitivity of the 

sustainability financial statements to changes in certain assumptions. The sustainability financial statements are intended to 

help citizens understand current policy and the importance and magnitude of policy reforms necessary to make it sustainable. 

By accounting convention, General Fund transfers to Medicare Parts B and D reported in the SOSI are eliminated when 

preparing the government-wide consolidated financial statements. The SOSI shows the projected General Fund transfers as 

eliminations that, under current law, would be used to finance the remainder of the expenditures in excess of revenues for 

Medicare Parts B and D reported in the SOSI. The SLTFP include all revenues (including general revenues) of the federal 

government.

Statements of Long-Term Fiscal Projections

The SLTFP, including the corresponding Note and RSI, are intended to help readers of the government’s financial 

statements assess the federal government’s financial condition and how it has changed during the year and may change in the 

future. The statements and corresponding analysis are specifically designed to help readers assess whether future budgetary 

resources will be sufficient to sustain public services and to meet obligations as they come due, assuming that current policy 

for federal government services and taxation continues without change.

The SLTFP display the PV of 75-year projections by major category of receipts and non-interest spending. The 

projections show the extent to which future receipts of the government exceed or fall short of the government’s non-interest 

spending and are presented both in terms of PV dollars and in terms of PV dollars as a percent of PV GDP. The projections 

reflect policies currently in place and are neither forecasts nor predictions. The projections are consistent with the projections 

for Social Security and Medicare presented in the SOSI and are based on the same economic and demographic assumptions 

that underlie the SOSI. The SLTFP display the fiscal gap, which is a summary measure of the change in receipts or noninterest spending that is necessary to reach a target ratio of debt held by the public to GDP at the end of the projection period. 

Note 24—Long-Term Fiscal Projections, explains the methods used to prepare the projections. Unaudited RSI further 

assesses the sustainability of current fiscal policy and provides results that are based on alternative assumptions to those used 

in the SLTFP.

As discussed further in Note 24, a sustainable policy is one where the debt-to-GDP ratio is stable or declining over the 

long term. Because GDP measures the size of the nation’s economy in terms of the total value of all final goods and services 

that are produced in a year, the debt-to-GDP ratio is a useful indicator of the economy’s capacity to support federal

government’s services.

Statements of Social Insurance and Changes in Social Insurance 

Amounts

SOSI provides estimates of the status of the most significant social insurance programs: Social Security, Medicare, 

Railroad Retirement, and Black Lung.2 They are administered by SSA, HHS, RRB, and DOL, respectively. The SSA and

HHS projections are based on the intermediate economic and demographic assumptions representing the Trustees’ reasonable

estimates of likely future economic and demographic conditions, as set forth in the applicable Social Security and Medicare

Trustees Reports as well as in the financial statements of HHS and SSA. RRB’s projections are based on assumptions from

the 28th Actuarial Valuation of the Assets and Liabilities Under the Railroad Retirement Acts as of December 31, 2019, the

2022 Annual Report of the Railroad Retirement System required by Section 502 of the Railroad Retirement Solvency Act of

1983 (P.L. 98-76), as well as in RRB’s financial statements and DOL’s projections are based on assumptions disclosed in its

financial statements.

The SCSIA show two reconciliations: 1) change from the period beginning on January 1, 2021 to the period beginning

on January 1, 2022; and 2) change from the period beginning on January 1, 2020 to the period beginning on January 1, 2021.

It reconciles the changes (between the current valuation and the prior valuation) in the PV of estimated future revenue less

estimated future expenditures for current and future participants (the open group measure) over the next 75 years (except

2 In relation to the amounts presented in the SOSI and SCSIA, because the combined Railroad Retirement and Black Lung programs account for less than 

one-quarter of 1.0 percent of the statement totals, they are not material from the government-wide perspective.
FINANCIAL STATEMENTS 58

Black Lung which has a rolling 25-year projection period through September 30, 2047). The reconciliation identifies several

components of the changes that are significant and provides reasons for the changes in Note 25—Social Insurance.
 59 FINANCIAL STATEMENTS

United States Government

Statement of Net Cost

for the Year Ended September 30, 2022 (Gain)/Loss

from

Gross Earned Changes in Net

(In billions of dollars) Cost Revenue Subtotal Assumptions Cost

Department of Veterans Affairs ................................. 413.8 5.4 408.4 1,526.5 1,934.9

Department of Health and Human Services ................. 1,812.7 154.1 1,658.6 1.4 1,660.0

Department of Defense ........................................... 979.6 47.6 932.0 527.0 1,459.0

Social Security Administration................................... 1,294.4 0.3 1,294.1 - 1,294.1

Department of Education ......................................... 595.1 55.6 539.5 - 539.5

Department of the Treasury...................................... 557.7 31.3 526.4 - 526.4

Interest on Treasury Securities held by the public ......... 496.5 - 496.5 - 496.5

Office of Personnel Management .............................. 174.5 27.3 147.2 148.2 295.4

Department of Agriculture ........................................ 250.5 9.6 240.9 - 240.9

Department of Transportation ................................... 116.4 1.0 115.4 - 115.4

Department of Homeland Security ............................. 102.2 14.8 87.4 1.2 88.6

Security Assistance Accounts ................................... 102.1 19.3 82.8 - 82.8

Small Business Administration.................................. 47.8 4.3 43.5 - 43.5

Department of Labor............................................... 42.4 - 42.4 - 42.4

Department of Justice ............................................. 42.4 1.2 41.2 - 41.2

Department of State ............................................... 40.0 4.8 35.2 3.4 38.6

Agency for International Development ........................ 29.5 0.1 29.4 - 29.4

Department of Energy ............................................. 50.3 22.4 27.9 - 27.9

Department of Housing and Urban Development .......... 28.2 1.9 26.3 - 26.3

Department of the Interior ........................................ 28.3 2.6 25.7 - 25.7

National Aeronautics and Space Administration............ 22.3 0.3 22.0 - 22.0

Federal Communications Commission........................ 16.0 0.4 15.6 - 15.6

Department of Commerce........................................ 15.8 4.2 11.6 0.1 11.7

Environmental Protection Agency .............................. 9.8 0.3 9.5 - 9.5

National Science Foundation.................................... 8.2 - 8.2 - 8.2

Railroad Retirement Board....................................... 8.2 - 8.2 - 8.2

National Railroad Retirement Investment Trust............. 4.7 1.1 3.6 - 3.6

United States Postal Service .................................... 78.7 76.2 2.5 - 2.5

Smithsonian Institution ............................................ 1.7 0.1 1.6 - 1.6

Millennium Challenge Corporation ............................. 0.7 - 0.7 - 0.7

Securities and Exchange Commission........................ 2.6 2.4 0.2 - 0.2

National Credit Union Administration.......................... 0.3 0.1 0.2 - 0.2

U.S. Nuclear Regulatory Commission......................... 0.8 0.7 0.1 - 0.1

United States International Development Finance 

Corporation........................................................... 0.3 0.2 0.1 - 0.1

Export-Import Bank of the United States ..................... - 0.5 (0.5) - (0.5)

General Services Administration ............................... 0.3 0.9 (0.6) - (0.6)

Farm Credit System Insurance Corporation ................. - 0.6 (0.6) - (0.6)

Tennessee Valley Authority...................................... 11.3 12.4 (1.1) - (1.1)

Federal Deposit Insurance Corporation....................... 1.9 8.2 (6.3) - (6.3)

Pension Benefit Guaranty Corporation........................ 9.9 16.9 (7.0) - (7.0)

All other entities ..................................................... 22.1 2.0 20.1 0.1 20.2

Total.................................................................... 7,420.0 531.1 6,888.9 2,207.9 9,096.8

The accompanying notes are an integral part of these financial statements.
FINANCIAL STATEMENTS 60

United States Government

Statement of Net Cost

for the Year Ended September 30, 2021 (Restated) (Gain)/Loss

from

Gross Earned Changes in Net

(In billions of dollars) Cost Revenue Subtotal Assumptions Cost

Department of Veterans Affairs ................................. 351.0 3.9 347.1 346.3 693.4

Department of Health and Human Services ................. 1,644.9 137.7 1,507.2 0.7 1,507.9

Department of Defense ........................................... 851.8 44.0 807.8 82.8 890.6

Social Security Administration................................... 1,194.1 0.3 1,193.8 - 1,193.8

Department of Education ......................................... 243.0 34.4 208.6 - 208.6

Department of the Treasury...................................... 966.5 135.7 830.8 - 830.8

Interest on Treasury Securities held by the public ......... 392.0 - 392.0 - 392.0

Office of Personnel Management .............................. 134.0 26.3 107.7 84.9 192.6

Department of Agriculture ........................................ 239.4 8.8 230.6 - 230.6

Department of Transportation ................................... 102.9 1.0 101.9 - 101.9

Department of Homeland Security ............................. 101.0 12.9 88.1 1.6 89.7

Security Assistance Accounts ................................... 92.9 14.4 78.5 - 78.5

Small Business Administration.................................. 350.5 3.1 347.4 - 347.4

Department of Labor............................................... 396.8 - 396.8 - 396.8

Department of Justice ............................................. 41.4 2.6 38.8 - 38.8

Department of State ............................................... 40.2 3.5 36.7 1.9 38.6

Agency for International Development ........................ 16.0 - 16.0 - 16.0

Department of Energy ............................................. 43.2 6.2 37.0 - 37.0

Department of Housing and Urban Development .......... 35.3 1.9 33.4 - 33.4

Department of the Interior ........................................ 23.8 2.3 21.5 - 21.5

National Aeronautics and Space Administration............ 22.1 0.3 21.8 - 21.8

Federal Communications Commission........................ 11.7 0.4 11.3 - 11.3

Department of Commerce........................................ 15.5 3.6 11.9 0.1 12.0

Environmental Protection Agency .............................. 8.9 0.4 8.5 - 8.5

National Science Foundation.................................... 7.4 - 7.4 - 7.4

Railroad Retirement Board....................................... 17.3 - 17.3 - 17.3

National Railroad Retirement Investment Trust............. 0.1 6.6 (6.5) - (6.5)

United States Postal Service .................................... 77.9 75.7 2.2 - 2.2

Smithsonian Institution ............................................ 1.5 0.8 0.7 - 0.7

Millennium Challenge Corporation ............................. 0.7 - 0.7 - 0.7

Securities and Exchange Commission........................ 2.4 2.5 (0.1) - (0.1)

National Credit Union Administration.......................... 0.2 0.1 0.1 - 0.1

U.S. Nuclear Regulatory Commission......................... 0.9 0.7 0.2 - 0.2

United States International Development Finance 

Corporation........................................................... - 0.2 (0.2) - (0.2)

Export-Import Bank of the United States ..................... 0.5 0.7 (0.2) - (0.2)

General Services Administration ............................... (0.1) 0.9 (1.0) - (1.0)

Farm Credit System Insurance Corporation ................. - 0.4 (0.4) - (0.4)

Tennessee Valley Authority...................................... 8.8 10.4 (1.6) - (1.6)

Federal Deposit Insurance Corporation....................... 1.7 7.1 (5.4) - (5.4)

Pension Benefit Guaranty Corporation........................ (56.5) 22.6 (79.1) - (79.1)

All other entities ..................................................... 24.9 1.8 23.1 0.1 23.2

Total.................................................................... 7,406.6 574.2 6,832.4 518.4 7,350.8

The accompanying notes are an integral part of these financial statements.
 61 FINANCIAL STATEMENTS

United States Government

Statement of Operations and Changes in Net Position

for the Year Ended September 30, 2022 (Consolidated)

Funds other than Funds from

those from Dedicated

Dedicated Collections

Collections (Note 22) Eliminations Total

(In billions of dollars) 2022

Revenue (Note 19):

Individual income tax and tax withholdings ............ 2,571.1 1,441.5 - 4,012.6

Corporate income taxes .................................... 383.2 - - 383.2

Excise taxes ................................................... 34.4 58.4 - 92.8

Unemployment taxes........................................ 6.9 56.7 - 63.6

Customs duties ............................................... 98.6 0.1 - 98.7

Estate and gift taxes......................................... 32.6 - - 32.6

Other taxes and receipts ................................... 182.3 16.2 - 198.5

Miscellaneous earned revenues.......................... 43.9 - - 43.9

Intra-governmental revenue ............................... - 99.8 (99.8) -

Total revenue.................................................. 3,353.0 1,672.7 (99.8) 4,925.9

Net Cost of Government Operations:

Net cost ......................................................... 6,970.1 2,126.7 - 9,096.8

Intra-governmental cost .................................... 99.8 - (99.8) -

Total net cost .................................................. 7,069.9 2,126.7 (99.8) 9,096.8

Intra-governmental transfers.............................. (667.4) 667.4 - -

Net operating (cost)/revenue.............................. (4,384.3) 213.4 - (4,170.9)

Net position, beginning of period........................ (33,368.8) 3,483.0 - (29,885.8)

Adjustments to beginning net position

Changes in accounting principle (Note 1.U) ....... (4.3) - - (4.3)

Net operating (cost)/revenue.............................. (4,384.3) 213.4 - (4,170.9)

Unmatched transactions and balances

(Note 1.T).................................................... (0.2) - - (0.2)

Net position, end of period ................................ (37,757.6) 3,696.4 - (34,061.2)

The accompanying notes are an integral part of these financial statements.
FINANCIAL STATEMENTS 62

United States Government

Statement of Operations and Changes in Net Position

for the Year Ended September 30, 2021 (Consolidated) (Restated)

Funds other than Funds from

those from Dedicated

Dedicated Collections

Collections (Note 22) Eliminations Total

(In billions of dollars) 2021

Revenue (Note 19):

Individual income tax and tax withholdings ............ 2,002.0 1,274.3 - 3,276.3

Corporate income taxes .................................... 456.2 - - 456.2

Excise taxes ................................................... 28.6 52.0 - 80.6

Unemployment taxes........................................ 6.1 44.2 - 50.3

Customs duties ............................................... 80.0 0.1 - 80.1

Estate and gift taxes......................................... 27.1 - - 27.1

Other taxes and receipts ................................... 163.9 26.8 - 190.7

Miscellaneous earned revenues.......................... 94.4 0.2 - 94.6

Intra-governmental revenue ............................... - 106.1 (106.1) -

Total revenue.................................................. 2,858.3 1,503.7 (106.1) 4,255.9

Net Cost of Government Operations:

Net cost ......................................................... 5,165.0 2,185.8 - 7,350.8

Intra-governmental cost .................................... 106.1 - (106.1) -

Total net cost .................................................. 5,271.1 2,185.8 (106.1) 7,350.8

Intra-governmental transfers.............................. (693.7) 693.7 - -

Net operating (cost)/revenue.............................. (3,106.5) 11.6 - (3,094.9)

Net position, beginning of period........................ (30,262.8) 3,471.4 - (26,791.4)

Adjustments to beginning net position

Changes in accounting principle (Note 1.U) ........ 0.7 - - 0.7

Net operating (cost)/revenue.............................. (3,106.5) 11.6 - (3,094.9)

Unmatched transactions and balances

(Note 1.T).................................................... (0.2) - - (0.2)

Net position, end of period................................. (33,368.8) 3,483.0 - (29,885.8)

The accompanying notes are an integral part of these financial statements.
 63 FINANCIAL STATEMENTS

United States Government

Reconciliations of Net Operating Cost and Budget Deficit

for the Years Ended September 30, 2022, and 2021

(In billions of dollars) 2022 2021

Net operating cost .................................................................................................... (4,170.9) (3,094.9)

Components of net operating cost not part of the budget deficit

Excess of accrual-basis expenses over budget outlays

* Federal employee and veteran benefits payable

Pension and accrued benefits .............................................................................. 774.1 282.0

Veterans compensation and burial benefits ............................................................. 1,662.8 439.2

Post-retirement health and accrued benefits............................................................ 176.3 28.7

Other benefits ................................................................................................... 15.8 17.6

Subtotal - federal employee and veteran benefits payable ....................................... 2,629.0 767.5

* Insurance and guarantee program liabilities ............................................................... (25.3) (69.5)

* Environmental and disposal liabilities........................................................................ 13.0 10.6

* Accounts payable ................................................................................................ (8.5) 24.1

* Benefits due and payable....................................................................................... 14.4 17.6

* Advances from others and deferred revenue.............................................................. 45.2 27.8

* Other liabilities..................................................................................................... (182.0) 283.1

Subtotal - excess of accrual-basis expenses over budget outlays .............................. 2,485.8 1,061.2

Amortized expenses not included in budget outlays

Property, plant, and equipment depreciation expense .................................................. 78.3 91.2

Other expenses that are not reported as budget outlays

Property, plant, and equipment disposals and revaluations ........................................... 15.5 (9.8)

Excess of accrual-basis revenue over budget receipts

Accounts receivable, net........................................................................................ (20.8) (11.8)

Taxes receivable, net ............................................................................................ 65.5 (68.0)

Other losses/(gains) and cost/(revenue) that are not budget receipts

* Investments in government-sponsored enterprises...................................................... (2.8) (112.0)

Subtotal - components of net operating cost not part of budget deficit ........................ 2,621.5 950.8

Components of the budget deficit that are not part of net operating cost

Budget receipts not included in net operating cost

Credit reform and other loan activities....................................................................... (58.5) (75.1)

Budget outlays not included in net operating cost

Acquisition of capital assets.................................................................................... (114.4) (118.4)

* Investments ........................................................................................................ 31.3 (31.8)

* Inventory and related property, net........................................................................... (7.7) (17.3)

* Advances and prepayments ................................................................................... 71.3 (150.7)

* Other assets........................................................................................................ 1.0 4.0

Subtotal - components of the budget deficit that are not part of net operating cost ........ (77.0) (389.3)

Adjustments to beginning net position (4.3) 0.7

Other

Allocations of special drawing rights ......................................................................... 14.8 (112.1)

Effect of uninvested principal from the Thrift Savings Plan's G Fund ............................... 156.7 (156.7)

All other reconciling items ...................................................................................... 83.7 25.9

Total other ..................................................................................................... 255.2 (242.9)

Budget deficit1.......................................................................................................... (1,375.5) (2,775.6)

1 The FY 2021 budget deficit differs from the FY 2021 budget deficit reported in the MTS because of approximately $3.4 billion of outlays that

were not recorded in the MTS until FY 2022.

* The amounts represent the year over year net change in the Balance Sheet line items. 

The accompanying notes are an integral part of these financial statements. 
FINANCIAL STATEMENTS 64

United States Government

Statements of Changes in Cash Balance from Budget and Other Activities

for the Years Ended September 30, 2022, and 2021

(In billions of dollars) 2022 2021

Cash flow from budget activities

Total budget receipts ................................................................................................. 4,896.1 4,046.0

Total budget outlays1 ................................................................................................. (6,271.6) (6,821.6)

Budget deficit1 .......................................................................................................... (1,375.5) (2,775.6)

Adjustments for non-cash outlays included in the budget

Non-cash flow amounts in the budget related to federal debt 

Accrued interest........................................................................................................ 311.3 293.4

Net amortization ....................................................................................................... 31.9 12.1

Other...................................................................................................................... 260.0 82.3

Subtotal - adjustments for non-cash flow amounts in the budget related to federal debt ........... 603.2 387.8

Non-cash flow amounts in the budget related to loan financing account activity

Interest revenue on uninvested funds ............................................................................ 12.7 12.8

Interest expense on entity borrowings ........................................................................... (45.5) (47.4)

Downward reestimates/negative subsidy payments.......................................................... (55.9) (58.1)

Subsidy expense/upward reestimates ........................................................................... 542.6 456.4

Subtotal - adjustments for non-cash flow amounts in the budget related to loan

financing account activity ............................................................................................ 453.9 363.7

Total of adjustments for non-cash outlays included in the budget .......................................... 1,057.1 751.5

Cash flow from activities not included in the budget

Cash flow from non-budget activities related to federal debt

Interest paid............................................................................................................. (299.2) (294.8)

Subtotal - cash flow from non-budget activities related to federal debt.................................. (299.2) (294.8)

Cash flow from non-budget activities related to loan financing account activity

Loan disbursements/default payments........................................................................... (522.6) (823.0)

Fees....................................................................................................................... 25.4 27.5

Principal and interest repayments................................................................................. 87.5 78.1

Other collections on defaulted loans receivable and sale of foreclosed property ..................... 2.2 2.2

Special purpose vehicle disbursements ......................................................................... (4.5) (14.9)

Repayments of special purpose vehicle investments ........................................................ 9.1 77.7

Subtotal - cash flow from non-budget activities related to loan financing account activity .......... (402.9) (652.4)

Cash flow from financing federal debt

Borrowings .............................................................................................................. 17,457.5 20,375.7

Repayments ............................................................................................................ (15,701.2) (19,194.0)

Discount/premium ..................................................................................................... (78.7) (11.7)

Effect of uninvested principal from the Thrift Saving Plan's G Fund...................................... (156.7) 156.7

Subtotal - cash flow from financing federal debt............................................................... 1,520.9 1,326.7

Total cash flow from activities not included in the budget ..................................................... 818.8 379.5

Other

Allocations of special drawing rights ................................................................................ (14.8) 112.1

All other reconciling items ............................................................................................. (82.8) 80.6

Total other............................................................................................................... (97.6) 192.7

Change in cash and other monetary assets balance........................................................... 402.8 (1,451.9)

Beginning cash and other monetary assets balance ........................................................... 475.0 1,926.9

Ending cash and other monetary assets balance ............................................................... 877.8 475.0

1 The FY 2021 budget deficit differs from the FY 2021 budget deficit reported in the MTS because of approximately $3.4 billion of outlays that

were not recorded in the MTS until FY 2022.

The accompanying notes are an integral part of these financial statements.
 65 FINANCIAL STATEMENTS

United States Government

Balance Sheets

as of September 30, 2022, and 2021

Restated

(In billions of dollars) 2022 2021

Assets:

Cash and other monetary assets (Note 2) ............................................................ 877.8 475.0

Accounts receivable, net (Note 3) ....................................................................... 356.3 401.0

Loans receivable, net (Note 4) ........................................................................... 1,434.1 1,651.0

Inventory and related property, net (Note 5).......................................................... 406.9 399.2

General property, plant and equipment, net (Note 6)............................................... 1,197.5 1,176.9

Investments (Note 7)........................................................................................ 130.3 161.6

Investments in government-sponsored enterprises (Note 8) ..................................... 223.7 220.9

Advances and prepayments (Note 9)................................................................... 298.1 369.3

Other assets (Note 10) ..................................................................................... 37.7 38.7

Total assets................................................................................................. 4,962.4 4,893.6

Stewardship property, plant, and equipment (Note 26)

Liabilities:

Accounts payable (Note 11) .............................................................................. 114.6 123.1

Federal debt and interest payable (Note 12) ......................................................... 24,328.0 22,344.8

Federal employee and veteran benefits payable (Note 13)....................................... 12,811.9 10,183.0

Environmental and disposal liabilities (Note 14) ..................................................... 626.3 613.3

Benefits due and payable (Note 15) .................................................................... 288.3 273.9

Loan guarantee liabilities (Note 4)....................................................................... 6.4 230.7

Insurance and guarantee program liabilities (Note 16)............................................. 104.5 129.8

Advances from others and deferred revenues (Note 17).......................................... 247.2 202.0

Other liabilities (Note 18)................................................................................... 495.1 677.1

Total liabilities .............................................................................................. 39,022.3 34,777.7

Commitments (Note 20) and Contingencies (Note 21) 

Unmatched transactions and balances (Note 1.T).............................................. 1.3 1.7

Net Position:

Funds from Dedicated Collections (Note 22) ......................................................... 3,696.4 3,483.0

Funds other than those from Dedicated Collections ................................................ (37,757.6) (33,368.8)

Total net position .......................................................................................... (34,061.2) (29,885.8)

Total liabilities and net position* ......................................................................... 4,962.4 4,893.6

* Total liabilities and net position equals Total liabilities, Total net position and Unmatched transactions and balances.

The accompanying notes are an integral part of these financial statements.
FINANCIAL STATEMENTS 66

United States Government

Statements of Long-Term Fiscal Projections (Note 24)

Present Value of 75-Year Projections as of September 30, 2022, and 20211

In trillions of dollars Percent of GDP2

2022 2021 Change 2022 2021 Change

Receipts:

Social Security payroll taxes ................. 77.8 72.9 4.9 4.2 4.2 (0.1)

Medicare payroll taxes......................... 26.4 24.5 2.0 1.4 1.4 -

Individual income taxes ....................... 201.1 190.9 10.3 10.7 11.1 (0.3)

Corporation income taxes .................... 25.0 23.0 2.1 1.3 1.3 -

Other receipts.................................... 20.2 21.6 (1.4) 1.1 1.3 (0.2)

Total receipts.......................................... 350.6 332.8 17.8 18.7 19.3 (0.6)

Non-interest spending:

Social Security................................... 109.0 102.9 6.1 5.8 6.0 (0.1)

Medicare Part A3 ................................ 37.1 34.9 2.2 2.0 2.0 -

Medicare Parts B & D4......................... 51.1 48.6 2.5 2.7 2.8 (0.1)

Medicaid........................................... 56.5 51.7 4.9 3.0 3.0 -

Other mandatory ................................ 53.4 70.6 (17.3) 2.8 4.1 (1.2)

Defense discretionary.......................... 56.9 54.4 2.5 3.0 3.2 (0.1)

Non-defense discretionary ................... 66.2 67.3 (1.1) 3.5 3.9 (0.4)

Total non-interest spending ....................... 430.2 430.4 (0.2) 23.0 25.0 (2.0)

Receipts less non-interest spending........ (79.5) (97.6) 18.0 (4.2) (5.7) 1.4

Fiscal gap5 .................................................................................................. (4.9) (6.2) 1.4

1

 75-year present value projections for 2022 are as of 9/30/2022 for FYs 2023-2097; projections for 2021 are as of 9/30/2021 for FYs 

 2022-2096. 2

 The 75-year present value of nominal GDP, which drives the calculations above is $1,872.9 trillion starting in FY 2023, and was 

 $1,724.4 trillion starting in FY 2022. 3

 Represents portions of Medicare supported by payroll taxes. 4 Represents portions of Medicare supported by general revenues. Consistent with the President's Budget, outlays for Parts B & D are 

 presented net of premiums. 5

 To prevent the debt-to-GDP ratio from rising over the next 75 years, a combination of non-interest spending reductions and receipt 

 increases that amounts to 4.9 percent of GDP on average is needed (6.2 percent of GDP on average in 2021). See Note 24— 

 Long-Term Fiscal Projections.

Totals may not equal the sum of components due to rounding. 

The accompanying notes are an integral part of these financial statements.
 67 FINANCIAL STATEMENTS

United States Government

Statements of Social Insurance (Note 25)

Present Value of Long-Range (75 Years, except Black Lung) Actuarial Projections

(In trillions of dollars) 2022 2021 2020 2019 2018

Federal Old-Age, Survivors and Disability Insurance (Social 

Security):11

Revenue (Contributions and Dedicated Taxes) from:

Participants who have attained eligibility age (age 62 and over) .. 2.0 1.8 1.7 1.5 1.5

Participants who have not attained eligibility age...................... 40.4 37.5 35.2 33.6 31.6

Future participants............................................................. 41.8 39.3 37.0 35.3 31.8

All current and future participants ......................................... 84.2 78.6 73.9 70.4 64.9

Expenditures for Scheduled Future Benefits for:

Participants who have attained eligibility age (age 62 and over) .. (21.6) (19.8) (18.3) (16.9) (15.9)

Participants who have not attained eligibility age...................... (68.5) (64.9) (59.8) (55.8) (52.2)

Future participants............................................................. (17.4) (16.6) (15.5) (14.5) (13.0)

All current and future participants ......................................... (107.5) (101.3) (93.6) (87.2) (81.1)

Present value of future expenditures in excess of future

revenue ............................................................................. (23.3)1 (22.7)2 (19.7)3 (16.8)4 (16.2)5

Federal Hospital Insurance (Medicare Part A):11

Revenue (Contributions and Dedicated Taxes) from:

Participants who have attained eligibility age (age 65 and over) .. 0.8 0.7 0.6 0.6 0.5

Participants who have not attained eligibility age...................... 14.8 13.0 12.5 12.0 11.3

Future participants............................................................. 14.6 13.0 12.5 11.8 11.0

All current and future participants ......................................... 30.2 26.7 25.6 24.4 22.8

Expenditures for Scheduled Future Benefits for:

Participants who have attained eligibility age (age 65 and over) .. (7.0) (6.2) (6.1) (5.3) (5.0)

Participants who have not attained eligibility age...................... (23.2) (20.9) (20.1) (20.0) (18.6)

Future participants............................................................. (5.0) (4.6) (4.2) (4.5) (3.9)

All current and future participants ......................................... (35.2) (31.7) (30.4) (29.8) (27.5)

Present value of future expenditures in excess of future 

revenue ............................................................................. (5.0)1 (5.0)2 (4.8)3 (5.4)4 (4.7)5

Federal Supplementary Medical Insurance (Medicare Part B):11

Revenue (Premiums) from:

Participants who have attained eligibility age (age 65 and over) .. 2.2 1.9 1.7 1.5 1.3

Participants who have not attained eligibility age...................... 11.8 10.0 9.3 7.5 6.6

Future participants............................................................. 3.1 2.6 2.5 1.9 1.5

General Fund transfers....................................................... 39.5 35.5 33.1 28.8 25.1

All current and future participants ......................................... 56.6 50.0 46.6 39.7 34.5

Expenditures for Scheduled Future Benefits for:

Participants who have attained eligibility age (age 65 and over) .. (7.8) (6.9) (6.2) (5.8) (5.2)

Participants who have not attained eligibility age...................... (38.6) (34.1) (31.8) (27.3) (23.9)

Future participants............................................................. (10.2) (9.0) (8.6) (6.6) (5.4)

All current and future participants ......................................... (56.6) (50.0) (46.6) (39.7) (34.5)

Eliminations........................................................................ (39.5) (35.5) (33.1) (28.8) (25.1)

Present value of future expenditures in excess of future 

revenue (after eliminations)6................................................... (39.5)1 (35.5)2 (33.1)3 (28.8)4 (25.1)5

The accompanying notes are an integral part of these financial statements.
FINANCIAL STATEMENTS 68

United States Government

Statements of Social Insurance (Note 25), continued

Present Value of Long-Range (75 Years, except Black Lung) Actuarial Projections

(In trillions of dollars) 2022 2021 2020 2019 2018

Federal Supplementary Medical Insurance (Medicare Part D):11

Revenue (Premiums and State Transfers) from:

Participants who have attained eligibility age (age 65 and over) .. 0.4 0.3 0.3 0.2 0.3

Participants who have not attained eligibility age...................... 2.3 2.0 2.0 2.1 2.1

Future participants............................................................. 1.0 0.9 0.9 0.9 0.8

General Fund transfers....................................................... 8.0 7.7 7.8 8.0 7.9

All current and future participants ......................................... 11.7 10.9 11.0 11.2 11.1

Expenditures for Scheduled Future Benefits for:

Participants who have attained eligibility age (age 65 and over) .. (1.2) (1.1) (1.0) (1.0) (1.0)

Participants who have not attained eligibility age...................... (7.4) (6.9) (7.0) (7.2) (7.2)

Future participants............................................................. (3.1) (2.9) (3.0) (3.0) (2.9)

All current and future participants ......................................... (11.7) (10.9) (11.0) (11.2) (11.1)

Eliminations........................................................................ (8.0) (7.7) (7.8) (8.0) (7.9)

Present value of future expenditures in excess of future 

revenue (after eliminations)6................................................... (8.0)1 (7.7)2 (7.8)3 (8.0)4 (7.9)5

Other:

Present value of future expenditures in excess of future 

revenue7.......................................................................... (0.1) (0.1) (0.1) (0.1) (0.1)

Total present value of future expenditures in excess of future 

revenue8, 9, 10........................................................................ (75.9) (71.0) (65.5) (59.1) (54.0)

The accompanying notes are an integral part of these financial statements.
 69 FINANCIAL STATEMENTS

United States Government

Statements of Social Insurance (Note 25), continued

Present Value of Long-Range (75 Years, except Black Lung) Actuarial Projections

(In trillions of dollars) 2022 2021 2020 2019 2018

Social Insurance Summary11

Participants who have attained eligibility age:

Revenue (e.g., contributions and dedicated taxes) ................. 5.4 4.7 4.3 3.8 3.6

Expenditures for scheduled future benefits ........................... (37.6) (34.0) (31.6) (29.1) (27.2)

Present value of future expenditures in excess of 

future revenue.............................................................. (32.2) (29.3) (27.3) (25.3) (23.6)

Participants who have not attained eligibility age:

Revenue (e.g., contributions and dedicated taxes) ................. 69.3 62.5 59.0 55.2 51.6

Expenditures for scheduled future benefits ........................... (137.7) (126.8) (118.7) (110.3) (101.9)

Present value of future expenditures in excess of 

future revenue.............................................................. (68.4) (64.3) (59.7) (55.1) (50.3)

Closed group - Total present value of future expenditures

in excess of future revenue ............................................... (100.6) (93.6) (87.0) (80.4) (73.9)

Future participants:

Revenue (e.g., contributions and dedicated taxes) ................. 60.5 55.8 52.9 49.9 45.1

Expenditures for scheduled future benefits ........................... (35.8) (33.2) (31.4) (28.6) (25.2)

Present value of future revenue in excess of future 

expenditure ................................................................. 24.7 22.6 21.5 21.3 19.9

Open group - Total present value of future expenditures in

excess of future revenue................................................... (75.9) (71.0) (65.5) (59.1) (54.0)

1 The projection period for Social Security and Medicare is 1/1/2022 - 12/31/2096 and the valuation date is 1/1/2022. 2 The projection period for Social Security and Medicare is 1/1/2021 - 12/31/2095 and the valuation date is 1/1/2021. 3 The projection period for Social Security and Medicare is 1/1/2020 - 12/31/2094 and the valuation date is 1/1/2020. 4 The projection period for Social Security and Medicare is 1/1/2019 - 12/31/2093 and the valuation date is 1/1/2019. 5 The projection period for Social Security and Medicare is 1/1/2018 - 12/31/2092 and the valuation date is 1/1/2018. 6 These amounts represent the PV of the future transfers from the General Fund to the SMI Trust Funds. These future intra-governmental 

are included as income in both HHS’s and the CMS’s financial statements but, by accounting convention, are not income from the

government-wide perspective of this report. 7 Includes Railroad Retirement and Black Lung. 8 These amounts do not include the PV of the financial interchange between the railroad retirement and social security systems, 

which is included as income in the Railroad Retirement Financial Report, but is not included from the government-wide perspective of this 

report (See discussion of RRB in the unaudited RSI section of this report). 9 Does not include interest expense accruing on the outstanding debt of the BLDTF. 10 For information on the projection periods and valuation dates for the Railroad Retirement and Black Lung programs, refer to the financial

statements of RRB and DOL, respectively. 11 Current participants for the Social Security and Medicare programs are assumed to be the closed group of individuals who are at least

15 years of age at the start of the projection period, and are participating as either taxpayers, beneficiaries, or both. Amounts shown exclude 

General Fund transfers reported by CMS for Medicare's Parts B and D.

The accompanying notes are an integral part of these financial statements.
FINANCIAL STATEMENTS 70

United States Government

Statement of Changes in Social Insurance Amounts

for the Year Ended September 30, 2022 (Note 25)

Social Medicare Medicare

(In trillions of dollars) Security1 HI1 SMI1, 3 Other2 Total

NPV of future revenue less future expenditures

for current and future participants (open group)

over the next 75 years, beginning of the year............ (22.7) (5.0) (43.2) (0.1) (71.0)

Reasons for changes in the NPV during the year:

Changes in valuation period.................................. (0.7) (0.1) (0.9) - (1.7)

Changes in demographic data, assumptions, and 

methods ........................................................... (0.3) - (0.5) - (0.8)

Changes in economic data, assumptions, and 

methods ........................................................... (0.2) - - - (0.2)

Changes in law or policy ...................................... - - - - -

Changes in methodology and programmatic data ...... 0.6 - - - 0.6

Changes in economic and health care 

assumptions ...................................................... - (1.9) (3.4) - (5.3)

Change in projection base .................................... - 2.0 0.5 - 2.5

Net change in open group measure........................ (0.6) - (4.3) - (4.9)

Open group measure, end of year............................. (23.3) (5.0) (47.5) (0.1) (75.9)

1 Amounts represent changes between valuation dates 1/1/2021 and 1/1/2022. 2 Includes Railroad Retirement changes between valuation dates 10/1/2020 and 10/1/2021 and Black Lung changes between 9/30/2021 and 

9/30/2022. 3 Amounts shown exclude General Fund transfers reported by CMS for Medicare's Parts B and D. 

The accompanying notes are an integral part of these financial statements. 
 71 FINANCIAL STATEMENTS

United States Government

Statement of Changes in Social Insurance Amounts

for the Year Ended September 30, 2021 (Note 25)

Social Medicare Medicare

(In trillions of dollars) Security1 HI1 SMI1, 3 Other2 Total

NPV of future revenue less future expenditures

for current and future participants (open group)

over the next 75 years, beginning of the year............ (19.7) (4.8) (40.9) (0.1) (65.5)

Reasons for changes in the NPV during the year:

Changes in valuation period.................................. (0.7) (0.1) (1.4) - (2.2)

Changes in demographic data, assumptions, and

methods ........................................................... 0.2 0.7 0.6 - 1.5

Changes in economic data, assumptions, and

methods ........................................................... (1.2) - - - (1.2)

Changes in law or policy ...................................... (0.1) - (0.1) - (0.2)

Changes in methodology and programmatic data ...... (1.2) - - - (1.2)

Changes in economic and health care 

assumptions ...................................................... - (1.0) (2.8) - (3.8)

Change in projection base .................................... - 0.2 1.4 - 1.6

Net change in open group measure........................ (3.0) (0.2) (2.3) - (5.5)

Open group measure, end of year............................. (22.7) (5.0) (43.2) (0.1) (71.0)

1 Amounts represent changes between valuation dates 1/1/2020 and 1/1/2021. 2 Includes Railroad Retirement changes between valuation dates 10/1/2019 and 10/1/2020 and Black Lung changes between 9/30/2020 and 

9/30/2021.

3 Amounts shown exclude General Fund transfers reported by CMS for Medicare's Parts B and D. 

The accompanying notes are an integral part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS 72

United States Government

Notes to the Financial Statements

for the Fiscal Years Ended September 30, 

2022, and 2021

Note 1. Summary of Significant Accounting Policies

A. Reporting Entity

The government includes the executive branch, the legislative branch, and the judicial branch. This Financial Report

includes the financial status and activities related to the operations of the government. SFFAS No. 47, Reporting Entity

provides criteria for identifying organizations that are included in the Financial Report as consolidation entities or disclosure 

entities. The determination as to whether an organization is a consolidation entity or disclosure entity is based on the 

assessment of the following characteristics as a whole, the organization: a) is financed through taxes and other non-exchange 

revenues; b) is governed by the Congress or the President; c) imposes or may impose risks and rewards to the government; 

and d) provides goods and services on a non-market basis. 

Consolidation entities are organizations that are consolidated in the financial statements. For disclosure entities, data is 

not consolidated in the financial statements, instead information is disclosed in the notes to the financial statements 

concerning: a) the nature of the federal government’s relationship with the disclosure entities; b) the nature and magnitude of 

relevant activity with the disclosure entities during the period and balances at the end of the period; and c) a description of 

financial and non-financial risks, potential benefits and, if possible, the amount of the federal government’s exposure to gains 

and losses from the past or future operations of the disclosure entity or entities.

SFFAS No. 47 also provides guidance for identifying related parties and in determining what information to provide 

about related party relationships of such significance that it would be misleading to exclude such information. 

Based on the criteria in GAAP for federal entities, the assets, liabilities, and results of operations of Fannie Mae and 

Freddie Mac 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. Although federal investments in Fannie Mae and Freddie Mac are significant, these entities 

do not meet the GAAP criteria for consolidation entities. 

Under SFFAS No. 47 criteria, Fannie Mae and Freddie Mac were owned or controlled by the federal government as a 

result of: a) regulatory actions (such as organizations in receivership or conservatorship); or b) other federal government 

intervention actions. Under the regulatory or other intervention actions, the relationship with the federal government is not 

expected to be permanent. These entities are classified as disclosure entities based on their characteristics as a whole (see 

Note 27—Disclosure Entities and Related Parties for additional information on these disclosure entities). 

Also, under GAAP criteria, the FR System and SPVs are not consolidated into the government's consolidated financial 

statements (see Note 7—Investments for additional information on SPVs and Note 27—Disclosure Entities and Related 

Parties for additional information concerning the FR System).

For additional information regarding Reporting Entity, see Appendix A—Reporting Entity.

B. Basis of Accounting and Revenue Recognition

Consolidated Financial Statements

The consolidated financial statements of the government are prepared in accordance with the standards established by 

FASAB. As permitted by FASAB standards, certain components of the federal government prepare their financial statements 

following the standards established by FASB. Information from those components is included within the government's 

consolidated financial statements without conversion to FASAB standards. Intra-governmental transactions are eliminated in 
73 NOTES TO THE FINANCIAL STATEMENTS

consolidation, except as described in the Other Information–Unmatched Transactions and Balances. See Note 1.T—

Unmatched Transactions and Balances for additional information. The consolidated financial statements include accrualbased financial statements and sustainability financial statements, which are discussed in more detail below, and the related 

notes to the consolidated financial statements. Collectively, the accrual-based financial statements, the sustainability financial 

statements, and the notes represent basic information that is deemed essential for the financial statements and notes to be 

presented in conformity with GAAP.

Accounting standards allow certain presentations and disclosures to be modified, if needed, to prevent the disclosure of 

classified information. Accordingly, modifications may have been made to certain presentations and disclosures.

Accrual-Based Financial Statements

The accrual-based financial statements were prepared under the following principles:

• Expenses are generally recognized when incurred.

• Non-exchange revenue, including taxes, duties, fines, and penalties, are recognized when collected and adjusted for 

the change in amounts receivable (modified cash basis). Related refunds and other offsets, including those that are 

measurable and legally payable, are netted against non-exchange revenue.

• Exchange (earned) revenue is recognized when the government provides goods and services to the public for a price. 

Exchange revenue includes user charges such as admission to federal parks and premiums for certain federal 

insurance.

The basis of accounting used for budgetary purposes, which is primarily on a cash basis (budget deficit) and follows 

budgetary concepts and policies, differs from the basis of accounting used for the financial statements which follow GAAP. 

See the Reconciliations of Net Operating Cost and Budget Deficit in the Financial Statements section and Note 29—COVID19 Activity in the notes to the financial statements. 

Sustainability Financial Statements

The sustainability financial statements were prepared based on the projected PV of the estimated future revenue and 

estimated future expenditures, primarily on a cash basis, for a 75-year period. The sustainability financial statements consist 

of the: 1) SLTFP, covering all federal government programs and all sources of federal revenue; 2) SOSI; and 3) SCSIA.

New Standards Issued in Prior and Current Years and Implemented in Current Year

In FY 2016, the government began implementing the requirements of new standards related to the reporting for 

inventory and related property, net and general PP&E. These standards are available to each reporting entity once per line 

item addressed in the standard. The standards being implemented are:

• FASAB issued SFFAS No. 48, Opening Balances for Inventory, Operating Materials and Supplies, and Stockpile 

Materials. SFFAS No. 48 permits a reporting entity to apply an alternative valuation method in establishing opening 

balances and applies when a reporting entity is presenting financial statements, or one or more line items addressed 

by this statement. SFFAS No. 48 was effective beginning in FY 2017. Early implementation was permitted. DOD 

did partially implement in 2016 and select component entities have continued to implement in FY 2017 through FY 

2022. DOD has not declared full implementation yet; therefore, this standard continues to be partially implemented 

each year.

• FASAB issued SFFAS No. 50, Establishing Opening Balances for General Property, Plant and Equipment. SFFAS 

No. 50 permits a reporting entity to apply an alternative valuation method in establishing opening balances and 

applies when a reporting entity is presenting financial statements, or one or more line items addressed by this 

statement. SFFAS No. 50 was effective beginning in FY 2017. Early implementation was permitted. DOD did 

partially implement in 2016 and select component entities have continued to implement in FY 2017 through FY 

2022. DOD has not declared full implementation yet; therefore, this standard continues to be partially implemented 

each year.

In July 2021, FASAB issued SFFAS No. 59, Accounting and Reporting Government Land. Per SFFAS No. 59, starting 

in FY 2026, land and permanent land rights will no longer be capitalized, and the previously capitalized amounts will be 

removed from the Balance Sheet. Also, starting in FY 2026, SFFAS No. 59 requires certain disclosures in the notes to the 

financial statements, including estimated acreage of land and permanent land rights and its predominant use. For FY 2022 

through FY 2025, such disclosures are required to be presented as RSI. These include:

• Estimated acres of general PP&E land and stewardship land using three predominant use sub-categories:

o Conservation and preservation land; 

o Operational land; and

o Commercial use land.
NOTES TO THE FINANCIAL STATEMENTS 74

• Estimated acres of land held for disposal or exchange.

New Standards Issued and Not Yet Implemented

As of September 2022, FASAB has issued the following new standards that are applicable to the Financial Report, but 

are not yet implemented at the government-wide level for FY 2022:

In April 2018, FASAB issued SFFAS No. 54, Leases: An Amendment of SFFAS No. 5, Accounting for Liabilities of the 

Federal Government, and SFFAS No. 6, Accounting for Property, Plant, and Equipment. SFFAS No. 54 revises the financial 

reporting standards for federal lease accounting. It provides a comprehensive set of lease accounting standards to recognize 

federal lease activities in the reporting entity’s financial statements and includes appropriate disclosures. This statement 

requires that federal lessees (for other than intra-governmental leases) recognize a lease liability and a right-to-use lease asset 

at the commencement of the lease term, unless it meets any of the scope exclusions or the definition/criteria of short-term 

leases, or contracts or agreements that transfer ownership, or intra-governmental leases. A federal lessor would recognize a 

lease receivable and deferred revenue, unless it meets any of the scope exclusions or the definition/criteria of short-term 

leases, contracts or agreements that transfer ownership, or intra-governmental leases. SFFAS No. 58, Deferral of the Effective 

Date of SFFAS No. 54, Leases, issued in June 2020, defers the effective date of SFFAS No. 54 to FY 2024 and early 

implementation is not permitted.

In November 2021, FASAB issued SFFAS No. 60, Omnibus Amendments 2021, Leases-Related Topics. SFFAS No. 60 

addresses issues by clarifying and improving consistency throughout SFFAS Nos. 54, 57, 5 and 6 with omnibus amendments. 

SFFAS No. 60 amends and rescinds certain requirements in SFFAS No. 54 and is effective for FY 2024.

C. Accounts Receivable, Net

Accounts receivable includes the amount of taxes receivable that consist primarily of uncollected tax assessments, 

penalties, and interest when taxpayers have agreed, or a court has determined, the assessments are owed. Taxes receivable do 

not include unpaid assessments when taxpayers or a court have not agreed that the amounts are owed (compliance 

assessments) or the government does not expect further collections due to factors such as the taxpayer’s death, bankruptcy, or 

insolvency (write-offs). Taxes receivable are reported net of an allowance for the estimated portion deemed to be 

uncollectible.

Other accounts receivable represent claims to cash or other assets from entities outside the government that arise from 

the sale of goods or services, duties, fines, certain license fees, recoveries, or other provisions of the law. Accounts receivable 

are reported net of an allowance for uncollectible amounts. An allowance is established when it is more likely than not the 

receivables will not be totally collected. The allowance method varies among the entities in the government and is usually 

based on past collection experience and is reestimated periodically as needed. Methods may include statistical sampling of

receivables, specific identification and intensive analysis of each case, aging methodologies, and percentage of total 

receivables based on historical collection. See Note 3—Accounts Receivable, Net for additional information.

D. Loans Receivable, Net

Direct loans committed after FY 1991 are valued at their gross amounts less an allowance for the PV of the amounts not 

expected to be recovered, and thus having to be subsidized is called an “allowance for subsidy.”

Direct loans obligated before FY 1992 are valued under the PV method. Under the PV method, the outstanding 

principal of direct loans is reduced by an allowance equal to the difference between the outstanding principal and the PV of 

the expected net cash flows. See Note 4—Loans Receivable, Net and Loan Guarantee Liabilities for additional information.

E. Loan Guarantee Liabilities

Loan guarantees committed after FY 1991 are valued at the PV of the cash outflows less the PV of the related inflows. 

The estimated PV of net long-term cash outflows of an entity for subsidized costs is net of recoveries, interest supplements, 

and offsetting fees. The loan guarantee liabilities present the net PV of all future cash flows from loans.

Loan guarantees committed before FY 1992 are valued under the allowance-for-loss method. The allowance for loan 

losses is recognized when it is more likely than not that the direct loans will not be totally collected. The allowance of the 
75 NOTES TO THE FINANCIAL STATEMENTS

uncollectible amounts is reestimated each year. See Note 4—Loans Receivable, Net and Loan Guarantee Liabilities for

additional information.

F. Inventory and Related Property, Net

Inventory is tangible personal property that is categorized as: 1) held for current sale; 2) held in reserve for future sale; 

3) held for repair; or 4) excess, obsolete, and unserviceable. Inventory held for current sale and held in reserve for future sale 

are valued by the main contributing entities at historical cost using the MAC flow assumption. Historical cost includes all 

appropriate purchase, transportation, and production costs incurred to bring the items to their current condition and location.

Any abnormal costs, such as excessive handling or rework costs, are charged to operations of the period. Inventory held for 

repair is accounted for by the main contributors using the allowance method which values inventory at the same value as a 

serviceable item. However, an allowance for repairs contra-asset account (e.g., allowance for loss) is established to recognize 

estimated repair costs in the current period operating expenses. Excess, obsolete, and unserviceable inventory is valued at its 

net realizable value.

Related property includes OM&S, stockpile materials, and other miscellaneous related property. OM&S is tangible 

personal property to be consumed in normal operations. Stockpile materials are strategic and critical materials being held due 

to statutory requirements for use in national defense, conservation, or national emergencies. The main contributing entities 

value OM&S and stockpile materials using various methods including MAC, standard price, historical cost, replacement 

price, and direct method. The entities also use both the consumption method and purchase method. The consumption method 

expenses OM&S when consumed, while the purchase method expenses OM&S when purchased. If OM&S are not significant 

amounts, are in the hands of the end user for use in normal operations, or if it is not cost beneficial to apply the consumption 

method; then the purchases method is applied.

FASAB issued additional guidance, SFFAS No. 48, Opening Balances for Inventory, Operating Materials and 

Supplies, and Stockpile Materials, which permits a reporting entity to apply an alternative valuation method (e.g., deemed 

cost) in establishing opening balances for inventory, OM&S, and stockpile materials. This guidance is intended to provide an 

alternative valuation method when historical records and systems do not provide a basis for valuation of opening balances in 

accordance with SFFAS No. 3, Accounting for Inventory and Related Property. Please refer to Note 5—Inventory and 

Related Property, Net, for additional information.

G. General Property, Plant, and Equipment, Net

General PP&E consists of tangible assets (e.g., buildings, structures and facilities, furniture and fixtures, equipment, and 

land) that have an estimated useful life of two or more years, are not intended for sale in the ordinary course of business and 

are intended for use or available for use by the entity. General PP&E also includes internal use software, land rights, assets 

acquired through capital leases, and leasehold improvements.

At the government-wide level, SFFAS No. 6, Accounting for Property, Plant, and Equipment is followed and requires 

that general PP&E is recorded at cost and includes all costs incurred to bring the general PP&E to a form and location 

suitable for its intended use. The main contributing entities use estimated historical cost for general PP&E. Costs to acquire 

general PP&E, extend the useful life of an existing asset, or enlarge or improve its capacity are capitalized and depreciated or 

amortized over the remaining useful life. Depreciation expense is recognized on all capitalized general PP&E, except land 

and land rights of unlimited duration. In the case of constructed general PP&E, the asset is recorded as construction work in 

process until it is placed in service, at which time the balance is transferred to a major class of general PP&E. See Note 6—

General Property, Plant, and Equipment, Net, for additional information.

FASAB issued additional guidance, SFFAS No. 50, Establishing Opening Balances for General Property, Plant, and 

Equipment, which states that a reporting entity may choose one of three alternative methods for establishing an opening

balance for general PP&E. The alternative methods include using deemed cost to establish opening balances of general

PP&E, selecting between deemed cost and prospective capitalization of internal use software, and allowing an exclusion of

land and land rights from opening balances with disclosure of acreage information and expensing of future acquisitions. An

entity electing to exclude land and land rights from its general PP&E opening balances must disclose, with a reference on the

Balance Sheet to the related disclosure, the number of acres held at the beginning of each reporting period, the number of

acres added during the period, the number of acres disposed of during the period, and the number of acres held at the end of

each reporting period. Some consolidating DOD contributors used the alternative valuation methods from SFFAS No. 50
NOTES TO THE FINANCIAL STATEMENTS 76

based on historical records such as expenditure data, contracts, budget information, and engineering documentation. When

applicable, DOD will continue to adopt SFFAS No. 50.

For financial reporting purposes, heritage assets (excluding multi-use heritage assets) and stewardship land are not 

recorded as part of general PP&E. Since heritage assets are intended to be preserved as national treasures, it is anticipated 

that they will be maintained in reasonable repair and that there will be no diminution in their usefulness over time. Many 

assets are clearly heritage assets. For example, the National Park Service manages the Washington Monument, the Lincoln 

Memorial and the Mall. Heritage assets that are predominantly used in general government operations are considered multiuse heritage assets and are included in general PP&E. Stewardship land is also consistent with the treatment of heritage assets 

in that much of the government’s land is held for the general welfare of the nation and is intended to be preserved and 

protected. Stewardship land is land owned by the government but not acquired for or in connection with general PP&E. 

Because most federal land is not directly related to general PP&E, it is deemed to be stewardship land and accordingly, it is 

not reported on the Balance Sheet. Examples of stewardship land include national parks and forests. For additional 

information on stewardship assets, see Note 26—Stewardship Property, Plant, and Equipment. 

H. Investments

Most investments are reported at FV. FV is the estimate of the price at which an orderly transaction to sell the asset

would take place between market participants at the measurement date under current market conditions. Market or observable

inputs are used as the preferred source of values, followed by assumptions based on hypothetical transactions in absence of

market inputs. Certain investments rely on NAV as a practical expedient (i.e., priced without adjustments) to estimate their

FV. NAV is derived from the FV of the underlying investments as of the reporting date. See Note 7—Investments for

additional information.

I. Investments in Government-Sponsored Enterprises

The senior preferred stock and associated warrants for the purchase of common stock in the GSEs (Fannie Mae and 

Freddie Mac) are presented at their FV. SPSPAs, which Treasury entered into with each GSE when they were placed under 

conservatorship, can result in payments to the GSEs when, at the end of any quarter, the FHFA, acting as the conservator, 

determines that the liabilities of either GSE exceed its respective assets. Such payments result in an increase to the liquidation 

preference of investment in the GSEs’ senior preferred stock, with a corresponding decrease to cash held by Treasury for

government-wide operations. In addition, the liquidation preference of investments in the GSEs will increase, based on the 

quarterly earnings of the GSEs, up to the adjusted capital reserve amounts set for each GSE.

The valuation to estimate the investment’s FV incorporates forecasts, projections, and cash flow analyses. Changes in 

valuation, including impairments, are deemed usual and recurring and thus are recorded as exchange transactions on the 

Statement of Net Cost and investments in GSEs on the Balance Sheet. The government also records dividends related to these 

investments as exchange transactions which are accrued when declared.

The potential liabilities to the GSEs, if any, are assessed annually and recorded at the gross estimated amount. For 

additional information on investments in GSEs, refer to Note 8—Investments in Government-Sponsored Enterprises. 

J. Federal Debt and Interest Payable

Federal debt is primarily comprised of Treasury securities, which are debt instruments issued to the public to raise 

money needed to operate the federal government and pay off maturing obligations. Treasury issues these debt instruments to 

the public in the form of marketable bills, notes, bonds, TIPS and FRNs, and in the form of nonmarketable securities 

including Government Account Series securities, U.S. Savings Securities, and SLGS securities. The amount of the debt, or 

principal, is also called the security’s face value or par value. To accurately reflect the federal debt, Treasury records 

principal transactions with the public at par value at the time of the transaction. Certain Treasury securities are issued at a 

discount or premium. These discounts and premiums are amortized over the term of the security using an interest method for 

all long-term securities (term greater than one year) and the straight-line method for short-term securities (term of one year or 

less). In addition, the principal for TIPS is adjusted daily based on the CPI for all Urban Consumers. Certain Treasury 

securities also pay interest. For marketable securities, Treasury issues notes and bonds that pay semi-annual interest based on 

the security’s stated interest rate, while FRNs, which have interest rates that are indexed to the highest accepted discount rate 
77 NOTES TO THE FINANCIAL STATEMENTS

of the most recent Treasury 13-week bill auction, pay interest quarterly based on the interest rate at the time of payment. 

TIPS, on the other hand, pay a semi-annual fixed rate of interest applied to the inflation-adjusted principal. However, for all 

security types accrued interest is recorded as an expense when incurred, instead of when paid. See Note 12—Federal Debt

and Interest Payable for additional information.

K. Federal Employee and Veteran Benefits Payable

Generally, federal employee and veteran benefits payable are recorded during the time employee services are rendered. 

The related liabilities for defined benefit pension plans, veterans’ compensation, burial, education and training benefits, postretirement health benefits, and life insurance benefits, are recorded at estimated PV of future benefits, less any estimated PV 

of future normal cost contributions. Normal cost is the portion of the actuarial PV of projected benefits allocated as an 

expense for employee services rendered in the current year. Actuarial gains and losses (as well as prior service cost, if any) 

are recognized immediately in the year they occur without amortization.

VA provides certain veterans and/or their dependents with pension benefits, based on annual eligibility reviews, if the 

veteran died or was disabled for nonservice-related causes. The pension program for veterans is not accounted for as a 

“federal employee pension plan” under SFFAS No. 5, Accounting for Liabilities of the Federal Government, due to 

differences between its eligibility conditions and those of federal employee pensions. Therefore, a future liability for pension 

benefits is not recorded. These benefits are recognized as expenses when benefits are paid rather than when employee 

services are rendered.

In accordance with 38 CFR § 17.36(c), the VA makes an annual enrollment decision that identifies which veterans, by 

priority, will be treated for that fiscal year based on funds appropriated, estimated collections, usage, the severity index of 

enrolled veterans, and changes in cost. While VA expects to continue to provide medical care to veterans in future years, an 

estimate of this amount cannot be reasonably made. These medical care expenses are recognized in the period the medical 

care services are provided.

The actuarial liability for FECA benefits is recorded at estimated PV of future benefits for injuries and deaths that have 

already been incurred.

Gains and losses from changes in long-term assumptions used to estimate federal employee pensions, ORB, and OPEB 

liabilities are reflected separately on the Statement of Net Cost and the components of the expense related to federal 

employee pension, ORB, and OPEB liabilities are disclosed in Note 13—Federal Employee and Veteran Benefits Payable as 

prescribed by SFFAS No. 33, Pensions, Other Retirement Benefits, and Other Postemployment Benefits: Reporting the Gains 

and Losses from Changes in Assumptions and Selecting Discount Rates and Valuation Dates. In addition, SFFAS No. 33 also 

provides a standard for selecting the discount rate assumption for PV estimates of federal employee pension, ORB, and 

OPEB liabilities. See Note 13—Federal Employee and Veteran Benefits Payable for additional information.

L. Environmental and Disposal Liabilities

Environmental and disposal liabilities are estimated costs for anticipated remediation, cleanup, and disposal costs 

resulting from the use of the governments assets or operations. Estimated costs for environmental and disposal liabilities can 

change over time because of laws and regulation updates, technology updates, inflation or deflation factors, and disposal plan 

revisions. Accruals for environmental cleanup costs are the cost of removing, containing, and/or disposing of hazardous 

wastes or materials that, because of quantity, concentration, or physical or chemical characteristics, may pose a substantial 

present or potential hazard to human health or the environment. Cleanup costs include, but are not limited to 

decontamination, decommissioning, site restoration, site monitoring, closure, and post-closure costs. PP&E recognition of an 

anticipated environmental disposal liability begins when the asset is placed in service. See Note 14—Environmental and 

Disposal Liabilities for additional information.

M. Benefits Due and Payable

A liability for social insurance programs (Social Security, Medicare, Railroad Retirement, Black Lung, and

Unemployment) is recognized for any unpaid amounts currently due and payable to beneficiaries or service providers as of

the end of the reporting period. See Note 15—Benefits Due and Payable for additional information.
NOTES TO THE FINANCIAL STATEMENTS 78

N. Insurance and Guarantee Program Liabilities

Insurance programs are authorized by law to financially compensate a designated population of beneficiaries by 

accepting all or part of the risk for losses incurred as a result of an adverse event. Certain consolidation entities with 

significant insurance and guarantee programs (e.g., PBGC) apply FASB standards and are not converted to FASAB standards 

in consolidation, as permitted by SFFAS No. 47.

PBGC values its liabilities at the PV of future benefits and PV of nonrecoverable future financial assistance using 

assumptions derived from market-based (FV) annuity prices from insurance companies. Assumptions are selected in 

accordance with PBGC’s best estimate of anticipated experience for expected retirement ages and the cost of administrative 

expenses.

The PV of future benefits is the estimated liability for future pension benefits that PBGC is or will be obligated to pay 

the participants of trusteed plans and the net liability for plans pending termination and trusteeship. PBGC recognizes a 

single-employer program liability for trusteed or terminated plans and probable plan terminations. The liability is PBGC's 

best estimate of the losses, net of plan assets, and the PV of expected recoveries (from sponsors and members of their 

controlled group) for plans that are likely to terminate in the future. PBGC uses assumptions to adjust the value of those 

future payments to reflect the time value of money (by discounting) and the probability of payment (by means of decrements, 

such as for death or retirement). PBGC also includes anticipated expenses to settle the benefit obligation in the determination 

of the PV of future benefits.

PBGC recognizes a multiemployer program liability for future financial assistance to insolvent plans and to plans 

deemed probable to becoming insolvent. Projecting a future insolvency requires considering several complex factors, such as 

an estimate of future cash flows, future mortality rates, and age of participants not in pay status. In general, if a terminated 

plan’s assets are less than the PV of its liabilities, PBGC considers the plan a probable risk of requiring financial assistance in 

the future. PBGC's exposure to losses from plan terminations is disclosed in Note 21—Contingencies.

All other insurance and guarantee programs are accounted for in the consolidated financial statements in accordance

with SFFAS No. 51, Insurance Programs.

Insurance programs exclude programs that administer direct loans and loan guarantees; qualify as social insurance; are 

authorized to engage in disaster relief activities; provide grants; provide benefits or assistance based on an individual’s or a 

household’s income and/or assets; assume the risk of loss arising from federal government operations; pay claims through an 

administrative or judicial role for individuals or organizations who claim they have been harmed by a federal entity; 

indemnify contractors, agreement partners, and other third parties for loss or damage incurred while or caused by work 

performed for a federal entity; or are workers’ or occupational illness compensation programs that compensate current or 

former employees (or survivors) and certain third parties for injuries and occupational diseases obtained while working for a 

federal entity.

There are three categories of insurance programs: 1) exchange transaction insurance programs other than life insurance;

2) non-exchange transaction insurance programs; and 3) life insurance programs.

For exchange transaction insurance programs other than life insurance, revenues are recognized when earned over the 

insurance arrangement period and liabilities are recognized for unearned premiums, unpaid insurance claims, and for losses 

on remaining coverage. Losses on remaining coverage represent estimated amounts to be paid to settle claims for the period 

after year-end through the end of insurance coverage in excess of the summation of unearned premiums and premiums due 

after the end of the reporting period.

For non-exchange transaction insurance programs, revenue is recognized the same as other non-exchange transaction 

revenue, no unearned premium liability is recorded, and a liability is only recognized for unpaid insurance claims.

For life insurance programs, revenue is recognized when due and liabilities are recognized for unpaid insurance claims 

and future policy benefits. The liability for future policy benefits represents the expected PV of future claims to be paid to, or 

on behalf of, existing policyholders, less the expected PV of future net premiums to be collected from those policyholders.

Life insurance programs are disclosed in Note 13—Federal Employee and Veteran Benefits Payable. See Note 16—Insurance 

and Guarantee Program Liabilities for additional information.

O. Deferred Maintenance and Repairs

DM&R are maintenance and repairs that were not performed when they should have been or scheduled maintenance 

and repairs that were delayed or postponed. Maintenance is the act of keeping fixed assets in acceptable condition, including 

preventative maintenance, normal repairs, and other activities needed to preserve the assets, so they continue to provide 
79 NOTES TO THE FINANCIAL STATEMENTS

acceptable service and achieve their expected life. Maintenance and repairs exclude activities aimed at expanding the 

capacity of assets or otherwise upgrading them to serve needs different from those originally intended. DM&R are not

expensed in the Statements of Net Cost or accrued as liabilities on the Balance Sheet. However, DM&R information is 

disclosed in the unaudited RSI section of this report. Please see unaudited RSI—Deferred Maintenance and Repairs for 

additional information including measurement methods.

P. Commitments

Commitments reflect binding agreements that may result in the future expenditure of financial resources that are not 

recognized or not fully recognized on the Balance Sheet and should be disclosed. Examples of commitments include certain 

long-term leases, undelivered orders, P3s, international or other agreements in support of international economic 

development, or agreements in support of financial market stability. See Note 20—Commitments for additional information.

Q. Contingencies

Liabilities for contingencies are recognized on the Balance Sheet when both:

• A past transaction or event has occurred, and

• A future outflow or other sacrifice of resources is probable and measurable.

The estimated contingent liability may be a specific amount or a range of amounts. If some amount within the range is a 

better estimate than any other amount within the range, then that amount is recognized. If no amount within the range is a 

better estimate than any other amount, then the minimum amount in the range is recognized and the range and a description 

of the nature of the contingency is disclosed.

A contingent liability is disclosed if any of the conditions for liability recognition do not meet the above criteria and 

there is at least a reasonable possibility that a loss may be incurred. See Note 21—Contingencies for additional information. 

R. Funds from Dedicated Collections 

Generally, funds from dedicated collections are financed by specifically identified revenues, provided to the 

government by non-federal sources, often supplemented by other financing sources that remain available over time. These 

specifically identified revenues and other financing sources are required by statute to be used for designated activities, 

benefits, or purposes, and must be accounted for separately from the government’s general revenues. The three required 

criteria for a fund from dedicated collections are:

• A statute committing the government to use specifically identified revenues and/or other financing sources that are 

originally provided to the government by a non-federal source only for designated activities, benefits, or purposes;

• Explicit authority for the fund to retain revenues and/or other financing sources not used in the current period for 

future use to finance the designated activities, benefits, or purposes; and

• A requirement to account for and report on the receipt, use, and retention of the revenues and/or other financing 

sources that distinguishes the fund from the government’s general revenues.

Funds from dedicated collections on the Statement of Operations and Changes in Net Position are presented on the 

consolidated basis. The consolidated dedicated collections presentation eliminates balances and transactions between funds 

from dedicated collections held by the entity. For additional information on funds from dedicated collections, see Note 22—

Funds from Dedicated Collections.

S. Sustainability Financial Statements

The sustainability financial statements are estimates based on economic as well as demographic assumptions presented 

in Note 24—Long-Term Fiscal Projections and 25—Social Insurance. The sustainability financial statements are not 

forecasts or predictions. The sustainability financial statements are designed to illustrate the relationship between receipts and 

expenditures, if current policy is continued. For this purpose, the projections assume, among other things, that scheduled 
NOTES TO THE FINANCIAL STATEMENTS 80

social insurance benefit payments would continue after related trust funds are projected to be depleted, contrary to current 

law, and that debt could continue to rise indefinitely without severe economic consequences.

SOSI and SCSIA are based on the selection of accounting policies and the application of significant accounting 

estimates, some of which require management to make significant assumptions. Further, the estimates are based on current 

conditions and expectations of future conditions. Actual results could differ materially from the estimated amounts. Each 

statement includes information to assist in understanding the effect of changes in assumptions to the related information. 

By accounting convention, General Fund transfers to Medicare Parts B and D reported in the SOSI are eliminated when

preparing the government-wide consolidated financial statements. The SOSI shows the projected General Fund transfer(s) as

eliminations that, under current law, would be used to finance the remainder of the expenditures in excess of revenues for

Medicare Parts B and D that is reported in the SOSI. The SLTFP include all revenues (including general revenues) of the

federal government.

T. Unmatched Transactions and Balances

The reconciliation of the change in net position requires that the difference between ending and beginning net position 

equals the difference between revenue and cost, plus or minus prior-period adjustments. The unmatched transactions and 

balances includes unmatched intra-governmental balances on the Balance Sheet and includes unmatched intra-governmental 

current year transactions on the Statement of Operations and Changes in Net Position to reconcile the change in net position 

to ensure beginning and ending net position equals the difference between revenue and cost, plus or minus prior-period 

adjustments. Unresolved intra-governmental differences (i.e., unmatched transactions and balances) result in errors in the 

consolidated financial statements.

The unmatched transactions and balances are needed to balance the accrual-based financial statements. The Statement 

of Operations and Changes in Net Position and the Balance Sheet include specific lines for the unmatched transactions and 

balances, while the unmatched transactions and balances are recorded in existing lines in the Statement of Net Cost. The 

primary factors affecting this out of balance situation are:

• Unmatched intra-governmental transactions and balances between federal entities; and

• Errors and restatements in federal entities’ reporting.

As intra-governmental transactions and balances reduce to immaterial amounts, the corresponding individual lines in the 

“Unmatched Transactions and Balances” table are adjusted to remove the differences for the fiscal year. Please refer to the 

table of “Unmatched Transactions and Balances” in Other Information (Unaudited) for examples of the individual lines. 

Materiality for these adjustments is considered in the absolute value, when at or below $0.1 billion.

Refer to the Other Information (unaudited)—Unmatched Transactions and Balances for additional information.

U. Changes in Accounting Principle

A change in accounting principle results from either adopting a new accounting pronouncement or an entity adopting an 

allowable alternative accounting principle on the basis that is preferable. Generally, as applicable, changes in accounting 

principle are shown as an adjustment to beginning net position in the Statement of Operations and Changes in Net Position of 

the period in which the change is implemented.

Adjustments to beginning net position in FY 2022 and FY 2021 for changes in accounting principle were ($4.3) billion 

and $0.7 billion, respectively, mostly due to DOD’s continued implementation of SFFAS No. 48, Opening Balances for 

Inventory, Operating Materials and Supplies, and Stockpile Materials and SFFAS No. 50, Establishing Opening Balances 

for General Property, Plant, and Equipment.

V. Correction of Errors

Correction of errors in financial statements result from mathematical mistakes, mistakes in the application of accounting 

principles, or oversight or misuse of facts that existed at the time financial statements were prepared. When preparing

comparative financial statements, if the material error occurred in the prior period presented and the effect is known, then the 

affected line items of the prior period are restated.

The FY 2021 Statement of Net Cost was restated to report the increase in Treasury’s GSEs liquidation preference and 

the year-end unrealized gain valuation adjustment as earned revenue instead of a reduction to gross cost. For more 
81 NOTES TO THE FINANCIAL STATEMENTS

information refer to the Statement of Net Cost and Note 8—Investments in Government-Sponsored Enterprises. Also, $3.8 

billion of FY 2021 Smithsonian dedicated collection funds were restated out of funds from dedicated collections into funds 

other than those from dedicated collections. Refer also to the Balance Sheet, Statement of Operations and Changes in Net 

Position, and Note 22—Funds from Dedicated Collections.

W. Changes in Presentation 

Changes in presentation are done to improve clarity of the presentation of the Financial Report and include changes 

since the prior year that are not the result of correction of errors or changes in accounting principles. In FY 2022, the Balance 

Sheet reports SPVs and investments together. The corresponding changes were made to Reconciliations of Net Operating 

Cost and Budget Deficit and Note 7—Investments. The FY 2021 presentation was modified to conform to the FY 2022 

presentation. 

X. Fiduciary Activities

Fiduciary activities are the collection or receipt, as well as the management, protection, accounting, investment and 

disposition by the government of cash or other assets in which non-federal individuals or entities have an ownership interest 

that the government must uphold. Fiduciary cash and other fiduciary assets are not assets of the government and are not 

recognized on the Balance Sheet. See Note 23—Fiduciary Activities, for additional information. 

Y. Use of Estimates

The government has made certain estimates and assumptions relating to the reporting of assets, liabilities, revenues, 

expenses, and the disclosure of contingent liabilities to prepare these financial statements. There are a large number of factors 

that affect these assumptions and estimates, which are inherently subject to substantial uncertainty arising from the likelihood 

of future changes in general economic, regulatory, and market conditions. As such, actual results will differ from these 

estimates and such differences may be material.

Significant transactions subject to estimates are included in the balance of loans receivable, net, federal employee and 

veteran benefits payable, investments, investments in SPVs, investments in GSEs, tax receivables, loan guarantee liabilities,

depreciation, other actuarial liabilities, cost and earned revenue allocations, as well as contingencies and any related 

recognized liabilities.

The government recognizes the sensitivity of credit reform modeling to slight changes in some model assumptions and 

uses regular review of model factors, statistical modeling, and annual reestimates to reflect the most accurate cost of the 

credit programs to the U.S. government. Federal Credit Reform Act of 1990 loan receivables and loan guarantees are

disclosed in Note 4—Loans Receivable, Net and Loan Guarantee Liabilities.

Estimates are also used to determine the FV of investments in SPVs and GSEs. The FV of the SPV preferred equity 

investments is estimated based on a discounted cash flow valuation methodology, whereby the primary input is the PV of the 

projected annual cash flows associated with these investments. The FV of the GSE senior preferred stock considers 

forecasted cash flows to equity holders and the traded prices of the other equity securities including the GSE’s common stock 

and junior preferred stock. The value of the GSE senior preferred stock is estimated by first estimating the FV of the total 

equity of each GSE (which, in addition to the senior preferred stock, is comprised of other equity instruments including 

common stock, common stock warrants, and junior preferred stock). The FV of the GSE total equity is based on a discounted 

cash flow valuation methodology, whereby the primary input is the PV of the projected quarterly cash flows to equity 

holders. The FV of the GSEs’ other equity instruments are then deducted from its total equity, with the remainder 

representing the FV of the senior preferred stock.

Factors impacting the FV of the GSE warrants include the nominal exercise price and the large number of potential

exercise shares, the market trading of the common stock that underlies the warrants as of September 30, the principal market,

and the market participants. Other factors impacting the FV of the GSE warrants include, the holding period risk related

directly to the assumption of the amount of time that it will take to sell the exercised shares without depressing the market.

For additional information on investments in SPVs and GSEs, see Note 7—Investments and Note 8—Investments in 

Government-Sponsored Enterprises, respectively.
NOTES TO THE FINANCIAL STATEMENTS 82

Treasury performs annual calculations, as of September 30, to assess the need for recording an estimated liability in 

accordance with SFFAS No. 5, Accounting for Liabilities of The Federal Government, and to the government’s funding 

commitment to the GSEs under the SPSPAs. For additional information on investments in GSEs and the amended SPSPAs, 

see Note 8—Investments in Government-Sponsored Enterprises.

Z. Credit Risk

Credit risk is the potential, no matter how remote, for financial loss from a failure of a borrower or counterparty to 

perform in accordance with underlying contractual obligations. The government takes on credit risk when it makes direct 

loans or guarantees to non-federal entities, provides credits to foreign entities, or becomes exposed to institutions that engage 

in financial transactions with foreign countries.

The government also takes on credit risk related to committed, but undisbursed direct loans, CARES Act Section 4003

COVID-19 credit program receivables, funding commitments to GSEs, CARES Act Section 4003 Section 13(3) funding

provided to Corporate Credit Facility LLC, MSF, MLF, TALF, and other activities. Many of these programs were developed 

or provided credit support to the pandemic emergency relief programs of the Federal Reserve Board, to provide credit where 

borrowers are not able to get access to credit with reasonable terms and conditions. These programs expose the government 

to potential costs and losses. The extent of the risk assumed is described in more detail in the notes to the financial 

statements, and where applicable, is factored into credit reform models and reflected in FV measurements. 

AA. Treaties and Other International Agreements

For financial reporting purposes, treaties and other international agreements may be understood as falling into three 

broad categories:

• No present or contingent obligation to provide goods, services, or financial support;

• Present obligation to provide goods, services, or financial support; or

• Contingent obligation to provide goods, services, or financial support.

The proper financial reporting of treaties and other international agreements depends on the probable future outflow or 

other sacrifice of resources as a result of entering into the agreement.

In many cases, treaties and other international agreements establish frameworks that govern cooperative activities with 

other countries, but leave to the discretion of the parties whether to engage in any such activities. In other cases, the 

agreements may contemplate specific cooperative activities, but create no present or contingent obligations to engage in 

them. Cooperative activities relevant to these treaties and other international agreements fall under the first category, which 

does not result in the U.S. government incurring any financial liability. Since these treaties and other international agreements 

have no financial impact, they are not reported or disclosed in this Financial Report. 

Some treaties and other international agreements fall under the second category, and involve a present obligation, and 

therefore result in liability recognition. Such present obligation may relate to the U.S. government providing financial and inkind support, including assessed contributions, voluntary contributions, grants, and other assistance to international 

organizations in which it participates as a member. Examples of such agreements include those that establish international 

organizations under which the U.S. government undertakes obligations to pay assessed dues to the organization; grant 

agreements under which the U.S. government provides foreign assistance funds to other countries; and claims settlement 

agreements under which the U.S. government agrees to pay specific sums of money to settle claims.

The last category encompasses those treaties or other international agreements which result in contingencies that may 

require recognition or disclosure in the financial statements. Such contingencies may stem from commitments in a treaty or 

other international agreement to provide goods, services, or financial support when a future event occurs, or from litigation, 

claims, or assessments forged by other parties to the agreement. For additional information related to treaties and other 

international agreements that fall under the last category, refer to Note 21—Contingencies.

AB. Public-Private Partnerships

Federal P3s are risk-sharing arrangements or transactions with expected lives greater than five years between public and 

private sector entities. Such arrangements or transactions provide a service or an asset for government and/or general public 

use where in addition to the sharing of resources, each party shares in the risks and rewards of said arrangements or 
83 NOTES TO THE FINANCIAL STATEMENTS

transactions. The P3s that are deemed material to the consolidated financial statements and have met the criteria of SFFAS 

No. 49, Public-Private Partnerships, are disclosed. See Note 28—Public-Private Partnerships for additional information. 
NOTES TO THE FINANCIAL STATEMENTS 84

Note 2. Cash and Other Monetary Assets

Cash and Other Monetary Assets as of September 30, 2022, and 2021

(In billions of dollars) 2022 2021

Unrestricted cash:

Cash held by Treasury for government-wide operations.......................................... 617.0 198.4

Other................................................................................................................... 3.7 5.7

Restricted .............................................................................................................. 46.8 46.0

Total cash ......................................................................................................... 667.5 250.1

International monetary assets.................................................................................. 185.3 197.0

Gold and silver ....................................................................................................... 11.1 11.1

Foreign currency .................................................................................................... 13.9 16.8

Total cash and other monetary assets................................................................. 877.8 475.0

Unrestricted cash includes cash held by Treasury for government-wide operations (operating cash) and all other 

unrestricted cash held by the federal entities. Operating cash represents balances from tax collections, federal debt receipts,

and other various receipts net of cash outflows for federal debt repayments and other payments. Treasury checks outstanding 

are netted against operating cash until they are cleared by the FR System. Other unrestricted cash not included in Treasury’s 

operating cash balance includes balances representing cash, cash equivalents, and other funds held by entities, such as 

undeposited collections, deposits in transit, demand deposits, amounts held in trust, and imprest funds. Operating cash held 

by Treasury increased by $418.7 billion compared to the end of the prior fiscal year largely due to Treasury investment and 

borrowing policy decisions to manage the balance and timing of the government’s cash position. During 2021, the debt 

ceiling constraints forced Treasury to maintain a significantly lower operating cash balance. When the debt ceiling was 

increased in December 2021, Treasury was able to bring the operating cash balance back to its one-week prudent policy level.

Restrictions on cash are due to the imposition on cash deposits by law, regulation, or agreement. Restricted cash is 

primarily composed of cash held by the SAA, which executes Foreign Military Sales. The SAA included $39.9 billion and 

$38.6 billion as of September 30, 2022, and 2021, respectively.

International monetary assets include the U.S. reserve position in the IMF and U.S. holdings of SDR. The U.S. reserve 

position in the IMF had a U.S. dollar equivalent of $31.3 billion and $32.7 billion as of September 30, 2022, and 2021, 

respectively. Only a portion of the U.S. financial subscription to the IMF is made in the form of reserve assets; the remainder 

is provided in the form of a letter of credit. The balance available under the letter of credit totaled $74.4 billion and $83.0 

billion as of September 30, 2022, and 2021 respectively. The total amount of SDR holdings of the U.S. was the equivalent of 

$153.6 billion and $163.9 billion as of September 30, 2022, and 2021, respectively. For more information regarding the U.S. 

participation in the IMF and SDR, see Treasury’s financial statements and Note 27—Disclosure Entities and Related Parties. 

The gold reserves that are held by the government are partially offset by a liability for gold certificates issued by the 

Secretary to the FRBs at the statutory rate. As of September 30, 2022, and 2021, gold totaling $11.0 billion per statutory 

carrying value was pledged as collateral for gold certificates also valued at $11.0 billion. All the gold certificates issued are 

payable to the FRBs, and a small portion of gold is in the custody of the FRBs. Additionally, the U.S. Mint holds 100,000 

FTOs of gold without certificates. The amount for gold and silver listed in the above table is based on the statutory values 

which are $42.2222 per FTO of gold and $1.2929 per FTO of silver. As of September 30, 2022, and 2021, the number of 

FTOs of gold and silver held is 261,498,927.0 and 16,000,000.0, respectively. While gold and silver are valued on the 

Balance Sheet using statutory rates, the market value of gold on the London Fixing was $1,671.75 and $1,742.80 per FTO as 

of September 30, 2022, and 2021, respectively and the market value of silver was $19.02 and $21.53 per FTO as of 

September 30, 2022, and 2021, respectively. Please refer to the financial statements of Treasury for additional information 

regarding gold reserves and Treasury’s liability for gold. 

The foreign currency is maintained by Treasury’s ESF and various U.S. federal entities as well as foreign banks. 

Foreign currency is translated into U.S. dollars at the exchange rate at fiscal year-end. 
85 NOTES TO THE FINANCIAL STATEMENTS

Note 3. Accounts Receivable, Net

Accounts Receivable, net as of September 30, 2022, and 2021

(In billions of dollars) 2022 2021

Taxes receivable:

Taxes receivable, gross........................................................................................ 451.4 507.8

Allowance for uncollectible amounts ...................................................................... (205.7) (196.6)

Taxes receivable, net......................................................................................... 245.7 311.2

Other accounts receivable:

Other accounts receivable, gross .......................................................................... 204.5 140.7

Allowance for uncollectible amounts ...................................................................... (93.9) (50.9)

Other accounts receivable, net ........................................................................... 110.6 89.8

 Total accounts receivable, net ......................................................................... 356.3 401.0

Taxes receivable is listed first above due to being the significant portion of total accounts receivable, and the rest are 

referred to as other accounts receivable. Other accounts receivable, gross includes related interest receivable of $2.8 billion 

and $3.0 billion as of September 30, 2022, and 2021, respectively.

Treasury comprises approximately 66.8 percent of the government’s reported accounts receivable, net, as of September

30, 2022. Treasury accounts for nearly all the reported taxes receivable, which consist of unpaid assessments due from 

taxpayers, unpaid taxes related to IRC section 965, and deferred payments resulting from the CARES Act. Examples of 

unpaid assessments are the filing of a tax return without sufficient payment or a court ruling in favor of the IRS. Section 

965(h) of the IRC requires taxpayers who are shareholders of certain specified foreign corporations to pay a transition tax on 

foreign earnings as if those earnings had been repatriated to the U.S. IRC 965(h) allows taxpayers to elect to pay their tax on 

an eight-year installment schedule. Pursuant to the CARES Act, employers, through December 31, 2020, could defer 

payment, without penalty, of their portions of the Social Security segment of FICA and the employer’s and employee 

representative’s share of the Railroad Retirement Tax. Treasury experienced a year over year decrease of $66.6 billion 

primarily due to the 50 percent year one installment payment of the deferred employer portion of FICA Social Security taxes.

Other accounts receivable, gross and the corresponding allowance for uncollectible amounts increased significantly year 

over year, primarily because of DOL’s benefit overpayments from programs related to COVID-19, including an increase in 

gross receivables of $37.5 billion and an increase to the allowance of $39.2 billion. Another substantial factor in the overall 

change in Other accounts receivable, gross, was the $11.6 billion increase in HHS receivables primarily due to Medicare.

The following entities are the main contributors to the government’s reported accounts receivable, net as of September 

30, 2022. Refer to each entity’s financial statements for additional information:

• Treasury • DOL • OPM 

• HHS • DOE • SEC

• DHS • VA • HUD 

• DOD • PBGC • USPS

• SSA • DOJ • FCC

• DOI • FDIC • EPA

• USDA • TVA
NOTES TO THE FINANCIAL STATEMENTS 86

Note 4. Loans Receivable, Net and Loan Guarantee Liabilities

Loans Receivable, net as of September 30, 2022 

Subsidy

Expense

Loans Subsidy Loans (Income)

Receivable, Interest Foreclosed Cost Receivable, for the

(In billions of dollars) Gross Receivable Property Allowance Net Fiscal Year

Federal Direct Student Loans -

Education................................ 1,341.8 86.7 - (611.9) 816.6 385.4

Disaster Assistance Loans -

SBA........................................ 367.0 14.8 - (61.5) 320.3 43.0

Federal Housing Admin Loans 

- HUD ..................................... 53.8 20.9 0.5 (14.3) 60.9 (0.1)

Electric Loans - USDA ............. 53.9 - - (2.2) 51.7 0.7

Federal Family Education 

Loans - Education.................... 80.3 21.6 - (62.1) 39.8 10.8

All other programs ................... 159.6 4.0 0.8 (19.6) 144.8 0.1

Total loans receivable ............ 2,056.4 148.0 1.3 (771.6) 1,434.1 439.9

Loans Receivable, net as of September 30, 2021 

Subsidy

Expense

Loans Subsidy Loans (Income)

Receivable, Interest Foreclosed Cost Receivable, for the

(In billions of dollars) Gross Receivable Property Allowance Net Fiscal Year

Federal Direct Student Loans -

Education................................ 1,292.2 86.5 - (273.9) 1,104.8 93.9

Disaster Assistance Loans -

SBA........................................ 249.2 7.5 - (12.6) 244.1 2.9

Federal Housing Admin Loans 

- HUD ..................................... 46.2 19.9 0.6 (17.6) 49.1 -

Electric Loans - USDA ............. 51.0 - - (2.6) 48.4 (0.8)

Federal Family Education 

Loans - Education.................... 82.0 23.9 - (47.7) 58.2 0.6

All other programs ................... 159.4 3.2 0.9 (17.1) 146.4 1.3

Total loans receivable ............ 1,880.0 141.0 1.5 (371.5) 1,651.0 97.9

Loans Receivable

Loans receivable consists primarily of direct loans disbursed by the government, receivables related to guaranteed loans 

that have defaulted, and certain receivables for guaranteed loans that the government has purchased from lenders. Direct 

loans are used to promote the nation’s welfare by making financing available to segments of the population not served 

adequately by non-federal institutions, or otherwise providing for certain activities or investments. For those unable to afford 
87 NOTES TO THE FINANCIAL STATEMENTS

credit at the market rate, federal credit programs provide subsidies in the form of direct loans offered at an interest rate lower 

than the market rate. 

The amount of the long-term cost of post-1991 direct loans equals the subsidy cost allowance for direct loans as of 

September 30. The amount of the long-term cost of pre-1992 direct loans equals the allowance for subsidy amounts (or PV 

allowance) for direct loans. The long-term cost is based on all direct loans disbursed in this fiscal year and previous years that 

are outstanding as of September 30. It includes the subsidy cost of these direct loans estimated as of the time of loan 

disbursement and subsequent adjustments such as modifications, reestimates, amortizations, and write-offs.

Loans receivable, net includes related interest and foreclosed property. Foreclosed property is property that is 

transferred from borrowers to a federal credit program, through foreclosure or other means, in partial or full settlement of 

post-1991 direct loans or as compensation for losses that the government sustained under post-1991 loan guarantees. Please 

refer to the financial statements of HUD, USDA, and VA for additional information regarding foreclosed property. 

The total subsidy expense/(income) is the cost recognized during the fiscal year. It consists of the subsidy 

expense/(income) incurred for direct loans disbursed during the fiscal year, for modifications made during the fiscal year of 

direct loans outstanding, and for upward or downward reestimates as of the end of the fiscal year. This expense/(income) is 

included in the Statements of Net Cost.

The majority of loans receivable programs are provided by Education, SBA, HUD, and USDA. For additional 

information regarding the direct loan programs listed in the tables above, please refer to the financial statements of the 

entities.

Education has loan programs that are authorized by Title IV of the Higher Education Act of 1965. The William D. Ford 

Federal Direct Loan Program (referred to as the Direct Loan Program), was established in FY 1994 and offered four types of 

educational loans: Stafford, Unsubsidized Stafford, Parent Loan for Undergraduate Students, and consolidation loans. With 

this program, the government makes loans directly to students and parents through participating institutions of higher 

education. Education disbursed approximately $120.4 billion in direct loans to eligible borrowers in FY 2022 and 

approximately $104.8 billion in FY 2021. The COVID-19 relief legislation and administrative actions provided support for 

student loan borrowers by temporarily suspending nearly all federal student loan payments interest free. In addition, all 

federal wage garnishments and collections actions for borrowers with federally held loan in default were halted. To address 

the financial harms of the pandemic by smoothing the transition back to repayment and helping borrowers at highest risk of 

delinquencies or default once payments resume, Education announced broad-based debt relief. Borrowers with loans held by 

Education who received a Pell Grant in college and meet the specified income limits are eligible for up to $20,000 in debt 

relief, while non-Pell Grant recipients who meet the specified income limits are eligible for up to $10,000 in relief. This 

action resulted in an upward modification cost of $361.0 billion in the Direct Loan Program. There was a net negative $23.7 

billion modification adjustment transfer associated with this modification, bringing the total modification cost for the Direct 

Loan Broad-Based Debt Relief for $337.3 billion. These loan modification costs are a part of the $338.0 billion increase in 

subsidy cost allowance for Education’s Federal Direct Student Loans. Subsequent to September 30, 2022, a federal court 

order stayed the implementation of the debt relief. For information regarding the status of student loan debt relief refer to 

Note 30—Subsequent Events.

The SBA makes loans to microloan intermediaries and provides a direct loan program that assists homeowners, renters 

and businesses recover from disasters. The CARES Act provides funding for SBA to offer low-interest EIDLs for working 

capital to small businesses suffering substantial economic injury as a result of COVID-19 that can be used to pay fixed debts, 

payroll, accounts payable and other bills that cannot be paid because of the disaster’s impact. Overall, SBA’s credit program 

receivables saw an increase of $76.1 billion from FY 2021 which includes SBA’s direct disaster loan program which saw an 

increase of $76.2 billion. The change in credit program receivables resulted from an increase of $117.8 billion in direct 

disaster loans as a direct result of CARES Act funded loans.

HUD’s Office of Housing plays a vital role for the nation’s homebuyers, homeowners, renters, and communities 

through its nationally administered programs. It includes FHA and Ginnie Mae.

USDA’s Rural Development offers direct loans with unique missions to bring prosperity and opportunity to rural areas. 

The Rural Housing programs provide affordable, safe, and sanitary housing and essential community facilities to rural 

communities. Rural Utility programs help improve the quality of life in rural areas through a variety of loan programs for 

electric energy, telecommunications, and water and environmental projects.
NOTES TO THE FINANCIAL STATEMENTS 88

Loan Guarantee Liabilities as of September 30, 2022, and 2021

Principal

Principal Amount Amount Subsidy Expense

Loan Guarantee of Loans Under Guaranteed (Income) for the

Liabilities Guarantee by the U.S. Fiscal Year

(In billions of dollars) 2022 2021 2022 2021 2022 2021 2022 2021

Federal Housing Administration 

Loans - HUD ............................... (39.8) (17.9) 1,533.7 1,503.6 1,368.0 1,344.4 (37.8) (25.2)

Small Business Loans.................. 25.7 227.8 187.9 459.6 163.8 435.3 (5.0) 296.8

Federal Family Education Loans -

Education.................................... 10.4 7.3 98.6 116.9 98.6 116.9 11.2 10.1

Veterans Housing Benefit 

Programs .................................... 9.9 10.9 940.9 862.2 237.3 218.3 (2.2) 0.6

All other guaranteed loan 

programs .................................... 0.2 2.6 195.0 208.6 178.3 190.9 (2.3) (3.2)

Total loan guarantee liabilities .... 6.4 230.7 2,956.1 3,150.9 2,046.0 2,305.8 (36.1) 279.1

Loan Guarantee Liabilities

Loan guarantee programs are also used to promote the nation’s welfare by making financing available to segments of 

the population not served adequately by non-federal institutions, or otherwise providing for certain activities or investments. 

For those to whom non-federal financial institutions are reluctant to grant credit because of the high risk involved, federal 

credit programs guarantee the payment of these non-federal loans and absorb the cost of defaults.

The amount of the long-term cost of post-1991 loan guarantees outstanding equals the liability for loan guarantees as of 

September 30. The amount of the long-term cost of pre-1992 loan guarantees equals the allowance for subsidy amounts (or 

PV allowance) and the liability for loan guarantees. The long-term cost is based on all guaranteed loans disbursed in this 

fiscal year and previous years that are outstanding as of September 30. It includes the subsidy cost of the loan guarantees 

estimated as of the time of loan disbursement and subsequent adjustments such as modifications, reestimates, amortizations, 

and write-offs. 

The total subsidy expense/(income) is the cost of loan guarantees recognized during the fiscal year. It consists of the 

subsidy expense/(income) incurred for guaranteed loans disbursed during the fiscal year, for modifications made during the 

fiscal year of loan guarantees outstanding, and for upward or downward reestimates as of the end of the fiscal year of the cost 

of loan guarantees outstanding. This expense/(income) is included in the Statements of Net Cost. 

The majority of the loan guarantee programs are provided by HUD, SBA, Education and VA. For additional 

information regarding the guaranteed loan programs listed in the tables above, please refer to the financial statements of the 

entities.

HUD’s Office of Housing promotes equal housing opportunities. It includes FHA who provides mortgage insurance on 

mortgages for single family mortgage loans made by FHA-approved lenders as well as providing mortgage insurance on 

multifamily rental housing, healthcare facilities and single-family Title I manufactured housing and property improvement 

loans. FHA strives to meet the needs of many first-time and minority homebuyers who, without the FHA guarantee, may find 

mortgage credit to be unaffordable or simply unavailable. These programs are a critical component of FHA’s efforts to meet 

the nation’s need for decent, safe, and affordable housing. Due to COVID-19 the CARES Act provided borrowers with 

federally backed mortgage loans a 60-day foreclosure moratorium and a right to forbearance of loan payments for up to one 

year for homeowners experiencing financial hardship. FHA’s Loan Guarantee Liability decreased $21.9 billion primarily due 

to upward and downward reestimates, increases in claim payments, decreases in interest fees received and decreases in 

negative subsidy payments. Overall, anticipated cash inflows are projected to exceed cash outflows.

The SBA provides guarantees that help small businesses obtain bank loans and licensed companies to make investments 

in qualifying small businesses. The loan guarantee PPP provides loan forgiveness for eligible small businesses, individuals, 

and nonprofits if proceeds were used in accordance with the law. Eligible expenses include payroll, rent, utility payments and 

other limited uses. SBA’s Loan Guarantee Liabilities decreased $202.1 billion primarily due to PPP loan forgiveness to 

lenders.
89 NOTES TO THE FINANCIAL STATEMENTS

Education has loan programs that are authorized by Title IV of the Higher Education Act of 1965. The FFEL Program 

was established in FY 1965 and operates through state and private, nonprofit guaranty agencies that provided loan guarantees 

on loans made by private lenders to eligible students. The Student Aid and Fiscal Responsibility Act, which was enacted as 

part of the Health Care Education and Reconciliation Act of 2010 (P.L. 111-152), eliminated the authority to guarantee new 

FFEL after June 30, 2010.

VA operates the following loan guarantee programs: Housing Guaranteed Loans and Loan Sale Guarantees. The Home 

Loans program provides loan guarantees to veterans, service members, qualifying dependents, and limited non-veterans to 

purchase homes and retain homeownership with favorable market terms.

For additional information regarding the CARES Act refer to the financial statements of SBA, Education, HUD and 

Note 29—COVID-19 Activity.
NOTES TO THE FINANCIAL STATEMENTS 90

Note 5. Inventory and Related Property, Net

Inventory and Related Property, net as of September 30, 2022, and 2021

(In billions of dollars) 2022 2021

Inventory held for current sale ................................................................................ 76.3 72.1

Inventory held in reserve for future sale................................................................... 0.9 0.9

Inventory and operating material and supplies held for repair ................................... 78.3 77.1

Inventory—excess, obsolete, and unserviceable...................................................... 0.8 0.7

Operating materials and supplies held for use ......................................................... 163.5 158.2

Operating materials and supplies held in reserve for future use ................................ 29.7 28.6

Operating materials and supplies—excess, obsolete, and unserviceable................... 0.6 0.7

Stockpile materials held in reserve for future use ..................................................... 59.4 58.6

Stockpile materials held for sale ............................................................................. 2.1 7.0

Other related property............................................................................................ 5.5 4.5

Allowance for loss.................................................................................................. (10.2) (9.2)

Total inventory and related property, net................................................................ 406.9 399.2

Inventory is tangible personal property that is either held for sale, in the process of production for sale, or to be 

consumed in the production of goods for sale or in the provision of services for a fee. Examples of inventory include raw 

materials, finished goods, spare and repair parts, clothing and textiles, and fuels.

Inventory is categorized as one of the following:

• Held for current sale – includes items currently for sale or transfer to either entities outside the federal government, 

or other federal entities.

• Held in reserve for future sale – includes items being held for sale or transfer to either entities outside the federal 

government or other federal entities in the future.

• Held for repair – items that require servicing to make them suitable for sale or use. 

• Excess – stock that exceeds the demand expected in the normal course of operations because the amount on hand is 

more than can be sold in the foreseeable future and that does not meet management’s criteria to be held in reserve 

for future sale or use.

• Obsolete – items that are no longer needed due to changes in technology, laws, customs, or operations.

• Unserviceable – damaged items that are more economical to dispose of than to repair.

OM&S consists of tangible personal property to be consumed in normal operations (e.g., spare and repair parts, 

ammunition, and tactical missiles) and is categorized as one of the above categories or in the additional listed category below:

• Held in reserve for future sale or use – items maintained because they are not readily available in the market or 

because there is more than a remote chance that they will eventually be needed.

Stockpile materials are strategic and critical materials held due to statutory requirements for use in national defense, 

conservation, or local/national emergencies. Stockpile materials are not held with the intent of selling in the ordinary course 

of business and are restricted unless released by congressional action. Once authorized, the materials (e.g., ores, metals, 

alloys, and medical supplies) are reclassified to held for sale. Refer to the financial statements of DOD, DOE, and HHS for 

additional information regarding stockpile materials.

Other related property consists of the following: 

• Forfeited property consists of monetary instruments, intangible property, real property, and tangible personal 

property acquired through forfeiture proceedings; property acquired by the government to satisfy a tax liability; and 

unclaimed and abandoned merchandise. Please refer to the financial statements of DOJ and Treasury for additional 

information regarding forfeited property.
91 NOTES TO THE FINANCIAL STATEMENTS

• Goods acquired under price support and stabilization programs are referred to as commodities. Commodities are 

items of commerce or trade having an exchange value. Please refer to the financial statements of USDA for 

additional information regarding commodities.

• Seized property includes monetary instruments, real property, and tangible personal property of others in the actual 

or constructive possession of the custodial entity. For additional information on seized property, refer to the 

financial statements of DOJ and Treasury.

• Foreclosed property consists of any asset received in satisfaction of a loan receivable or as a result of payment of a 

claim under a guaranteed or insured loan (excluding commodities acquired under price support programs). For 

additional information on foreclosed property, see Note 4—Loans Receivable, Net and Loan Guarantee Liabilities

and refer to the financial statements of USDA, VA, and HUD.

DOD comprises approximately 82.9 percent of the government’s inventory and related property, net, as of September 

30, 2022. 

The following entities are the main contributors to the government’s reported inventory and related property, net of 

$406.9 billion as of September 30, 2022. Refer to each entity’s financial statements for additional information.

• DOD

• DOE

• Treasury

• HHS

• DHS
NOTES TO THE FINANCIAL STATEMENTS 92

Note 6. General Property, Plant, and Equipment, Net

General Property, Plant, and Equipment, net as of September 30, 2022, and 2021

Accumulated Accumulated

Depreciation/ Depreciation/

Cost Amortization Net Cost Amortization Net

(In billions of dollars) 2022 2021

Buildings, structures, and facilities .............. 720.0 421.6 298.4 674.1 381.3 292.8

Furniture, fixtures, and equipment............... 1,442.5 868.2 574.3 1,424.3 846.1 578.2

Construction in progress ............................ 260.4 N/A 260.4 243.5 N/A 243.5

Internal use software ................................. 66.1 40.9 25.2 61.3 38.3 23.0

Land ......................................................... 22.4 N/A 22.4 22.3 N/A 22.3

Other general property, plant, and 

equipment................................................. 35.2 18.4 16.8 33.1 16.0 17.1

Total general property, plant, and 

equipment, net........................................ 2,546.6 1,349.1 1,197.5 2,458.6 1,281.7 1,176.9

Note: "N/A" indicates not applicable.

DOD comprises approximately 68.0 percent of the government’s reported general PP&E, net as of September 30, 2022.

DOD continues to implement SFFAS No. 50, Establishing Opening Balances for General Property, Plant, and Equipment

which permits alternative methods in establishing opening balances for general PP&E and has elected to exclude land and 

land rights. The total acreage excluded was 22,958,006 as of September 30, 2022, and 23,566,363 as of September 30, 2021.

Differences year over year are due to DOD understating general PP&E due to asset balances that were previously recorded in 

a legacy system but not the reporting system, incorrect accumulated depreciation amounts recorded in FYs 2019 through 

2021, updated construction in progress billing models, and offline adjustments that were made after the reporting system had 

closed in FY 2021.

The following entities are the main contributors to the government’s reported general PP&E net of $1,197.5 billion as of 

September 30, 2022. Please refer to each entity’s financial statements for additional information.

• DOD

• DOE

• GSA

• DOC

• Treasury

• HHS

• DOI

• USPS

• DHS

• Smithsonian

• SSA

• NASA

• VA

• TVA

• State

• DOJ

• DOT

Certain PP&E are multi-use heritage assets, see Note 26—Stewardship Property, Plant, and Equipment for additional 

information on multi-use heritage assets. Please refer to DM&R and Land and Permanent Land Rights located in the

unaudited RSI for information concerning the estimated maintenance and repair costs related to PP&E and the federal 

estimated acreage by predominant use.
93 NOTES TO THE FINANCIAL STATEMENTS

Note 7. Investments

Investments as of September 30, 2022

(In billions of dollars) Level 1 Level 2 Level 3 Other Total

Pension Benefit Guaranty Corporation:

Asset backed/mortgage backed securities.................. - 9.7 - - 9.7

Corporate bonds and other ....................................... - 18.3 - - 18.3

International fixed maturity securities ......................... 0.1 5.8 - - 5.9

Equity securities ....................................................... 2.8 - - 9.7 12.5

Pooled funds............................................................ - - - 2.2 2.2

Real estate and real estate investment trusts ............. 1.1 - - 0.4 1.5

Other securities........................................................ - 4.8 0.3 2.3 7.4

Total Pension Benefit Guaranty Corporation ............ 4.0 38.6 0.3 14.6 57.5

Department of the Treasury:

Investments in Special Purpose Vehicles ................... - - 17.8 - 17.8

Other Investments .................................................... 3.9 - 2.9 - 6.8

Total Department of the Treasury............................ 3.9 - 20.7 - 24.6

National Railroad Retirement Investment Trust:

U.S. equity ............................................................... 6.4 - - - 6.4

Non-U.S. equity........................................................ 4.9 - - - 4.9

Private equity ........................................................... - - - 3.8 3.8

Global fixed income.................................................. - 2.1 - 0.5 2.6

Global real assets..................................................... 0.3 - - 2.5 2.8

Absolute return mandates ......................................... - - - 1.0 1.0

Opportunistic mandates ............................................ - - - 0.7 0.7

Total National Railroad Retirement Investment Trust 11.6 2.1 - 8.5 22.2

Tennessee Valley Authority:

Commingled funds measured at net asset value......... - - - 2.4 2.4

Equity securities ....................................................... 1.2 - - - 1.2

Corporate debt securities .......................................... - 1.4 - - 1.4

Private equity measured at net asset value ................ - - - 1.9 1.9

Private real assets measured at net asset value ......... - - - 1.5 1.5

Private credit measured at net asset value................. - - - 0.6 0.6

Other securities........................................................ 0.7 1.3 0.1 0.5 2.6

Total Tennessee Valley Authority ............................ 1.9 2.7 0.1 6.9 11.6

Department of Defense ............................................... - - - 11.4 11.4

Smithsonian Institution................................................ 0.5 - - 2.1 2.6

All other ..................................................................... - - 0.1 0.3 0.4

Total investments ..................................................... 21.9 43.4 21.2 43.8 130.3
NOTES TO THE FINANCIAL STATEMENTS 94

Investments as of September 30, 2021

(In billions of dollars) Level 1 Level 2 Level 3 Other Total

Pension Benefit Guaranty Corporation:

Asset backed/mortgage backed securities.................. - 8.7 - - 8.7

Corporate bonds and other ....................................... - 24.4 - - 24.4

International fixed maturity securities ......................... - 7.9 - - 7.9

Equity securities ....................................................... 2.5 0.1 - 13.2 15.8

Pooled funds............................................................ 0.1 - - 5.9 6.0

Real estate and real estate investment trusts ............. 1.7 - - 0.5 2.2

Other securities........................................................ - 7.3 0.2 2.7 10.2

Total Pension Benefit Guaranty Corporation ............ 4.3 48.4 0.2 22.3 75.2

Department of the Treasury:

Investments in Special Purpose Vehicles ................... - - 25.6 - 25.6

Other Investments .................................................... 5.3 - 0.8 - 6.1

Total Department of the Treasury............................ 5.3 - 26.4 - 31.7

National Railroad Retirement Investment Trust:

U.S. equity ............................................................... 8.4 - - - 8.4

Non-U.S. equity........................................................ 6.8 - - - 6.8

Private equity ........................................................... - - - 4.0 4.0

Global fixed income.................................................. 0.1 2.7 - 0.5 3.3

Global real assets..................................................... 0.5 - - 2.2 2.7

Absolute return mandates ......................................... - - - 0.9 0.9

Opportunistic mandates ............................................ - - - 0.7 0.7

Total National Railroad Retirement Investment Trust 15.8 2.7 - 8.3 26.8

Tennessee Valley Authority:

Commingled funds measured at net asset value......... - - - 3.0 3.0

Equity securities ....................................................... 1.6 - - - 1.6

Corporate debt securities .......................................... - 1.8 - - 1.8

Private equity measured at net asset value ................ - - - 1.7 1.7

Private real assets measured at net asset value ......... - - - 1.0 1.0

Private credit measured at net asset value................. - - - 0.4 0.4

Other securities........................................................ 1.5 1.5 0.1 0.5 3.6

Total Tennessee Valley Authority ............................ 3.1 3.3 0.1 6.6 13.1

Department of Defense ............................................... - - - 11.4 11.4

Smithsonian Institution................................................ 0.5 - - 2.4 2.9

All other ..................................................................... - - 0.1 0.4 0.5

Total investments ..................................................... 29.0 54.4 26.8 51.4 161.6

PBGC, NRRIT, TVA, and Smithsonian 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 accounting and reporting standards issued by FASAB. PBGC, NRRIT, and TVA also hold 
95 NOTES TO THE FINANCIAL STATEMENTS

investments in Treasury securities which are not included in the above tables, as such investments are eliminated in 

consolidation. Overall, the FY 2022 balance for investments decreased due to a decrease in investment holdings.

In FY 2022, Investments in Special Purpose Vehicles was consolidated into the Investments note. The data was moved 

under Treasury with corresponding lines “Investments in Special Purpose Vehicles” and common stock warrants reporting 

under “Other Investments”.

PBGC insures pension benefits of participants in covered single-employer and multiemployer defined benefit pension

plans and values its financial assets at estimated FV consistent with the standards issued by FASB for pension plans. PBGC’s

investments are used to pay future benefits of covered participants.

Treasury’s investments consist of foreign currency holdings invested in interest bearing securities issued or held through

foreign governments or monetary authorities, SPVs, and common stock warrants that include non-federal investments

holdings acquired pursuant to the establishment of emergency relief programs in response to the COVID-19 pandemic that

are valued at FV. Common stock warrants provide Treasury with the right to purchase shares of common stock of either

publicly or non-publicly traded air carriers. The warrants are assets of the U.S. government and Treasury is precluded from

using the cash proceeds realized from the financial instruments received.

NRRIT on behalf of the RRB, manages and invests railroad retirement assets that are to be used to pay retirement

benefits to the nation’s railroad workers under the RRP. As an investment company, NRRIT is subject to accounting

standards for investment companies issued by FASB.

TVA’s investments consist of amounts held in the Nuclear Decommissioning Trust, Asset Retirement Trust,

Supplemental Executive Retirement Plan, and Deferred Compensation Plan. TVA’s qualified benefit pension plan is funded

with qualified plan assets.

Certain other investments reported by DOD represent joint ventures with private developers constructing or improving 

military housing on behalf of the department.

Please refer to PBGC, NRRIT, TVA, Treasury, DOD, and Smithsonian’s financial statements for additional information 

on these investments and FV measurement.

Investments in Special Purpose Vehicles

The SPVs were established by FRBNY and FRBB for the purpose of making loans, purchasing debt, and other 

commercial paper of eligible entities affected by COVID-19. The valuation to estimate the investment’s FV incorporates 

forecasts, projections, and cash flow analyses. Changes in valuation, including impairments, are deemed usual and recurring 

and thus are recorded as exchange transactions on the Statement of Net Cost and investments on the Balance Sheet. For 

additional information regarding the recording of revenue and the changes in valuation refer to Treasury’s financial 

statements.

Certain lending facilities were implemented through SPVs, which consist of the MSF, MLF, and TALF. The MSF 

supports lending to small and medium-sized businesses that were in sound financial condition before the onset of the 

COVID-19 pandemic and have good post-pandemic prospects. The MLF helps state and local governments manage cash 

flow pressures while continuing to serve households and businesses in their communities. The TALF supports the flow of 

credit to consumers and businesses for purposes of stabilizing the U.S. financial system. As of January 8, 2021, the SPVs 

have ceased purchasing of loan participations, eligible notes, and no new credit extensions have been made. For additional 

information regarding the SPVs refer to Treasury’s financial statements and to Note 27—Disclosure Entities and Related 

Parties.

Fair Value Measurement

Investments are recorded at FV and have been categorized based upon a FV hierarchy, in accordance with FASB ASC 

Topic 820. FV is a market-based measurement. For some assets, observable market transactions or market information might 

be available. For other assets, observable market transactions and market information might not be available. However, the 

objective of a FV measurement in both cases is the same—to estimate the price at which an orderly transaction to sell the 

asset would take place between market participants at the measurement date under current market conditions.

When a price for an identical asset is not observable, a reporting entity measures FV using another valuation technique 

that maximizes the use of relevant observable inputs and minimizes the use of unobservable inputs. Because FV is a marketbased measurement, it is measured using the assumptions that market participants would use when pricing the asset, 

including assumptions about risk. As a result, a reporting entity’s intention to hold an asset is not relevant when measuring 

FV.

The measurement of FV of an asset is categorized with different levels of FV hierarchy as follows:

• Level 1—Unadjusted quoted prices in active markets for identical assets that the reporting entity can access at the 

measurement date.
NOTES TO THE FINANCIAL STATEMENTS 96

• Level 2—Inputs other than quoted prices included with Level 1 that are based on observable market data (quoted 

prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in 

inactive markets), or that are either directly or indirectly observable for substantially the full term of the asset or 

liability.

• Level 3—Inputs that are both unobservable and significant to the overall FV measurement.

• Other—This category contains investments in certain commingled funds and partnerships that are measured at FV 

using NAV practical expedient that are not classified within the FV hierarchy and joint ventures. Please refer to 

PBGC, NRRIT, and TVA’s financial statements for additional information on investments priced by NAV per share 

(or its equivalent) practical expedient and DOD’s financial statements for additional information about joint 

ventures.
97 NOTES TO THE FINANCIAL STATEMENTS

Note 8. Investments in Government-Sponsored Enterprises

Investments in GSEs as of September 30, 2022

Cumulative

Gross Valuation Fair

(In billions of dollars) Investments Gain/(Loss) Value

Fannie Mae senior preferred stock................................................ 177.7 (62.0) 115.7

Freddie Mac senior preferred stock............................................... 106.6 (2.1) 104.5

Fannie Mae warrants common stock............................................. 3.1 (0.9) 2.2

Freddie Mac warrants common stock............................................ 2.3 (1.0) 1.3

Total investments in GSEs ........................................................ 289.7 (66.0) 223.7

Investments in GSEs as of September 30, 2021

Cumulative

Gross Valuation Fair

(In billions of dollars) Investments Gain/(Loss) Value

Fannie Mae senior preferred stock................................................ 158.7 (38.2) 120.5

Freddie Mac senior preferred stock............................................... 94.9 0.1 95.0

Fannie Mae warrants common stock............................................. 3.1 0.4 3.5

Freddie Mac warrants common stock............................................ 2.3 (0.4) 1.9

Total investments in GSEs......................................................... 259.0 (38.1) 220.9

Congress established Fannie Mae and Freddie Mac as GSEs to provide stability and increase liquidity in the secondary

mortgage market and to promote access to mortgage credit throughout the nation. A key function of the GSEs is to purchase 

mortgages, package those mortgages into securities, which are subsequently sold to investors, and guarantee the timely 

payment of principal and interest on these securities.

Congress passed the Housing and Economic Recovery Act of 2008 (P.L. 110-289) in July 2008 in response to the

financial crisis that year and the increasingly difficult conditions in the housing market which challenged the soundness and

profitability of the GSEs and thereby threatened to undermine the entire housing market. This Act created FHFA, with 

enhanced regulatory authority over the GSEs, and provided the Secretary of the Treasury with certain authorities intended to 

ensure the financial stability of the GSEs, if necessary. In September 2008, FHFA placed the GSEs under conservatorship 

and Treasury invested in the GSEs by entering into a SPSPA with each GSE. These actions were taken to preserve the GSEs’ 

assets, ensure a sound and solvent financial condition, and mitigate systemic risks that contributed to market instability. 

The purpose of such actions is to maintain the solvency of the GSEs so they can continue to fulfill their vital roles in the 

mortgage market while the Administration and Congress determine what structural changes should be made to the housing

finance system. Draws under the SPSPAs would result in an increased investment in the GSEs as further discussed below. 

Under SFFAS No. 47, Reporting Entity criteria, Fannie Mae and Freddie Mac were owned or controlled by the federal

government only as a result of: a) regulatory actions (such as organizations in receivership or conservatorship); or b) other

federal government intervention actions. Under the regulatory or other intervention actions, the relationship with the federal

government was and is not expected to be permanent. These entities are classified as disclosure entities based on their
NOTES TO THE FINANCIAL STATEMENTS 98

characteristics as a whole. Accordingly, these entities are not consolidated into the government’s consolidated financial

statements; however, the value of the investments in these entities, changes in value, and related activity with these entities

are included in the government’s consolidated financial statements. The net change in valuations of the GSEs include both

liquidation preference adjustments and changes in FV, both of which are discussed below and are included on the Statement

of Net Cost. Due to an increase in the GSEs’ liquidation preference and the year-end valuation adjustment for FY 2022 and

FY 2021 a net gain of $2.9 billion and $111.9 billion was reported as earned revenue, respectively. The FY 2021 Statement

of Net Cost was restated to report the increase in the GSE’s liquidation preference, and the year-end unrealized gain valuation

adjustment as earned revenue instead of a reduction to gross cost. For additional information, refer to Note 1.V—Correction

of Errors.

Senior Preferred Stock Purchase Agreements 

In return for committing to maintain the GSEs’ solvency by making a quarterly advance of funds to each GSE in an 

amount equal to any excess of the GSEs’ total liabilities over its total assets as of the end of the previous quarter, Treasury 

initially received from each GSE: 1) 1,000,000 shares of non-voting variable liquidation preference senior preferred stock 

with a liquidation preference value of $1,000 per share; and 2) a non-transferable warrant for the purchase, at a nominal cost, 

of 79.9 percent of common stock on a fully-diluted basis. The warrants expire on September 7, 2028. Treasury was entitled to 

distributions on the senior preferred stock equal to 10.0 percent per annum fixed rate dividend on the total liquidation 

preference (as discussed below). This dividend structure was changed in the third amendment in August 2012 to a variable 

equivalent to the GSEs’ positive net worth above a capital reserve amount. The capital reserve amount was initially set at 

$3.0 billion for calendar year 2013 and, upon nearing its scheduled decline to zero, was reset at $3.0 billion in calendar year 

2017. On September 27, 2019, Treasury and FHFA amended the SPSPAs to increase the capital reserve amounts of Fannie 

Mae and Freddie Mac to $25.0 billion and $20.0 billion, respectively. In exchange, Treasury’s liquidation preference in each 

GSE was scheduled to gradually increase up to the adjusted capital reserve amounts based on the quarterly earnings of each 

GSE. 

On January 14, 2021, Treasury and FHFA further amended the SPSPAs to replace the prior variable dividend with an 

alternative compensation plan for Treasury that permits the GSEs to continue their recapitalization efforts, as prescribed by 

the GSE capital framework finalized by FHFA in 2020. Under the amended SPSPAs, each GSE is permitted to retain capital 

until the GSE has achieved its regulatory minimum capital requirement, including buffers (i.e., the capital reserve end date), 

at which point its cash dividend obligations will resume along with the obligation to pay a periodic commitment fee. As 

compensation to Treasury for the replacement of the variable dividend, the liquidation preference of Treasury’s senior 

preferred stock in each GSE will increase by the amount of retained capital until each GSE has achieved its capital reserve 

end date. 

Additionally, the January 14 amendment, among other things, imposed restrictions on certain GSE business activities,

including purchases of loans backed by investment properties, second homes, and multifamily properties, and on purchases 

of loans with multiple high-risk characteristics or for cash consideration. On September 14, 2021, Treasury and FHFA agreed 

to suspend certain business activity restrictions added to the SPSPAs by the January 14 amendment while FHFA undertakes a 

review of the extent to which these requirements are redundant or inconsistent with existing FHFA standards, policies, and 

directives. The suspension will terminate six months after Treasury notifies the GSEs. As of September 30, 2022, Treasury 

has not provided notice to GSEs to terminate the suspension. 

As of September 30, 2022, Treasury’s liquidation preference in Fannie Mae and Freddie Mac increased by $19.1 billion 

and $11.7 billion, respectively. As of September 30, 2021, Treasury’s liquidation preference in Fannie Mae and Freddie Mac 

increased by $20.9 billion and $11.0 billion, respectively. The GSEs will not pay a quarterly dividend until after the capital 

reserve end date. Treasury received no cash dividends for the fiscal years ended September 30, 2022, and 2021, as the GSEs 

had not achieved their capital reserve end date as of September 30, 2022, and their positive net worth was below the 

permitted capital reserve amounts as of September 30, 2022.

The SPSPAs, which have no expiration date, require that Treasury will disburse funds to either GSE if, at the end of any 

quarter, the FHFA determines that the liabilities of either GSE exceed its assets. Draws from Treasury under the SPSPAs are 

designed to ensure that the GSEs maintain positive net worth, with a fixed maximum amount available to each GSE under 

this agreement established as of December 31, 2012 (refer to the “Contingent Liability to GSEs” section below and Note 

21—Contingencies). Draws against the funding commitment of the SPSPAs do not result in the issuance of additional shares 

of senior preferred stock; instead, they increase the liquidation preference of the initial 1,000,000 shares by the amount of the 

draw. The combined cumulative liquidation preference totaled $284.0 billion and $254.0 billion as of September 30, 2022,

and 2021, respectively. There were no payments to the GSEs for the fiscal years ended September 30, 2022, and 2021. 
99 NOTES TO THE FINANCIAL STATEMENTS

Senior Preferred Stock and Warrants for Common Stock

In determining the FV of the senior preferred stock and warrants for common stock, Treasury relied on the GSEs’ 

public filings and press releases concerning their financial statements, as well as non-public, long-term financial forecasts, 

monthly summaries, quarterly credit supplements, independent research regarding preferred stock trading, independent 

research regarding the GSEs’ common stock trading on the Over-The-Counter Market, discussions with each of the GSEs 

and FHFA, and other information pertinent to the valuations. Because the senior preferred stock is not publicly traded, there 

is no comparable trading information available. The fair valuation of the senior preferred stock relies on significant Level 3 

unobservable inputs that reflect assumptions about the expectations that market participants would use in pricing.

The FV of the senior preferred stock considers forecasted cash flows to equity holders and the traded prices of the other 

equity securities, including the GSEs’ common stock and junior preferred stock. The FV of the senior preferred stock-as 

measured by unobservable and observable inputs-increased as of September 30, 2022, when compared to September 30, 

2021. Freddie Mac’s senior preferred stock drove this increase primarily due to higher projected cash flows and a decrease in 

the market value of Freddie Mac’s other equity securities that comprise the GSEs’ total equity.

Factors impacting the FV of the warrants include the nominal exercise price and the large number of potential exercise 

shares, the market prices and trading volumes of the underlying common stock as of September 30, the principal market, and 

the market participants. Other factors impacting the FV include, among other things, the holding period risk related directly 

to the assumption of the amount of time that it will take to sell the exercised shares without depressing the market. The FV of 

the warrants-as measured by observable inputs-decreased at the end of FY 2022, when compared to FY 2021, primarily due 

to decreases in the Level 1 FV measurement of the market price of the underlying common stock of each GSE.

Estimation Factors

Treasury’s forecasts concerning the GSEs may differ from actual experience. Estimated senior preferred values and

future draw amounts will depend on numerous factors that are difficult to predict including, but not limited to, changes in 

government policy with respect to the GSEs, the business cycle, inflation, home prices, unemployment rates, interest rates, 

changes in housing preferences, home financing alternatives, availability of debt financing, market rates of guarantee fees, 

outcomes of loan refinancings and modifications, new housing programs, and other applicable factors.

Contingent Liability to GSEs

As part of the annual process undertaken by Treasury, a series of long-term financial forecasts are prepared to assess, as 

of September 30, the likelihood and magnitude of future draws to be required by the GSEs under the SPSPAs within the

forecast time horizon. Treasury used 25-year financial forecasts prepared through years 2047 and 2046 in assessing if a 

contingent liability was required as of September 30, 2022, and 2021, respectively. If future payments under the SPSPAs are 

deemed to be probable within the forecast horizon, and Treasury can reasonably estimate such payment, Treasury will accrue 

a contingent liability to the GSEs to reflect the forecasted equity deficits of the GSEs. Treasury does not discount this accrued

contingent liability, nor take into account any of the offsetting dividends that could be received, as the dividends, if any,

would be owed directly to the General Fund. Treasury will adjust such recorded accruals in subsequent years as new

information develops or circumstances change.

Based on Treasury’s annual assessment, there were no probable future funding draws as of September 30, 2022, and 

2021, and thereby accrued no contingent liability. However, as of September 30, 2022, it is reasonably possible that a period 

of sustained economic and housing market volatility could potentially cause the GSEs to generate quarterly losses of 

sufficient magnitude to result in future funding draws against the funding commitment. Due to challenges quantifying future 

market volatility or the timing, magnitude, and likelihood of such events, Treasury could not estimate the total amount of this 

reasonably possible future funding liability as of September 30, 2022, and 2021. There were no payments to the GSEs for 

fiscal years ended September 30, 2022, and 2021. At September 30, 2022, and 2021, the maximum remaining contractual

commitment to the GSEs for the remaining life of the SPSPAs was $254.1 billion. Subsequent funding draws will reduce the 

remaining commitments. Refer to Note 20—Commitments for a full description of other commitments and risks.

In assessing the need for an estimated contingent liability, Treasury relied on the GSEs’ public filings and press 

releases, including their financial statements, monthly business summaries, and quarterly credit supplements, as well as nonpublic, long-term financial forecasts, the FHFA House Price Index, discussions with each of the GSEs and FHFA, and other 

information pertinent to the liability estimates. The forecasts prepared in assessing the need for an estimated contingent 

liability as of September 30, 2022, include two potential scenarios, with varying assumptions regarding the continuation of 

the GSEs’ new business activities, including purchasing mortgage loans and issuing new guaranteed MBS. The forecasts as 

of September 30, 2022, also assumed the maintenance of the GSEs’ retained mortgage portfolios below the maximum

permitted under the amended SPSPAs. 
NOTES TO THE FINANCIAL STATEMENTS 100

Regulatory Environment

To date, Congress has not passed legislation nor has FHFA taken action to end the GSEs’ conservatorships. The GSEs 

continue to operate under the direction of FHFA as conservator. 

The Temporary Payroll Tax Cut Continuation Act of 2011 (P.L. 112-78) was funded by an increase of ten basis points 

in the GSEs’ guarantee fees (referred to as “the incremental fees”) which began in April 2012 and extended by the 

Infrastructure Investment and Jobs Act of 2021 (P.L. 117-58) through September 30, 2032. The incremental fees are remitted 

to Treasury and not retained by the GSEs and, thus, do not affect the profitability of the GSEs. For fiscal years ended 2022 

and 2021, the GSEs remitted to Treasury the incremental fees totaling $5.8 billion and $4.9 billion, respectively.
101 NOTES TO THE FINANCIAL STATEMENTS

Note 9. Advances and Prepayments

Advances and Prepayments as of September 30, 2022, and 2021

(In billions of dollars) 2022 2021

Department of the Treasury..................................................................................... 225.2 256.1

Department of Health and Human Services .............................................................. 39.2 70.1

Department of Defense ........................................................................................... 14.2 20.7

Department of Labor............................................................................................... 10.7 13.0

All other ................................................................................................................. 8.8 9.4

Total advances and prepayments.......................................................................... 298.1 369.3

Advances and prepayments are assets that represent funds disbursed in contemplation of the future performance of

services, receipt of goods, the incurrence of expenditures, or the receipt of other assets. These include advances to 

contractors, grantees, Medicare providers, and state, local, territorial, and tribal governments; travel advances; and 

prepayments for items such as rents, taxes, insurance, royalties, commissions, and supplies. 

Until such time as the goods or services are received, contract terms are met or progress has been made, or prepaid 

expenses expired these should be recorded as assets. Any amounts that are subject to a refund at the time of completion 

should be transferred to accounts receivable. 

Treasury and HHS had the largest changes to advances and prepayments. Treasury’s $30.9 billion decrease represents 

additional liquidation of advances paid to state, local, territorial, and tribal governments pursuant to the COVID-19 related 

legislations enacted during FY 2021 and FY 2020. See also Note 29—COVID-19 Activity. HHS's decrease of $29.5 billion 

was primarily due to collections of COVID-19 Accelerated & Advance Payment program advances offset by the October 

2022 Prescription Drug and Medicare Advantage benefit payments which occurred on September 30, 2022, instead of 

October 1, 2022. The remaining amount of the decrease is primarily due to recognizing grant expenses at the time of payment 

to the grant recipients, beginning in March 2022.
NOTES TO THE FINANCIAL STATEMENTS 102

Note 10. Other Assets

Other Assets as of September 30, 2022, and 2021

(In billions of dollars) 2022 2021

Regulatory assets................................................................................................... 15.2 17.5

Investments in Multilateral Development Banks ........................................................ 8.7 8.5

Buildout/enhancement of nationwide public safety broadband network....................... 5.7 5.3

Department of Energy's operating non-federal generation ......................................... 3.2 3.4

Other ..................................................................................................................... 4.9 4.0

Total other assets ................................................................................................ 37.7 38.7

Other assets are miscellaneous assets that are not reported elsewhere on the Balance Sheet (e.g., regulatory assets,

investments, and costs related to special projects).

DOE and TVA record regulatory assets in accordance with FASB ASC Topic 980, Regulated Operations. The 

provisions of this standard require that regulated enterprises reflect rate actions of the regulator in their financial statements, 

when appropriate. These rate actions can provide reasonable assurance of the existence of an asset, reduce or eliminate the 

value of an asset, or impose a liability on a regulated enterprise. In order to defer incurred costs under FASB ASC Topic 980,

a regulated entity must have the statutory authority to establish rates that recover all costs, and those rates must be charged to 

and collected from customers. If rates should become market-based, FASB ASC Topic 980 would no longer be applicable, 

and all the deferred costs under that standard would be expensed. DOE’s BPA is responsible for repaying Treasury for 

transmission and power-generating assets owned by other entities based on this deferred cost. Other regulatory assets for 

DOE include BPA’s fixed schedule of benefit payments for investor-owned utility customers, repayment of debt for 

terminated nuclear projects, and deferred energy conservation measures relating to fish and wildlife. TVA’s regulatory assets 

represent incurred costs that have been deferred because such costs are probable of future recovery in customer rates.

On behalf of the U.S., Treasury invests in certain MDB, through subscriptions to capital, which allows the MDB to 

issue loans at market-based rates to middle-income developing countries. These paid-in capital investments are 

nonmarketable equity investments valued at cost.

DOC’s cost contribution to buildout/continuing enhancement of the Nationwide Public Safety Broadband network

embodies future economic benefits to the National Telecommunications and Information Administration. Achieving this 

important mission will ensure the operation and maintenance of the first high-speed, nationwide wireless broadband network 

dedicated to public safety. Please refer to Note 28—Public-Private Partnerships for additional information.

DOE’s BPA is party to long-term contracts to acquire all the generating nuclear and hydroelectric capability of Energy 

Northwest’s Columbia Generating Station and Lewis County Public Utility District’s Cowlitz Falls Hydroelectric Project. 

These contracts require that BPA meet all the facilities’ operating, maintenance, and debt service costs until their license 

termination dates.

Items included in other are derivative assets, FDIC receivables from resolution activity, non-federal nuclear 

decommissioning trusts, and the balance of assets held by the experience rated carriers participating in the Health Benefits 

and Life Insurance Programs (pending disposition on behalf of OPM). Additional information concerning other assets can be 

obtained from the financial statements of DOE, TVA, Treasury, DOC, OPM, and FDIC.
103 NOTES TO THE FINANCIAL STATEMENTS

Note 11. Accounts Payable

Accounts Payable as of September 30, 2022, and 2021

(In billions of dollars) 2022 2021

Department of Defense .......................................................................................... 37.4 39.4

Security Assistance Accounts ................................................................................. 17.5 17.5

Department of Veterans Affairs ............................................................................... 5.0 13.7

Department of the Treasury .................................................................................... 8.4 7.3

General Services Administration ............................................................................. 6.3 5.5

Department of Education........................................................................................ 4.5 5.0

Department of Energy ............................................................................................ 5.1 4.8

Department of State............................................................................................... 2.9 3.3

Department of Justice ............................................................................................ 2.7 2.6

Department of Homeland Security........................................................................... 3.2 2.6

U.S. Agency for International Development.............................................................. 3.1 2.6

Department of Agriculture....................................................................................... 2.5 2.4

U.S. Postal Service ................................................................................................ 2.3 2.3

All other................................................................................................................. 13.7 14.1

Total accounts payable ........................................................................................ 114.6 123.1

Accounts payable includes amounts due for goods and property ordered and received, services rendered by other than 

federal employees, cancelled appropriations for which the U.S. government has contractual commitments for payment, and 

non-debt related interest payable.
NOTES TO THE FINANCIAL STATEMENTS 104

Note 12. Federal Debt and Interest Payable

Federal Debt and Interest Payable as of September 30, 2022, and 2021 (held by the public)

Average Interest

Net Rate

(In billions of dollars) 2021 Change 2022 2022 2021

Treasury securities:

Marketable securities:

Treasury bills ...................................... 3,712.9 (69.2) 3,643.7 2.5% 0.1%

Treasury notes.................................... 12,570.5 1,126.0 13,696.5 1.6% 1.4%

Treasury bonds................................... 3,340.8 526.9 3,867.7 3.0% 3.1%

Treasury inflation-protected securities 

(TIPS) ................................................ 1,652.0 187.8 1,839.8 0.5% 0.5%

Treasury floating rate notes (FRN) ....... 579.3 46.6 625.9 3.3% 0.4%

Total marketable Treasury securities.. 21,855.5 1,818.1 23,673.6

Nonmarketable securities....................... 427.4 198.2 625.6 2.7% 1.3%

Net unamortized premiums/(discounts). (26.8) (44.9) (71.7)

Total Treasury securities, net (public). 22,256.1 1,971.4 24,227.5

Agency securities:

Tennessee Valley Authority.................... 19.3 (0.3) 19.0

Total agency securities, net of 

unamortized premiums and discounts... 19.3 (0.3) 19.0

Accrued interest payable.......................... 69.4 12.1 81.5

Total federal debt and interest payable...... 22,344.8 1,983.2 24,328.0

Types of marketable securities:

Bills–Short-term obligations issued with a term of 1 year or less.

Notes–Medium-term obligations issued with a term of 2-10 years. 

Bonds–Long-term obligations of more than 10 years.

TIPS–Term of 5 years or more.

FRN–Term of 2 years.

Federal debt held by the public consists of securities outside the government by individuals, corporations, state or local 

governments, FRBs, foreign governments, and other non-federal entities. The above table details government borrowing 

primarily to finance operations and shows marketable and nonmarketable securities at face value less net unamortized 

premiums and discounts including accrued interest.

Securities that represent federal debt held by the public are issued primarily by Treasury and include:

• Interest-bearing marketable securities (bills, notes, bonds, inflation-protected, and FRN).

• Interest-bearing nonmarketable securities (Government Account Series held by fiduciary and certain deposit funds, 

foreign series, state and local government series, domestic series, and savings bonds).

• Non-interest-bearing marketable and nonmarketable securities (matured and other).
105 NOTES TO THE FINANCIAL STATEMENTS

In FY 2020, Treasury expanded its domestic series to include a new special nonmarketable Treasury security, known as 

a SPV security. Treasury issued these securities to SPVs, which were established by the Federal Reserve to implement its 

emergency lending facilities under Section 13(3) of the Federal Reserve Act to respond to the COVID-19 pandemic. An SPV 

security is a demand deposit certificate of indebtedness for which interest accrues daily and is paid at redemption. The total 

amount of SPV redemptions in FY 2022 was $7.0 billion, including $0.1 billion in capitalized interest, and there were no 

issuances. As of September 30, 2022, and 2021, the total amount of SPV securities outstanding were $15.4 and $22.3 billion, 

respectively.

Gross federal debt, with some adjustments, is the sum of debt held by the public and intra-governmental debt holdings 

(discussed on the next page) and is subject to a statutory ceiling (i.e., the debt limit). Prior to 1917, Congress approved each 

debt issuance. In 1917, to facilitate planning in World War I, Congress and the President first enacted a statutory dollar 

ceiling for federal borrowing. With the Public Debt Act of 1941 (P.L. 77-7), Congress and the President set an overall limit of 

$65.0 billion on Treasury debt obligations that could be outstanding at any one time; since then, Congress and the President 

have enacted a number of debt limit increases. 

A delay in raising the debt limit that began in FY 2021 continued into FY 2022. During the period August 2, 2021, 

through December 15, 2021, Treasury departed from its normal debt management operations and undertook extraordinary 

measures to avoid exceeding the debt limit. On October 14, 2021, P.L. 117-50 was enacted, which raised the statutory debt 

limit by $480.0 billion, from $28,401.5 billion to $28,881.5 billion. Even with this increase, extraordinary measures 

continued for Treasury to manage below the debt limit. Many of the extraordinary actions taken by Treasury resulted in 

federal debt securities not being issued to certain federal government accounts. As a result of Treasury securities not being 

issued to the federal employees’ TSP’s G Fund as of September 30, 2021, Treasury reported other liabilities of $157.0 billion 

that would have been reported as Federal Debt and Interest Payable had there not been a delay in raising the statutory debt 

limit as of September 30, 2021, and had the Treasury securities been issued. On December 16, 2021, P.L. 117-73 was 

enacted, increasing the debt limit by $2,500.0 billion from $28,881.5 billion to $31,381.5 billion. Treasury subsequently 

restored the uninvested principal and related interest to the TSP’s G Fund, resulting in an increase in federal debt securities 

held by the public from FY 2021 to FY 2022. See Note 18—Other Liabilities and Note 23—Fiduciary Activities for 

additional information.

From FY 2021 to FY 2022, interest on Treasury securities held by the public increased from $392.0 billion to $496.5 

billion. This $104.5 billion increase primarily resulted from an increase in inflation adjustments, an increase in the average 

interest rate (see table above), and an increase in the outstanding debt held by the public.

As of September 30, 2022, and 2021, debt subject to the statutory debt limit was $30,869.3 billion and $28,401.4 

billion, respectively. The debt subject to the limit includes Treasury securities held by the public and government guaranteed 

debt of federal entities (shown in the table above) and intra-governmental debt holdings (shown in the following table). On 

January 19, 2023, Treasury began taking extraordinary measures. See Note 30—Subsequent Events. 
NOTES TO THE FINANCIAL STATEMENTS 106

Intra-governmental Debt Holdings: Federal Debt Securities

Held as Investments by Government Accounts as of September 30, 2022, and 2021

Net

(In billions of dollars) 2021 Change 2022

Social Security Administration, Federal Old-Age and Survivors Insurance 

Trust Fund ........................................................................................... 2,755.8 (32.2) 2,723.6

Department of Defense, Military Retirement Fund................................... 1,032.0 162.7 1,194.7

Office of Personnel Management, Civil Service Retirement and Disability 

Fund.................................................................................................... 925.8 85.9 1,011.7

Department of Defense, Medicare-Eligible Retiree Health Care Fund....... 289.7 32.3 322.0

Department of Health and Human Services, Federal Hospital Insurance 

Trust Fund ........................................................................................... 136.2 41.2 177.4

Department of Health and Human Services, Federal Supplementary 

Medical Insurance Trust Fund ............................................................... 170.7 (2.7) 168.0

Department of Transportation, Highway Trust Fund ................................ 12.0 115.5 127.5

Federal Deposit Insurance Corporation, Deposit Insurance Fund............. 115.5 10.0 125.5

Department of Housing and Urban Development, FHA, Mutual Mortgage 

Insurance Capital Reserve Account ....................................................... 94.1 25.8 119.9

Social Security Administration, Federal Disability Insurance Trust Fund ... 98.0 16.7 114.7

Department of Labor, Unemployment Trust Fund.................................... 53.1 20.5 73.6

Department of Energy, Nuclear Waste Disposal Fund............................. 55.3 1.3 56.6

Pension Benefit Guaranty Corporation ................................................... 50.3 5.3 55.6

Office of Personnel Management, Employees Life Insurance Fund .......... 50.2 0.8 51.0

Office of Personnel Management, Postal Service Retiree Health Benefits 

Fund.................................................................................................... 38.8 (3.2) 35.6

Office of Personnel Management, Employees Health Benefits Fund ........ 28.0 (0.7) 27.3

U.S. Postal Service, Postal Service Fund ............................................... 24.7 (3.8) 20.9

Department of State, Foreign Service Retirement and Disability Fund...... 20.3 0.4 20.7

National Credit Union Share Insurance Fund.......................................... 18.5 2.2 20.7

Department of the Treasury, ESF .......................................................... 22.8 (4.4) 18.4

Department of Housing and Urban Development, Guarantees of 

Mortgage-Backed Securities Capital Reserve Account ............................ 14.2 4.2 18.4

Department of the Interior, Abandoned Mine Reclamation Fund .............. 2.6 11.8 14.4

Pension Benefit Guaranty Corporation Deposit Fund .............................. 15.0 (1.3) 13.7

Department of Transportation, Airport and Airway Trust Fund.................. 15.9 (5.1) 10.8

Department of Commerce, Public Safety Trust Fund, NTIA ..................... 12.2 (12.2) -

All other programs and funds................................................................. 94.1 13.0 107.1

Subtotal............................................................................................. 6,145.8 484.0 6,629.8

Total net unamortized premiums/(discounts) for intra-governmental......... 86.2 2.5 88.7

Total intra-governmental debt holdings, net ....................................... 6,232.0 486.5 6,718.5

Intra-governmental debt holdings represent the portion of the gross federal debt held as investments by government 

entities such as trust funds, revolving funds, and special funds. As noted above, the delay in raising the debt limit still existed 

as of September 30, 2021. On December 16, 2021, P.L. 117-73 was enacted, increasing the debt limit by $2,500.0 billion 

from $28,881.5 billion to $31,381.5 billion. Treasury subsequently restored uninvested principal and related interest, 

resulting in an increase to the CSRDF from 2021 to 2022.

Government entities that held investments in Treasury securities include trust funds that have funds from dedicated 

collections. For additional information on funds from dedicated collections, see Note 22─Funds from Dedicated Collections. 

These intra-governmental debt holdings are eliminated in the consolidation of these financial statements.
107 NOTES TO THE FINANCIAL STATEMENTS

Note 13. Federal Employee and Veteran Benefits Payable

Federal Employee and Veteran Benefits Payable as of September 30, 2022, and 2021

Civilian Military Total Total

(In billions of dollars) 2022 2021 2022 2021 2022 2021

Pension benefits......................................... 2,556.0 2,361.8 2,513.5 1,933.6 5,069.5 4,295.4

Veterans compensation and burial benefits .. N/A N/A 5,965.1 4,302.3 5,965.1 4,302.3

Post-retirement health benefits .................... 427.4 427.3 1,045.0 868.7 1,472.4 1,296.0

Veterans education and training benefits...... N/A N/A 170.0 151.2 170.0 151.2

Life insurance benefits ................................ 62.9 60.1 3.9 4.5 66.8 64.6

FECA benefits ............................................ 25.9 29.2 7.1 7.7 33.0 36.9

Unfunded leave .......................................... 10.3 10.3 16.6 16.8 26.9 27.1

Liability for other benefits ............................ 1.8 1.7 6.4 7.8 8.2 9.5

Total federal employee and veteran 

benefits payable....................................... 3,084.3 2,890.4 9,727.6 7,292.6 12,811.9 10,183.0

Note: "N/A" indicates not applicable.

The government offers its employees retirement and other benefits, as well as health and life insurance. The liabilities 

for these benefits, which include both actuarial amounts and amounts due and payable to beneficiaries and health care 

carriers, apply to current and former civilian and military employees. The actuarial accrued liability represents an estimate of 

the PV of the cost of benefits that have accrued, determined based on future economic and demographic assumptions. 

Actuarial accrued liabilities can vary widely from year to year, due to actuarial gains and losses that result from changes to 

the assumptions and from experience that has differed from prior assumptions. 

OPM administers the largest civilian pension and post-retirement health benefits plans. DOD and VA administer the 

military pension and post-retirement health benefit plans. Other significant pension plans with more than $10.0 billion in 

actuarial accrued liability include those of Foreign Service (State), TVA, and HHS’s Public Health Service Commissioned 

Corps Retirement System. Please refer to the financial statements of the entities listed for additional information regarding 

their pension plans and other benefits.

In accordance with SFFAS No. 33, Pension, Other Retirement Benefits, and Other Postemployment Benefits: Reporting 

the Gains and Losses from Changes in Assumptions and Selecting Discount Rates and Valuation Dates, entities are required 

to separately present gains and losses from changes in long-term assumptions used to estimate liabilities associated with 

pensions, ORB, and OPEB on the Statement of Net Cost. SFFAS No. 33 also provides a standard for selecting the discount 

rate assumption for PV estimates of federal employee pension, ORB, and OPEB liabilities. The SFFAS No. 33 standard for 

selecting the discount rate assumption requires it be based on a historical average of interest rates on marketable Treasury

securities consistent with the cash flows being discounted. Additionally, SFFAS No. 33 provides a standard for selecting 

the valuation date for estimates of federal employee pension, ORB, and OPEB liabilities that establishes a consistent method 

for such measurements. This SFFAS No. 33 does not apply to the FECA program.

To provide a sustainable, justifiable data resource for the affected entities, Treasury developed a model and 

methodology for developing these interest rates in FY 2014. 1 The model is based on the methodology used to produce the 

HQM yield curve pursuant to the Pension Protection Act of 2006. As of July 2014, Treasury began releasing interest rate

yield curve data using this new Treasury’s TNC yield curve, which is derived from Treasury notes and bonds. The TNC 

yield curve provides information on Treasury nominal coupon issues and the methodology extrapolates yields beyond 

1 Treasury’s HQM resource is available at: https://home.treasury.gov/data/treasury-coupon-issues-and-corporate-bond-yield-curves/treasury-coupon-issues
NOTES TO THE FINANCIAL STATEMENTS 108

30 years through 100 years maturity. The TNC yield curve is used to produce a Treasury spot yield curve (a zero coupon 

curve), which provides the basis for discounting future cash flows.

In addition to the benefits presented in this note, federal, civilian, and military employees and federal entities contribute 

to the TSP. The TSP is administered by an independent government entity, the FRTIB, which is charged with operating the 

TSP prudently and solely in the interest of the participants and their beneficiaries. Please refer to Note 23—Fiduciary 

Activities for additional information on the TSP.

Pension Benefits

Change in Pension Benefits

Civilian Military Total

(In billions of dollars) 2022 2021 2022 2021 2022 2021

Actuarial accrued pension liability, 

beginning of fiscal year ............................... 2,361.8 2,214.1 1,933.6 1,799.3 4,295.4 4,013.4

Pension expense:

Normal costs ........................................... 55.9 51.7 38.0 38.4 93.9 90.1

Interest on liability .................................... 64.6 65.6 55.6 57.0 120.2 122.6

Actuarial (gains)/losses (from experience) . 96.0 46.2 112.9 47.4 208.9 93.6

Actuarial (gains)/losses (from assumption 

changes) ................................................. 142.9 80.8 376.7 53.9 519.6 134.7

Other....................................................... (63.7) - 63.6 - (0.1) -

 Total pension expense............................ 295.7 244.3 646.8 196.7 942.5 441.0

Less benefits paid....................................... (101.5) (96.6) (66.9) (62.4) (168.4) (159.0)

Actuarial accrued pension liability, end of 

fiscal year .................................................. 2,556.0 2,361.8 2,513.5 1,933.6 5,069.5 4,295.4

Significant Long-Term Economic Assumptions Used in Determining Pension 

Liability and the Related Expense

Civilian Military

2022 2021 2022 2021

FERS CSRS FERS CSRS

Rate of interest................................. 2.90% 2.30% 3.10% 2.40% 2.80% 2.90%

Rate of inflation ................................ 2.00% 2.00% 1.70% 1.70% 2.30% 1.60%

Projected salary increases ................ 1.60% 1.60% 1.30% 1.30% 2.30% 2.00%

Cost of living adjustment ................... 1.80% 2.00% 1.50% 1.70% 2.30% 1.60%
109 NOTES TO THE FINANCIAL STATEMENTS

Civilian Employees’ Pension

OPM administers the largest civilian pension plan, which covers substantially all full-time, permanent civilian federal 

employees. This plan includes two components of defined benefits, the CSRS and the FERS. The basic benefit components 

of the CSRS and the FERS are financed and operated through the CSRDF, a trust fund. CSRDF monies are generated 

primarily from employees’ contributions, federal entity contributions, payments from the General Fund, and interest on 

investments in Treasury securities. As of September 30, 2022, USPS has accrued, but not paid OPM, $18.1 billion in CSRS 

and FERS retirement benefit expenses since 2014. In 2022, USPS made a partial payment of $0.5 billion towards the required 

payment for FERS amortization. In order for USPS to preserve liquidity and to ensure the ability to fulfill its primary 

universal service mission was not placed at undue risk, USPS has not made all of the required payments for FERS or CSRS 

amortization. The cost of each year’s payment, including defaulted payments, along with other benefit program costs, are 

included in USPS’ net cost for that year in the consolidated Statements of Net Cost. The liability is not included on the 

government-wide Balance Sheet due to the USPS liability being eliminated with OPM’s corresponding receivable.

The civilian pension liability increased by $194.2 billion, primarily due to less favorable than assumed plan experience 

and the declining interest rate assumption.

Military Employees’ Pensions

The Military Retirement System consists of a funded, noncontributory, defined benefit plan for military personnel 

(Services of Army, Navy, Air Force, Marine Corps, Space Force, and the USCG) with an entry date prior to January 1, 2018 

and the BRS, generally for military personnel with an entry date on or after January 1, 2018. The defined benefit plan 

includes non-disability retired pay, disability retired pay, survivor annuity programs, Concurrent Retirement and Disability 

Pay, and Combat-Related Special Compensation. The Service Secretaries may approve immediate non-disability retired pay 

at any age with credit of at least 20 years of active duty service. Reserve retirees must be at least 60 years old and have at 

least 20 qualifying years of service before retired pay commences; however, in some cases, the age can be less than 60 if the 

reservist performs certain types of active service. P.L. 110-181 and P.L. 113-291 includes provisions for a three-month

reduction in the reserve retirement age from age 60 for each aggregate of 90 days of certain active-duty service served in any 

fiscal year after January 28, 2008, or in any two consecutive fiscal years after September 30, 2014. However, in no case may 

the retirement age drop below age 50. There is no vesting of defined benefits before non-disabled retirement. There are 

distinct non-disability benefit formulas related to four populations within the Military Retirement System: Final Pay, High-3, 

Career Status Bonus/Redux, and the BRS enacted in the NDAA for FY 2016, effective January 1, 2018. The BRS is a 

retirement benefit merging aspects of both a defined benefit annuity with a defined contribution account, through the TSP. 

The date an individual enters the military generally determines which retirement system they would fall under and if they 

have the option to select, via a one-time irrevocable election, their retirement system. Military personnel with a start date on 

or after January 1, 2018 are automatically enrolled in BRS. Although all members serving as of December 31, 2017 were 

grandfathered under the prior retirement system, Active Duty, National Guard and Reserve personnel meeting established 

criteria may have opted into BRS during calendar year 2018. Under the BRS, retiring members are given the option to 

receive a portion of their retired pay annuity in the form of a lump sum distribution. For additional information on these 

benefits, see DOD’s Office of Military Compensation website https://militarypay.defense.gov.

The DOD MRF was established by P.L. 98-94 (currently 10 U.S.C. §1461-1467) and accumulates funds to finance, on 

an accrual basis, the liabilities of DOD military retirement and survivor benefit programs. This fund receives income from 

three sources: monthly normal cost payments from the services to pay for DOD’s portion of the current year’s service cost; 

annual payments from Treasury to amortize the unfunded liability and pay for the increase in the normal cost attributable to 

Concurrent Receipt (certain beneficiaries with combat-related injuries who are receiving payments from VA) per P.L. 108-

136; and investment income. 

The NDAA for FY 2021, §§ 8224-8225 requires the USCG be covered by the MRF no later than the beginning of FY 

2023. For additional information regarding DOD’s USCG actuarial liability, please refer to DOD’s financial statements.

DOD’s Office of the Actuary calculates the actuarial liability annually using economic and demographic assumptions 

about the future (e.g., mortality and retirement rates). The $579.9 billion increase in the Military Retirement Pension liability 

is primarily attributable to updated actuarial assumptions, experience and the plan amendment related to the USCG. The net 

impact of the updated actuarial assumptions was $376.7 billion. The updated long-term economic assumptions under SFFAS 

No. 33 increased the liability by $319.5 billion and are as follows, comparing FY 2022 to FY 2021, 2.8 percent discount rate 

compared to 2.9 percent, 2.3 percent COLA compared to 1.6 percent, 2.3 percent across the board salary increase compared 

to 2.0 percent. Updated non-economic actuarial assumptions increased the actuarial liability by $57.2 billion. The increase in 

liability of $63.6 billion labeled “other” represents the transfer of the actuarial liability for the USCG from DHS to DOD. 

The VA provides eligible veterans and/or their dependents with pension benefits if the veteran died, is over age 65 or is 

totally disabled, based on annual eligibility reviews. Unlike a traditional pension program, VA pension is only available to 
NOTES TO THE FINANCIAL STATEMENTS 110

veterans who meet the financial means test. As such, only the amounts currently due and payable are reflected as a liability 

on VA’s balance sheet, which is consistent with federal accounting standards. No actuarial liability is recognized for the NPV 

of projected future benefit payments. 

Veterans Compensation and Burial Benefits

Change in Veterans Compensation and Burial Benefits

Compensation Burial Total

(In billions of dollars) 2022 2021 2022 2021 2022 2021

Actuarial accrued liability, beginning of fiscal 

year........................................................... 4,291.7 3,854.3 10.6 8.8 4,302.3 3,863.1

Current year expense:

Interest on the liability balance .................. 126.6 124.5 0.3 0.3 126.9 124.8

Prior (and past) service costs from 

program amendments or new programs 

during the period...................................... 7.0 26.3 - 1.1 7.0 27.4

Actuarial (gains)/losses (from experience) . 144.6 47.7 (0.4) (0.2) 144.2 47.5

Actuarial (gains)/losses (from assumption 

changes) ................................................. 1,505.2 349.5 1.5 0.9 1,506.7 350.4

Total current year expense..................... 1,783.4 548.0 1.4 2.1 1,784.8 550.1

Less benefits paid....................................... (121.7) (110.6) (0.3) (0.3) (122.0) (110.9)

Actuarial accrued liability, end of fiscal year.. 5,953.4 4,291.7 11.7 10.6 5,965.1 4,302.3

Significant Economic Assumptions Used in Determining Veterans Compensation and 

Burial Benefits as of September 30, 2022, and 2021

2022 2021

Rate of interest....................................................................................................... 2.82% 2.95%

Rate of inflation ...................................................................................................... 2.67% 2.32%

The government compensates disabled veterans and their survivors. Veterans’ compensation is payable as a disability

benefit or a survivor’s benefit. Entitlement to compensation depends on the veterans’ disabilities incurred in or aggravated

during active military service, death while on duty, or death resulting from service-connected disabilities after active duty.

Eligible veterans who die or are disabled during active military service-related causes, as well as their dependents, and

dependents of service members who died during active military service, receive compensation benefits. In addition, service

members who die during active military service and veterans who separated under other than dishonorable conditions are

provided with a burial flag, headstone/marker, and grave liner for burial in a VA national cemetery or are provided a burial

flag, headstone/marker and a plot allowance for burial in a private cemetery. These benefits are provided under 38 U.S.C.,

Part 2, §2301-2308, in recognition of a veteran’s military service and are recorded as a liability in the period the requirements

are met.

Several significant actuarial assumptions were used in the valuation of compensation and burial benefits to calculate the

PV of the liability. A liability was recognized for the projected benefit payments to: 1) those beneficiaries, including veterans

and survivors, currently receiving benefit payments; 2) current veterans who are expected in the future to become

beneficiaries of the compensation program; and 3) a proportional share of those in active military service as of the valuation
111 NOTES TO THE FINANCIAL STATEMENTS

date who are expected to be future veterans and to become beneficiaries of the compensation program. Future benefit

payments to survivors of those veterans in classes 1, 2, and 3 above are also incorporated into the projection.

The veterans’ compensation and burial benefits liability is developed on an actuarial basis. It is impacted by interest on

the liability balance, experience gains or losses, changes in actuarial assumptions, prior service costs, and amounts paid for

costs included in the liability balance.

The liability for veterans’ compensation and burial benefits payable is based on an actuarial estimate of future

compensation and burial payments. The liability increased by $1,662.8 billion in FY 2022 primarily due to: 1) actuarial

losses from assumption changes; 2) actuarial losses from experience; and 3) interest on the liability balance. The interest on

liability cost of $126.9 billion is based on the prior year liability balance multiplied by the single weighted average discount

rate used to compute the liability for veterans’ compensation and burial benefits payable in the prior year. The experience

cost accounted for $144.2 billion of increase in the liability, and the amounts paid decreased the liability by $122.0 billion.

The $1,506.7 billion is mainly due to increases in other actuarial assumptions, a decrease in the discount rate assumptions,

and an increase in the COLA rate assumptions.

The single-equivalent discount rate decreased from 2.95 percent to 2.82 percent as of September 30, 2022, which

increased the liability by $139.3 billion. The single equivalent COLA rate increased from 2.32 percent as of September 30,

2021, to 2.67 percent as of September 30, 2022, which increased the liability by $309.7 billion. The long-term COLA rate

assumption for the September 30, 2021, valuation was based on the average of the last 10 years of monthly Treasury

Breakeven Inflation Curve rates. The long-term COLA rate assumption for the September 30, 2022, valuation was based on

the intermediate assumptions published in SSA’s Annual Report of the Board of Trustees of the Federal Old-Age and

Survivors Insurance and Federal Disability Insurance Trust Funds. VA’s long term COLA rate assumption for the

compensation benefit is similar to that of the SSA’s intermediate COLA rate assumption. This methodological change to

developing the COLA assumption increased the liability by an additional $326.2 billion.

The increase in the liability due to other assumptions was primarily the result of updates to the veterans compensation

plan participation and benefit level distribution rates, and mortality rates, which together increased the liability by $728.0

billion. An experience study was performed for the compensation plan participation and benefit level distribution rates, which

estimate potential veterans and service members who may be eligible to receive an award in the future. The increase in plan

participation and benefit level distribution rates reflect the impact of various legislation and VA policy changes in the prior

years that expanded eligibility including improved outreach efforts on compensation benefits to legacy Veterans and recently

separated military members. These assumption rate changes resulted in an increase of $564.2 billion in the compensation

liability as of September 30, 2022. The veterans mortality rate, which is the probability of death at a given age, were

developed using more recent data which showed a combination of a decrease in mortality rate and higher disability ratings

given to a younger population. The updated mortality rates resulted in an increase of $163.8 billion.

On August 10, 2022, the PACT Act, P.L. 117-168, was signed into law expanding and extending eligibility for VA

benefits and health care for veterans with toxic exposures and veterans of the Vietnam, Gulf War and Post-9/11 eras. The

PACT Act is the most significant expansion of benefits for toxic exposed Veterans in more than 30 years. Provisions of the

PACT Act that directly impact compensation benefits include the addition of over 20 presumptive medical conditions from

exposures to burn pits and other toxins. VA is currently assessing the effect of this new law to the compensation benefits

liability and additional data and analysis is warranted to develop a precise estimate in accordance with SFFAS No. 5,

Accounting for Liabilities of the Federal Government.
NOTES TO THE FINANCIAL STATEMENTS 112

Post-Retirement Health Benefits

Change in Post-Retirement Health Benefits

Civilian Military Total

(In billions of dollars) 2022 2021 2022 2021 2022 2021

Actuarial accrued post-retirement health 

benefits liability, beginning of fiscal year ....... 427.3 418.7 868.7 848.6 1,296.0 1,267.3

Post-Retirement health benefits 

expense: 

Prior (and past) service costs from plan 

amendments or new plans ........................ (28.3) - - - (28.3) -

Normal costs............................................ 21.3 19.8 25.4 25.5 46.7 45.3

Interest on liability..................................... 13.5 14.0 29.0 28.4 42.5 42.4

Actuarial (gains)/losses (from experience).. 0.4 (16.1) (5.6) (40.4) (5.2) (56.5)

Actuarial (gains)/losses (from assumption 

changes) ................................................. 10.2 7.3 150.2 28.9 160.4 36.2

Total post-retirement health benefits 

expense ................................................ 17.1 25.0 199.0 42.4 216.1 67.4

Less claims paid ......................................... (17.0) (16.4) (22.7) (22.3) (39.7) (38.7)

Actuarial accrued post-retirement health 

benefits liability, end of fiscal year ................ 427.4 427.3 1,045.0 868.7 1,472.4 1,296.0

Significant Long-Term Economic Assumptions Used in Determining 

Post-Retirement Health Benefits and the Related Expense

Civilian Military

2022 2021 2022 2021

Rate of interest............................................. 3.10% 3.20% 2.90% 3.00%

Single equivalent medical trend rate .............. 4.50% 4.40% 4.60% 4.11%

Ultimate medical trend rate............................ 3.40% 3.20% 4.30% 3.60%

Civilian Employees’ Post-Retirement Health Benefits

The post-retirement civilian health benefit liability is an estimate of the government’s future cost of providing postretirement health benefits to current employees and retirees. Although active and retired employees pay insurance premiums 

under the Federal Employee Health Benefits Program, these premiums cover only a portion of the costs. The OPM actuary 

applies economic and demographic assumptions to historical cost information to estimate the liability.

The USPS was required to make annual prefunding payments to the PSRHB Fund beginning in FY 2007. USPS 

defaulted on these payments from FY 2011 through FY 2021. The amount due in FY 2021 was $5.1 billion, and the total 

amount that USPS owed to the Fund as of September 30, 2021, was $57.0 billion. The Postal Service Reform Act of 2022

changes the method in which required payments into the PSRHB Fund are calculated and cancelled the payments due from 

USPS. Consequently, the intra-governmental receivable at OPM and the related payable at USPS were written off, which had 

no effect on the respective agencies’ reported net cost in the Statement of Net Cost. 
113 NOTES TO THE FINANCIAL STATEMENTS

The prior (and past) service costs from plan amendments was a decrease of $28.3 billion. This change is due to a 

reduction in future costs as a result of the Postal Service Reform Act of 2022.

Military Employees’ Post-Retirement Health Benefits

Military retirees who are not yet eligible for Medicare (and their non-Medicare eligible dependents) are eligible for

post-retirement medical coverage provided by DOD. Depending on the benefit plan selected, retirees and their eligible

dependents may receive care from MTF on a space-available basis or from civilian providers through TRICARE. This

TRICARE coverage is available as Select (a preferred provider health plan that contracts with medical providers to create a

network of participating providers; member cost-shares are typically higher for services received out-of-network) and Prime

(a health maintenance plan that limits services to a specific network of medical personnel and facilities and usually by

requiring referral by a primary-care physician for specialty care; coverage is also available for non-referred and out-ofnetwork care, subject to higher cost-sharing). These post-retirement medical benefits are paid by the DOD Defense Health

Program on a pay-as-you-go basis.

Since FY 2002, DOD has provided medical coverage to Medicare-eligible retirees (and their eligible Medicare-eligible

dependents). This coverage, called TFL, is a Medicare Supplement plan which includes inpatient, outpatient and pharmacy

coverage. Enrollment in Medicare Part B is required to maintain eligibility in TFL. Retirees with TFL coverage can obtain 

care from MTF on a space-available basis or from civilian providers.

10 U.S.C., Chapter 56 created the DOD MERHCF, which became operative on October 1, 2002. The purpose of this 

fund is to account for and accumulate funds for the health benefit costs of Medicare-eligible military retirees, and their 

dependents and survivors who are Medicare eligible. The Fund receives revenues from three sources: interest earnings on 

MERHCF assets, Uniformed Services normal cost contributions, and Treasury contributions. The DOD Medicare-Eligible 

Retiree Health Care Board of Actuaries (the MERHCF Board) approves the methods and assumptions used in actuarial 

valuations of the MERHCF for the purpose of calculating the per capita normal cost rates (to fund the annual accrued

benefits) and determining the unfunded liability amortization payment (Treasury contribution). 

The Secretary of Defense directs the Secretary of the Treasury to make DOD’s normal cost payments. The MERHCF 

pays for medical costs incurred by Medicare-eligible beneficiaries at MTF and civilian providers (including payments to U.S.

Family Health Plans for grandfathered beneficiaries), plus the costs associated with claims administration.

DOD’s Office of the Actuary calculates the actuarial liabilities annually using assumptions and experience (e.g., 

mortality and retirement rates, health care costs, medical trend rates, and the discount rate) in accordance with SFFAS No.

33. Actuarial liabilities are calculated for all DOD retiree medical benefits, including both the benefits funded through the

MERHCF and the benefits for pre-Medicare retirees who are paid on a pay-as-you-go basis. Military post-retirement health

and accrued benefits payable increased $176.3 billion. The increase is primarily attributable to changes in assumptions.

In addition to the health care benefits the federal government provides for civilian and military retirees and their 

dependents, the VA also provides medical care to veterans on an “as available” basis, subject to the limits of the annual 

appropriations. For the FYs 2018 through 2022, the average medical care cost per year was $86.5 billion.
NOTES TO THE FINANCIAL STATEMENTS 114

Veterans Education and Training Benefits

Change in Veterans Education and Training Benefits

(In billions of dollars) 2022 2021

Actuarial accrued liability, beginning of fiscal year..................................................... 151.2 133.1

Current year expense:

Prior (and past) service costs from plan amendments or new plans ......................... - 14.3

Interest on liability ................................................................................................ 3.7 3.6

Actuarial (gains)/losses (from experience) ............................................................. 7.4 17.4

Actuarial (gains)/losses (from assumption changes) ............................................... 19.8 (4.1)

Total current year expense................................................................................. 30.9 31.2

Less benefits paid................................................................................................... (12.1) (13.1)

Actuarial accrued liability, end of fiscal year.............................................................. 170.0 151.2

For eligible Veterans and their dependents, the VA provides four education/retraining type programs: 

• Post 9/11 GI Bill;

• VR&E;

• Survivors’ and Dependents’ Educational Assistance; and 

• Montgomery GI Bill-Active Duty.

Based on the actuarial estimates of future payments, the total liability for the four education and training programs 

increased by $18.8 billion in FY 2022. The $18.8 billion increase is primarily attributable to experience losses and losses 

from other assumption changes.

In FY 2022, VA conducted experience studies for the Post 9/11 GI Bill, Survivors’ and Dependents’ Educational 

Assistance, Montgomery GI Bill-Active Duty and VR&E programs, resulted in the liability increase of $19.8 billion from 

assumption changes. 

For additional information regarding actuarial assumptions and the four education and training type programs, please 

refer to VA’s financial statements.
115 NOTES TO THE FINANCIAL STATEMENTS

Life Insurance Benefits

Civilian Employees’ Life Insurance Benefits

Change in Civilian Life Insurance Benefits

(In billions of dollars) 2022 2021

Actuarial accrued life insurance benefits liability, beginning of fiscal year.................... 60.1 57.6

Life insurance benefits expense:

New entrant expense ........................................................................................... 0.9 0.7

Interest on liability ................................................................................................ 1.7 1.6

Actuarial (gains)/losses (from experience) ............................................................. (0.4) (0.3)

Actuarial (gains)/losses (from assumption changes) ............................................... 1.3 1.2

Total life insurance benefits expense .................................................................. 3.5 3.2

Less costs paid ...................................................................................................... (0.7) (0.7)

Actuarial accrued life insurance benefits liability, end of fiscal year............................. 62.9 60.1

Significant Long-Term Economic Assumptions Used in Determining Life

Insurance Benefits and the Related Expense

Civilian

2022 2021

Rate of interest....................................................................................................... 2.80% 2.90%

Rate of increase in salary........................................................................................ 1.60% 1.30%

One of the other significant employee benefits is the FEGLI Program. Employee and annuitant contributions and 

interest on investments fund a portion of this liability. The actuarial life insurance liability is the expected PV of future 

benefits to pay to, or on behalf of, existing FEGLI participants, less the expected PV of future contributions to be collected 

from those participants. The OPM actuary uses salary increase and interest rate yield curve assumptions that are generally 

consistent with the pension liability.

As of September 30, 2022, the total amount of FEGLI insurance in-force is estimated at $766.7 billion ($659.8 billion 

for employees and $106.9 billion for annuitants).

Veterans’ Life Insurance Benefits

The largest veterans’ life insurance programs consist of the following:

• National Service Life Insurance covers policyholders who served during World War II.

• Veterans’ Special Life Insurance was established in 1951 to meet the insurance needs of veterans who served during 

the Korean Conflict and through the period ending January 1, 1957.

• Service-Disabled Veterans Insurance program was established in 1951 to meet the insurance needs of veterans who 

received a service-connected disability rating.

Death benefit liabilities consist of reserves for permanent plan and term policies as well as policy benefits for Veterans 

Mortgage Life Insurance. Disability income and waiver liabilities consist of reserves to fund the monthly payments to 

disabled insureds under the Total Disability Income Provision and the policy premiums waived for qualifying disabled 

veterans. Insurance dividends payable consists of dividends left on deposit with VA and dividends payable to policyholders. 
NOTES TO THE FINANCIAL STATEMENTS 116

Unpaid policy claims consist of insurance claims that are pending at the end of the reporting period, an estimate of claims 

that have been incurred but not yet reported, and disbursements in transit. The veteran’s life insurance liability for future 

policy benefits as of September 30, 2022, and 2021, was $3.9 billion and $4.5 billion, respectively. For additional 

information on veteran’s life insurance liability, please refer to VA’s financial statements.

The VA supervises SGLI and Veterans Group Life Insurance programs that provide life insurance coverage to members

of the uniformed armed services, reservists, and post-Vietnam Veterans as well as their families. VA has entered into a group 

policy with the Prudential Insurance Company of America to administer and provide the insurance payments under these 

programs. All SGLI insureds are automatically covered under the Traumatic Injury Protection program, which provides for 

insurance payments to veterans who suffer a serious traumatic injury in service.

The amount of insurance in-force is the total face amount of life insurance coverage provided by each administered and 

supervised program at the end of the fiscal year. It includes any paid-up additional coverage provided under these policies. 

The supervised programs’ policies and face values are not reflected in VA’s liabilities because the risk of loss on these 

programs is assumed by Prudential and its reinsurers through the terms and conditions of the group policy. As a result, the 

information provided for the supervised programs is for informational purposes only and is unaudited. The face value for 

supervised programs as of September 30, 2022, and 2021, was $1,213.2 billion and $1,219.0 billion, respectively. The face 

value for administered programs as of September 30, 2022, and 2021, was $4.8 billion and $5.3 billion, respectively. 

Federal Employees’ Compensation Act Benefits

Workers’ Compensation Benefits

DOL determines both civilian and military entities’ liabilities for future workers’ compensation benefits for civilian 

federal employees, as mandated by the FECA, for death, disability, medical, and miscellaneous costs for approved 

compensation cases, and a component for incurred, but not reported, claims. Effective March 12, 2021, the ARP, Section 

4016, “Eligibility for Workers’ Compensation Benefits for Federal Employees Diagnosed with COVID-19,” mandated that 

accepted COVID-19 claims (or other accepted claims resulting from a coronavirus pandemic) be paid by the fund and are not 

billable to other federal entities; related administrative costs, including the fair share costs of non-appropriated entities, are to 

be paid by the fund and are not billable. Beginning in FY 2021, the actuarial liability includes claims covered by Section 

4016 of the ARP.

The FECA liability is determined annually using historical claim data and benefit payment patterns related to injury 

years to predict the future payments. The actuarial methodology provides for the effects of inflation and adjusts liability 

estimates to constant dollars by applying wage inflation factors (COLA) and medical inflation factors (CPIM) to the 

calculation of projected benefits. DOL selects the COLA factors and CPIM factors by averaging over five years the COLA 

rates and CPIM rates, respectively. The FY 2022 methodology for averaging the COLA rates used OMB provided rates; the 

FY 2022 methodology for averaging the CPIM rates used OMB‐provided rates and information obtained from the Bureau of 

Labor Statistics public releases for CPI. Using averaging renders estimates that reflect trends over five years instead of 

conditions that exist in one year. 

The COLAs and CPIMs used in the projections for FY 2022 are listed below in the table. 

DOL selects the discount rates by averaging interest rates for the current and prior four years. Using averaging renders

estimates that reflect historical trends over five years instead of conditions that exist in one year. DOL selected the interest

rate assumptions whereby projected annual payments were discounted to PV based on interest rate assumptions on the TNC

yield curve to reflect the average duration of income payments and medical payments. The average durations for income

payments and medical payments were 13.8 years and 10.6 years, respectively. Based on averaging the TNC yield curves for

the current and prior four years, the interest rate assumptions for income payments and medical payments were 2.1 percent

and 2.0 percent, respectively.
117 NOTES TO THE FINANCIAL STATEMENTS

For the COLAs, CPIMs, average durations, and interest rate assumptions used in the projections for FY 2021, refer to

the FY 2021 Financial Report.

Unfunded Leave

Unfunded leave are the amounts recorded by an employer federal entity for unpaid leave earned that an employee is 

entitled to upon separation and that will be funded by future years’ budgetary resources. The unfunded leave total as of 

September 30, 2022, and 2021, was $26.9 billion and $27.1 billion, respectively. 

Liability for Other Benefits

Liability for other benefits includes several programs. The largest program is VA’s Community Care Program, with an

estimated liability of $4.7 billion as of September 30, 2022.
NOTES TO THE FINANCIAL STATEMENTS 118

Note 14. Environmental and Disposal Liabilities

Environmental and Disposal Liabilities as of September 30, 2022, and 2021

(In billions of dollars) 2022 2021

Department of Energy............................................................................................. 519.7 515.6

Department of Defense ........................................................................................... 90.6 82.0

All other entities...................................................................................................... 16.0 15.7

Total environmental and disposal liabilities ............................................................ 626.3 613.3

After World War II, the U.S. developed a massive industrial complex to research, produce, and test nuclear weapons

and commercial nuclear power reactors. The nuclear complex was comprised of nuclear reactors, chemical-processing 

buildings, metal machining plants, laboratories, and maintenance facilities.

At all sites where these activities took place, some environmental contamination occurred. This contamination was 

caused by the production, storage, and use of radioactive materials and hazardous chemicals, which resulted in contamination 

of soil, surface water, or groundwater. The environmental legacy of nuclear weapons production also includes thousands of 

contaminated buildings and large volumes of waste and special nuclear materials requiring treatment, stabilization, and 

disposal.

Estimated cleanup costs at sites for which there are no current feasible remediation approaches are excluded from the 

estimates, although applicable stewardship and monitoring costs for these sites are included. DOE has not been required 

through regulation to establish remediation activities for these sites.

Estimating DOE’s environmental cleanup liability requires making assumptions about future activities and is inherently 

uncertain. The future course of DOE’s environmental cleanup and disposal will depend on a number of fundamental technical 

and policy choices, many of which have not been made. Some contaminated sites and facilities could be restored to a 

condition suitable for any desired use or could be restored to a point where they pose no near-term health risks to the 

surrounding communities. Achieving the former condition of the sites and facilities would have a higher cost which may or 

may not warrant the cost or be legally required. The environmental and disposal liability estimates include contingency 

estimates intended to account for the uncertainties associated with the technical cleanup scope of the program. Congressional 

appropriations at lower-than anticipated levels or lack of congressional approval, unplanned delays in project completions 

including potential delays due to COVID-19, unforeseen technical issues, obtaining regulatory approval, among other things, 

could cause increases in life-cycle costs.

DOE’s environmental and disposal liabilities also include the estimated cleanup and post-closure responsibilities, 

including surveillance and monitoring activities, soil and groundwater remediation, and disposition of excess material for 

sites. DOE is responsible for the post-closure activities at many of the closure sites as well as other sites. The costs for these 

post-closure activities are estimated for a period of 75 years after the balance sheet date, i.e., through 2097 in FY 2022 and 

through 2096 in FY 2021. While some post-cleanup monitoring and other long-term stewardship activities post-2097 are 

included in the liability, there are others DOE expects to continue beyond 2097 for which the costs cannot reasonably be 

estimated.

A portion of DOE’s environmental liability at various field sites includes anticipated costs for facilities managed by 

DOE’s ongoing program operations, which will ultimately require stabilization, deactivation, and decommissioning. The 

estimates are largely based upon a cost-estimating model. Site specific estimates are used in lieu of the cost-estimating 

model, when available. Cost estimates for ongoing program facilities are updated each year. For facilities newly 

contaminated since FY 1997, cleanup costs allocated to the periods benefiting from the operations of the facilities. Facilities’ 

cleanup costs allocated to future periods and not included in the environmental and disposal liabilities amounted to $1.1 

billion for fiscal years ending September 30, 2022, and 2021. 

DOD has cleanup requirements and conducts the cleanup under DERP at active installations, Base Realignment 

Closure, and Formerly Used Defense Sites. DOD has additional cleanup requirements for active installations not driven by 

DERP, weapon systems programs, and chemical weapons disposal programs. The weapons system program consists of 

chemical weapons disposal, nuclear powered aircraft carriers, nuclear powered submarines, and other nuclear ships. All 
119 NOTES TO THE FINANCIAL STATEMENTS

cleanup efforts are performed in coordination with regulatory entities, other responsible parties, and current property owners, 

as applicable.

DOD follows CERCLA, SARA, RCRA or other applicable federal or state laws to clean up contamination. The 

CERCLA, SARA, and RCRA require DOD to clean up contamination in coordination with regulatory entities, current 

owners of property damaged by DOD, and third parties that have a partial responsibility for the environmental restoration. 

Failure to comply with agreements and legal mandates puts the DOD at risk of incurring fines and penalties.

DOD utilizes an estimating methodology model which includes the use of mathematical equations to convert resources 

data into cost data to project environmental cleanup cost. DOD validates the models and estimates liabilities based on data 

received during preliminary assessment and site investigation.

For general PP&E placed into service after September 30, 1997, DOD expenses associated environmental cleanup costs 

using two methods: physical capacity usage of the assets or systematically recognized over the useful life. DOD expensed 

cleanup costs for general PP&E placed into service before October 1, 1997, unless costs are to be recovered through user 

charges. As costs are recovered DOD expenses cleanup costs associated with the asset life that has passed since the general 

PP&E was placed into service. DOD systematically recognizes the remaining cost over the remaining life of the asset. The 

unrecognized portion of the estimated total cleanup costs associated with disposal of general PP&E was $3.9 billion and $4.9 

billion for fiscal years ending September 30, 2022, and 2021, respectively.

DOD is responsible for environmental restoration and corrective action for buried chemical munitions and agents; 

however, a reasonable estimate is indeterminable because the extent of the buried chemical munitions and agents is unknown. 

DOD has ongoing studies for the Formerly Utilized Sites Remedial Action Program and will update its estimate as additional 

information is identified. DOD may incur costs for restoration initiatives in conjunction with returning overseas DOD

facilities to host nations. DOD continues its efforts to reasonably estimate required restoration costs.

Environmental liabilities change over time because of laws and regulation updates, technology advances, inflation or 

deflation factors and disposal plan revisions. DOD is unaware of pending changes affecting its estimated cleanup costs. DOD 

revised estimates resulting from previously unknown contaminants, reestimation based on different assumptions, and other 

changes in project scope.

Please refer to the financial statements of the main contributing entities, DOD and DOE, for additional information 

regarding environmental and disposal liabilities, including cleanup costs.

Legal contingent liabilities including contingencies related to environmental legal disputes are recognized as an other 

liability on the Balance Sheet. See Note 18—Other Liabilities and Note 21—Contingencies for additional information related 

to legal contingencies.
NOTES TO THE FINANCIAL STATEMENTS 120

Note 15. Benefits Due and Payable

Benefits Due and Payable as of September 30, 2022, and 2021

(In billions of dollars) 2022 2021

Federal Old-Age and Survivors Insurance - SSA ...................................................... 98.6 87.4

Grants to states for Medicaid - HHS......................................................................... 54.8 52.7

Federal Supplementary Medical Insurance (Medicare Parts B and D) - HHS .............. 42.9 43.8

Federal Hospital Insurance (Medicare Part A) - HHS................................................. 42.1 35.9

Federal Disability Insurance - SSA........................................................................... 24.2 20.5

Unemployment Insurance - DOL.............................................................................. 11.1 19.2

All other benefits programs...................................................................................... 14.6 14.4

Total benefits due and payable ............................................................................. 288.3 273.9

Benefits due and payable are amounts owed to program recipients or medical service providers as of September 30 that 

have not been paid. Please refer to the financial statements of HHS, SSA, and DOL for more information.
121 NOTES TO THE FINANCIAL STATEMENTS

Note 16. Insurance and Guarantee Program Liabilities

Insurance and Guarantee Program Liabilities as of September 30, 2022, and 2021

(In billions of dollars) 2022 2021

Single-Employer Pension Plan - Pension Benefit Guaranty Corporation ..................... 78.3 108.9

Federal Crop Insurance - Department of Agriculture ................................................. 17.3 14.2

Multiemployer Pension Plan - Pension Benefit Guaranty Corporation......................... 2.4 3.0

Other insurance and guarantee programs ................................................................ 6.5 3.7

Total insurance and guarantee program liabilities................................................... 104.5 129.8

The federal government incurs liabilities related to various insurance and guarantee programs as detailed in the table 

above. Note 21—Contingencies includes a discussion of contingencies and other risks related to significant insurance and 

guarantee programs. Insurance information and the related liability concerning federal employee and veteran benefits are 

included in Note 13—Federal Employee and Veteran Benefits Payable. Social insurance and loan guarantees are not 

considered insurance programs under SFFAS No. 51, Insurance Programs, and are accounted for under SFFAS No. 17,

Accounting for Social Insurance, and SFFAS No. 2, Accounting for Direct Loans and Loan Guarantees. Loan guarantees are 

disclosed in Note 4—Loans Receivable, Net and Loan Guarantee Liabilities, and social insurance information is included 

primarily in the sustainability financial statements and in Note 25—Social Insurance.

Insurance and guarantee program liabilities are recognized for known losses and contingent losses to the extent that the 

underlying contingency is deemed probable and a loss amount is reasonably measurable. Please see Note 21—Contingencies 

for discussion on the meaning of “probable” depending on the accounting framework used by each significant consolidation 

entity. PBGC, which insures defined benefit pensions, has the largest insurance and guarantee program liability.

PBGC insures pension benefits for participants in covered defined benefit pension plans. The FY 2022 decrease of 

$31.2 billion in PBGC’s liability for its two separate insurance programs is comprised of a decrease of $30.6 billion in the 

single-employer program liability and a decrease of $0.6 billion in the multiemployer program liability. As of September 30, 

2022, and 2021, PBGC had total liabilities of $90.3 billion and $122.8 billion, respectively. As of September 30, 2022, 

PBGC’s total assets exceeded its total liabilities by $37.6 billion, and in FY 2021 its total assets exceeded its total liabilities 

by $31.4 billion. Most of the change in liability from FY 2021 to FY 2022 occurred in the single-employer program and was

primarily due to change in interest factors which resulted from increases in market interest rates. On March 11, 2021, the 

ARP established the SFA program for distressed multiemployer pension plans that meet specific eligibility criteria. The SFA 

program is administered by PBGC and paid in a lump sum rather than in periodic payments. An application under the ARP 

must be filed by the eligible plans no later than December 31, 2025. Unlike PBGC’s insolvency insurance program for 

multiemployer plans, which is funded by insurance premiums, the SFA program is funded by appropriations from the 

General Fund. The SFA program is intended to enable eligible plans to pay benefits and administrative expenses for the next 

30 years, and, as a result, the vast majority of PBGC’s liability for traditional financial assistance recognized in previous 

years for ongoing plans that were previously expected to become insolvent was reversed (i.e., unbooked) in FY 2021. PBGC 

projects the range of total costs for the SFA program to be between $66.2 billion and $100.4 billion, including $7.5 billion 

paid during FY 2022. Refer to PBGC’s financial statements for additional information.

As of September 30, 2022, and 2021, $17.3 billion and $14.2 billion, respectively, pertain to USDA’s Federal Crop 

Insurance Program. The Federal Crop Insurance Program is administered by the FCIC, which provides insurance to reduce 

agricultural producers’ economic losses due to natural disasters.

As of September 30, 2022, and 2021, $5.8 billion and $3.4 billion, respectively, pertain to the DHS NFIP, which is

included in Other insurance and guarantee programs. The NFIP insurance program liability represents an estimate based on 

the loss and loss adjustment expense factors inherent to the NFIP Insurance Underwriting Operations, including trends in 

claim severity and frequency. The estimate is driven primarily by the timing and severity of flooding activity in the U.S. and 

can significantly vary year over year.
NOTES TO THE FINANCIAL STATEMENTS 122

Note 17. Advances from Others and Deferred Revenue

Advances from Others and Deferred Revenue as of September 30, 2022, and 2021

(In billions of dollars) 2022 2021

Security Assistance Accounts ................................................................................. 167.7 125.7

Department of Energy ............................................................................................ 50.6 48.8

All other................................................................................................................. 28.9 27.5

Total advances from others and deferred revenue ................................................. 247.2 202.0

Advances from others and deferred revenue consists of payments received in advance of performance of activities for 

which revenue has not been earned and other deferred revenue or income received but not yet earned not otherwise classified 

as advances or repayments. Some examples include deferred project revenue funded in advance, funds received in advance 

under the terms of a settlement agreement, prepaid postage, and unearned fees, assessments, and surcharges.

SAA advances from others represent liabilities for collections received to cover future expenses or acquisition of assets

and are related to contracts authorizing progress payments based on cost as defined in the Federal Acquisition Regulation. In

accordance with contract terms, specific rights to the contractors’ work vest when a specific type of contract financing 

payment is made. Due to the probability the contractors will complete their efforts and deliver satisfactory products, and 

because the amount of potential future payments is estimable, the SAA has recognized a contingent liability for estimated 

future payments which are conditional pending delivery and government acceptance. SAA had a large increase in advances 

from others and deferred revenue in FY 2022 due to adjustments to Foreign Military Sales cash collections from systems that 

do not directly feed into Defense Departmental Reporting System, and the funds advanced from State that were previously 

recognized as revenue.

The DOE’s Nuclear Waste Fund collects revenues from owners or generators of high-level radioactive waste and SNF 

to pay their share of disposal costs. These revenues are recognized as a financing source as costs are incurred, and revenues 

that exceed the expenses are considered deferred revenue.
123 NOTES TO THE FINANCIAL STATEMENTS

Note 18. Other Liabilities

Other Liabilities as of September 30, 2022, and 2021

(In billions of dollars) 2022 2021

Allocation of special drawing rights.......................................................................... 147.0 161.8

Other liabilities without related budgetary obligations................................................ 94.6 258.2

Actuarial liabilities for Treasury-managed benefits program ...................................... 56.7 51.0

Other liabilities with related budgetary obligations .................................................... 55.8 66.2

Contingent liabilities ............................................................................................... 51.6 46.4

Accrued funded payroll and leave ........................................................................... 20.6 26.4

Other miscellaneous liabilities................................................................................. 68.8 67.1

Total other liabilities............................................................................................. 495.1 677.1

Other liabilities are the amounts owed to the public and are not reported elsewhere in the Balance Sheet.

• Allocation of SDR is the amount of corresponding liability representing the value of the reserve assets allocated by 

the IMF to meet global needs to supplement existing reserve assets. SDR derive their quality as reserve assets from 

the undertakings of the members to accept them in exchange for “freely useable” currencies (the U.S. dollar, 

European euro, Chinese renminbi, Japanese yen, and British pound sterling). Treasury is the sole contributor.

• Other liabilities without related budgetary obligations represent those unfunded liabilities for which congressional 

action is needed before budgetary resources can be provided. The largest contributions to this category are SAA’s 

liability to offset non-entity cash and DOE’s contractor-sponsored pension plans and other post-retirement benefits. 

In addition, for FY 2021 Treasury incurred a liability for the restoration of federal debt principal and interest. This 

resulted from debt management measures taken during the delay in raising the statutory debt limit, which included 

suspending investments in Treasury debt securities by the Government Securities Investment Fund of the FERS 

TSP. As a result of Treasury securities not being issued to the TSP’s G Fund, Treasury reported other liabilities, as 

of September 30, 2021, in the amount of $157 billion that represented uninvested principal and related interest for 

the TSP’s G Fund that would have been reported in Note 12—Federal Debt and Interest Payable had there not been 

a delay in raising the statutory debt limit as of September 30, 2021, and had the securities been issued. After 

Congress enacted P.L. 117-73 on December 16, 2021, to raise the debt limit, the uninvested principal and related 

interest were restored in FY 2022, resulting in a decrease to Other Liabilities and an increase to Federal Debt and 

Interest Payable. For additional information related to the impact on the TSP, see Note 23—Fiduciary Activities.

• Actuarial liabilities for Treasury-managed benefit programs are the amounts recorded by Treasury for actuarial 

liabilities of future benefit payments to be paid from programs such as the D.C. Federal Pension Fund and the D.C. 

Judicial Retirement Fund. The only contributors are DOL and Treasury.

• Other liabilities with related budgetary obligations are amounts of liabilities for which there is a related budgetary 

obligation. Grant accruals, subsidies, and unpaid obligations related to assistance programs are all part of this 

category. The largest contributors are DOT, HHS, and USDA.

• Contingent liabilities are amounts that are recognized as a result of a past event where a future outflow or sacrifice 

of resource is probable and measurable. These consist of a wide variety of administrative proceedings, legal actions, 

and tort claims which may ultimately result in settlements or decisions adverse to the federal government. DOE and 

HHS are the top contributors. For additional information, refer to Note 21—Contingencies.

• Accrued funded payroll and leave are the estimated amounts of liabilities for salaries, wages, and funded annual 

leave and sick leave that have been earned but are unpaid. The most substantial contribution is from DOD.

• Other miscellaneous liabilities are the liabilities not otherwise classified above. Many entities reported relatively 

small amounts.
NOTES TO THE FINANCIAL STATEMENTS 124

The following entities are the main contributors to the government’s reported other liabilities as of September 30, 2022. 

Refer to each entity’s financial statements for additional information:

• Treasury • DOT • Education

• DOE • USPS • DOI

• DOL • USDA • SEC

• SAA • PBGC • HUD

• HHS • DOJ • TVA 

• DOD • DHS • State
125 NOTES TO THE FINANCIAL STATEMENTS

Note 19. Collections and Refunds of Federal Revenue

Collections of Federal Tax Revenue for the Year Ended September 30, 2022

Federal Tax Year to Which Collections Relate

Tax

Revenue Prior

(In billions of dollars) Collections 2022 2021 2020 Years

Individual income tax and tax withholdings ............... 4,308.1 2,495.6 1,680.0 99.5 33.0

Corporate income taxes .......................................... 475.8 294.0 156.6 3.4 21.8

Excise taxes........................................................... 95.3 74.8 20.1 - 0.4

Unemployment taxes .............................................. 63.8 49.8 13.8 - 0.2

Customs duties ...................................................... 104.7 97.9 6.8 - -

Estate and gift taxes ............................................... 33.4 2.3 25.9 1.8 3.4

Railroad retirement taxes ........................................ 6.1 4.4 1.3 0.4 -

Fines, penalties, interest, and other revenue ............ 5.0 4.9 0.1 - -

Subtotal............................................................... 5,092.2 3,023.7 1,904.6 105.1 58.8

Less: amounts collected for non-federal entities........ (0.4)

Total.................................................................... 5,091.8

Treasury is the government’s principal revenue-collecting entity. Collections of individual income and tax withholdings

include FICA/SECA and individual income taxes. These taxes are characterized as non-exchange revenue.

Excise taxes, also characterized as non-exchange revenue, consist of taxes collected for various items, such as airline 

tickets, gasoline products, distilled spirits and imported liquor, tobacco, firearms, and others. 

Tax and other revenues reported reflect the effects of tax expenditures, which are special exclusions, exemptions, 

deductions, tax credits, preferential tax rates, and tax deferrals that allow individuals and businesses to reduce taxes they may 

otherwise owe. The Budget Act (P.L. 93-344) requires that a list of tax expenditures be included in the annual Budget. Tax 

expenditures may be viewed as alternatives to other policy instruments, such as spending or regulatory programs. For 

example, the government supports college attendance through both spending programs and tax expenditures. The government 

uses Pell Grants to help low- and moderate-income students afford college and allows certain funds used to meet college 

expenses to grow tax free in special college savings accounts. 

Tax expenditures include deductions and exclusions, which reduce the amount of income subject to tax. Examples are 

the deduction for mortgage interest on personal residences and the exclusion of interest on state and local bonds. Tax 

expenditures also include tax credits, which reduce tax liability dollar for dollar for the amount of credit. For example, the 

child tax credit reduces liability by $2,000 per child for taxpayers eligible to use it fully. Other credits are targeted at business 

activity, such as credits for producing electricity from renewable energy or the research and experimentation credit, which 

encourages businesses in the U.S. to increase investment in research activities. In addition, tax expenditures include some 

provisions that allow taxpayers to defer tax liability. Examples include provisions that allow immediate expensing or 

accelerated depreciation of certain capital investments, and others that allow taxpayers to defer their tax liability, such as the 

deferral of recognition of income on contributions to and income accrued within qualified retirement plans.

The total revenues reported in the Statement of Operations and Changes in Net Position and the related information 

reported in this note, do not include explicit line items for tax expenditures, but the total revenue amounts and budget results 

reflect the effect of these expenditures. Tax expenditures are discussed in this note, the unaudited MD&A, and in the 

unaudited Other Information section of the Financial Report.
NOTES TO THE FINANCIAL STATEMENTS 126

Federal Tax Refunds Disbursed and Other Payments for the Year Ended September 30, 2022

Tax Year to Which Refunds Relate

Refunds Prior

(In billions of dollars) Disbursed 2022 2021 2020 Years

Individual income tax and tax withholdings ............... 583.3 85.8 418.5 63.6 15.4

Corporate income taxes .......................................... 55.7 4.4 12.3 6.1 32.9

Other taxes, fines, and penalties.............................. 10.1 4.0 2.0 1.7 2.4

Total.................................................................... 649.1 94.2 432.8 71.4 50.7

Reconciliation of Tax Collections to Revenue for the Year

Ended September 30, 2022, and 2021

(In billions of dollars) 2022 2021

Total collections of federal tax revenue .................................................................... 5,091.8 4,269.6

Refunds of federal taxes and other payments ........................................................... (649.1) (1,145.6)

Individual and other tax credits ................................................................................ 338.3 804.2

Federal Insurance Contributions Act - Tax................................................................ (20.7) (16.4)

Federal Reserve earnings ....................................................................................... 106.7 100.1

Change in taxes receivable ..................................................................................... (65.5) 68.0

Nontax-related fines and penalties reported by entities.............................................. 80.5 81.4

Nontax-related earned revenue ............................................................................... 43.9 94.6

Consolidated revenue per the Statement of Operations and Changes

in Net Position ..................................................................................................... 4,925.9 4,255.9

Consolidated revenue in the Statement of Operations and Changes in Net Position is presented on a modified cash basis, 

net of tax refunds, and includes other non-tax related revenue. Refunds of federal taxes and other payments and individual 

and other tax credits in FY 2022 and FY 2021 include the CARES Act, CAA and ARP stimulus disbursements of $13.1 

billion and $569.5 billion, respectively, to eligible taxpayers. Individual and other tax credits amounts are included in gross 

cost in the Statements of Net Cost. Refer to Note 3—Accounts Receivable, Net for further explanation of line changes in

taxes receivable. The FICA – tax paid by federal entities is included in the individual income and tax withholdings line in the 

Collections of Federal Tax Revenue; however, it is not reported on the Statement of Operations and Changes in Net Position 

as these collections are intra-governmental revenue and eliminated in consolidation. The table above reconciles federal tax 

collections to total revenue. 
127 NOTES TO THE FINANCIAL STATEMENTS

Collections of Federal Tax Revenue for the Year Ended September 30, 2021

Federal Tax Year to Which Collections Relate

Tax

Revenue Prior

(In billions of dollars) Collections 2021 2020 2019 Years

Individual income tax and tax withholdings................ 3,593.9 2,283.0 1,231.8 43.8 35.3

Corporate income taxes........................................... 419.0 254.8 130.5 4.3 29.4

Excise taxes ........................................................... 83.6 63.2 19.9 0.2 0.3

Unemployment taxes............................................... 50.4 41.6 8.7 - 0.1

Customs duties ....................................................... 85.6 79.3 6.3 - -

Estate and gift taxes................................................ 28.1 1.5 21.1 2.7 2.8

Railroad retirement taxes......................................... 5.3 4.2 1.1 - -

Fines, penalties, interest and other revenue.............. 4.2 4.0 0.2 - -

Subtotal ............................................................... 4,270.1 2,731.6 1,419.6 51.0 67.9

Less: amounts collected for non-federal entities ........ (0.5)

Total .................................................................... 4,269.6

Federal Tax Refunds Disbursed and Other Payments for the Year Ended September 30, 2021

Tax Year to Which Refunds Relate

Refunds Prior

(In billions of dollars) Disbursed 2021 2020 2019 Years

Individual income tax and tax withholdings ............... 1,081.2 533.3 496.9 38.3 12.7

Corporate income taxes .......................................... 53.1 3.9 6.4 13.7 29.1

Other taxes, fines, and penalties.............................. 11.3 3.4 4.5 2.2 1.2

Total.................................................................... 1,145.6 540.6 507.8 54.2 43.0
NOTES TO THE FINANCIAL STATEMENTS 128

Note 20. Commitments

Long-Term Operating Leases as of September 30, 2022, and 2021

(In billions of dollars) 2022 2021

General Services Administration............................................................................. 28.5 25.8

Department of Veterans Affairs............................................................................... 6.0 4.9

Department of Health and Human Services ............................................................. 2.9 2.3

Department of State............................................................................................... 1.2 1.3

Other operating leases........................................................................................... 3.6 3.3

Total long-term operating leases .......................................................................... 42.2 37.6

The government has entered into contractual commitments that require future use of financial resources. It has 

significant amounts of long-term lease obligations. Long-term operating leases in this note refer to those leases in which 

federal entities do not assume the risks of ownership of the underlying general PP&E, and payments are expensed over the 

lease term. The lease liabilities and assets arising from operating leases for FASB-reporting entities who early-implemented 

FASB ASC 842, Leases, are recorded on the Balance Sheet in other liabilities and PP&E, respectively, and thus are not 

included in this Commitments note.
129 NOTES TO THE FINANCIAL STATEMENTS

Undelivered Orders and Other Commitments as of September 30, 2022, and 2021

(In billions of dollars) 2022 2021

Undelivered Orders - Unpaid:

Department of Defense ........................................................................................ 440.2 411.5

Department of Education ...................................................................................... 262.4 321.4

Department of Health and Human Services ........................................................... 254.6 288.8

Department of Transportation ............................................................................... 166.7 141.1

Department of Homeland Security......................................................................... 95.4 81.0

Department of Housing and Urban Development.................................................... 92.6 93.4

Department of Agriculture..................................................................................... 83.1 84.5

Department of Energy .......................................................................................... 41.6 33.9

Security Assistance Accounts ............................................................................... 41.2 37.3

Department of State ............................................................................................. 30.9 26.8

Environmental Protection Agency.......................................................................... 27.4 20.7

Department of the Treasury .................................................................................. 26.4 5.9

U.S. Agency for International Development............................................................ 24.8 20.5

All other entities ................................................................................................... 184.1 164.1

Total undelivered orders - unpaid........................................................................ 1,771.4 1,730.9

Other Commitments:

GSE Senior Preferred Stock Purchase Agreements ............................................... 254.1 254.1

U.S. participation in the International Monetary Fund.............................................. 146.4 162.6

Callable capital subscriptions for Multilateral Development Banks ........................... 127.9 125.6

All other commitments .......................................................................................... 20.8 18.1

Total other commitments.................................................................................... 549.2 560.4

Undelivered Orders and Other Commitments

Undelivered Orders - Unpaid

Undelivered orders, included in this note disclosure, represent the value of goods and services ordered that have not yet 

been received and that have not been prepaid. As of September 30, 2022, and 2021, the total reported undelivered orders 

were $1,771.4 billion and $1,730.9 billion, respectively. In FY 2022, Education had a $59.0 billion decrease that was largely 

due to the disbursement of COVID-19 related obligations. HHS had a $34.2 billion decrease that was primarily due to the 

COVID-19 related obligations being delivered and paid. DOT had a $25.6 billion increase that was primarily due to the 

increase in funding received in programs funded by the IIJA. Treasury had a $20.5 billion increase that primarily reflects the 

amounts associated with those COVID-19 financial assistance programs that had not yet fully commenced program 

disbursements.

GSE Senior Preferred Stock Purchase Agreements

As of September 30, 2022, and 2021, the maximum remaining potential commitment to the GSEs for the remaining life 

of the SPSPAs was $254.1 billion, which was established on December 31, 2012. Refer to Note 8—Investments in 

Government-Sponsored Enterprises for a full description of the SPSPAs related commitments and contingent liability, if any, 

as well as additional information.
NOTES TO THE FINANCIAL STATEMENTS 130

U.S. Participation in the International Monetary Fund

The government participates in the IMF through a quota subscription and certain borrowing arrangements that 

supplement IMF resources. As of September 30, 2022, and 2021, the financial commitment under the U.S. quota and 

borrowing arrangements was $146.4 billion and $162.6 billion, respectively. Refer to Note 2—Cash and Other Monetary 

Assets and Note 27—Disclosure Entities and Related Parties for additional information regarding the U.S. participation in the 

IMF.

Callable Capital Subscriptions for Multilateral Development Banks

The government has callable subscriptions in certain MDB, which are international financial institutions that finance

economic and social development projects in developing countries. Callable capital in the MDB serves as a supplemental 

pool of resources that may be redeemed and converted into ordinary paid in shares, if the MDB cannot otherwise meet certain 

obligations through its other available resources. MDB are able to use callable capital as backing to obtain favorable 

financing terms when borrowing from international capital markets. To date, there has never been a call on this capital at any 

MDB and none is anticipated. As of September 30, 2022, and 2021, the capital commitment to MDB was $127.9 billion and 

$125.6 billion, respectively. 
131 NOTES TO THE FINANCIAL STATEMENTS

Note 21. 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 additional information.

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 additional 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, potential 

draws by GSEs, and whistleblower awards. 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. Estimated 

potential losses for legal claims related to treaties and international agreements are included in the Legal Contingencies and 

Environmental and Disposal Contingencies section of this note. For additional information on 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. Federal entities account for loss contingencies based on the likelihood of loss and measurability criteria provided in 

the following table.2

2 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 132

Likelihood of future 

outflow or 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.3

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 but less than 

probable.

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. 4 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). 

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

occur.

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

TVA, and USPS.
133 NOTES TO THE FINANCIAL STATEMENTS

Legal Contingencies and Environmental and Disposal Contingencies

Legal Contingencies and Environmental and Disposal Contingencies as of 

September 30, 2022, and 2021 

2022 2021

Estimated Range of Loss Estimated Range of Loss

for Certain Cases 2 for Certain Cases 2

Accrued Accrued

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

Probable ............................. 41.1 40.6 43.6 39.7 39.6 42.7

Reasonably possible............ N/A 17.2 44.5 N/A 25.9 52.0

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.

Note: "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 $41.1 billion and $39.7 billion as of 

September 30, 2022, and 2021, 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 $6.1 billion in FY 2022 and $5.8 billion in FY 2021. 

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 $17.2 billion to $44.5 billion as of September 30, 2022, and 

from $25.9 billion to $52.0 billion as of September 30, 2021. An example is a case that contests SSA’s method of reducing 

benefits under the family maximum provision for auxiliary children of retired workers whose benefits are reduced due to 

becoming entitled to such benefits before attaining full retirement age. The amount of potential loss arising out of these cases 

is estimated based on the broadest possible scope of application, to be approximately $6.3 billion for the Social Security trust 

funds. 

In accordance with the NWPA, DOE entered into more than 69 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. Significant litigation claiming damages for partial breach of contract has ensued as a result of this delay. Based 

on settlement estimates, the total liability estimate as of September 30, 2022 is $41.1 billion. After deducting the cumulative 

amount paid of $10.1 billion as of September 30, 2022 under settlements, and as a result of final judgments, the remaining 

liability is estimated to be approximately $31.0 billion, compared to approximately $30.9 billion as of September 30, 2021. 

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, in these cases, damages of $1.2 billion are currently sought.

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 
NOTES TO THE FINANCIAL STATEMENTS 134

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 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 (please refer to Note 8—Investments in Government-Sponsored Enterprises). In the U.S. Court of 

Federal Claims, the plaintiffs seek just compensation and other damages from the U.S. government. With respect to certain 

cases pending before the U.S. Court of Federal Claims, the U.S. government’s motion to dismiss was granted with respect to 

certain claims and denied with respect to certain other claims. The U.S. Court of Appeals for the Federal Circuit dismissed all 

of the claims. Certain plaintiffs filed petitions for a writ of certiorari with the Supreme Court. 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 an injunction that 

results in changes to Treasury’s liquidation preference, or that converts Treasury’s senior preferred stock to common stock. 

Following the Supreme Court’s decision in June 2021, the Court left open the possibility that the plaintiffs may be entitled to 

retrospective relief if the unconstitutional provision inflicted “compensable harm”. The Fifth and Eighth Circuit Courts of 

Appeal remanded cases to the U.S. District Court for the Southern District of Texas and the U.S. District Court for the 

District of Minnesota, where plaintiffs filed amended complaints and motions to dismiss are pending. The Sixth Circuit Court 

of Appeals remanded a case to the U.S. District Court for the Western District of Michigan to determine if the 

unconstitutional provision inflicted “compensable harm”. A case in the Eastern District of Pennsylvania remains in litigation, 

and a motion to dismiss is pending. Treasury is unable to determine the likelihood of an unfavorable outcome or an estimate 

of potential loss in these cases at this time.

Insurance and Guarantees

As discussed in Note 1.N—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. Please refer to Note 16—Insurance and Guarantee Program 

Liabilities for insurance and guarantee liabilities and Note 13—Federal Employee and Veteran Benefits Payable for insurance 

related to federal employee and veteran benefits.

Entities Reporting under FASB

PBGC, FCSIC, and FDIC are the main contributing consolidation entities with significant insurance or guarantee 

programs that apply FASB standards. Insurance in-force estimates and a discussion of PBGC’s coverage are disclosed to 

provide an understanding of the magnitude of the programs. Current conditions indicate it is extremely unlikely that losses 

equal to the maximum risk exposure described below would be incurred.

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. As of September 30, 2022, PBGC's single-employer and multiemployer pension insurance programs had $124.4

billion and $3.5 billion in total assets, respectively. In FY 2021, PBGC reported pension insurance program total assets for 

single-employer and multiemployer of $150.7 billion and $3.5 billion, respectively. The single-employer pension insurance 

program assets decreased $26.3 billion in FY 2022. The decrease is primarily attributed to the decrease in fixed maturity 

securities, public equity securities, and securities lending cash collateral.

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

The single-employer program covered about 22.3 million people (excluding those in plans that PBGC has trusteed) in FY

2022, down from about 22.7 million people in FY 2021, and the maximum guaranteed annual benefit for participants who are 

in a plan that terminated in FY 2022 and commence benefits at age 65 is $74,455. The maximum guaranteed benefit for 

single-employer plan participants is determined by the year the retiree’s plan terminated (if the plan terminated during the 

plan sponsor’s bankruptcy, the year the sponsor entered bankruptcy) and the participant’s age at the earlier of the plan 

termination date (the date the sponsor entered bankruptcy, if earlier) or the date the participant begins collecting benefits. The 

number of covered ongoing plans at the end of FY 2022 was about 23,800. 

The multiemployer program covers about 11.2 million participants in about 1,360 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 

multiemployer 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. On March 11, 2021, the President signed into law the ARP. The 

ARP established a new multiemployer SFA program resulting in a new source of financing from the General Fund. PBGC 

has begun to receive appropriated SFA funds to disburse to multiemployer plans that meet certain criteria. Unlike traditional 

financial assistance where PBGC provides assistance to the multiemployer plans in the form of a loan, the new special 

financial assistance will be provided via a transfer (pass through of funds) with no obligation of repayment. Changes made in 
135 NOTES TO THE FINANCIAL STATEMENTS

PBGC’s final rule for SFA published on July 8, 2022 improve the likelihood that plans receiving SFA will be able to pay all 

benefits due through plan year 2051, thus reducing but not eliminating in all scenarios, the risk that SFA plans will become 

insolvent in the 2030s and 2040s. Please refer to PBGC financial statements for additional information.

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 System Banks. Systemwide Debt Securities are not

obligations of and are not guaranteed by the U.S. government. As stated in the Farm Credit Quarterly Information Statement

of the Farm Credit System, outstanding Systemwide Debt Securities reported by the Farm Credit System Banks totaled

$377.2 billion and $329.0 billion as of September 30, 2022, and 2021 respectively. The increase in the outstanding

Systemwide Debt Securities primarily resulted from increases in the Farm Credit System’s loan portfolio, including real

estate mortgage, processing and marketing, rural infrastructure and agricultural export finance loans offset, in part, by a

decrease in loans to cooperatives. 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, 2022, and 2021, FCSIC reported an Insurance Fund balance of $6.5 billion and $5.8 billion,

respectively.

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

insured deposits of $9,926.3 billion and $9,577.1 billion as of September 30, 2022, and 2021 respectively, for the DIF.

For PBGC and FDIC, the government also has guarantee contingencies that are reasonably possible in the amount of 

$54.5 billion and $105.9 billion as of September 30, 2022, and 2021, respectively. 

PBGC reported $54.2 billion and $105.7 billion as of September 30, 2022, and 2021, respectively, for the estimated 

aggregate unfunded vested benefits exposure to PBGC for private-sector single-employer and multiemployer defined benefit 

pension plans that are classified with a reasonably possible exposure to loss. As of September 30, 2022, PBGC’s estimate of 

its single-employer reasonably possible exposure decreased to $52.0 billion compared to $105.4 billion in FY 2021. The 

$53.4 billion decrease is primarily due to positive investment results on plan assets during calendar year 2021 and the 

significant increase in the interest factors used for valuing liabilities as of the measurement date.5 PBGC’s estimate of its 

multiemployer reasonably possible exposure increased to $2.2 billion in FY 2022 compared to $0.3 billion in FY 2021. The 

primary reason for the $1.9 billion increase in exposure was due to the 12 plans classified as reasonably possible at 

September 30, 2022, while only three plans were classified as reasonably possible at September 30, 2021. The majority of the 

plans newly classified as reasonably possible are due to plan asset losses. Additionally, the reasonably possible aggregate 

reserve for small plans increased due to an increase in small plans from 23 to 55 projected to become insolvent within 20 

years primarily due to plan asset losses.

FDIC reported $0.3 billion and $0.2 billion as of September 30, 2022, and 2021, respectively for additional risk 

identified 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 Reporting 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 for consolidation entities with significant 

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

5 The estimate of the reasonably possible exposure to loss for the single-employer plans was measured as of December 31, 2021.
NOTES TO THE FINANCIAL STATEMENTS 136

Insurance In-force as of September 30, 2022, and 2021

(In billions of dollars) 2022 2021

Ginnie Mae - HUD .................................................................................................. 2,284.5 2,125.6

National Credit Union Share Insurance Fund - NCUA ............................................... 1,700.0 1,600.0

National Flood Insurance Program - DHS................................................................. 1,286.2 1,341.3

Federal Crop Insurance - USDA .............................................................................. 193.2 150.0

Ginnie Mae insures MBS and commitments, which exposes Ginnie Mae to various risks. Ginnie Mae’s MBS program 

guarantees the timely payment of principal and interest on securities backed by pools of mortgage loans insured by FHA, 

Public and Indian Housing, and Rural Housing Service, or guaranteed by the VA. Accordingly, Ginnie Mae’s credit risk 

related to outstanding MBS is greatly mitigated by guarantees discussed in Note 4—Loans Receivable, Net and Loan 

Guarantee Liabilities.

NCUA operates and manages the NCUSIF, insuring the deposits of over 134.3 million account holders in all federal 

credit unions and the majority of state-chartered credit unions. NCUSIF insures the balance of each members’ accounts, 

dollar-for-dollar, up to at least the standard maximum share insurance amount of $250,000. 

NFIP, managed by FEMA, 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. FEMA 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.

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. Amounts borrowed at any time are not predetermined, and 

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, 2022, and 2021, 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 pay its debt in full. 

The Federal Crop Insurance Program, administered by USDA’s FCIC, is considered a short-duration exchange 

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

natural causes. There were approximately 1.2 million crop insurance policies in force for crop years 2022, and 2021. The 

insurance policies are structured as a contract between Approved Insurance Providers and 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 insurance protection in force increased $43.2 billion in crop year 

2022 primarily due to the elevated commodity prices and greater participation in certain products and plans.

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 a 

permanent indefinite appropriation for the crop insurance program used to cover premium subsidy, delivery expenses, losses 

in excess of premiums, and research and delivery costs. FCIC has no outstanding borrowing as of September 30, 2022. 

Please refer to the financial statements of the main contributing entities, HUD, NCUA, DHS, and USDA for additional 

information. 

Congress originally enacted the Terrorism Risk Insurance Act in November 2002, to address market disruptions 

resulting from terrorist attacks on September 11, 2001. Most recently, the Terrorism Risk Insurance Program 

Reauthorization Act of 2019 extended TRIP until December 31, 2027. The TRIP helps to ensure available and affordable 

commercial property and casualty insurance for terrorism risk, and simultaneously allows private markets to stabilize. The 

authority to pay claims under TRIP is activated when the Secretary of the Treasury (in consultation with the Secretary of the 

DHS and the U.S. Attorney General) certifies 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 2022 and 2021, the Program Trigger amount was $200.0 million. Insurance companies 

and the U.S. government will share insured losses above insurer deductibles. TRIP includes both mandatory and 
137 NOTES TO THE FINANCIAL STATEMENTS

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, 2022 or 2021.

Other Contingencies

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

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. The state may submit 

a written request to FHWA that a project be converted to a regular federal aid project at any time provided that sufficient 

federal aid funds and obligation authority are available. As of September 30, 2022, and 2021, FHWA has $69.3 billion and 

$68.8 billion, respectively, of advanced construction authorizations that could be converted to federal obligations subject to 

the availability of funds. These authorizations have not been recognized in the DOT consolidated financial statements.

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 $7.0 billion and $3.7 billion for fiscal years ending September 30, 

2022, and 2021, 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.

Treasury has a contingency for future draws by the GSEs. There were no probable future draws accrued as of 

September 30, 2022, and 2021, and the total amount of reasonably possible future draws is not estimable as of September 30, 

2022. Refer to Note 8—Investments in Government-Sponsored Enterprises for additional information.
NOTES TO THE FINANCIAL STATEMENTS 138

Note 22. Funds from Dedicated Collections

Funds from Dedicated Collections as of September 30, 2022

Federal Federal Federal

Old-Age and Disability Medicare All Other Total Funds Total Funds

Survivors Insurance Insurance Funds from from Funds from from

Insurance Trust Trust Funds Dedicated Dedicated Dedicated Dedicated

Trust Fund Fund (Part A, B, D) Collections Collections Collections Collections

(In billions of dollars) (Combined) (Combined) (Combined) (Combined) (Combined)1 Eliminations (Consolidated)2

Assets:

Cash and other monetary 

assets......................... - - - 167.8 167.8 - 167.8

Accounts receivable, net ... 2.1 2.9 25.6 26.0 56.6 - 56.6

Loans receivable, net ....... - - - 2.0 2.0 - 2.0

Inventory and related 

property, net ................. - - - 2.4 2.4 - 2.4

General property, plant and 

equipment, net............... - - 0.5 37.8 38.3 - 38.3

Investments .................. - - - 26.2 26.2 - 26.2

Advances and 

prepayments ................. - - 39.0 10.3 49.3 - 49.3

Other assets3 ................ - - - 18.9 18.9 - 18.9

Investments in Treasury 

securities, net of 

unamortized 

premiums/discounts.........

2,723.6 114.7 345.4 379.9 3,563.6 - 3,563.6

Other federal assets ........ 15.6 0.7 284.0 323.7 624.0 (205.2) 418.8

Total assets ................. 2,741.3 118.3 694.5 995.0 4,549.1 (205.2) 4,343.9

Liabilities and net

position:

Accounts payable ........... - - 0.1 4.8 4.9 - 4.9

Federal employee and 

veteran benefits payable ... - - - 6.5 6.5 - 6.5

Environmental and disposal 

liabilities ...................... - - - 26.1 26.1 - 26.1

Benefits due and payable .. 98.7 24.2 85.1 10.2 218.2 - 218.2

Insurance and guarantee 

program liabilities............ - - - 9.6 9.6 - 9.6

Advances from others and 

deferred revenues........... - - 1.3 66.4 67.7 - 67.7

Other liabilities3 .............. - - - 190.1 190.1 - 190.1

Federal liabilities............. 6.4 0.9 108.6 213.7 329.6 (205.2) 124.4

Total liabilities............... 105.1 25.1 195.1 527.4 852.7 (205.2) 647.5
139 NOTES TO THE FINANCIAL STATEMENTS

Funds from Dedicated Collections as of September 30, 2022, continued

Federal Federal Federal

Old-Age and Disability Medicare All Other Total Funds Total Funds

Survivors Insurance Insurance Funds from from Funds from from

Insurance Trust Trust Funds Dedicated Dedicated Dedicated Dedicated

Trust Fund Fund (Part A, B, D) Collections Collections Collections Collections

(In billions of dollars) (Combined) (Combined) (Combined) (Combined) (Combined)1 Eliminations (Consolidated)2

Net position:

Total net position ........... 2,636.2 93.2 499.4 467.6 3,696.4 - 3,696.4

Total liabilities and net 

position ..................... 2,741.3 118.3 694.5 995.0 4,549.1 (205.2) 4,343.9

Change in net position:4

Net position, beginning of 

period ......................... 2,681.0 80.5 409.9 311.6 3,483.0 - 3,483.0

Adjustments to beginning 

net position

Beginning net position, 

adjusted ..................... 2,681.0 80.5 409.9 311.6 3,483.0 - 3,483.0

Individual income taxes and 

tax withholdings ............. 929.0 157.8 354.7 - 1,441.5 - 1,441.5

Other taxes and 

miscellaneous earned 

revenue....................... - - (0.8) 132.2 131.4 - 131.4

Other changes in fund 

balance (e.g., 

appropriations, transfers)... 37.9 (1.2) 504.4 126.3 667.4 - 667.4

Federal non-exchange 

revenue....................... 64.1 2.7 - 33.0 99.8 - 99.8

Total financing sources .... 1,031.0 159.3 858.3 291.5 2,340.1 - 2,340.1

Program gross costs and 

non-program expenses ..... 1,075.8 146.6 905.7 227.3 2,355.4 (0.8) 2,354.6

Less: program revenue ..... - - (136.9) (91.8) (228.7) 0.8 (227.9)

Net cost...................... 1,075.8 146.6 768.8 135.5 2,126.7 - 2,126.7

Ending net position........ 2,636.2 93.2 499.4 467.6 3,696.4 - 3,696.4

1The combined presentation does not eliminate intra-entity balances or transactions between funds from dedicated collections held by the

entity.

2The consolidated dedicated collections presentation eliminates balances and transactions between funds from dedicated collections

held by the entity, but does not eliminate balances or transactions between funds from dedicated collections and funds from other than

dedicated collections.

3Other assets and other liabilities include multiple line items on the Balance Sheet. 

4By law, certain expenses (costs), revenues, and other financing sources related to the administration of the above funds are not charged

to the funds and are therefore financed and/or credited to other sources.
NOTES TO THE FINANCIAL STATEMENTS 140

Funds from Dedicated Collections as of September 30, 2021 (Restated)

Federal Federal Federal

Old-Age and Disability Medicare All Other Total Funds Total Funds

Survivors Insurance Insurance Funds from from Funds from from

Insurance Trust Trust Funds Dedicated Dedicated Dedicated Dedicated

Trust Fund Fund (Part A, B, D) Collections Collections Collections Collections

(In billions of dollars) (Combined) (Combined) (Combined) (Combined) (Combined)1 Eliminations (Consolidated)2

Assets:

Cash and other monetary 

assets......................... - - - 182.1 182.1 - 182.1

Accounts receivable, net ... 2.1 3.1 15.6 25.7 46.5 - 46.5

Loans receivable, net ....... - - - 2.3 2.3 - 2.3

Inventory and related 

property, net ................. - - - 1.5 1.5 - 1.5

General property, plant and 

equipment, net............... - - 0.3 35.8 36.1 - 36.1

Investments .................. - - - 32.4 32.4 - 32.4

Advances and 

prepayments ................. - - 67.0 11.2 78.2 - 78.2

Other assets3 ................ - - - 19.1 19.1 - 19.1

Investments in Treasury 

securities, net of 

unamortized 

premiums/discounts.........

2,755.9 98.0 306.8 238.7 3,399.4 - 3,399.4

Other federal assets ........ 16.6 0.7 233.1 290.0 540.4 (175.7) 364.7

Total assets ................. 2,774.6 101.8 622.8 838.8 4,338.0 (175.7) 4,162.3

Liabilities and net

position:

Accounts payable ........... - - 0.1 4.9 5.0 - 5.0

Federal employee and 

veteran benefits payable ... - - - 6.9 6.9 - 6.9

Environmental and disposal 

liabilities ...................... - - - 26.1 26.1 - 26.1

Benefits due and payable .. 87.4 20.5 79.8 17.6 205.3 - 205.3

Insurance and guarantee 

program liabilities............ - - - 3.5 3.5 - 3.5

Advances from others and 

deferred revenues........... - - 0.8 64.0 64.8 - 64.8

Other liabilities3 .............. - - - 201.4 201.4 - 201.4

Federal liabilities............. 6.2 0.8 132.2 202.8 342.0 (175.7) 166.3

Total liabilities............... 93.6 21.3 212.9 527.2 855.0 (175.7) 679.3
141 NOTES TO THE FINANCIAL STATEMENTS

Funds from Dedicated Collections as of September 30, 2021 (Restated), continued

Federal Federal Federal

Old-Age and Disability Medicare All Other Total Funds Total Funds

Survivors Insurance Insurance Funds from from Funds from from

Insurance Trust Trust Funds Dedicated Dedicated Dedicated Dedicated

Trust Fund Fund (Part A, B, D) Collections Collections Collections Collections

(In billions of dollars) (Combined) (Combined) (Combined) (Combined) (Combined)1 Eliminations (Consolidated)2

Net position:

Total net position ........... 2,681.0 80.5 409.9 311.6 3,483.0 - 3,483.0

Total liabilities and net 

position ..................... 2,774.6 101.8 622.8 838.8 4,338.0 (175.7) 4,162.3

Change in net position:4

Net position, beginning of 

period ......................... 2,741.0 78.6 364.9 286.9 3,471.4 - 3,471.4

Adjustments to beginning 

net position

Beginning net position, 

adjusted ..................... 2,741.0 78.6 364.9 286.9 3,471.4 - 3,471.4

Individual income taxes and 

tax withholdings ............. 831.1 141.2 302.0 - 1,274.3 - 1,274.3

Other taxes and 

miscellaneous earned 

revenue....................... - - (0.8) 124.1 123.3 - 123.3

Other changes in fund 

balance (e.g., 

appropriations, transfers)... 26.8 (1.9) 468.5 200.3 693.7 - 693.7

Federal non-exchange 

revenue....................... 69.0 2.7 6.1 28.3 106.1 - 106.1

Total financing sources .... 926.9 142.0 775.8 352.7 2,197.4 - 2,197.4

Program gross costs and 

non-program expenses ..... 986.9 140.1 853.4 402.4 2,382.8 (1.5) 2,381.3

Less: program revenue ..... - - (122.6) (74.4) (197.0) 1.5 (195.5)

Net cost...................... 986.9 140.1 730.8 328.0 2,185.8 - 2,185.8

Ending net position........ 2,681.0 80.5 409.9 311.6 3,483.0 - 3,483.0

1The combined presentation does not eliminate intra-entity balances or transactions between funds from dedicated collections held by the

entity.

2The consolidated dedicated collections presentation eliminates balances and transactions between funds from dedicated collections

held by the entity, but does not eliminate balances or transactions between funds from dedicated collections and funds from other than

dedicated collections.

3Other assets and other liabilities include multiple line items on the Balance Sheet. 

4By law, certain expenses (costs), revenues, and other financing sources related to the administration of the above funds are not charged

to the funds and are therefore financed and/or credited to other sources.
NOTES TO THE FINANCIAL STATEMENTS 142

Generally, funds from dedicated collections are financed by specifically identified revenues, often supplemented by 

other financing sources, provided to the government by non-federal sources, which remain available over time. These 

specifically identified revenues and other financing sources are required by statute to be used for designated activities, 

benefits, or purposes and must be accounted for separately from the government’s general revenues. Funds from dedicated 

collections generally include trust funds, public enterprise revolving funds (not including credit reform financing funds), and 

special funds. Funds from dedicated collections specifically exclude any fund established to account for pensions, ORB, 

OPEB, or other benefits provided for federal employees (civilian and military). In the federal budget, the term “trust fund” 

means only that the law requires a particular fund to be accounted for separately, used only for a specified purpose, and 

designated as a trust fund. A change in law may change the future receipts and the terms under which the fund’s resources are 

spent. In the private sector, trust fund refers to funds of one party held and managed by a second party (the trustee) in a 

fiduciary capacity. The activity of funds from dedicated collections differs from fiduciary activities primarily in that assets 

within funds from dedicated collections are government-owned. For additional information related to fiduciary activities, see 

Note 23—Fiduciary Activities.

Public enterprise revolving funds include expenditure accounts authorized by law to be credited with offsetting 

collections, mostly from the public, that are generated by and dedicated to finance a continuing cycle of business-type 

operations. Some of the financing for these funds may be from appropriations.

Special funds are federal funds dedicated by law for a specific purpose. Special funds include the special fund receipt 

account and the special fund expenditure account.

Total assets represent the unexpended balance from all sources of receipts and amounts due to the funds from dedicated 

collections, regardless of source, including related governmental transactions. These are transactions between two different 

entities within the government or intradepartmental (for example, monies received by one entity of the government from 

another entity of the government).

The federal assets are comprised of fund balances with Treasury, investments in Treasury securities—including 

unamortized amounts, and other assets that include the related accrued interest receivable on federal investments. These 

amounts were excluded in preparing the principal financial statements. The non-federal assets include activity with 

individuals and organizations outside of the government.

Most of the assets within funds from dedicated collections are invested in intra-governmental debt holdings. The 

government does not set aside assets to pay future benefits or other expenditures associated with funds from dedicated 

collections. The cash receipts collected from the public for funds from dedicated collections are deposited in the General 

Fund, which uses the cash for general government purposes. Treasury securities are issued to federal entities as evidence of 

its receipts. Treasury securities are an asset to the federal entities and a liability to Treasury and, therefore, they do not 

represent an asset or a liability in the Financial Report. These securities require redemption if a fund’s disbursements exceeds 

its receipts. Redeeming these securities will increase the government’s financing needs and require more borrowing from the 

public (or less repayment of debt), or will result in higher taxes than otherwise would have been needed, or less spending on

other programs than otherwise would have occurred, or some combination thereof. See Note 12—Federal Debt and Interest

Payable for additional information related to the investments in federal debt securities.

Below is a description of the major funds from dedicated collections, which also identifies the government entities that 

administer each particular fund. For additional information regarding funds from dedicated collections, please refer to the 

financial statements of the corresponding administering entities. For additional information on the benefits due and payable 

liability associated with certain funds from dedicated collections, see Note 15—Benefits Due and Payable.

Federal Old-Age and Survivors Insurance Trust Fund

The OASI Trust Fund, administered by SSA, provides retirement and survivors benefits to qualified workers and their 

families.

Payroll and self-employment taxes primarily fund the OASI Trust Fund. Interest earnings on Treasury securities, federal 

entities’ payments for the Social Security benefits earned by military and federal civilian employees, and Treasury payments for 

a portion of income taxes collected on Social Security benefits provide the fund with additional income. The law establishing the 

OASI Trust Fund and authorizing the depositing of amounts to the credit of the fund is set forth in 42 U.S.C. § 401.
143 NOTES TO THE FINANCIAL STATEMENTS

Federal Disability Insurance Trust Fund

The DI Trust Fund, administered by SSA, provides assistance and protection against the loss of earnings due to a wage 

earner’s disability in form of monetary payments. 

Like the OASI Trust Fund, payroll taxes primarily fund the DI Trust Fund. The fund also receives income from interest 

earnings on Treasury securities, federal entities’ payments for the Social Security benefits earned by military and federal 

civilian employees, and Treasury payments for a portion of income taxes collected on Social Security benefits. The law 

establishing the DI Trust Fund and authorizing the depositing of amounts to the credit of the fund is set forth in 42 U.S.C. § 

401.

Federal Medicare Insurance Trust Funds

(Medicare Parts A, B and D)

The HI Trust Fund, administered by HHS, finances Medicare Part A. This program funds the cost of inpatient hospital 

and related care for individuals age 65 or older who meet certain insured status requirements and individuals younger than 

age 65 with certain disabilities. 

The HI Trust Fund is financed primarily by payroll taxes, including those paid by federal entities. It also receives 

income from interest earnings on Treasury securities, a portion of income taxes collected on Social Security benefits, 

premiums paid by, or on behalf of, aged uninsured beneficiaries, and receipts from fraud and abuse control activities. Section 

1817 of the Social Security Act established the Medicare Hospital Trust Fund.

The SMI Trust Fund, administered by HHS, finances the Medicare Part B and the Medicare Prescription Drug Benefit 

Program (Medicare Part D). These programs provide SMI benefits for enrolled eligible participants to cover physician and 

outpatient services not covered by Medicare Part A and to obtain qualified prescription drug coverage, respectively. Medicare 

Part B financing is not based on payroll taxes; it is primarily based on monthly premiums, income from the General Fund, 

and interest earnings on Treasury securities. The Medicare SMI Trust Fund was established by Section 1841 of the Social 

Security Act.

Medicare Part D was created by the Medicare Modernization Act of 2003 (P.L. 108-173). Medicare Part D financing is 

similar to Part B; it is primarily based on monthly premiums and income from the General Fund, not on payroll taxes. The 

fund also receives transfers from states. 

All Other Funds from Dedicated Collections

The government is responsible for the management of numerous funds from dedicated collections that serve a wide 

variety of purposes. The funds from dedicated collections presented on an individual basis in the above tables represent the 

majority of the government’s net position attributable to funds from dedicated collections. All other activity attributable to 

funds from dedicated collections is aggregated in accordance with SFFAS No. 27, Identifying and Reporting Funds from 

Dedicated Collections, as amended by SFFAS No. 43, Funds from Dedicated Collections: Amending Statement of Federal 

Financial Accounting Standards 27, Identifying and Reporting Earmarked Funds. The majority entities with funds from 

dedicated collections within the “all other” aggregate, include the following:

• DOT • RRB

• DOC • DOE

• DOI • HUD

• Treasury • DOJ

• DOD • SEC

In accordance with SFFAS No. 43, any funds established to account for pension, other retirement, or OPEB to civilian 

or military personnel are excluded from the reporting requirements related to funds from dedicated collections.

FY 2021 has been restated. The Smithsonian Trust Fund is no longer considered a dedicated collections fund. This 

restatement created a $3.8 billion reduction to funds from dedicated collections net position and a $3.8 billion increase to 

funds other than those from dedicated collections net position. There was no impact to total net position. 
NOTES TO THE FINANCIAL STATEMENTS 144

Note 23. Fiduciary Activities

Fiduciary activities are the collection or receipt, and the management, protection, accounting, investment and 

disposition by the government of cash or other assets in which non-federal individuals or entities have an ownership interest 

that the government must uphold. Fiduciary cash and other assets are not assets of the government and are not recognized on 

the consolidated Balance Sheet. The government’s fiduciary activities include the TSP, which is administered by the FRTIB, 

and the Indian Tribal and individual Indian Trust Funds, which are administered by the DOI. 

Schedule of Fiduciary Net Assets as of September 30, 2022, and 2021

(In billions of dollars) 2022 2021

Thrift Savings Plan ................................................................................................. 726.0 784.2

Department of the Interior ....................................................................................... 8.5 6.4

All other ................................................................................................................. 5.4 6.0

Total fiduciary net assets ...................................................................................... 739.9 796.6

In accordance with the requirements of SFFAS No. 31, Accounting for Fiduciary Activities, fiduciary investments in 

Treasury securities and fund balance with Treasury held by fiduciary funds are to be recognized on the Balance Sheet as 

federal debt and interest payable and a liability for fiduciary fund balance with Treasury, respectively. 

As of September 30, 2022, total fiduciary investments in Treasury securities and in non-Treasury securities are $318.4 

billion and $406.3 billion, respectively. As of September 30, 2021, total fiduciary investments in Treasury securities and in 

non-Treasury securities were $119.8 billion and $507.8 billion, respectively. The increase in Treasury securities from FY 

2021 to FY 2022 relates to the restoration of uninvested principal and related interest to the TSP’s G Fund after the statutory 

debt limit was raised on December 16, 2021. See the Thrift Savings Plan section below. Refer to Note 12—Federal Debt and 

Interest Payable for more information on Treasury securities. 

As of September 30, 2022, and 2021, the total fiduciary fund balance with Treasury is $1.7 billion and $3.4 billion, 

respectively. A liability for this fiduciary fund balance with Treasury is reflected as other miscellaneous liabilities in Note 

18—Other Liabilities.

As of September 30, 2022, and 2021, collectively, the fiduciary investments in Treasury securities and fiduciary fund 

balance with Treasury held by all government entities represent $4.8 billion and $164.2 billion, respectively, of unrestricted 

cash included within cash held by Treasury for government-wide operations shown in Note 2—Cash and Other Monetary 

Assets. This increase relates to the delay in raising the statutory debt limit that was ongoing as of September 30, 2021. See 

the Thrift Savings Plan section below.

Thrift Savings Plan

The TSF maintains and holds in trust the assets of the TSP. The TSP is administered by an independent government 

entity, the FRTIB, which is charged with operating the TSP prudently and solely in the interest of the participants and their 

beneficiaries. 

The TSP is a retirement savings and investment plan for federal employees and members of the uniformed services. It 

was authorized by the U.S. Congress in the Federal Employees’ Retirement System Act of 1986. The plan provides federal 

employees and members of the uniformed services with a savings and tax benefit similar to what many private sector 

employers offer their employees under 401(k) plans. This includes two fixed income funds, three stock funds and ten 

lifecycle funds. Effective June 1, 2022, Accenture Federal Services, as part of its recordkeeping services contract, provides a 

Mutual Fund Window that offers participants who meet certain eligibility criteria access to mutual funds. The plan was 

primarily designed to be a key part of the retirement package (along with a basic annuity benefit and Social Security) for 

employees who are covered by FERS. 
145 NOTES TO THE FINANCIAL STATEMENTS

As of September 30, 2022, and 2021, the TSP held $726.0 billion and $784.2 billion, respectively, in net assets, which 

included $315.4 billion and $116.1 billion, respectively, of nonmarketable Treasury securities. The TSF combines the net 

assets of the TSP and the FRTIB in its financial statements. Only the TSP net assets of the TSF financial statements are 

disclosed in this note. The most recent audited financial statements for the TSF are as of December 31, 2021, and 2020. For 

additional information about FRTIB, the TSP and the investment options of the TSP, please refer to the FRTIB website at 

https://www.frtib.gov.

When delays in raising the statutory debt limit occur, as they did during both FYs 2021 and 2022, Treasury often must 

deviate from its normal debt management operations and take a number of extraordinary measures consistent with relevant 

laws and regulations to meet the government’s obligations as they come due without exceeding the debt limit. Many 

extraordinary measures taken by Treasury during the period August 2, 2021, through December 15, 2021, resulted in federal 

debt securities not being issued to certain federal government accounts. As reported in Note 18—Other Liabilities, as a result 

of Treasury securities not being issued to the TSP’s G Fund as of September 30, 2021, Treasury reported other liabilities in 

the amount of $157.0 billion that represent uninvested principal and related interest for TSP’s G Fund that would have been 

reported as federal debt securities had there not been a delay in raising the statutory debt limit as of September 30, 2021, and 

had the securities been issued.

On October 14, 2021, P.L. 117-50 was enacted which raised the statutory debt limit by $480.0 billion, from $28,401.5

billion to $28,881.5 billion. Even with this increase, extraordinary measures continued in order for Treasury to manage below 

the debt limit. 

On December 16, 2021, P.L. 117-73 was enacted, which increased the statutory debt limit by $2.5 trillion from 

$28,881.5 billion to $31,381.5 billion. On this date, Treasury discontinued its use of extraordinary measures and resumed 

normal debt management operations. Treasury subsequently restored the uninvested principal and related interest to the 

TSP’s G Fund, resulting in an increase of federal debt securities held by the public from FY 2021 to FY 2022.

Department of Interior–Indian Trust Funds

As stated above, DOI has responsibility for the assets held in trust on behalf of American Indian Tribes and individuals. 

DOI maintains accounts for Tribal and Other Trust Funds (including the Alaska Native Escrow Fund) and IIM Trust Funds in 

accordance with the American Indian Trust Fund Management Reform Act of 1994. The fiduciary balances that have 

accumulated in these funds have resulted from land use agreements, royalties on natural resource depletion, other proceeds 

derived directly from trust resources, judgment awards, settlements of claims, and investment income. Indian trust assets, 

including Tribal and Other Trust Funds and IIM Trust Funds, are primarily managed under the delegated authority of BTFA 

and BIA. Management of Indian trust assets on behalf of the trust beneficiaries is dependent upon the processing of trustrelated transactions within certain information systems of the department, including but not limited to BTFA, BIA, ONRR, 

and other departmental bureaus and offices. BIA and other departmental bureaus and offices are responsible for managing the 

natural resources located within the boundaries of Indian reservations and trust lands, as well as the processing of data 

regarding the ownership and leasing of Indian lands. The allocation of receipts and disbursements by BTFA to trust 

beneficiaries are significantly dependent and reliant upon the receipt of timely and accurate information derived from records 

maintained by BIA, ONRR, and other departmental bureaus and offices. DOI maintains separate financial statements for 

these trust funds, which are prepared using a cash or modified cash basis of accounting, a comprehensive basis of accounting 

other than GAAP. The independent auditors’ reports on the Tribal and Other Trust Funds were qualified as it was not 

practical to extend audit procedures sufficiently to satisfy themselves as to the fairness of the trust fund balances. The IIM 

Trust Funds received an unmodified opinion from the auditors. As of September 30, 2022, and 2021, the DOI held $8.5 

billion and $6.4 billion, respectively, in net assets. For additional information related to these assets, please refer to the DOI 

website at https://www.doi.gov.

All Other Entities with Fiduciary Activities

The government is responsible for the management of other fiduciary net assets on behalf of various non-federal 

entities. The entities presented individually in the table on the previous page represent the vast majority of the government’s 

fiduciary net assets. All other component entities with fiduciary net assets are aggregated in accordance with SFFAS No. 31. 

As of September 30, 2022, and 2021, including TSP and DOI, there are a total of 21 and 20 federal entities, respectively, with 

fiduciary activities at a grand total of 68 and 67 fiduciary funds, respectively. SBA and DOD are the largest entities relating 
NOTES TO THE FINANCIAL STATEMENTS 146

to the fiduciary activities of the remaining entities within the “all other” aggregate balance. As of September 30, 2022, “all 

other” fiduciary net assets were $5.4 billion, compared to $6.0 billion as of September 30, 2021.
147 NOTES TO THE FINANCIAL STATEMENTS

Note 24. Long-Term Fiscal Projections

The SLTFP is prepared pursuant to SFFAS No. 36, Comprehensive Long-Term Projections for the U.S. Government. 

The financial statements, Note 24, and unaudited RSI provide information to aid readers of the Financial Report in assessing 

whether current policies for federal spending and taxation can be sustained and the extent to which the cost of public services 

received by current taxpayers will be shifted to future taxpayers. This assessment requires prospective information about 

receipts and spending, the resulting debt, and how these amounts relate to the size of the economy. A sustainable policy is 

defined as one where the ratio of federal debt held by the public to GDP (the debt-to-GDP ratio) is ultimately stable or 

declining. The Financial Report does not address the sustainability of state and local government fiscal policy.

The projections and analysis presented here are extrapolations based on an array of assumptions described in detail 

below. A fundamental assumption is that current federal policy will not change. This assumption is made so as to inform the 

question of whether current fiscal policy is sustainable and, if it is not sustainable, the magnitude of needed reforms to make 

fiscal policy sustainable. The projections are therefore neither forecasts nor predictions. If policy changes are implemented, 

perhaps in response to projections like those presented here, then actual financial outcomes will be different than those 

projected. The methods and assumptions underlying the projections are subject to continuing refinement.

The projections focus on future cash flows, and do not reflect either the accrual basis or the modified-cash basis of 

accounting. These cash-based projections reflect receipts or spending at the time cash is received or when a payment is made 

by the government. In contrast, accrual-based projections would reflect amounts in the time period in which income is earned 

or when an expense or obligation is incurred. The cash basis accounting underlying the long-term fiscal projections is 

consistent with methods used to prepare the SOSI and the generally cash-based federal budget. 

The SLTFP displays the PV of 75-year projections for various categories of the federal government’s receipts and noninterest spending.6 The projections for FYs 2022 and 2021 are expressed in PV dollars and as a percent of the PV of GDP7 as 

of September 30, 2022 and September 30, 2021, respectively. The PV of a future amount, for example $1.0 billion in October 

2097, is the amount of money that if invested on September 30, 2022 in an account earning the government borrowing rate 

would have a value of $1.0 billion in October 2097.

8

The PV of a receipt or spending category over 75 years is the sum of the annual PV amounts. When expressing a receipt 

or spending category over 75 years as a percent of GDP, the PV dollar amount is divided by the PV of GDP over 75 years. 

Measuring receipts and spending as a percent of GDP is a useful indicator of the economy’s capacity to sustain federal 

government programs. 

Fiscal Projections

Receipt categories in the long-term fiscal projections include individual and corporation income taxes, Social Security 

and Medicare payroll taxes, and a residual category of “other receipts.” Non-interest spending categories include 

discretionary spending that is funded through annual appropriations, such as spending for national security, and mandatory 

(entitlement) spending that is generally funded with permanent or multi-year appropriations, such as spending for Social 

Security and Medicare. This year’s long-term fiscal projections for Social Security and Medicare are based on the same 

economic and demographic assumptions that underlie the 2022 SOSI, which is as of January 1, 2022. The long-term

projections are not adjusted for the more current near-term economic information (e.g., higher inflation and lower real 

growth). Projections for the other categories of receipts and spending are consistent with the economic and demographic 

assumptions in the Trustees Reports and include updates for actual budget results for FY 2022 or budgetary estimates from 

the President’s FY 2023 Budget.9 Where possible, those budget totals are adjusted before spending is projected to remove 

outlays for programs or activities that are judged to be temporary, such as spending related to the COVID-19 pandemic and 

economic recovery. Such an adjustment is not possible for increased Medicaid outlays under the COVID-19 Public Health 

Emergency, resulting in higher projections of future spending, increasing the uncertainty surrounding the projections.

6 For the purposes of this analysis, spending is defined in terms of outlays. In the context of federal budgeting, spending can either refer to budget authority –

the authority to commit the government to make a payment; to obligations – binding agreements that will result in payments, either immediately or in the 

future; or to outlays – actual payments made. 7 GDP is a standard measure of the overall size of the economy and represents the total market value of all final goods and services produced domestically 

during a given period of time. The components of GDP are: private sector consumption and investment, government consumption and investment, and net 

exports (exports less imports). Equivalently, GDP is a measure of the gross income generated from domestic production over the same time period. 8 PVs recognize that a dollar paid or collected in the future is worth less than a dollar today because a dollar today could be invested and earn interest. To 

calculate a PV, future amounts are thus reduced using an assumed interest rate, and those reduced amounts are summed. 9 Social Security and Medicare Trustees Reports can be found at https://www.ssa.gov/OACT/TR/.
NOTES TO THE FINANCIAL STATEMENTS 148

The projections assume the continuance of current policy, which builds off current law, but can be different than current 

law in cases where lawmakers have in the past periodically changed the law in a consistent way. The specific assumptions 

that depart from current law and are used for the current policy basis of these projections are explained below.

The projections shown in the SLTFP are made over a 75-year time frame, consistent with the time frame featured in the 

Social Security and Medicare Trustees Reports. However, these projections are for fiscal years starting on October 1, whereas 

the Trustees Reports feature calendar-year projections. Using fiscal years allows the projections to start from the actual 

budget results from FYs 2022 and 2021.

This year’s estimate of the 75-year PV imbalance of receipts less non-interest spending is 4.2 percent of the current 75-

year PV of GDP, compared to 5.7 percent as was projected in last year’s Financial Report.10 The above table reports the 

effects of various factors on the updated projections.

• The largest factor affecting the projections is an adjustment to the model’s technical assumptions, which decreases 

the imbalance by 0.7 percent of the 75-year PV of GDP ($11.9 trillion). In last year’s projections, discretionary 

spending grew from the 2022 baseline estimate in the President’s 2022 Budget. As discussed below, discretionary 

spending in this year’s projections grows with GDP from actual budget results following an adjustment to remove 

outlays of supplemental funding11 provided in response to the COVID-19 pandemic. This adjustment prevents 

inflating projections with spending considered temporary.

• The second largest factor is the effect of new Social Security, Medicare, and Medicaid program-specific actuarial 

assumptions, which decrease this imbalance as a share of the 75-year PV of GDP by 0.3 percentage points ($5.0

trillion).

12

• The third largest factor affecting the projections—decreasing the imbalance as a share of the 75-year PV of GDP by 

0.2 percentage points ($4.6 trillion)—is attributable to actual budget results for FY 2022 and baseline estimates 

published in the FY 2023 President’s Budget, and changes to spending and receipts from legislation enacted toward 

10 The fiscal imbalances reported in the long-term fiscal projections do not include the initial level of publicly held debt, which was $24.3 trillion in 2022 and 

$22.3 trillion in 2021, and, therefore, they do not by themselves answer the question of how large fiscal reforms must be to make fiscal policy sustainable. 

See “Sustainability and the Fiscal Gap” for additional discussion. More information on the projections in last year’s Financial Report can be found in Note 

26 to the financial statements here: https://fiscal.treasury.gov/reports-statements/#. 11 Discretionary outlays of supplemental funding provided in response to COVID-19 are identified using Disaster Emergency Fund Code attributes in budget 

execution data for the following laws: the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020 (P.L. 116-123); Families First 

Coronavirus Response Act (P.L. 116-127); the CARES Act (P.L. 116-136); the Paycheck Protection Program and Health Care Enhancement Act (P.L. 116-

139); and the CAA (P.L. 116-260, Division M). 12 For more information on Social Security and Medicare actuarial estimates, refer to Note 25—Social Insurance.
149 NOTES TO THE FINANCIAL STATEMENTS

the end of the fiscal year.

13 This improvement in the fiscal position is primarily due to a lower 75-year PV of 

spending for mandatory programs other than Social Security, Medicare, and Medicaid. That decrease in spending is 

partially offset by a lower 75-year PV of individual income taxes receipts and other receipts (includes excise taxes, 

estate and gift taxes, customs duties, and miscellaneous receipts).

• The fourth factor was the update of economic and demographic assumptions. While the 75-year PV of receipts less 

non-interest spending deteriorated by $1.5 trillion and appears to worsen the fiscal position, the imbalance decreased 

by 0.2 percentage points as a share of the 75-year PV of GDP. The 75-year PV of GDP for this year’s projections is 

$1,872.9 trillion, greater than last year's $1,724.4 trillion. That increase in GDP exceeds the increase in the 

imbalance of receipts less non-spending, and thus improves the fiscal position as a percent of GDP. Larger GDP is 

attributable to updates that raised the level of GDP for 2022 and higher growth rates near the start of the projection 

period.

• The last factor in the table, the change in reporting period—the effect of shifting calculations from 2022 through 

2096 to 2023 through 2097—increases the imbalance of the 75-year PV of receipts less non-interest spending by 

$2.1 trillion, which has a negligible effect as a share of the 75-year PV of GDP.

The net effect of the changes in the table above, equal to the penultimate row in the SLTFP, shows that this year’s 

estimate of the overall 75-year PV of receipts less non-interest spending is negative 4.2 percent of the 75-year PV of GDP 

(negative $79.5 trillion, as compared to a GDP of $1,872.9 trillion). This imbalance can be broken down by funding source. 

Spending projections exceeded receipts by 2.7 percent of GDP (about $50.2 trillion) among programs funded by the 

government’s general revenues, and there is an imbalance of 1.6 percent of GDP (about $29.4 trillion)14 for the combination 

of Social Security (OASDI) and Medicare Part A, which under current law are funded with payroll taxes and not in any 

material respect with general revenues.15,16 By comparison, the FY 2021 projections showed that programs funded by the 

government’s general revenues had an excess of spending over receipts of 4.0 percent of GDP ($68.6 trillion) while the 

payroll tax-funded programs had an imbalance of spending over receipts of 1.7 percent of GDP ($29.0 trillion).

Sustainability and the Fiscal Gap

This report presents data, including debt, as a percent of GDP to help readers assess whether current fiscal policy is 

sustainable. The debt-to-GDP ratio was approximately 97 percent at the end of FY 2022. As discussed further in the 

unaudited RSI, the projections based on this report’s assumptions indicate that current policy is not sustainable. If current

policy is left unchanged, the projections show the debt-to-GDP ratio will be approximately 100 percent in 2025, rise to 200 

percent by 2046 and reach 566 percent in 2097. Moreover, if the trends that underlie the 75-year projections were to continue, 

the debt-to-GDP ratio would continue to rise beyond the 75-year window. 

The fiscal gap measures how much the primary surplus (receipts less non-interest spending) must increase in order for 

fiscal policy to achieve a target debt-to-GDP ratio in a particular future year. In these projections, the fiscal gap is estimated 

over a 75-year period, from 2023 to 2097, and the target debt-to-GDP ratio is equal to the ratio at the beginning of the 

projection period, in this case the estimated debt-to-GDP ratio at the end of FY 2022. The target year is the last year of the 

75-year period (2097). 

13 Legislation enacted toward the end of FY 2022 includes: An act making appropriations for Legislative Branch for the fiscal year ending September 30, 

2022, and for other purposes (P.L. 117-167); PACT Act (P.L. 117-168); and an act to provide for reconciliation pursuant to title II of S. Con.Res. 14 (P.L. 

117-169). 14 The 75-year PV imbalance for Social Security and Medicare Part A of $29.4 trillion is comprised of several line items from the SLTFP – Social Security 

outlays net of Social Security payroll taxes ($31.1 trillion) and Medicare Part A outlays net of Medicare payroll taxes ($10.7 trillion) – as well as 

subcomponents of these programs not presented separately in the statement. These subcomponents include Social Security and Medicare Part A 

administrative costs that are classified as non-defense discretionary spending ($0.7 trillion) and Social Security and Medicare Part A income other than 

payroll taxes: taxation of benefits (-$6.0 trillion), federal employer share (-$1.5 trillion), and other income (-$5.5 trillion). 15 Social Security and Medicare Part A expenditures can exceed payroll tax revenues in any given year to the extent that there are sufficient balances in the 

respective trust funds; these balances derive from past excesses of payroll tax revenues over expenditures and interest earned on those balances and represent 

the amount the General Fund owes the respective trust fund programs. When spending does exceed payroll tax revenues, as has occurred each year since 

2008 for Medicare Part A and 2010 for Social Security, the excess spending is financed first with interest due from the General Fund and secondly with a 

drawdown of the trust fund balance; in either case, the spending is ultimately supported by general revenues or borrowing. Under current law, benefits for 

Social Security and Medicare Part A can be paid only to the extent that there are sufficient balances in the respective trust funds. In order for the long-term 

fiscal projections to reflect the full size of these programs’ commitments to pay future benefits, the projections assume that all scheduled benefits will be 

financed with borrowing to the extent necessary after the trust funds are depleted. 16 The fiscal imbalances reported in the long-term fiscal projections are limited to future outlays and receipts. They do not include the initial level of 

publicly-held debt, $24.3 trillion in 2022 and $22.3 trillion in 2021, and therefore they do not by themselves answer the question of how large fiscal reforms 

must be to make fiscal policy sustainable, or how those reforms divide between reforms to Social Security and Medicare Part A and to other programs. Other 

things equal, past cash flows (primarily surpluses) for Social Security and Medicare Part A reduced federal debt at the end of 2022 by $3.0 trillion (the trust 

fund balances at that time); the contribution of other programs to federal debt at the end of 2022 was therefore $27.3 trillion. Similarly, because the $29.4

trillion imbalance between outlays and receipts over the next 75 years for Social Security and Medicare Part A does not take account of the Social Security 

and Medicare Part A trust fund balances, it overstates the magnitude of reforms necessary to make Social Security and Medicare Part A solvent over 75 

years by $3.0 trillion. The $3.0 trillion combined Social Security and Medicare Part A trust fund balance represents a claim on future general revenues.
NOTES TO THE FINANCIAL STATEMENTS 150

The 75-year fiscal gap under current policy is estimated at 4.9 percent of GDP, which is 26.0 percent of the 75-year PV

of projected receipts and 21.2 percent of the 75-year PV of non-interest spending. This estimate of the fiscal gap is 1.4

percentage points smaller than was estimated in 2021 (6.2 percent of GDP).

The projections show that projected primary deficits average 4.2 percent of GDP over the next 75 years under current

policy. If policies were put in place that would result in a zero fiscal gap, the average primary surplus over the next 75 years 

would be 0.6 percent of GDP, 4.9 percentage points higher than the projected PV of receipts less non-interest spending 

shown in the SLTFP. In these projections, closing the fiscal gap requires running a substantially positive level of primary 

surplus, rather than simply eliminating the primary deficit. The primary reason is that the projections assume future interest 

rates will exceed the growth rate of GDP. Achieving primary balance (that is, running a primary surplus of zero) implies that 

the debt held by the public grows each year by the amount of interest spending, which under these assumptions would result 

in debt growing faster than GDP.

Assumptions Used and Relationship to Other Financial Statements

A fundamental assumption underlying the projections is that current federal policy (defined below) does not change. 

The projections are therefore neither forecasts nor predictions, and do not consider large infrequent events such as natural 

disasters, military engagements, or economic crises. By definition, they do not build in future changes to policy. If policy 

changes are enacted, perhaps in response to projections like those presented here, then actual fiscal outcomes will be different 

than those projected.

Even if policy does not change, actual spending and receipts could differ materially from those projected here. Longrange projections are inherently uncertain and are necessarily based on simplifying assumptions. For example, one key 

simplifying assumption is that interest rates paid on debt held by the public remain unchanged, regardless of the amount of 

debt outstanding. To the contrary, it is likely that future interest rates would increase if the debt-to-GDP ratio rises as shown 

in these projections. To help illustrate this uncertainty, projections that assume higher and lower interest rates are presented in 

the “Alternative Scenarios” discussion in the unaudited RSI section of this Financial Report.

As is true for prior long-term fiscal projections for the Financial Report, the assumptions for GDP, interest rates, and 

other economic and demographic variables underlying this year’s projections are the same assumptions that underlie the most 

recent Social Security and Medicare Trustees Report projections, adjusted for historical revisions that occur annually. These 

assumptions differ from those in the President’s Budget because they extend for 75 years, rather than 25 years. Additionally, 

they assume extension of current policy whereas the economic assumptions in the President’s Budget assume full 

implementation of policy proposals reflected in the Budget.17 The use of discount factors consistent with the Social Security 

Trustees rate allows for consistent PV calculations over 75 years between the SLTFP and the SOSI. 

The following bullets summarize the key assumptions used for the categories of receipts and spending presented in the 

SLTFP and the disclosures:

• Social Security: Projected Social Security (OASDI) spending excludes administrative expenses, which are 

classified as discretionary spending, and is based on the projected spending in the 2022 Social Security Trustees 

Report for benefits and for the Railroad Retirement interchange. The projections of Social Security payroll taxes and 

Social Security spending are based on future spending and payroll taxes projected in the 2022 Social Security 

Trustees Report, adjusted for presentational differences and converted to a fiscal year basis. More information about 

the assumptions for Social Security cost growth can be found in Note 25 and the unaudited RSI discussion of Social 

Insurance.

• Medicare: Projected Medicare spending also excludes administrative expenses, which are classified as discretionary

spending, and is based on projected spending from the 2022 Medicare Trustees Report. The projections here make 

some adjustments to the Trustees Report projections. Medicare Part B and D premiums, as well as state 

contributions to Part D, are subtracted from gross spending in measuring Part B and Part D spending, just as they are 

subtracted from gross cost to yield net cost in the financial statements.18 Here, as in the federal budget, premiums are 

treated as “negative spending” rather than receipts since they represent payment for a service rather than payments 

obtained through the government’s sovereign power to tax. This is similar to the financial statement treatment of 

premiums as “earned” revenue as distinct from all other sources of revenue, such as taxes. The projections are based 

on Medicare spending in the Medicare Trustees Report, adjusted for presentational differences and converted to a 

fiscal year basis. Medicare Part A payroll taxes are projected similarly. More information about the assumptions for 

Medicare cost growth can be found in Note 25 and the unaudited RSI discussion of Social Insurance. As discussed 

in Note 25, there is uncertainty about whether the reductions in health care cost growth assumed in the Medicare 

17 See the FY 2023 President’s Budget, Analytical Perspectives Volume, Chapter 3 “Long-Term Budget Outlook.” 18 Medicare Part B and D premiums and state contributions to Part D are subtracted from the Part B and D spending displayed in the SLTFP. The total 75-

year PV of these subtractions is $22.3 trillion, or 1.2 percent of GDP.
151 NOTES TO THE FINANCIAL STATEMENTS

Trustees Report will be fully achieved. Note 25 illustrates this uncertainty by considering Medicare cost growth 

assumptions under varying policy assumptions. 

• Medicaid: The Medicaid spending projections start with the projections from the 2018 Medicaid Actuarial Report

prepared by CMS’s Office of the Actuary, which is the most recent report available.

19 These projections are based on 

recent trends in Medicaid spending; the demographic, economic, and health cost growth assumptions in the 2018 

Medicare Trustees Report; and projections of the effect of the PPACA on Medicaid enrollment. The projections in 

the Medicaid Actuarial Report, which end in 2027, are adjusted to accord with the actual Medicaid spending in FY

2022. Actual Medicaid spending includes temporary spending increases due to changes in enrollment and other 

temporary measures related to the pandemic.20 The amounts related to these temporary spending increases cannot be 

identified, which adds uncertainty to the projections. After 2027, the projections assume no further change in State 

Medicaid coverage under the PPACA, and the numbers of aged beneficiaries (65-plus years) and non-aged 

beneficiaries (less than 65 years) are expected to grow at the same rates as the aged and non-aged populations, 

respectively. Medicaid costs per beneficiary are assumed to grow at the same rate as Medicare benefits per 

beneficiary, as is generally consistent with the experience since 1987. Between 1987 and 2017, the average annual 

growth rates of spending per beneficiary for Medicaid and Medicare were within 0.3 percentage point of each other. 

Projections of Medicaid spending are subject to added uncertainty related to: 1) assumed reductions in health care 

cost growth discussed above in the context of Medicare; 2) the projected size of the Medicaid enrolled population, 

which depends on a variety of factors, including future state actions regarding the PPACA Medicaid expansion; and 

3) certain limitations relating to the data used to generate the projected per enrollee spending in the 2018 Medicaid 

actuarial report. 

• Other Mandatory Spending: Other mandatory spending includes federal employee retirement, veterans’ disability 

benefits, and means-tested entitlements other than Medicaid. Current mandatory spending components that are 

judged permanent under current policy are assumed to increase by the rate of growth in nominal GDP starting in 

2023, implying that such spending will remain constant as a percent of GDP.21,22 Other mandatory spending includes

changes to net outlays attributable to legislation23 enacted toward the end of the fiscal year; those changes are added 

to projections based on CBO estimates and assumed to grow with GDP. Projected spending for insurance exchange 

subsidies starting in 2023 grows with growth in the non-elderly population and with the NHE projected per enrollee 

cost growth for other private health insurance for the NHE projection period (through 2030 for the FY 2022

projections), and with growth in per enrollee health care costs as projected for the Medicare program after that 

period. As discussed in Note 25, there is uncertainty about whether the reductions in health care cost growth 

projected in the Medicare Trustees Report will be fully achieved. Projected exchange subsidy spending as a percent 

of GDP remains below the failsafe provision in the PPACA that limits the federal share of spending to 0.504 percent 

of GDP. 

• Defense and Non-defense Discretionary Spending: Discretionary spending is grown with GDP starting in 2023. 

Spending grows from a base level that excludes outlays of supplemental funding24 provided during the COVID-19 

pandemic, which are judged to be temporary.25 To illustrate sensitivity to different assumptions, PV calculations 

under alternative discretionary growth scenarios are presented in the unaudited “Alternative Scenarios” RSI section.

19 Christopher J. Truffer, Kathryn E. Rennie, Lindsey Wilson, and Eric T. Eckstein II, 2018 Actuarial Report on the Financial Outlook for Medicaid, Office 

of the Actuary, Centers for Medicare and Medicaid Services, U.S. Department of Health and Human Services. 20 The Consolidated Appropriations Act, 2023 (P.L. 117-328) established a process to unwind temporary Medicaid requirements, which would decrease 

spending relative to the projections. The act was signed into law on December 29, 2022, and is therefore not reflected in the projections shown in the SLTFP 

or this note, and the effects thereon cannot be reasonably estimated at this time.

21 Other mandatory spending in 2022 from legislation enacted in response to the COVID-19 pandemic is considered temporary and is not assumed to 

increase with nominal GDP. Such spending is identified using Disaster Emergency Fund Code attributes in budget execution data for the following: the 

Families First Coronavirus Response Act (P.L. 116-127); the CARES Act (P.L. 116-136); the Paycheck Protection Program and Health Care Enhancement 

Act (P.L. 116-139); the CAA (P.L. 116-260, Division N); and the ARP (P.L. 117-2). Spending data for COVID-19 response legislation are available on 

USAspending.gov. 22 This assumed growth rate for other mandatory programs after 2023 is slightly higher than the average growth rate in the most recent OMB and CBO 10-

year budget baselines.

23 Legislation enacted toward the end of FY 2022 includes: An act making appropriations for Legislative Branch for the fiscal year ending September 30, 

2022, and for other purposes (P.L. 117-167); PACT Act (P.L. 117-168); and an act to provide for reconciliation pursuant to title II of S. Con.Res. 14 (P.L. 

117-169). All estimated changes to mandatory outlays included in the long-term fiscal projections are reflected in the other mandatory category. 24 Discretionary outlays of supplemental funding provided in response to COVID-19 are identified using Disaster Emergency Fund Code attributes in budget 

execution data for the following laws: the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020 (P.L. 116-123); Families First 

Coronavirus Response Act (P.L. 116-127); the CARES Act (P.L. 116-136); the Paycheck Protection Program and Health Care Enhancement Act (P.L. 116-

139); and the CAA (P.L. 116-260, Division M). 25 This method reflects an update to the model’s technical assumptions. Discretionary spending in the 2021 projections grew from the 2022 baseline estimate 

in the President’s 2022 Budget.
NOTES TO THE FINANCIAL STATEMENTS 152

• Receipts (Other than Social Security and Medicare Payroll Taxes): Individual income taxes are based on the 

share of salaries and wages in the current law baseline projection in the FY 2023 President’s Budget, and the salaries 

and wages projections in the Social Security 2022 Trustees Report. That baseline accords with the tendency of 

effective tax rates to increase as growth in income per capita outpaces inflation (also known as “bracket creep”) and 

the expiration dates of individual income and estate and gift tax provisions of TCJA. Effects of recent legislation 

enacted toward the end of FY 2022 are added to projections based on CBO estimates and assumed to continue 

through the projection period. After falling to 19 percent of wages and salaries in 2024, individual income taxes 

increase gradually to 29 percent of wages and salaries in 2097 as real taxable incomes rise over time and an 

increasing share of total income is taxed in the higher tax brackets. Through the first 10 years of the projections, 

corporation tax receipts as a percent of GDP reflect the economic and budget assumptions used in developing the 

FY 2023 President’s Budget ten-year advance baseline budgetary estimates plus estimated effects of recent 

legislation. After this time, corporation tax receipts grow at the same rate as nominal GDP. Other receipts also 

reflect FY 2023 President’s Budget baseline levels as a share of GDP throughout the budget window, plus estimated 

effects of recent legislation, and grow with GDP outside of the budget window. Corporation tax receipts peak at 1.8

percent of GDP in 2024 before falling to 1.3 percent of GDP in 2032, where they stay for the remainder of the 

projection period. The ratio of other receipts, including excise taxes, estate and gift taxes, customs duties, and 

miscellaneous receipts, to GDP is estimated to be 1.3 percent in 2023, after which it gradually declines to 1.1

percent by 2032 where it remains through the projection period. To illustrate uncertainty, PV calculations under 

higher and lower receipts growth scenarios are presented in the “Alternative Scenarios” section.

• Debt and Interest Spending: Interest spending is determined by projected interest rates and the level of outstanding 

debt held by the public. The long-run interest rate assumptions accord with those in the 2022 Social Security 

Trustees Report.26 The average interest rate over this year’s projection period is 4.5 percent, up slightly from the 

2021 Financial Report’s 4.4 percent. These rates are also used to convert future cash flows to PVs as of the start of 

FY 2023. Debt at the end of each year is projected by adding that year’s deficit and other financing requirements to 

the debt at the end of the previous year.

Departures of Current Policy from Current Law 

The long-term fiscal projections are made on the basis of current policy, which in some cases is assumed to be different 

from current law. The notable differences between current policy that underlies the projections and current law are: 1) 

projected spending, receipts, and borrowing levels assume raising or suspending the current statutory limit on federal debt; 2) 

continued discretionary appropriations are assumed throughout the projection period; 3) scheduled Social Security and 

Medicare Part A benefit payments are assumed to occur beyond the projected point of trust fund depletion; and 4) many 

mandatory programs with expiration dates prior to the end of the 75-year projection period are assumed to be reauthorized. 

As is true in the Medicare Trustees Report and in the SOSI, the projections incorporate programmatic changes already 

scheduled in law, such as the PPACA productivity adjustment for non-physician Medicare services and the expiration of 

certain physician bonus payments in 2025.

26 As indicated in the more detailed discussion of Social Insurance in Note 25 to the financial statements.
153 NOTES TO THE FINANCIAL STATEMENTS

Note 25. Social Insurance

SOSI presents the projected actuarial PV of the estimated future revenue and estimated future expenditures of the Social 

Security, Medicare, Railroad Retirement, and Black Lung social insurance programs which are administered by the SSA, 

HHS, RRB, and DOL, respectively. Social Security and Medicare projections are based on current law and the Social 

Security and Medicare trustees intermediate set of assumptions, except that the projections assume full Social Security and 

Medicare Part A benefits are paid after fund depletion contrary to current law.

Contributions consist of: payroll, income, and excise taxes, premiums from, and state transfers on behalf of,

participants in Medicare, and miscellaneous reimbursements from the General Fund. Generally, beneficiaries finance the 

remainder of Parts B and D costs via monthly premiums to these programs. With the introduction of Part D drug coverage, 

Medicaid is no longer the primary payer of drug costs for full-benefit dually eligible beneficiaries of Medicare and Medicaid. 

For those beneficiaries, states are subject to a contribution requirement and must pay a portion of their estimated foregone 

drug costs into the Part D account (referred to as state transfers). By accounting convention, the General Fund transfers are 

eliminated in the consolidation of the SOSI at the government-wide level. These General Fund transfers that are used to 

finance Medicare Parts B and D are also shown as eliminations on these calculations. For the FYs 2022 and 2021, the 

amounts eliminated totaled $47.5 trillion and $43.2 trillion, respectively. 

The SOSI also includes projected general revenues that, under current law, would be used to finance the remainder of

the expenditures in excess of revenues for Medicare Parts B and D that is reported in the SOSI. Expenditures include benefit

payments scheduled under current law and administrative expenses. Current Social Security and Medicare Part A law

provides for full benefit payments only to the extent that there are sufficient balances in the trust funds. Social insurance

programs utilize “trust funds” to account for dedicated collections held for later use to accomplish the program’s purpose.

Expenditures reflect full benefit payments even after the point at which trust fund asset reserves are projected to be depleted.

Refer to the unaudited RSI–Social Insurance section and SSA’s, HHS’s, RRB’s, and DOL’s financial statements for

additional information on Social Security, Medicare, Railroad Retirement, and Black Lung program financing.

The estimates in the consolidated SOSI of the open group measures are for persons who are participants or eventually 

will participate in the programs as contributors (workers) or beneficiaries (retired workers, survivors, dependents, and 

disabled) during the 75-year projection period. The closed group comprises only current participants which are those who

have attained age 15 at the start of the projection period. Actuarial PV of estimated future income (excluding interest) and 

estimated future expenditures for the Social Security and Medicare social insurance programs are presented for three different 

groups of participants: 1) current participants who have not yet attained eligibility age; 2) current participants who have 

attained eligibility age; and 3) new entrants, who are expected to become participants in the future. Current participants in the 

Social Security and Medicare programs are the closed group of taxpayers and/or beneficiaries who are aged at least 15 years 

at the start of the projection period. Future participants for Social Security and Medicare include those born during the 

projection period and individuals below age 15 as of January 1 of the valuation year. Railroad Retirement’s future 

participants are the projected new entrants as of October 1 of the valuation year. 

The trust fund balances as of the valuation date for the respective programs, including interest earned, are shown in the 

table below.

27 The PV of estimated future expenditures in excess of estimated future revenue are calculated by subtracting the 

actuarial PV of future scheduled contributions as well as dedicated tax income by and on behalf of current and future 

participants from the actuarial PV of the future scheduled benefit payments to them or on their behalf. To determine a 

program’s funding shortfall over any given period of time, the starting trust fund balance is subtracted from the PV of 

expenditures in excess of revenues over the period. The portion of each trust fund not required to pay benefits and

administrative costs is invested, on a daily basis, in interest-bearing obligations of the U.S. government. The Social Security Act

authorizes the issuance by Treasury of special nonmarketable, intra-governmental debt obligations for purchase exclusively by

the trust funds. Although the special issues cannot be bought or sold in the open market, they are redeemable at any time at face

value and thus bear no risk of fluctuation in principal value due to changes in market yield rates. Interest on the bonds is credited

to the trust funds and becomes an asset to the funds and a liability to the General Fund. These Treasury securities and related

interest are eliminated in consolidation at the government-wide level. For additional information, see Note 22—Funds from

Dedicated Collections.

27 Trust fund balances for the Railroad Retirement and Black Lung programs are not included, as these balances are less than $50.0 billion.
NOTES TO THE FINANCIAL STATEMENTS 154

Social Insurance Programs Trust Fund Balances1

(In trillions of dollars) 2022 2021 2020 2019 2018

Social Security ........................................ 2.9 2.9 2.9 2.9 2.9

Medicare................................................. 0.4 0.3 0.3 0.3 0.3

1 As of the valuation date of the respective programs.

Medicare – Illustrative Alternative Scenario

The financial projections for the Medicare program reflect substantial, but very uncertain, cost savings deriving from 

specific provisions of the PPACA and the MACRA that lowered increases in Medicare payment rates to most categories of 

health care providers. Certain features of current law may result in some challenges for the Medicare program including 

physician payments, payment rate updates for most non-physician categories, and productivity adjustments. Payment rate 

updates for most non-physician categories of Medicare providers are reduced by the growth in economy-wide private 

nonfarm business total factor productivity although these health providers have historically achieved lower levels of 

productivity growth. Should payment rates prove to be inadequate for any service, beneficiaries’ access to and the quality of 

Medicare benefits would deteriorate over time, or future legislation would need to be enacted that would likely increase 

program costs beyond those projected under current law. Please refer to the unaudited RSI—Social Insurance and HHS 

financial statements for additional information.

To help illustrate and quantify the potential magnitude of the cost understatement, the Trustees asked the Office of the

Actuary at CMS to prepare the following illustrative Medicare Trust Fund projections under a hypothetical alternative. This

scenario illustrates the impact that would occur if the payment updates that are affected by the productivity adjustments were

to gradually transition from current law to the payment updates assumed for private health plans, the physician updates

transition to the Medicare Economic Index, and the 5.0 percent bonuses paid to qualified physicians in advance APM did not

expire. The extent to which actual future Part A and Part B costs exceed the projected amounts due to changes to the

productivity adjustments and physician updates depends on what specific changes might be legislated and whether Congress

would pass further provisions to help offset such costs. This alternative was developed for illustrative purposes only and the

calculations have not been audited.
155 NOTES TO THE FINANCIAL STATEMENTS

Medicare Present Values (Unaudited)

2022 Consolidated Illustrative

SOSI Alternative

(In trillions of dollars) Current Law Scenario1, 2

Income:

 Part A ........................................................................ 30.2 30.2

 Part B3 ....................................................................... 17.1 19.3

 Part D 4 ....................................................................... 3.7 3.7

 Total income............................................................ 51.0 53.2

Expenditures: 

 Part A ........................................................................ 35.2 41.6

 Part B ........................................................................ 56.6 63.7

 Part D ........................................................................ 11.7 11.7

 Total expenditures ................................................... 103.5 117.0

Income less expenditures:

 Part A ........................................................................ (5.0) (11.4)

 Part B ........................................................................ (39.5) (44.4)

 Part D ........................................................................ (8.0) (8.0)

 Excess of expenditures over income (52.5) (63.8)

1 These amounts are not presented in the current fiscal year Trustees Report.

2 A set of illustrative alternative Medicare projections has been prepared under a hypothetical modification to current law. No 

endorsement of the illustrative alternative by the Trustees, CMS, or the Office of the Actuary should be inferred.

3 Excludes $39.5 trillion and $44.4 trillion of general revenue contributions from the 2022 Consolidated SOSI Current Law projection and

the Illustrative Alternative Scenario's projection, respectively; i.e., to reflect Part B income on a consolidated government-wide basis.

4 Excludes $8.0 trillion of general revenue contributions from both the 2022 Consolidated SOSI Current Law projection and the Illustrative

Alternative projection; i.e., to reflect Part D income on a consolidated government-wide basis.
NOTES TO THE FINANCIAL STATEMENTS 156

Demographic and Economic Assumptions

Social Security and Medicare – Demographic and Economic Assumptions and Summary Measures

Demographic Assumptions

2022 2030 2040 2050 2060 2070 2080 2090 210013

Total Fertility Rate1 ................................ 1.7 1.9 2.0 2.0 2.0 2.0 2.0 2.0 2.0

Age-Sex Adjusted Death Rate2 ............... 824.8 738.4 679.8 627.2 580.6 539.3 502.6 469.9 440.6

Net Annual Immigration3......................... 1,440 1,341 1,288 1,256 1,240 1,228 1,221 1,217 1,215

Period Life Expectancy at Birth - Male4 .... 75.7 77.1 78.2 79.2 80.2 81.2 82.0 82.9 83.7

Period Life Expectancy at Birth -

Female4 ................................................ 80.9 82.1 83.0 83.9 84.7 85.4 86.2 86.8 87.5

Economic Assumptions (percent change)

2022 2030 2040 2050 2060 2070 2080 2090 210013

Real Wage Differential5 .......................... 2.0 1.3 1.2 1.1 1.2 1.2 1.1 1.1 1.2

Wages6 ................................................. 6.5 3.7 3.6 3.5 3.6 3.6 3.5 3.5 3.6

CPI7 ...................................................... 4.5 2.4 2.4 2.4 2.4 2.4 2.4 2.4 2.4

Real GDP8............................................. 3.9 2.0 1.9 2.0 2.0 1.9 2.0 2.1 2.0

Total Employment9................................. 3.1 0.4 0.3 0.4 0.4 0.3 0.4 0.5 0.4

Avg. Annual Interest Rate (percent)10 ...... 1.8 4.6 4.7 4.7 4.7 4.7 4.7 4.7 4.7

Real Interest Rate (percent)11 ................. (3.0) 2.1 2.3 2.3 2.3 2.3 2.3 2.3 -

Per Beneficiary Cost - HI12 ...................... 6.7 14 3.7 4.2 3.4 3.4 3.4 3.5 3.5 -

Per Beneficiary Cost - SMI Part B12 ......... 6.8 14 5.3 4.7 3.8 3.8 3.6 3.7 3.7 -

Per Beneficiary Cost - SMI Part D12 ......... (0.2) 15 4.3 4.2 4.3 4.2 4.0 4.1 4.2 -

1 Average number of children per woman.

2 The age-sex-adjusted death rate per 100,000 that would occur in the enumerated population as of April 1, 2010, if that population were to

experience the death rates by age and sex observed in, or assumed for, the selected year.

3 Includes legal immigration, net of emigration, as well as other, non-legal, immigration per thousand of persons. 

4 Summary measure of average number of years expected prior to death for a person born on January 1 in that year, using the mortality

rates for that year over the course of his or her remaining life. (Social Security)

5 Difference between percentage increases in wages and the CPI.

6 Average annual wage in covered employment.

7 CPI represents a measure of the average change in prices over time in a fixed group of goods and services.

8 Total dollar value of all goods and services produced in the U.S., adjusted to remove the impact of assumed inflation growth.

9 Summary measure of total U.S. military and civilian employment. (Social Security)

10 The average of the nominal interest rates, compounded semi-annually, for special public-debt obligations issuable monthly.

11 Average rate of interest earned on new trust fund securities, above and beyond rate of inflation. (Medicare)

12 These changes to per beneficiary cost over the 75-year period reflect the overall impact of more detailed assumptions that are made

for each of the different services provided by the Medicare program. These assumptions include changes in the payment rates,

utilization, and intensity of each type of services. (Medicare)

13 The valuation period used for the 2022 Statement of Social Insurance extends to 2096. (Social Security) Medicare did not report

assumptions for 2100. 

14 Reflects the assumed return of healthcare services that were reduced or deferred in 2020 due to the COVID-19 pandemic. 

15 Part D cost growth is projected to be negative in 2022 mainly due to slower growth in overall drug prices and higher assumed direct

and indirect remuneration. 
157 NOTES TO THE FINANCIAL STATEMENTS

The Boards of Trustees28 of the Social Security and Medicare Trust Funds provide in their annual reports to Congress

short-range (10-year) and long-range (75-year) actuarial estimates of each trust fund. Significant uncertainty surrounds the

estimates, especially for a period as long as 75 years. To illustrate the range of uncertainty, the Trustees use three alternative

scenarios (low-cost, intermediate, and high-cost) that use specific assumptions. These assumptions include fertility rates,

rates of change in mortality, LPR and other than LPR immigration levels, emigration levels, changes in real GDP, changes in

the CPI, changes in average real wages, unemployment rates, trust fund real yield rates, and disability incidence and recovery

rates. The assumptions used for the most recent set of projections shown above in the Social Security and Medicare

demographic and economic assumption table are generally referred to as the “intermediate assumptions,” and reflect the

Trustees reasonable estimate of expected future experience. For additional information on Social Security and Medicare

demographic and economic assumptions, refer to SSA’s and HHS’s financial statements.

The RRB’s estimated future revenues and expenditures reflected in the SOSI are based on various economic, employment,

and other actuarial assumptions, and assume that the program will continue as presently constructed. For further details on

actuarial assumptions related to the program and how these assumptions affect amounts presented on the SOSI and SCSIA,

consult the Technical Supplement to the 28th Actuarial Valuation of the Assets and Liabilities Under the Railroad Retirement

Acts as of December 31, 2019, the 2022 Annual Report of the Railroad Retirement System required by Section 502 of the

Railroad Retirement Solvency Act of 1983 (P.L. 98-76), and RRB’s financial statements.

The BLDBP significant assumptions used in the projections are the coal excise tax revenue estimates, the tax rate 

structure, the number of beneficiaries, life expectancy, federal civilian pay raises, medical cost inflation, and the interest rates 

used to discount future cash flows.

Statement of Changes in Social Insurance Amounts

The SCSIA reconciles the change (between the current valuation and the prior valuation) in the PV of estimated future 

revenue less estimated future expenditures for current and future participants (the open group measure) over the next 75 years 

(except Black Lung which has a rolling 25-year projection period through September 30, 2047). The reconciliation identifies 

several components of the changes that are significant and provides reasons for the changes. The following disclosures relate 

to the SCSIA including the reasons for the components of the changes in the open group measure during the reporting period 

from the end of the previous reporting period for the government’s social insurance programs. 

All estimates relating to the Social Security and Medicare Programs in the SCSIA represent values that are incremental 

to the prior change. In general, an increase in the PV of net cash flows represents a positive change (improving financing), 

while a decrease in the PV of net cash flows represents a negative change (worsening financing). For additional information 

regarding the estimates used to prepare the SCSIA, see SSA’s, HHS’S, RRB’s, and DOL’s financial statements.

Assumptions Used for the Components of the Changes

The PV included in the SCSIA are for the current and prior years and are based on various economic as well as 

demographic assumptions used for the intermediate assumptions in the Social Security and Medicare Trustees Report for

these years. The Social Security and Medicare – Demographic and Economic Assumptions table summarizes these 

assumptions for the current year. This year’s SOSI projections for Social Security and Medicare, which are as of January 1, 

2022, are based on the same demographic and economic assumptions that underlie the 2022 Social Security and Medicare 

Trustees Report. The 2022 SOSI projections are not adjusted for the more current near-term economic information (e.g., 

higher inflation and lower real growth). 

PV as of January 1, 2021 and January 1, 2020 are calculated using interest rates from the intermediate assumption of the 

2021 and 2020 Trustees Reports, respectively. All other PV in this part of the SCSIA are calculated as a PV as of January 1, 

2022 and January 1, 2021 respectively.

For the period beginning on January 1, 2021 to the period beginning on January 1, 2022 (current year) and period 

beginning on January 1, 2020 to the period beginning on January 1, 2021 (prior year) estimates of the PV of Social Security 

and Medicare changes in social insurance amounts due to changing the valuation period, projection base, demographic data 

and assumptions, methods, and law are presented using the interest rates under the intermediate assumption of the 2021 and 

2020 Trustees Report respectively. Since interest rates are an economic estimate and all estimates in the table are incremental 

to the prior change, the estimates of the PV of changes in economic and health care assumptions and all other PV in this part 

28 The boards are composed of six members. Four members serve by virtue of their positions in the federal government: the Secretary of the Treasury, who is

the Managing Trustee; the Secretary of Labor; the Secretary of HHS; and the Commissioner of Social Security. The President appoints and the Senate

confirms the other two members to serve as public representatives. These two positions are currently vacant.
NOTES TO THE FINANCIAL STATEMENTS 158

of the SCSIA are calculated using the interest rates under the intermediate assumptions of the 2022 and 2021 Trustees

Reports, respectively.

Changes in Valuation Period

From the period beginning on January 1, 2021 to the period beginning on January 1, 2022

The effect on the 75-year PV of changing the valuation period from the prior valuation period (2021-2095) to the 

current valuation period (2022-2096) is measured by using the assumptions for the prior valuation and extending them to 

cover the current valuation. Changing the valuation period removes a small negative estimated net cash flow for 2021, 

replaces it with a much larger negative estimated net cash flow for 2096, and measures the PV as of January 1, 2022, one 

year later. As a result, the PV of the estimated future net cash flows decreased by $0.7 trillion and $1.0 trillion for Social 

Security and Medicare, respectively.

From the period beginning on January 1, 2020 to the period beginning on January 1, 2021

The effect on the 75-year PV of changing the valuation period from the prior valuation period (2020-2094) to the 

current valuation period (2021-2095) is measured by using assumptions for the prior valuation and extending them to cover 

the current valuation. Changing the valuation period removes small negative estimated net cash flow for 2020, replaces it 

with a much larger negative net cash flow for 2095, and measures the PV as of January 1, 2021, one year later. As a result, 

the PV of estimated future net cash flows decreased by $0.7 trillion and decreased by $1.5 trillion for Social Security and 

Medicare, respectively.

Changes in Demographic Data, Assumptions, and Methods

From the period beginning on January 1, 2021 to the period beginning on January 1, 2022

For the current valuation (beginning on January 1, 2022), the ultimate demographic assumptions are the same as those 

for the prior valuation. However, the starting demographic values and the way these values transition to the ultimate 

assumptions were changed.

• Final birth rate data for calendar year 2020 indicated slightly lower birth rates than were assumed in the prior 

valuation.

• Near-term lawful permanent resident immigration data were updated since the prior valuation; near-term lawful 

permanent resident immigration assumptions were also updated to better reflect the expected effects of the recovery 

from the pandemic.

• Historical population data and other-than-lawful permanent resident immigration data were updated since the prior 

valuation.

There was one notable change in demographic methodology. An improvement was made to put more emphasis on 

recent mortality data by increasing the weights for the most recent years in the regressions used to calculate the starting rates 

of improvement and starting death rates. This change decreased the PV of the estimated future net cash flows.

Overall, changes in demographic data, assumptions, and methods caused the PV of the estimated future net cash flows 

to decrease by $0.3 trillion and $0.5 trillion for Social Security and Medicare, respectively. 

From the period beginning on January 1, 2020 to the period beginning on January 1, 2021

For the current valuation (beginning on January 1, 2021), there were two changes to the ultimate demographic 

assumptions and an associated change in methodology. 

• The ultimate total fertility rate was increased in conjunction with switching from a period-based model to a cohortbased model for birth-rates. 

• An additional cause of death category was added, by separating dementia out from the all-other-causes category, and 

ultimate mortality improvement rates were updated for cardiovascular disease.

In addition to this ultimate demographic assumption change, the starting demographic values and the way those values 

transition to the ultimate assumptions were changed.

• Birth rate data through the third quarter of 2020 indicated somewhat lower birth rates. 

• Death rates increased significantly for 2020 and 2021 to account for elevated deaths during the COVID-19 

pandemic.

The PVs of estimated income and expenditures are lower for Part A, Part B, and Part D. Overall, changes to these 

assumptions caused the PV of the estimated future net cash flows to increase by $0.2 trillion and $1.3 trillion for Social 

Security and Medicare, respectively.
159 NOTES TO THE FINANCIAL STATEMENTS

Changes in Economic Data, Assumptions, and Methods (Social Security Only)

From the period beginning on January 1, 2021 to the period beginning on January 1, 2022

For the current valuation (beginning on January 1, 2022), the ultimate economic assumptions are the same as those for 

the prior valuation. However, the starting economic values and the way these values transition to the ultimate assumptions 

were changed. The most significant are identified below.

• Near-term real interest rates are assumed to be slightly higher on average than those for the prior valuation.

• Economic starting values and near-term growth assumptions were updated to reflect the stronger-than-expected 

recovery from the pandemic-induced recession. 

• The level of potential GDP for years 2021 and later is assumed to be about 1.1 percent higher than the level in the 

prior valuation, reflecting the strong recovery and the expectation of a permanent level shift in total economy labor 

productivity.

The changes to near-term real interest rates and the resulting effects on PV calculations decreased the PV of the 

estimated future net cash flows, while changes to starting values and near-term economic growth assumptions and the level 

shift in the assumptions for potential GDP increased the PV of the estimated future net cash flows.

There were no additional notable changes in economic methodology. Overall, changes to economic data, assumptions, and 

methods caused the PV of the estimated future net cash flows to decrease by $0.2 trillion for Social Security.

From the period beginning on January 1, 2020 to the period beginning on January 1, 2021

For the current valuation (beginning on January 1, 2021), there were two changes to the ultimate economic assumptions 

compared to prior valuation (beginning on January 1, 2020). 

• The ultimate average real wage differential increased. Additionally, the real wage differential assumptions for the 

first 10 years of the projection period were also increased. 

• The ultimate age-sex-adjusted unemployment rate was reduced.

The higher real wage differential and the combined changes to the unemployment assumption and the labor force 

methodology both increased the PV of estimated future net cash flows. 

In addition to these changes in ultimate economic assumptions, the starting economic values and the way these values 

transition to the ultimate assumptions were changed.

• Near-term interest rates were adjusted downward significantly. Real interest rates are now assumed to be negative 

for calendar years 2021 through 2024, with a gradual rise to the ultimate real interest rate. 

• The level of potential GDP is assumed to be roughly 1.0 percent lower than the level beginning with the second 

quarter 2020. 

The changes to near-term interest rate and the starting values and near-term economic growth assumptions decrease the 

PV of the estimated future net cash flows. 

There were no additional notable changes in economic methodology. Overall, changes to economic data, assumptions, 

and methods decreased the PV of the estimated future net cash flows by $1.2 trillion for Social Security.

Changes in Law or Policy

From the period beginning on January 1, 2021 to the period beginning on January 1, 2022

The monetary effect of the changes in law or policy on the PV of estimated future net cash flows of the OASDI and 

Medicare programs was not significant at the consolidated level. Please refer to SSA’s and HHS’s financial statements for 

additional information related to the impact of the changes in law or policy on the PV of estimated future net cash flows of 

the OASDI and Medicare programs.

From the period beginning on January 1, 2020 to the period beginning on January 1, 2021

For Social Security, between prior valuation and the current valuation one change in policy is expected to have 

significant effect on the long-range cost. 

• The Deferred Action for Childhood Arrivals policy extends indefinitely the ability of those qualifying to remain in 

the country and work lawfully. A memorandum was issued on January 20, 2021.

Most of the provisions enacted as part of Medicare legislation since the prior valuation date have little or no impact on 

the program. The following provisions did have financial impact. 

• The CARES Act (P.L. 116-136, enacted on March 27, 2020) included provisions that affect the HI and SMI 

programs. 

• The Continuing Appropriations Act, 2021, and Other Extensions Act, (P.L. 116-159, enacted on October 1, 2020) 

included provisions that affect the HI and SMI programs.
NOTES TO THE FINANCIAL STATEMENTS 160

• The CAA, 2021 (P.L. 116-260, enacted on December 27, 2020) included provisions that affect the HI and SMI 

Programs. 

• An Act to Prevent Across-the-Board Direct Spending Cuts and for Other Purposes (P.L. 117-7, enacted on April 14, 

2021) included provisions that affect the HI and SMI Programs. 

Overall, the changes to these laws, regulations, and policies caused the PV of the estimated future net cash flows to 

decrease by $0.1 trillion for Social Security and Medicare. 

Changes in Methodology and Programmatic Data (Social Security Only)

From the period beginning on January 1, 2021 to the period beginning on January 1, 2022

Several methodological improvements and updates of program-specific data are included in the current valuation 

(beginning on January 1, 2022). The most significant are identified below.

• The ultimate disability incidence rate was lowered from 5.0 per thousand exposed in the prior valuation to 4.8 in the 

current valuation.

• The current valuation is updated using a 10.0 percent sample of all newly entitled worker beneficiaries in 2018 to 

project average benefit levels of retired-worker and disabled-worker beneficiaries.

• Recent data and estimates provided by the Office of Tax Analysis at Treasury indicate higher near-term and ultimate 

levels of revenue from taxation of OASDI benefits than projected in the prior valuation.

• Updates were made to the post-entitlement benefit adjustment factors. These factors are used to account for changes 

in benefit levels, primarily due to differential mortality by benefit level and earnings after benefit entitlement.

Overall, changes to programmatic data and methods caused the PV of the estimated future net cash flows to increase by 

$0.6 trillion for Social Security. 

From the period beginning on January 1, 2020 to the period beginning on January 1, 2021

Several methodological improvements and updates of program-specific data are included in the current valuation 

(beginning on January 1, 2021) compared to the prior valuation (beginning on January 1, 2020). The most significant are 

identified below. 

• The current valuation is updated using a 10.0 percent sample of all newly entitled worker beneficiaries in 2017 to 

project average benefit levels of retired-workers and disabled-workers beneficiaries. 

• Recent data and estimates indicated lower near-term and ultimate levels of revenue from taxation of Social Security 

benefits than projected. 

• The methodology for projecting retroactive benefits for retired workers was improved to better capture the different 

rules for workers who become newly entitled prior to normal retirement age versus those who become entitled at or 

after normal retirement age.

Overall, changes to these assumptions and methods caused the PV of the estimated future net cash flows to decrease by 

$1.2 trillion for Social Security.

Changes in Economic and Health Care Assumptions (Medicare Only)

From the period beginning on January 1, 2021 to the period beginning on January 1, 2022

The economic assumptions used in the Medicare projections are the same as those for the Social Security programs 

shown above while the health care assumptions are specific to the Medicare projections. The following health care 

assumptions were changed in the current valuation. 

• High projected spending growth for outpatient hospital services and for physician-administered drugs.

• Slower price growth and higher direct and indirect remuneration.

Overall, these changes decreased the PV of estimated future net cash flow by $5.3 trillion for Medicare.

From the period beginning on January 1, 2020 to the period beginning on January 1, 2021

The economic assumptions used in the Medicare projections are the same as those used for the Social Security program 

shown above while the health care assumptions are specific to the Medicare projections. The following health care 

assumptions were changed in the current valuation. 

• Slightly faster projected spending growth for outpatient services and for physician-administered drugs. 

• Higher direct and indirect remuneration and shifts to Medicare Advantage offset higher gross drug prices.

Overall, these changes decreased the PV of the estimated future net cash flows by $3.8 trillion for Medicare.

Change in Projection Base (Medicare Only)
161 NOTES TO THE FINANCIAL STATEMENTS

From the period beginning on January 1, 2021 to period beginning on January 1, 2022

Actual income and expenditures in 2021 were different from what was anticipated when the 2021 Trustees Report 

projections were prepared. For Part A and Part B income and expenditures in 2021 were lower than estimated based on 

experience. Part D income and expenditures were higher than estimated based on actual experience. Actual experience of the 

Medicare Trust Funds between January 1, 2021 and January 1, 2022 is incorporated in the current valuation and is more than 

projected in the prior valuation. Overall, the net impact of Part A, B, and D projection base change is an increase in the 

estimated future net cash flows by $2.5 trillion for Medicare.

From the period beginning on January 1, 2020 to the period beginning on January 1, 2021

Actual income and expenditures in 2020 were different than what was anticipated when the 2020 Trustees Report 

projections were prepared. For Part A and Part B income and expenditures in 2020 were lower than anticipated based on 

actual experience, mainly due to the impact of the COVID-19 pandemic. Part D was largely unaffected by the pandemic and 

total income and expenditures were only slightly higher than the estimated based on actual experience. Actual experience of 

the Medicare Trust Funds between January 1, 2020 and January 1, 2021 is incorporated in the current valuation and is more 

than projected in the prior valuation. Overall, the net impact of the Part A, B, and D projection base change is an increase in 

the estimated future net cash flows by $1.6 trillion for Medicare.
NOTES TO THE FINANCIAL STATEMENTS 162

Note 26. Stewardship Property, Plant, and Equipment

Stewardship PP&E consists of items whose physical properties resemble those of general PP&E traditionally capitalized 

in financial statements. However, stewardship PP&E differs from general PP&E in that their values may be indeterminable or 

may have little meaning (e.g., museum collections, monuments, assets acquired in the formation of the nation) or that 

allocating the cost of such assets to accounting periods that benefit from the ownership of such assets is meaningless. 

Stewardship PP&E includes stewardship land (land not acquired for or in connection with general PP&E) and heritage assets 

(e.g., federal monuments and memorials and historically or culturally significant property).

Stewardship land is land and land rights owned by the federal government intended to be held indefinitely. The majority 

of stewardship land was acquired by the government during the first century of the nation’s existence. Examples of 

stewardship land include land reserved, managed, planned, used, or acquired for forests and parks, recreation and 

conservation, wildlife and grazing, historical landmarks, multiple purpose ancillary revenue generating activities, and/or

buffer zones. “Land” is defined as the solid part of the surface of the earth. Excluded from the definition are the natural 

resources (that is, depletable resources, such as mineral deposits and petroleum; renewable resources, such as timber; and the 

outer-continental shelf resources) related to land.

Additional information concerning stewardship land, such as entity stewardship policies, physical units by major 

categories, and the condition of stewardship land, can be obtained from the financial statements of DHS, DOC, DOD, DOE,

DOI, DOT, EPA, HHS, TVA, USDA, and VA. Please refer to Land and Permanent Land Rights located in the unaudited RSI 

for information concerning the federal estimated acreage.

Heritage assets are government-owned assets that have one or more of the following characteristics: historical or natural 

significance; cultural, educational, or artistic importance; or significant architectural characteristics. Entities provide

protection and preservation services to maintain all heritage assets in the best possible condition as part of America’s history. 

Examples of heritage assets include the Declaration of Independence, the U.S. Constitution, and the Bill of Rights preserved 

by the National Archives. Heritage assets are classified into two categories: collection and non-collection. Collection type 

heritage assets include objects gathered and maintained for exhibition, for example, museum collections, art collections, and

library collections. Non-collection type heritage assets include parks, memorials, monuments, and buildings. In some cases, 

heritage assets may serve two purposes: a heritage function and general government operations. In those cases, the heritage 

asset should be considered a multi-use heritage asset if the predominant use of the asset is in general government operations 

(e.g., the main Treasury building used as an office building). The cost of acquisition, improvement, reconstruction, or 

renovation of multi-use heritage assets should be capitalized as general PP&E and depreciated over its estimated useful life. 

Additional information concerning other significant heritage assets, multi-use heritage assets, component federal entity 

stewardship policies for heritage assets, physical units by major categories of heritage assets, and the condition of heritage 

assets, can be obtained from the financial statements of DHS, DOC, DOD, DOE, DOI, DOT, GSA, NASA, State, Treasury, 

USDA, and VA. Please refer to DM&R located in the unaudited RSI for information concerning estimated maintenance and 

repair costs.
163 NOTES TO THE FINANCIAL STATEMENTS

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.
NOTES TO THE FINANCIAL STATEMENTS 164

• 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.

At the beginning of FY 2022, the target range for the federal funds rate was at zero to 0.25 percent and the FOMC

continued to increase its holdings in Treasury securities by at least $80.0 billion per month and agency mortgage-backed 

securities by at least $40.0 billion per month. However, inflation rose to its highest level in more than 40 years. 

Consumer price inflation, as measured by the 12-month change in the price index for PCE, rose from 5.8 percent in 

December 2021 to 6.3 percent in April 2022, well above the FOMC’s objective of 2.0 percent. This increase was driven 

by an acceleration of retail food and energy prices, reflecting further increases in commodity prices due to the unrest in 

Ukraine.

In response to sustained inflationary pressures and a strong labor market, the FOMC began tightening monetary 

policy. In December 2021, the FOMC decided to begin reducing the monthly pace of its net asset purchases by $20.0 

billion per month for Treasury securities and $10.0 billion per month for agency MBS, but kept the target range for the 

federal funds rate at near zero. In March 2022, the FOMC raised the target range for the federal funds rate to 0.25 

percent to 0.50 percent and ceased net asset purchases. In May 2022, the FOMC decided to begin reducing its securities 

holdings starting on June 1, 2022 and raised the target range for the federal funds to 0.75 percent to 1.0 percent. This 

was followed by an increase of the target range for federal funds to 1.25 percent to 1.75 percent in June 2022 along with 

continued reduction of its securities holding. In July 2022, the FOMC raised the target range for the federal funds to 

2.25 percent to 2.50 percent. In September 2022, the FOMC decided to raise the target range for the federal funds rate to 

3.0 percent to 3.25 percent. Further, the FOMC continued to raise the target range for federal funds after September 30, 

2022 to 4.25 percent to 4.50 percent by December 2022. In addition, the FOMC continued reducing its holdings of 

Treasury securities and agency debt and agency mortgage-backed securities, as described in the Plans for Reducing the 

Size of the Federal Reserve’s balance sheet that were issued in May.

• 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, 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. As of September 30, 2021, Treasury securities 

held by the FRB totaled $3,803.7 billion, which excludes $1,628.0 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, 2022, and 2021, Treasury incurred interest cost 

relating to the FRB’s Treasury holdings amounting to $114.7 billion and $87.1 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, 2022, and 2021, was $617.0 billion and $198.4 billion, respectively, and are included in 

cash and other monetary assets. In addition, restricted cash as of September 30, 2022, and 2021, was $46.8 billion and 

$46.0 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, 2022, and 2021, 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.
165 NOTES TO THE FINANCIAL STATEMENTS

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.

• 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 $106.7 billion and $100.1 billion for fiscal years ended September 30, 2022, and 

2021, 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. As of 

September 30, 2022, and 2021, accounts receivable on FRB’s residual earnings are $7.0 million and $267.0 million, 

respectively (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 
NOTES TO THE FINANCIAL STATEMENTS 166

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.

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 government’s annual budget and the DOT financial statements. 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. For the fiscal year ended

September 30, 2021, the net cost amount related to grants was $3.2 billion, and total budgetary outlays were $4.7 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/fy22-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 two pools of resources that can be used in the event 

of a crisis that requires lending beyond the level available from quota resources: (i) the NAB and (ii) bilateral borrowing 

arrangements. 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, 2022, and 2021, was approximately $106.0 billion and approximately $116.7 billion, respectively. 
167 NOTES TO THE FINANCIAL STATEMENTS

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.

The U.S. reserve position was approximately $31.3 billion as of September 30, 2022, and approximately $32.7 billion as of 

September 30, 2021, 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, 2022, and 2021, was SDR 56.4 billion respectively, which is equivalent to $72.2 billion and

$79.5 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, 2022, and 2021, loans outstanding to the IMF from the government under the 

NAB stood at $0.5 billion and $0.9 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, 2022, and 2021, the government's total undrawn financial commitment to the IMF was $146.4

billion and $162.6 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, 2022, and 2021, amounted to 

$153.6 billion and $163.9 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, 2022, and 2021, amounted to $147.0 billion and $161.8 

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 
NOTES TO THE FINANCIAL STATEMENTS 168

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

for 25 years.

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 

$2,228.6 million at September 30, 2022 and $3,418.8 million at September 30, 2021, 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 $29.1 million in FY 2022 and $47.0 million in FY 2021 for the agreements, which 

are included in Earned Revenue on the Statements of Net Cost.
169 NOTES TO THE FINANCIAL STATEMENTS

Note 28. Public-Private Partnerships

The government enters into various collaborative relationships with private sector entities in which the goals, structures, 

governance, roles and responsibilities are mutually determined to produce a risk-sharing arrangement. These relationships are 

referred to as P3s, in accordance with SFFAS No. 49, Public-Private Partnerships: Disclosure Requirements. While many of 

the government’s relationships are classified as and may be referred to as a P3, only those meeting the disclosure 

requirements outlined in SFFAS No. 49 are disclosed. 

The National Energy Conservation Policy Act, as amended, authorizes federal entities to enter into ESPC contracts for 

the purpose of achieving energy savings and other related benefits. In consultations with the entity, the contractor designs and 

constructs a project that meets the entity’s needs and arranges the necessary funding. The contractor guarantees that the 

improvements will generate energy cost savings sufficient to pay for the project over the term of the contract. The cost of the 

ESPC project must be covered by the energy, water and related cost savings generated at the project site. GSA and DOE have 

entered into contracts with the private sector that meet the criteria for P3s. These contracts allow federal entities to produce 

energy savings and facility improvements with no up-front capital costs or special appropriations from Congress. Future 

aggregate payments to be made by GSA and DOE are $1.4 billion and $1 billion, respectively, over the course of the 

agreements. After an ESPC contract ends, all additional cost savings accrue to the entities.

In addition to the energy contracts, DOC has entered into a P3 contract on another matter. Congress has tasked DOC’s

FirstNet with the responsibility to ensure the deployment and operation of a nationwide interoperable broadband network to 

meet the communication needs of public safety. This network must be designed to be reliable, functional, safe, and secure, 

and to provide optimal levels of operational capability at all times. The Nationwide Public Safety Broadband Network is 

being built out, deployed, operated, and maintained under a 25-year contract awarded by FirstNet to AT&T in March 2017. 

The service will cover all 50 U.S. states, five territories, and D.C., including rural communities and tribal nations. Under the 

terms of the contract, total receipts for DOC over the life of the contract are $18.0 billion based on annual payments AT&T is 

required to make. Payments received from AT&T and that are retained by FirstNet are required to be only used for 

constructing, maintaining, operating or improving the Nationwide Public Safety Broadband Network. Additionally, DOC is

required to make payments to AT&T for success-based payment milestones under firm-fixed price buildout and continuing

enhancement Task Orders. The total paid in FY 2022 was $1.1 billion.

DOD identified MHPI agreements as P3s requiring disclosure. The MHPI agreements are with private sector entities

established as LLCs or LPs. These MHPI project LLC and LP entities with Private Partners serve as the project’s managing 

members and have direct managerial control allowing DOD to work with the private sector to build, renovate, and sustain 

military housing by obtaining private capital to leverage government dollars. By engaging MHPI agreements, DOD benefits 

through use of private industry expertise and tools, improving the condition of military housing more expediently and 

efficiently than the traditional military construction process would allow. Private Partners serve as the majority managing 

member ensuring performance objectives are met over the expected life of the agreement. Military departments generally 

serve as the minority member and enter a long-term ground lease (generally 50 years), and convey the associated real 

property assets (buildings, structures, facilities, and utilities) to the MHPI project LLC or LP. The contractual terms and 

termination clauses vary by agreement. The DOD’s involvement in the operations and management of the MHPI LLC or LP 

is governed by evaluating the percentage of ownership interest and analyzing ownership control indicators, which determine 

the level of influence over the partnership. The DOD provides funding to the LLC or LP through:

• Equity Investments - Provision of cash and transfer of real property ownership (land, housing units, and other 

structures) to a project and, in return, the DOD receives a portion of that project’s profits and losses. If the 

investment is sold, the DOD receives compensation.

• Government Direct Loans - Provision of cash to a project with the expectation of future payment;

• Government Loan Guarantees - Agreement to pay a percentage of the outstanding balance on a non-government 

loan in the event of nonpayment by the project;

• Differential Lease Payments - Provision of monthly payments to a project above the Basic Allowance for Housing 

paid by the military personnel.

The military departments are assessing their MHPI agreements in an effort to provide actual and estimated amounts paid 

and received for future periods and continues to assess agreements using criteria from SFFAS No. 49 to determine if there are 

additional P3s to disclose. DOD will report these agreements as soon as these assessments are complete.

The consolidated amounts the government received and paid in FY 2022 were $0.3 billion and $1.4 billion, 

respectively. The estimated amounts to be received and paid in the aggregate over the expected life of the P3s is $22.3 billion 

and $4.4 billion, respectively. As main contributors of P3 activity please refer to the financial statements of DOC, DOD, 

DOE, and GSA for additional information.
NOTES TO THE FINANCIAL STATEMENTS 170

Note 29. COVID-19 Activity

On March 11, 2020, a novel strain of the Coronavirus, also known as COVID-19, was declared a pandemic by the 

WHO. As a result, a national emergency was declared in the U.S. concerning the COVID-19 outbreak on March 13, 2020. 

The global spread of COVID-19, which commenced in early spring of 2020 and continued throughout FY 2022 resulted in a

severe global health and economic crisis. In FY 2021 Congress passed the CAA, which was signed into law on December 27, 

2020, and the ARP on March 11, 2021. Both acts, along with several bills, provided additional funding to help supplement 

the COVID-19 relief efforts that started in FY 2020 including the CARES Act on March 27, 2020. The CARES Act was 

subsequently modified in legislation in April, June, and July of 2020 to add funding and adjust programs for continued 

pandemic response.

The COVID-19 related legislation provided supplemental appropriations totaling $4.5 trillion for federal entities to 

respond to COVID-19 since the beginning of the pandemic. The $4.5 trillion includes enacted rescissions, returns of unused 

permanent and indefinite authority, and obligation adjustments. Significant impacts of these programs on the government’s 

FYs 2022 and 2021 Balance Sheet and financial results are discussed below. For additional information regarding COVID-19 

relief efforts please refer to Treasury, HHS, Education, DOT, USDA, SBA, DHS, and DOL’s financial statements.

The government invested in SPVs for the purpose of enhancing the liquidity of the U.S. financial system. As of

September 30, 2022, and 2021, Treasury had $17.8 billion and $25.6 billion, respectively, of equity investments in SPVs

established through the FRBNY and FRBB. Treasury’s funds remaining in the SPVs funded under the CARES Act cannot be

used for further lending, asset purchase, or extensions of credit. The FYs 2022 and 2021, FV net gain of $0.7 billion and $3.8

billion, respectively, from these investments is included in Treasury’s net cost. See also Note 7—Investments.

Treasury’s COVID-19 appropriations provided funding for a variety of emergency relief programs. The state, local,

territorial, and tribal programs provided payments to cover eligible costs incurred in response to the pandemic through

several funds including: 1) SLFRF; 2) ERA; and 3) HAF. During FY 2022 and FY 2021, Treasury disbursed an aggregate of

$125.8 billion and $277.7 billion, respectively, in appropriated and obligated funds to states, local, territorial, and tribal

governments related to the programs discussed above to cover eligible costs that recipients incurred in response to the

pandemic. Of the aggregate amounts disbursed, Treasury initially recorded $115.8 billion and $276.7 billion as an advance

during FY 2022 and FY 2021, respectively, within the line “Advances and Prepayments”, and recorded the remaining $10.0

billion and $1.0 billion disbursed in FY 2022 and FY 2021, respectively, as costs. Treasury subsequently recognized $146.6

billion and $89.5 billion of this advance as an expense for the fiscal years ended September 30, 2022 and 2021, respectively,

to reflect the estimated amount of eligible costs incurred during those years by recipients. Two other Treasury COVID-19

programs include the American Industry and Financial Markets programs provided financial assistance payments to

passenger air carriers and contractors to provide payroll support to aviation workers during the pandemic and the CDFI

programs provided immediate assistance and quick deployment of capital to specialized organizations that provide services to

low-income communities and those that lack access to financing. Treasury’s net costs related to COVID-19 activity totaled

$164.4 billion and $110.2 billion in FY 2022 and FY 2021, respectively. The increase in Treasury’s COVID-19 net costs is

mainly due to the expense recognition of support to state, local, territorial, and tribal programs. See also Note 9—Advances

and Prepayments and Note 20—Commitments.

Treasury’s taxpayer support programs provided a refundable tax credit (recovery rebate), referred to as an EIP and other

taxpayer support programs to eligible recipients in every state and territory and at foreign addresses. Refunds of federal taxes

and other payments and individual and other tax credits in FY 2022 and FY 2021 (related to the CARES Act, CAA, and

ARP) totaled $13.1 billion and $569.5 billion, respectively, to eligible taxpayers. It should be noted that these credits are

included in net costs in addition to the $164.4 billion and $110.2 billion, respectively noted in the previous paragraph. The 

financial statements impact of these and other programs can be found within Note 19—Collections and Refunds of Federal 

Revenue and Note 27—Disclosure Entities and Related Parties.

HHS’s COVID-19 appropriations provided support testing, contact tracing, containment, mitigation to monitor and

suppress the spread of COVID-19, as well as support COVID-19 vaccination programs and addressing disparities in

obtaining quality healthcare. Certain programs also assisted households with paying for drinking water and wastewater

services, as well as provide direct payment to participating eligible pharmacies and healthcare providers for up to eight free

over-the-counter COVID-19 tests. Funding provided broad support including payments to assist eligible health care providers

for health care related expenses or lost revenues attributed to the COVID-19 pandemic. In addition, HHS’s advances and

prepayments primarily represent payments made for the COVID-19 Accelerate and Advance Payments program which was

recorded as an advance on the Balance Sheet of $1.3 billion and $67.0 billion as of September 30, 2022, and 2021. The

financial statements impact of the advance can be found within Note 9—Advances and Prepayments. HHS’ net cost for

operations other than CMS increased by $41.0 billion during FY 2022 primarily due to the Public Health and Social Services
171 NOTES TO THE FINANCIAL STATEMENTS

Emergency Fund. HHS’s outlays related to COVID-19 activity totaled $130.1 billion and $89.7 billion in FY 2022 and FY

2021, respectively.

Education’s COVID-19 appropriations provided funding for a variety of programs administered primarily through grant

programs. The COVID-19 relief legislation and administrative actions also provided support for student loan borrowers

primarily by temporarily suspending nearly all federal loan payments. These COVID-19 loan modifications are a component

of subsidy expense, which reduced the overall loan receivable balances. The significant financial statements impact of these 

programs can be found within Note 4—Loans Receivable, Net and Loan Guarantee Liabilities. Education’s outlays related to 

COVID-19 activity totaled $80.2 billion and $48.7 billion in FY 2022 and FY 2021, respectively. The increase in Education’s 

COVID-19 costs is due to loan modifications, reestimates (subsidy expense), and grant expenses.

Several DOT programs received COVID-19 appropriations in support of maintaining and continuing the operations and 

business needs of various transportation systems in response to COVID-19. These programs include the Federal Transit

Administration’s Transit Infrastructure Grants, the Federal Aviation Administration’s Grants-In-Aid for Airports and Airport

Relief Grants, FHWA’s Highway Infrastructure programs, Federal Railroad Administration’s Grants to Amtrak, and Office

of the Secretary’s Aviation Manufacturing Jobs Protection program. DOT’s net costs related to COVID-19 activity totaled

$32.1 billion and $23.5 billion in FY 2022 and FY 2021, respectively.

USDA’s COVID-19 appropriations provided funding and extended various programs and activities. It extended

modifications to federal nutrition assistance programs for children, pregnant women, and older adults. As well as provided

funding for programs to support agricultural producers, growers, and processors. USDA’s net costs related to COVID-19

activity totaled $27.2 billion and $77.0 billion in FY 2022 and FY 2021, respectively. The decrease in USDA’s COVID-19

costs is due to less spending in pandemic related programs.

SBA provided emergency and immediate economic relief and assistance through disaster response programs, funded by

COVID-19 appropriations. These programs include: 1) PPP; 2) CARES Act Debt Relief Program; 3) EIDL Grants; 4) the

Business Loan Fee Waiver and Debt Relief program; 5) the Targeted EIDL and Supplemental EIDL Advance programs; 6)

the Restaurant Revitalization program; 7) the Shuttered Venue Operators Grants program; and 8) the Community Navigator

Pilot program. SBA’s outlays related to COVID-19 activity totaled $23.7 billion and $345.9 billion in FY 2022 and FY 2021,

respectively. The decrease in SBA’s COVID-19 outlays is due to COVID-19 program applications closing, programs

expiring, and program applications no longer being accepted.

DHS’s COVID-19 appropriations supported DHS components by providing funding to several programs which

included the expansion of medical support, provided COVID-19 test kits, developed assessments for risk management

efforts, research and development, disaster relief, and the analysis for national threats and hazards. DHS’s outlays related to

COVID-19 activity totaled $20.3 billion and $33.9 billion in FY 2022 and FY 2021, respectively.

DOL’s COVID-19 appropriations provided funding for several unemployment programs. DOL has spent approximately

$10.7 billion and $332.9 billion, respectively, on COVID-19 relief in FY 2022 and FY 2021. The decrease in DOL’s

COVID-19 related spending is due to the decreases in unemployment benefits. DOL’s net costs for COVID-19 programs for

the year ended September 30, 2022, and 2021, was $9.7 billion and $313.0 billion, comprised mostly of unemployment

benefits expenses for programs implemented in FY 2020 and ending in FY 2021.
NOTES TO THE FINANCIAL STATEMENTS 172

Note 30. Subsequent Events

Status of Student Loan Debt Relief

On November 10, 2022, a U.S. District Court in Texas issued an order in Brown v. Education to vacate the broad-based 

student loan debt relief program that was adopted by the U.S. Secretary of Education and announced on August 24, 2022. On 

November 14, 2022, the U.S. Court of Appeals for the Eighth Circuit stayed the implementation of the same program 

pending an appeal by six states in Nebraska v. Biden, a case challenging the relief, in which Education had prevailed in U.S. 

District Court for the Eastern District of Missouri. Education subsequently requested a stay of both decisions, and ultimately 

sought stays as well as a hearing on the merits from the Supreme Court of the U.S. Those stay requests were denied, but the 

Supreme Court granted certiorari and has agreed to hear both cases and to address questions of both standing and Education’s 

authority to provide the debt relief. Please refer to Note 4—Loans Receivable, Net and Loan Guarantee Liabilities for 

additional information.

Statutory Debt Limit

On December 16, 2021, P.L. 117-73 was enacted, increasing the statutory debt limit to $31,381.5 billion. As of 

September 30, 2022, debt subject to the limit was $30,869.3 billion. On January 19, 2023, the debt limit was reached and 

Treasury began taking extraordinary measures. When delays in raising the debt limit occur, Treasury often must deviate from 

its normal cash and debt management operations and take a number of what it calls “extraordinary measures” to meet the 

government's obligations as they come due without exceeding the debt limit. Please refer to Note 12—Federal Debt and 

Interest Payable for additional information.
173 NOTES TO THE FINANCIAL STATEMENTS

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REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) 174

United States Government

Required Supplementary Information 

(Unaudited) For the Fiscal Years Ended

September 30, 2022, and 2021

The Sustainability of Fiscal Policy

One of the important purposes of the Financial Report is to help citizens and policymakers assess whether current fiscal 

policy is sustainable and, if it is not, the urgency and magnitude of policy reforms necessary to make fiscal policy 

sustainable. A sustainable policy is defined as one where the ratio of debt held by the public to GDP (the debt-to-GDP ratio) 

is ultimately stable or declining. 

As discussed below, the projections based on this report’s assumptions indicate that current policy is not sustainable. 

The debt-to-GDP ratio was approximately 97 percent at the end of 2022, and was approximately 100 percent at the end of 

2021. If current policy is left unchanged, the projections show the debt-to-GDP ratio will be approximately 100 percent in 

2025, exceed 200 percent by 2046 and reach 566 percent in 2097. For comparison, under the 2021 projections, the debt-toGDP ratio exceeded 200 percent in 2041 and reached 701 percent in 2096.

These conclusions are rooted in the projected trends in receipts, spending, and deficits in the context of current law and 

policy, although, as described in the following pages, there is considerable uncertainty surrounding these projections. The 

projections are on the basis of policies currently in place and are neither forecasts nor predictions. Changes in policy –

including investments in infrastructure efforts to mitigate the impact of climate change and enhancements to caregiving 

services to build a more resilient and sustainable economy – could have a significant effect on eventual fiscal outcomes.
175 REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

Current Policy Projections for Primary Deficits

A key determinant of growth in the debt-to-GDP ratio and hence fiscal sustainability is the ratio of the primary deficit to

GDP. The primary deficit is the difference between non-interest spending and receipts, and the primary deficit-to-GDP ratio 

is the primary deficit expressed as a percent of GDP. As shown in Chart 1, the primary deficit-to-GDP ratio spiked during 

2009 through 2012 due to the 2008-09 financial crisis and the ensuing severe recession, and rose again in 2020 due to the 

COVID-19 pandemic. Increased spending and temporary tax reductions enacted to stimulate the economy and support 

recovery contributed to elevated primary deficits, resulting in sharp increases in the ratio of debt to GDP. The debt-to-GDP 

ratio rose from 39 percent at the end of 2008 to 70 percent at the end of 2012 and then from 79 percent at the end of 2019 to 

100 percent at the end of 2020.

The primary deficit-to-GDP ratio in 2022 was 3.6 percent, decreasing by 7.1 percentage points from 2021 as spending 

attributable to the pandemic winds down. The primary deficit-to-GDP ratio is projected to fall to 2.2 percent in 2023, based 

on the technical assumptions1 in this report, and then average 3.0 percent through 2029. After 2029, however, increased 

spending for Social Security and health programs due in part to the continued retirement of the baby boom generation is 

projected to result in increasing primary deficits that peak at 4.8 percent of GDP in 2044. Primary deficits as a share of GDP 

gradually decrease beyond that point as the aging of the population continues at a slower pace, and reaches 3.5 percent in 

2097, the last year of the projection period. 

Trends in the primary deficit are heavily influenced by tax receipts. The receipt share of GDP was markedly depressed 

in 2009 through 2012 because of the recession and tax reductions enacted as part of the ARRA and the Tax Relief, 

Unemployment Insurance Reauthorization, and Job Creation Act of 2010. The share subsequently increased to 18.0 percent 

of GDP by 2015 before falling below the 30-year average of 17.2 percent in 2018, after enactment of the TCJA. As a share of 

GDP, receipts were 19.6 percent of GDP in 2022, 1.5 percentage points above 2021. Receipts are projected to fall to 17.7 

percent of GDP in 2023 and then further decrease to 17.1 percent of GDP in 2025. Receipts are projected to be 18.1 percent 

of GDP in 2032 when corporation income tax and other receipts stabilize as a share of GDP. After 2032, receipts grow 

slightly more rapidly than GDP over the projection period as increases in real (i.e., inflation-adjusted) incomes cause more 

taxpayers and a larger share of income to fall into the higher individual income tax brackets. Other possible paths for the 

receipts-to-GDP ratio and the implications for projected debt held by the public are analyzed in the “Alternative Scenarios” 

section. 

On the spending side, the non-interest spending share of GDP was 23.2 percent in 2022, 5.8 percentage points below the 

share of GDP in 2021, which was 28.9 percent. The ratio of non-interest spending to GDP is projected to fall to 19.9 percent 

in 2023 and then rise gradually, reaching 23.8 percent of GDP in 2078. The ratio of non-interest spending to GDP then 

declines to 23.3 percent in 2097, the end of the projection period. Beginning in 2025, these increases are principally due to 

faster growth in Social Security, Medicare, and Medicaid spending (see Chart 1). The aging of the baby boom generation,

among other factors, is projected to increase the Social Security and Medicare spending shares of GDP by about 0.9 

percentage points and 1.5 percentage points, respectively, from 2023 to 2040. After 2040, the Social Security and Medicare 

spending shares of GDP continue to increase in most years, albeit at a slower rate, due to projected increases in health care 

costs and population aging, before declining toward the end of the projection period.

Current Policy Projections for Debt and Interest Payments

The primary deficit projections in Chart 1, along with projections for interest rates and GDP, determine the projections 

for the debt-to-GDP ratio shown in Chart 2. That ratio was approximately 97 percent at the end of FY 2022, and under 

current policy and based on this report’s assumptions is projected to reach 566 percent in 2097. The continuous rise of the 

debt-to-GDP ratio indicates that current policy under this report’s assumptions is unsustainable.

1 Projections for discretionary and mandatory programs—other than Social Security, Medicare, and Medicaid—exclude COVID-19-related spending judged 

to be temporary. The primary deficit-to-GDP ratio would likely be higher in the near-term if projections assumed outlays of remaining COVID-19 relief 

funding. See Note 24 for more detail on technical assumptions for the long-term fiscal projections.
REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) 176

As a general approximation, the change in debt held by the public from one year to the next is the budget deficit, the 

difference between total receipts and total spending.2 Total spending is non-interest spending plus interest spending. Chart 3 

shows that the rapid rise in total spending and the unified deficit (total receipts less total spending) is almost entirely due to 

projected net interest, which results from the growing debt. As a percent of GDP, interest spending was 1.9 percent in 2022, 

and under current policy is projected to reach 5.1 percent in 2034, 15.2 percent in 2066, and 25.6 percent in 2097. 

2 The change in debt each year is also affected by certain transactions not included in the budget deficit, such as changes in Treasury’s cash balances and the 

non-budgetary activity of federal credit financing accounts. These transactions are assumed to hold constant at about 0.3 percent of GDP each year, with the 

same effect on debt as if the primary deficit was higher by that amount.
177 REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

Another way of viewing the change in the financial outlook in this year’s report relative to previous years’ reports is in 

terms of the projected debt-to-GDP ratio in 2095, the last year of the 75-year projection period used in the FY 2020 report. 

This ratio is projected based on this report’s assumptions to reach 552 percent in the FY 2022 projections, which compares 

with 691 percent projected in the FY 2021 projections and 623 percent projected in the FY 2020 projections.3

The Cost of Delay in Closing the 75-Year Fiscal Gap

The longer policy action to close the fiscal gap4 is delayed, the larger the post-reform primary surpluses must be to 

achieve the target debt-to-GDP ratio at the end of the 75-year period. This can be illustrated by varying the years in which 

reforms closing the fiscal gap are initiated while holding the target ratio of debt to GDP in 2097 equal to the 2022 ratio. Three 

timeframes for reforms are considered, each one beginning in a different year, and each one increasing the primary surplus 

relative to current policy by a fixed percent of GDP starting in the reform year. The analysis shows that the longer policy 

action is delayed, the larger the post-reform primary surplus must be to bring the debt-to-GDP ratio in 2097 equal to its level 

in 2022. Future generations are burdened by delays in policy changes because delay necessitates higher primary surpluses 

during their lifetimes, and those higher primary surpluses must be achieved through some combination of lower spending and 

higher revenue.

As previously shown in Chart 1, under current policy, primary deficits occur throughout the projection period. Table 1 

shows primary surplus changes necessary to make the debt-to-GDP ratio in 2097 equal to its level in 2022 under each of the 

three timeframes. If reform begins in 2023, then it is sufficient to raise the primary surplus share of GDP by 4.9 percentage 

3 For additional information on changes from the 2020 projections, see the unaudited RSI in the 2021 Financial Report. 4 The fiscal gap reflects how much the primary surplus (receipts less non-interest spending) must increase to maintain the debt-to-GDP ratio at the 2022

level. See Note 24 for a more complete discussion of the fiscal gap.
REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) 178

points in every year between 2023 and 2097 in order for the debt-to-GDP ratio in 2097 to equal its level in 2022. This policy 

raises the average 2023-2097 primary surplus-to-GDP ratio from -4.2 percent to +0.6 percent.

In contrast to a reform that begins immediately, if reform begins in 2033 or 2043, then the primary surpluses must be 

raised by 5.7 percent and 7.0 percent of GDP, respectively, in order for the debt-to-GDP ratio in 2097 to equal its level at the 

end of 2022. The difference between the primary surplus increase necessary if reform begins in 2033 or 2043 and the increase 

necessary if reform begins in 2023, an additional 0.9 and 2.1 percentage points, respectively, is a measure of the additional 

burden policy delay would impose on future generations. The costs of delay are due to the additional debt that accumulates 

between the end of 2022 and the year reform is initiated, in comparison to the scenario in which reform begins immediately. 

Alternative Scenarios 

The long-run projections are highly uncertain. This section illustrates this inherent uncertainty by presenting alternative 

scenarios for the growth rate of health care costs, interest rates, discretionary spending, and receipts. (Not considered here are 

the effects of alternative assumptions for long-run trends in birth rates, mortality, and immigration, among other factors.)

The population is aging rapidly and will continue to do so over the next several decades, which puts pressure on 

programs such as Social Security, Medicare, and Medicaid. A shift in projected fertility, mortality, or immigration rates could 

have important effects on the long-run projections. Higher-than-projected immigration, fertility, or mortality rates would 

improve the long-term fiscal outlook. Conversely, lower-than-projected immigration, fertility, or mortality rates would result 

in deterioration in the long-term fiscal outlook. 

Effect of Changes in Health Care Cost Growth

One of the most important assumptions underlying the projections is the future growth of health care costs. These future 

growth rates – both for health care costs in the economy generally and for federal health care programs such as Medicare, 

Medicaid, and PPACA exchange subsidies – are highly uncertain. In particular, PPACA in 2010 and MACRA in 2015 

lowered payment rates for Medicare hospital and physician payments. The Medicare spending projections in the long-term 

fiscal projections are based on the projections in the 2022 Medicare Trustees Report, which assume the PPACA and MACRA 

payment rates will be effective in producing a substantial slowdown in Medicare input cost growth. As discussed in Note 

25—Social Insurance, the Medicare projections are subject to much uncertainty about the ultimate effects of these provisions 

to reduce health care cost growth. For the long-term fiscal projections, that uncertainty also affects the projections for 

Medicaid and exchange subsidies, because the cost per beneficiary in these programs grows at the same reduced rate as 

Medicare cost growth per beneficiary. 

As an illustration of the dramatic effect of variations in health care cost growth rates, Table 2 shows the effect on the 

size of reforms necessary to close the fiscal gap under per capita health care cost growth rates that are one percentage point 

higher or two percentage points higher than the growth rates in the base projection, as well as the effect of delaying closure of 

the fiscal gap.5 As indicated earlier, if reform is initiated in 2023, eliminating the fiscal gap requires that the 2023-2097

5 The base case health cost growth rates are derived from the projections in the 2022 Medicare Trustees Report. These projections are summarized and 

discussed in Note 25 and the “Medicare Projections” section of the unaudited RSI for the SOSI.
179 REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

primary surplus increase by an average of 4.9 percent of GDP in the base case. However, that figure increases to 8.9 percent 

of GDP if per capita health cost growth is assumed to be 1.0 percentage point higher, and 15.9 percent of GDP if per capita 

health cost growth is 2.0 percentage points higher. The cost of delaying reform is also increased if health care cost growth is 

higher because debt accumulates more rapidly during the period of inaction. For example, the lower part of Table 2 shows 

that delaying reform initiation from 2023 to 2033 requires that 2033-2097 primary surpluses be higher by an average of 0.9

percent of GDP in the base case, 1.6 percent of GDP if per capita health cost growth is 1.0 percentage point higher, and 2.8

percent of GDP if per capita health cost growth is 2.0 percentage points higher. The dramatic deterioration of the long-run 

fiscal outlook caused by higher health care cost growth shows the critical importance of managing health care cost growth.

Effects of Changes in Interest Rates

A higher debt-to-GDP ratio is likely to increase the interest rate on government debt, making it costlier for the 

government to service its debt than if the debt-to-GDP ratio were lower. Table 3 displays the effect of several alternative 

scenarios using different nominal (and real) interest rates than assumed in the base case on the size of reforms to close the

fiscal gap as well as the effect of delaying closure of the fiscal gap. If reform is initiated in 2023, eliminating the fiscal gap 

requires that the 2023-2097 primary surplus increase by an average of 4.9 percent of GDP in the base case, 6.4 percent of 

GDP if the interest rate is 2.0 percentage points higher in every year, and 5.6 percent of GDP if the interest rate is 1.0 

percentage point higher in every year. The required increase in the 2023-2097 primary surplus decreases to an average of 4.0

percent of GDP if the interest rate is 1.0 percentage point lower in every year and 3.2 percent of GDP if the interest rate is 2.0 

percentage points lower in every year. The cost of delaying reform is also increased if interest rates are higher, due to the fact 

that interest paid on debt accumulates more rapidly during the period of inaction. For example, the lower part of Table 3 

shows that delaying reform initiation from 2023 to 2033 requires that 2033-2097 primary surpluses be higher by an average 

of 0.9 percent of GDP in the base case, 2.1 percent of GDP if the interest rate is 2.0 percentage points higher in every year, 

and 1.4 percent of GDP if the interest rate is 1.0 percentage point higher in every year. The required increase in the 2033-

2097 primary surplus is higher by an average of 0.5 percent of GDP if the interest rate is 1.0 percentage point lower in every 

year and 0.3 percent of GDP if the interest rate is 2.0 percentage points lower in every year.
REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) 180

Effects of Changes in Discretionary Spending Growth

The rate of growth of discretionary spending has a large impact on long-term fiscal sustainability. The current base 

projection for discretionary spending assumes that spending grows with nominal GDP starting in 2023. Under the base 

projection, discretionary spending is approximately 6.6 percent of GDP each year over the projection period. The 

implications of an alternative scenario are shown in Table 4. In the alternative scenario, discretionary spending grows with 

inflation and population beginning in 2023 so as to hold discretionary spending constant on a real per capita basis. (This 

growth rate assumption is slower than growth with GDP but is still higher than the standard 10-year budget baseline 

assumption, which assumes that discretionary spending grows with inflation but not with population.) As shown in Table 4, if 

discretionary spending grows with nominal GDP, eliminating the fiscal gap requires that the 2023-2097 primary surplus 

increase by an average of 4.9 percent of GDP. If discretionary spending grows with inflation and population, the fiscal gap is 

2.3 percent of GDP. The cost of delaying reform is greater when discretionary spending levels are higher. Initiating reforms 

in 2033 requires that the primary surplus increase by an average of 0.9 percent of GDP per year in the base case and by an 

average of 0.4 percent of GDP if discretionary levels grow with inflation and population. If delayed until 2043, the primary 

surplus must increase by an average of 2.1 percent of GDP in the base case and by an average of 1.0 percent of GDP when

spending grows with inflation and population.
181 REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

Effects of Changes in Individual Income Receipt Growth

The growth rate of receipts, specifically individual income taxes, is another key determinant of long-term sustainability. 

The base projections assume growth in individual income taxes over time to account primarily for the slow shift of 

individuals into higher tax brackets due to real wage growth (“real bracket creep”). This assumption approximates the longterm historical growth in individual income taxes relative to wages and salaries and is consistent with current policy without 

change, as future legislation would be required to prevent real bracket creep. As an illustration of the effect of variations in 

individual income tax growth, Table 5 shows the effect on the size of reforms necessary to close the fiscal gap and the effect 

of delaying closure of the fiscal gap if long-term receipt growth as a share of wages and salaries is 0.1 percentage point 

higher than the base case, as well as 0.1 percentage point lower than the base case. If reform is initiated in 2023, eliminating 

the fiscal gap requires that the 2023-2097 primary surplus increase by an average of 4.9 percent of GDP in the base case, 3.8

percent of GDP if receipt growth is 0.1 percentage point higher, and 6.0 percent of GDP if receipt growth is 0.1 percentage 

point lower. The cost of delaying reform is also affected if receipt growth assumptions change, much as was the case in the 

previous alternative scenarios. 
REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) 182

Fiscal Projections in Context

In this report, a sustainable fiscal policy is defined as one where the federal debt-to-GDP ratio is stable or declining over 

the projection period. However, this definition does not indicate what a sustainable debt-to-GDP ratio might be. Any 

particular debt ratio is not the ultimate goal of fiscal policy. Rather, the goals of fiscal policy are many. They include 

financing public goods, such as infrastructure and government services; promoting a strong and growing economy; and 

managing the debt so that it is not a burden on future generations. These goals are interrelated, and readers should consider 

how policies intended to affect one might depend on or affect another. 

This report shows that current policy under this report’s assumptions is not sustainable. In evaluating policies that could 

make policy sustainable, note that debt may play roles in both facilitating and hindering a healthy economy. For example, 

government deficit spending supports demand and allows the economy to emerge from recessions more quickly. Debt may 

also be a cost-effective means of financing capital investment that promotes future economic growth, which may in turn 

make future debt levels more manageable. However, economic theory also suggests that high levels of debt may contribute to 

higher interest rates, leading to lower private investment and a smaller capital stock that the economy can use to grow. 

Unfortunately, it is unclear what debt-to-GDP ratio would be sufficiently high to produce these negative outcomes, or 

whether the key concern is the level of debt per se, or a trend that shows debt increasing over time. 

While several empirical studies have attempted to discern a definite relationship between debt and economic growth 

from the past experience of countries, the evidence is mixed. One study suggested that debt-to-GDP ratios in excess of 90 

percent had significant negative consequences for real GDP growth across advanced countries.

6 Real GDP growth is 

generally lower by about 1 percent when the countries’ debt-to-GDP ratios are above 90 percent relative to the times when 

6 Reinhart, Carmen M., Vincent R. Reinhart and Kenneth S. Rogoff. 2012. “Public Debt Overhangs: Advanced-Economy Episodes Since 1800.” Journal of

Economic Perspectives, 26(3):69.86.
183 REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

they are below 90 percent.7 However, after removing sample countries with very high indebtedness – those with debt-to-GDP 

ratios of more than 120 percent – and very low indebtedness – those with debt-to-GDP ratios of less than 30 percent – the 

negative relationship between growth and debt is difficult to determine. Another study reports that differences in average 

GDP growth in countries with debt-to-GDP ratios between 30-60 percent, 60-90 percent, and 90-120 percent cannot be 

statistically distinguished.8 Some countries with high debt-to-GDP ratios have been observed to experience lower-thanaverage growth, while other countries with similarly high debt ratios have continued to enjoy robust growth. Analogously, 

low debt-to-GDP ratios are no guarantee of strong economic growth. Moreover, the direction of causality is unclear. High 

debt may undermine growth through increased interest rates and lower business confidence, or low growth may contribute to

high debt by depressing tax revenues and increasing deficit spending on social safety net programs.

Nevertheless, to put the current and projected debt-to-GDP ratios in context, it is instructive to examine how the U.S. 

experience compares with that of other countries. The U.S. government’s debt as a percent of GDP is relatively large 

compared with central government debt of other countries, but far from the largest among developed countries. Based on 

historical data as reported by the IMF for 29 advanced economies, the debt-to-GDP ratio in 2019 ranged from 5.9 percent of 

GDP to 194.6 percent of GDP. 9 The U.S. is not included in this set of statistics, which underscores the difficulty in 

calculating debt ratios under consistent definitions, but the 2022 debt-to-GDP ratio for the U.S. government was 

approximately 97 percent. Despite using consistent definitions where available, these debt measures are not strictly 

comparable due to differences in the share of government debt that is debt of the central government, how government 

responsibilities are shared between central and local governments, how current policies compare with the past policies that 

determine the current level of debt, and how robustly each economy grows. 

The historical experience of the U.S. may also provide some perspective. As Chart 4 shows, the debt-to-GDP ratio was 

highest in the 1940s, following the debt buildup during World War II. In the projections in this report, the U.S. would reach 

the previous peak debt ratio in 2029. However, the origins of current and future federal debt are quite different from the 

wartime debt of the 1940s, which limits the pertinence of past experience.

7 Errata: “Growth in a Time of Debt,” Carmen M. Reinhart and Kenneth S. Rogoff. Harvard University, 2013. 8 Herndon, Thomas, Michael Ash, and Robert Pollard, “Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff,” 

Cambridge Journal of Economics, 2013. 9 Government Finance Statistics Yearbook, Main Aggregates and Balances, available at https://data.imf.org. Data is for D1 debt liabilities for the central 

government, excluding social security funds, for Advanced Economies. While more current data are available, the recent pandemic has substantially 

distorted debt-to-GDP ratios. Pre-pandemic levels likely provide a better basis of comparison.
REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) 184

As the cross-country and historical comparisons suggest, there is a very imperfect relationship between the current level 

of central government debt and the sustainability of overall government policy. Past accrual of debt is certainly important, but 

current policies and their implications for future debt accumulation and future growth are as well.

Conclusion

The projections in this Financial Report indicate that if policy remains unchanged, the debt-to-GDP ratio will steadily 

increase throughout the projection period and beyond, which implies current policy under this report’s assumptions is not 

sustainable and must ultimately change. Subject to the important caveat that policy changes are not so abrupt that they slow 

economic growth, the sooner policies are put in place to avert these trends, the smaller are the adjustments necessary to return 

the nation to a sustainable fiscal path, and the lower the burden of the debt will be to future generations.
185 REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

Social Insurance

The social insurance programs consisting of Social Security, Medicare, Railroad Retirement, Black Lung, and UI were 

developed to provide income security and health care coverage to citizens under specific circumstances as a responsibility of 

the government. Because taxpayers rely on these programs in their long-term planning, social insurance program information 

should indicate whether the current statutory provisions of the programs can be sustained, and more generally what effect 

these provisions likely have on the government’s financial condition. The resources needed to run these programs are raised 

through taxes and fees. Eligibility for benefits depends in part on earnings and time worked by the individuals. Social 

Security benefits are generally redistributed intentionally toward lower-wage workers (i.e., benefits are progressive). In 

addition, each social insurance program has a uniform set of eligibility events and schedules that apply to all participants.

RSI material is generally drawn from the 2022 Annual Reports of the Boards of Trustees, which represents the official 

government evaluation of the financial and actuarial status of the Social Security and Medicare Trust Funds. Unless 

otherwise noted, all data are for calendar years, all projections are based on current law and the Trustees intermediate set of 

assumptions. The one exception is that the projections disregard benefit payment reductions that would result from the 

projected depletion of the OASDI and HI Trust Funds. Under current law, benefit payments would be reduced to levels that 

could be covered by incoming tax and premium revenues when the trust fund balances have been depleted.

Social Security and Medicare

Social Security

The OASI and DI Trust Funds were established on January 1, 1940 and August 1, 1956 respectively as separate 

accounts in Treasury. The OASI fund pays cash retirement benefits to eligible retirees and their eligible dependents and 

survivors, and the much smaller DI fund pays cash benefits to eligible individuals who are unable to work because of medical 

conditions and certain family members of such eligible individuals. All financial operations of the OASI and DI Programs are 

handled through these respective funds. The two funds are often referred to as the combined OASDI Trust Funds or “Social 

Security.” At the end of calendar year 2021, Social Security benefits were paid to approximately 65 million beneficiaries.

The events that trigger benefit payments are quite different however, both trust funds have the same dedicated financing 

structure: taxes paid by workers, their employers, and individuals with self-employment income, based on work covered by 

the Social Security Program. Currently, employers and employees each pay 6.2 percent of taxable earnings, and the selfemployed pay 12.4 percent of taxable earnings. Payroll taxes are levied on wages and net earnings from self-employment up 

to a specified maximum annual amount, referred to as maximum taxable earnings ($147,000.00 in 2022), that increases each 

year with economy-wide average wages.

Legislation passed in 1984 subjected up to half of Social Security benefits to income tax and allocated the revenue to 

the OASDI Trust Funds. In 1993 legislation increased the potentially taxed portion of benefits to 85.0 percent and allocated 

the additional revenue to the Medicare’s HI Trust Fund.

Medicare

The Medicare Program, created in 1965, has two separate trust funds: the HI Trust Fund (otherwise known as Medicare 

Part A) and the SMI Trust Funds (which consists of the Medicare Part B and Part D10 accounts). HI helps pay for inpatient 

hospital skilled nursing facility, home health, and hospice. SMI helps pay for hospital outpatient services, physician services, 

and assorted other services and products through Part B and for prescription drugs through Part D.

Though the events that trigger benefit payments are similar, HI and SMI have different dedicated financing structures. 

Similar to Social Security, HI is financed primarily by payroll contributions. Currently, employers and employees each pay 

1.45 percent of earnings, while self-employed workers pay 2.9 percent of their net earnings. SMI is financed primarily by 

direct transfers from the General Fund. Additional financing sources include premiums paid by beneficiaries and, for Part D 

state transfers. 

10 Medicare legislation in 2003 created the new Part D account in the Medicare Part B and D Trust Fund to track the finances of a new prescription drug 

benefit that began in 2006. As is the case for Medicare Part B, a little less than three-quarters of revenues to the Part D account will come from future 

transfers from the General Fund. Consequently, the nature of the relationship between the Medicare Part B and D Trust Fund and the federal budget 

described below is largely unaffected by the presence of the Part D account though the magnitude will be greater.
REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) 186

Surplus 

Borrowed

Interest 

Credited

Benefit 

Taxes

Interest 

Credited

Surplus 

Borrowed

E

X

P

E

N

D

I

T

U

R

E

S

General

Government

Expenditures,

Net Interest

SMI Trust

Fund 

Account

Other

Government

Accounts

HI, OASDI

Trust Fund 

Accounts

M

E

A

N

S

O

F

F

I

N

A

N

C

I

N

G

SMI

Premiums and 

State Transfers

Income Taxes,

Benefit Taxes, 

Other Revenues,

Borrowing from

the Public

Payroll Taxes and

HI

Premiums

HI, OASDI, SMI

Benefits

Other 

Government 

Transfers

Social Security, Medicare, and Government-wide Finances

Figure 1—Social Security, Medicare, and Government-wide Finances

• Other Government Transfers: Intra-governmental transfers to the Medicare SMI Trust Fund from other government 

accounts.

• Surplus Borrowed: Program revenue loaned to the General Fund and treated as if it borrowed the money from the 

public.

• Interest Credited: Interest earned when the excess of program revenue over expenses is loaned to the General Fund 

becoming a future obligation to the General Fund.

The current and future financial status of the separate Social Security and Medicare Trust Funds is the focus of the 

Social Security and Medicare Trustees Reports, a focus that may appropriately be referred to as the “trust fund perspective.” 

In contrast, the government primarily uses the budget concept, appropriately referred to as the “budget perspective” or the 

“government-wide perspective” as the framework for budgetary analysis and presentation. It represents a comprehensive 

display of all federal activities, regardless of fund type or on- and off-budget status and has a broader focus than the trust 

fund perspective. Social Security and Medicare are among the largest expenditure categories of the U.S. federal budget. This 

section describes the important relationship between the trust fund perspective and the government-wide perspective.

Figure 1 is a simplified depiction of the interaction of the Social Security and Medicare Trust Funds with the rest of the 

federal budget.11 The boxes on the left show sources of funding, those in the middle represent the trust funds and other 

government accounts, including the General Fund into which that funding flows, and the boxes on the right show simplified 

expenditure categories. The figure is intended to illustrate how the various sources of program revenue flow through the 

budget to beneficiaries. The general approach is to group revenues and expenditures that are linked specifically to Social 

Security and/or Medicare separately from those for other government programs.

Each of the trust funds has its own sources and types of revenue. With the exception of General Fund transfers to 

Medicare Parts B and D, each of these revenue sources represents revenue from the public that is dedicated specifically for 

the respective trust fund and cannot be used for other purposes. In contrast, personal and corporate income taxes as well as 

other revenue go into General Fund and are drawn down for any government program for which Congress has approved 

spending.12 The Medicare SMI Trust Fund is shown separately from the Social Security OASDI Trust Funds and the 

Medicare HI Trust Fund to highlight the unique financing of Medicare Parts B and D. Currently, Medicare Parts B and D are

11 The federal budget encompasses all government financing and is synonymous with a government-wide perspective. 12 Other programs also have dedicated revenues in the form of taxes and fees (and other forms of receipt) and there are a large number of dedicated trust 

funds in the federal budget. 
187 REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

the only programs that are funded through transfers from the General Fund. The transfers are automatic and; their size 

depends on program expenses, not on how much revenue comes into Treasury. If General Fund revenues become insufficient 

to cover both the mandated transfer to Medicare Parts B and D and expenditures on other general government programs, 

Treasury needs to borrow to make up the difference. In the longer run, if transfers to Medicare Parts B and D increase beyond 

growth in general revenues is as projected, then Congress must either raise taxes, cut other government spending, reduce 

Medicare Parts B and D benefits, or borrow even more.

Intra-governmental transfers (surplus) is a form of “borrowing/lending” between the government accounts. How loans 

from the trust funds to the General Fund and later repayments of those loans affect tax income and expenditures of the 

General Fund is uncertain. Two extreme cases encompass the possibilities. At one extreme, each dollar the trust funds loan to 

the General Fund might reduce borrowing from the public by a dollar at the time the loan is extended, in which case the 

General Fund could repay all trust fund loans by borrowing from the public without raising the level of public debt above the 

level that would have occurred in the absence of the loans. At the other extreme, the trust fund loans result in additional 

largess (i.e., higher spending and/or lower taxes) in General Fund programs at the time the loans are extended, but ultimately 

that additional largess is financed with additional austerity (i.e., lower spending and/or higher taxes). The actual impact of 

trust fund loans to the General Fund and their repayment on General Fund programs is at one of these two extremes or 

somewhere in between.

Actual dollar amounts roughly corresponding to the flows presented in Figure 1 are shown in the following table for FY 

2022. From the government-wide perspective, only revenues received from the public and state transfers less expenditures 

made to the public are important for the final balance. From the trust fund perspective which is captured in the bottom section 

of each of the three trust fund columns, revenue also includes amounts transferred from the General Fund and interest earned 

from the lending/borrowing activity between the General Fund and the trust funds. Transfers to the SMI Program from the 

General Fund are obligated under current law and therefore, appropriately viewed as revenue from the trust fund perspective. 
REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) 188

Revenues and Expenditures for Medicare and Social Security Trust Funds and the Total

Federal Budget for the Fiscal Year ended September 30, 2022

Trust Funds

(In billions of dollars) HI SMI OASDI Total All Other Total1

Payroll taxes and other public revenues:

Payroll and benefit taxes............................... 376.5 - 1,135.4 1,511.9 - 1,511.9

Premiums .................................................... 5.9 144.9 - 150.8 - 150.8

Other taxes and fees .................................... - 16.1 - 16.1 3,217.2 3,233.3

 Total ......................................................... 382.4 161.0 1,135.4 1,678.8 3,217.2 4,896.0

Total expenditures to the public2 .................... 344.7 573.3 1,218.6 2,136.6 4,135.4 6,272.0

Net results for budget perspective3 ................... 37.7 (412.3) (83.2) (457.8) (918.2) (1,376.0)

Revenues from other government 

accounts:

Transfers ..................................................... 1.1 406.4 - 407.5 (407.5)

Interest credits ............................................. 3.1 3.2 67.7 74.0 (74.0)

 Total ......................................................... 4.2 409.6 67.7 481.5 (481.5)

Net results for trust fund perspective3 ............... 41.9 (2.7) (15.5) 23.7 N/A N/A

1 This column is the sum of the preceding two columns and shows data for the total federal budget. The figure $1,376.0 billion was 

the total federal deficit in FY 2022.

2 The OASDI figure includes $5.5 billion transferred to the RRB for benefit program payments and is therefore an expenditure to the

public.

3 Net results are computed as revenues less expenditures.

Transfers and interest credits received by the trust funds appear as a negative entry under “all other” and the column is offset when

summed for the total budget.

Note: "N/A" indicates not applicable.

Medicare Part A: From the government-wide perspective, the difference between expenditures made to the public and 

revenues was $37.7 billion. From the trust fund perspective, after revenues from transfers and interest from the General Fund, 

revenues exceeded expenditures by $41.9 billion.

Medicare Parts B and D: From the government-wide perspective, the difference between expenditures made to the 

public and revenues was $412.3 billion resulting in a net draw on the overall budget balance. From the trust fund perspective, 

after revenues from transfers and interest from the General Fund, revenues exceeded expenditures by $2.7 billion. 

Social Security: From the government-wide perspective, the difference between expenditures made to the public and 

revenues was $83.2 billion. From the trust fund perspective, after revenues from transfers and interest from the General Fund, 

expenditures exceeded revenues by $15.5 billion. 

Cash Flow Projections

Economic and Demographic Assumptions. The Boards of Trustees of the OASDI and Medicare Trust Funds provide in 

their annual reports to Congress short-range (10-year) and long-range (75-year) actuarial estimates of each trust fund. 

Because of their inherent uncertainty in estimating 75 years into the future, the boards use three alternative sets of economic 

and demographic assumptions to show a range of possibilities. The economic and demographic assumptions used for the 

most recent set of intermediate projections for Social Security and Medicare are shown in the demographic and economic 

assumption section of Note 25—Social Insurance. 

Worker-to-Beneficiary Ratio. For the most part, current workers’ pay for current benefits. The relatively smaller number 

of persons born after the baby boom will therefore finance the retirement of the baby boom generation. Chart 1 shows the 

estimated number of covered workers per OASDI beneficiary using the Trustees intermediate assumptions. Covered workers 

are persons having earnings creditable for OASDI purposes based on wages in covered employment or income from covered 
189 REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

self-employment. The estimated number of workers per beneficiary declines from 2.8 in 2021 to 2.1 in 2096. A similar 

demographic pattern confronts the Medicare Program. In 2021 every HI beneficiary had about 2.9 workers to pay for his or 

her benefit and continues to decline until there are only 2.2 workers per beneficiary by 2096. 

Chart 1—Number of Covered Workers per OASDI Beneficiary

2017-2096

Social Security Projections

Income and Expenditures as a Percent of Taxable Payroll. Chart 2 shows annual non-interest income and expenditures 

expressed as percentages of taxable payroll. Estimated cost continues to exceed income excluding interest in years 2022 

through 2035. Estimated cost increases through about 2078 and then slightly declines through the end of the 75-year period. 

The estimated income at the end of the 75-year period is sufficient to cover 74.0 percent of the estimated cost.

In any year, to meet all OASDI cost on a timely basis, the combined OASI and DI Trust Funds will need to redeem 

Treasury securities. This redemption differs from the situation of prior years when the combined OASI and DI Trust Funds 

had been net lenders to the General Fund. Because the program lacks the authority to borrow to continue paying benefits, 

benefit payments would be limited to the available noninterest income.

Solvency could be achieved by: 1) increasing revenue equivalent to an immediate and permanent payroll tax rate increase of 

3.24 percentage points; or by 2) reducing scheduled benefits by an amount equivalent to an immediate and permanent 

reduction of about 20.0 percent applied to all current and future beneficiaries, or about 24.0 percent if the reductions were 

applied only to newly entitled beneficiaries. Alternatively, some combination of tax increases and benefit reductions could be 

adopted.
REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) 190

Chart 2—OASDI Income (Excluding Interest) and Expenditures

as a Percent of Taxable Payroll

2017-2096

Income and Expenditures as a Percent of GDP. Chart 3 shows estimated annual non-interest income and expenditures, 

expressed as a percent of GDP. Analyzing these cash flows in terms of percentage of the estimated GDP, which represents 

the total value of goods and services produced in the U.S., provides a measure of the cost of the OASDI program in relation 

to the size of the national economy that must finance it.

In calendar year 2021, OASDI cost was about $1.1 trillion, which was about 5.0 percent of GDP. The cost of the 

program (based on current law) rises to a peak of 6.2 percent of GDP in 2077, then declines to 5.9 percent by 2096. The 

increase from 2022 to 2039 is projected to occur as baby boomers continue to become eligible for OASDI benefits, lower 

birth rates result in fewer workers per beneficiary, and beneficiaries continue to live longer.

Chart 3—OASDI Income (Excluding Interest) and Expenditures

as a Percent of GDP

2017-2096
191 REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

Medicare Projections

Medicare Legislation. The projections presented here are based on current law, certain features of which may result in 

some challenges for the Medicare program. In 2010 the PPACA was signed into law and contains the most significant 

changes to health care coverage since the Social Security Act. The PPACA provided funding for the establishment of a Center 

for Medicare and Medicaid Innovation to test innovative payment and service delivery models to reduce program 

expenditures while preserving or enhancing the quality of care furnished to individuals. In 2020, COVID-19 was declared a 

pandemic. While the COVID-19 pandemic has significantly affected Medicare short-term financing and spending it is not 

expected to have a larger effect on the financial status of the trust funds after 2028. Spending for services other than COVID19 was significantly lower than expected in 2020 and 2021. Because of the large wave of COVID-19 cases in late 2021 

through early 2022, the Trustees estimate that non-COVID-19 related spending will be lower than previously expected for the 

beginning of 2022. The estimates incorporate the cost of the COVID-19 vaccines, which consist of both the payment for the 

vaccines themselves and the payments for their administration.

Incorporated in these projections is the sequestration of non-salary Medicare expenditures as required by the following

laws:

• Budget Control Act of 2011 (P.L. 112-25, enacted on August 2, 2011), as amended by the American Taxpayer Relief

Act of 2012 (P.L. 112-240, enacted on January 2, 2013);

• Continuing Appropriations Resolution, 2014 (P.L. 113-67, enacted on December 26, 2013);

• Sections 1 and 3 of P.L. 113-82, enacted on February 15, 2014;

• Protecting Access to Medicare Act of 2014 (P.L. 113-93, enacted on April 1, 2014);

• BBA of 2015 (P.L. 114-74, enacted on November 2, 2015);

• BBA of 2018 (P.L. 115-123, enacted on February 9, 2018);

• BBA of 2019 (P.L. 116-37, enacted on August 2, 2019);

• The CARES Act (P.L. 116-136, enacted on March 27, 2020);

• The CAA, 2021 (P.L. 116-260, enacted on December 27, 2020); and

• An Act to Prevent Across-the-Board Direct Spending Cuts, and for Other Purposes (P.L. 117-7, enacted on April 14,

2021).

• The Infrastructure Investment and Jobs Acts (P.L. 117-58, enacted on November 15, 2021);

• The Protecting Medicare and American Farmers from Sequester Cuts Act (P.L. 117-71, enacted on December 10,

2021).

The sequestration reduces benefit payments by 2.0 percent from April 1, 2013 through April 30, 2020, by 1.0 percent

from April 1, 2022 through June 30, 2022, by 2.0 percent from July 1, 2022 through March 31, 2030, by 2.25 percent from

April 1, 2030 through September 30, 2030, by 3.0 percent from October 1, 2030 through March 31, 2031, and by 4.0 percent

from April 1, 2031 through September 30, 2031. Due to sequestration, non-salary administrative expenses are reduced by an

estimated 5.0 to 7.0 percent from March 1, 2013 through September 30, 2031.

The financial projections for the Medicare program reflect substantial, but very uncertain, cost savings deriving from 

current law provisions that lower increases in Medicare payment rates to most categories of health care providers, but such 

adjustments would probably not be viable indefinitely without fundamental change in the current delivery system. In view of 

the factors described above, it is important to note that Medicare’s actual future costs are highly uncertain for reasons apart

from the inherent challenges in projecting health care cost growth over time. For additional information refer to the 

“Medicare – Illustrative Alternative Scenario” section of Note 25—Social Insurance and HHS’s financial statements.

Changes in Projection Methods. The long-range cost growth rates must be modified to reflect demographic impacts. In 

the 2021 report, these impacts reflected the changing distribution of Medicare enrollment by age and sex, and the 

beneficiary’s proximity to death, which is referred to as a TTD adjustment. The TTD adjustment reflects the fact that the

closer an individual is to death, the higher his or her health care spending is. 

Total Medicare. Chart 4 shows expenditures and current-law non-interest revenue sources for HI and SMI combined as 

a percent of GDP. Under the PPACA, beginning in 2013 the HI Trust Fund receives an additional 0.9 percent tax on earnings 

in excess of $250,000 for joint tax return filers and $200,000 for individual tax return filers. As a result of this provision, it is 

projected that payroll taxes will grow slightly faster than GDP. After 2022, HI revenue from income taxes on Social Security 

benefits will gradually increase as a share of GDP as the share of benefits subject to such taxes increase. Beginning in 2009, 

as HI payroll tax receipts declined due to the recession and general revenue increased, the transfers from the General Fund 

became the largest single source of income to the Medicare program as a whole. General revenue transfers to the Part B 

account increased significantly in 2016, as required by the BBA of 2015 to compensate for premium revenue that was not 

received in 2016 due to the hold harmless provision, which limited the Part B premium increase for a majority of 

beneficiaries. From 2020 through 2022 general revenues are projected to gradually increase through 2040 to about 49.0
REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) 192

percent of Medicare financing, stabilizing thereafter. SMI premiums will also grow in proportion to general revenue transfers, 

placing a growing burden on beneficiaries. Medicare Part B and D general revenues equal 1.8 percent of GDP in 2021 and 

will increase to an estimated 3.1 percent in 2096 under current law.

Chart 4—Total Medicare (HI and SMI) Expenditures and Non-interest Income

as a Percent of GDP

2017-2096

Medicare, Part A Income and Expenditures as a Percent of Taxable Payroll. Chart 5 illustrates Medicare Part A income 

(excluding interest) and expenditures as a percentage of taxable payroll. The standard HI payroll tax rate is not scheduled to 

change in the future under current law and payroll tax income as a percentage of taxable payroll is estimated to remain 

constant at 2.9 percent. Income from taxation of Social Security benefits will also increase faster than taxable payroll because 

the income thresholds determining taxable benefits are not indexed for price inflation. Since these income thresholds are not 

indexed, over time an increasing proportion of workers and their earnings will become subject to the additional HI tax rate. 

In 2022 and beyond, as indicated in Chart 5, the cost rate is projected to rise, primarily due to the continued retirements 

of those in the baby boom generation and partly due to an acceleration of health services cost growth. This cost rate increase 

is moderated by the accumulating effect of the productivity adjustments to provider price updates, which are estimated to 

reduce annual HI per capita cost growth by an average of 0.7 percent through 2031 and 1.0 percent thereafter. 
193 REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

Chart 5—Medicare Part A Income (Excluding Interest) and Expenditures

as a Percent of Taxable Payroll

2017-2096

Medicare, Part A Income and Expenditures as a Percent of GDP. Chart 6 shows estimated annual Medicare Part A noninterest income and expenditures, expressed as a percent of GDP. This measure provides an idea of the relative financial 

resources that will be necessary to pay for Medicare Part A services. In 2021, the expenditures were $328.9 billion, which 

was 1.4 percent of GDP. This percentage is projected to increase steadily until about 2045 and then remain fairly level 

throughout the rest of the 75-year period, as the accumulated effects of the price update reductions are realized. 

Chart 6—Medicare Part A Income (Excluding Interest) and Expenditures

as a Percent of GDP

2017-2096

Medicare Part B and Part D Premium as well as State Transfer Income and Expenditures as a Percent of GDP. Chart 7 

shows expenditures for the Part B and D Program expressed as a percent of GDP. It is important to examine the projected rise 

in expenditures and the implications for beneficiary premiums and General Fund transfers. 

In 2021, SMI expenditures were $510.4 billion, or about 2.2 percent of GDP. Under current law, they would grow to 

about 4.0 percent of GDP within 25 years and to 4.5 percent by the end of the projection period. To match the faster growth 

rates for SMI expenditures, beneficiary premiums, along with general revenue contributions, would increase more rapidly 
REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) 194

than GDP over time but at a slower rate compared to the last 10 years. Average per beneficiary costs for Part B and Part D

benefits are projected to increase after 2021 by about 4.3 percent annually. The associated beneficiary premiums—and 

General Fund transfers would increase by approximately the same rate. The special state payments to the Part D account are 

set by law at a declining portion of the states’ forgone Medicaid expenditures attributable to the Medicare drug benefit. 

Chart 7—Medicare Part B and Part D Premium and State Transfer

Income and Expenditures as a Percent of GDP

2017-2096

Social Security and Medicare Sensitivity Analysis

Projections of the future financial status of the Social Insurance programs depend on many demographic and economic 

assumptions. The estimates presented here are based on the assumption that the programs will continue under current law

except that the full amount of Social Security and Medicare HI scheduled benefits are paid after trust fund depletion contrary 

to current law. Income will depend on how these factors affect the size and composition of the working population and the

level and distribution of wages and earnings. Similarly, the cost will depend on how these factors affect the size and 

composition of the beneficiary population and the general level of benefits.

Because actual experience is likely to differ from the estimated or assumed values of these factors, this section is 

included to illustrate the sensitivity of the long-range projections to changes in assumptions by analyzing key assumptions: 

average annual reduction in death rates for Social Security, average annual growth in health costs for Medicare, total fertility 

rate, real-wage differential, CPI change, net immigration, and real interest rate.

For this analysis, the intermediate assumptions are used as the reference point, and each selected assumption is varied

individually. The variation used for each individual assumption reflects the levels used for that assumption in the low-cost 

and high-cost projections. For example, when analyzing sensitivity with respect to variation in real wages, income, and 

expenditure projections using the intermediate assumptions are compared to the outcome when projections are done by 

changing only the real wage assumption to either low-cost or high-cost alternatives. While the COVID-19 pandemic has 

significantly affected Social Security and Medicare short-term financing and spending, it is not expected to have a large 

effect on the financial status of the trust funds after 2028. The pandemic is an example of the inherent uncertainty in 

projecting demographic and economic factors, including healthcare financing and spending over any duration. 

The following tables show the PV of the estimated excess of Social Security and Medicare cost over income for the 75-

year period, using various assumptions, which are shown in parentheses. The low-cost alternative is characterized by 

assumptions that improve the financial status of the program (relative to the intermediate assumption) such as slower 

improvement in mortality (beneficiaries die younger). In contrast, assumptions under the high-cost alternative worsen the 

financial outlook. All PV are calculated as of January 1, 2022 and are based on estimates of income and cost during the 75-

year projection period 2022-2096. Refer to SSA’s and HHS’s unaudited RSI—Social Insurance section for additional 

information on the Social Insurance programs sensitivity analysis.
195 REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

Present Values of Estimated OASDI Expenditures in Excess of Income

Under Various Assumptions, 2022-2096

(Dollar values in trillions; values of assumptions shown in parentheses)

Financing Shortfall Range

Assumption Low Intermediate High

Average annual reduction in death rates1 ..................................... 18.9 23.3 28.5 

(0.3) (0.7) (1.3)

Total fertility rate2 ........................................................................ 21.0 23.3 26.6

(2.2) (2.0) (1.7)

Real-wage differential2 ................................................................ 18.7 23.3 26.1 

(1.8) (1.2) (0.5)

CPI change2 ............................................................................... 22.7 23.3 23.9 

(3.0) (2.4) (1.8)

Net immigration2 ......................................................................... 21.8 23.3 24.8 

(1,684)3 (1,246)3 (829)3

Real interest rate ........................................................................ 19.8 23.3 27.7 

(2.8) (2.3) (1.8)

1 The amounts shown represent averages from 2031 to 2096 of the 75-year projection period. 

2 The amounts shown represent averages from 2032 to 2096 of the 75-year projection period. 

3 Per thousands of persons. 

Source: SSA.

The decrease and increase discussed below represent how much the low and high alternatives differ from the 

intermediate alternative shown in the table above over the 75-year projection period. 

• The average annual reduction in death rates: If people die at younger ages Social Security income relative to cost 

would decrease by $4.4 trillion; if people live longer the shortfall would increase by $5.2 trillion.

• Total fertility rate: Higher rates of fertility increase the ratio of workers to beneficiaries, all else equal. If there are 

more workers compared to beneficiaries Social Security income relative to cost would decrease by $2.3 trillion; if 

there are fewer workers compared to beneficiaries the shortfall would increase by $3.3 trillion. 

• Real-wage differential: Higher real wage growth results in faster income growth relative to expenditure growth; if 

real-wage growth is higher Social Security income relative to cost would decrease by $4.6 trillion; if real-wage 

growth is lower the shortfall would increase by $2.8 trillion. 

• CPI change: If the ultimate annual increase in the CPI percentage is higher Social Security income relative to cost 

would decrease by $0.6 trillion; if the ultimate annual increase in the CPI percentage is lower shortfall would 

increase by $0.6 trillion. 

• Net immigration: If there is a larger increase in immigration levels then Social Security income relative to cost 

would decrease by $1.5 trillion; if there is a smaller increase in immigration levels the shortfall would increase by 

$1.5 trillion.

• Real interest rate: If the ultimate real interest rate is higher, then Social Security income relative to cost would 

decrease by $3.5 trillion; if the ultimate annual real interest rate is lower, then the shortfall would increase by $4.4 

trillion.
REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) 196

Present Values of Estimated Medicare Part A Expenditures in Excess of Income

Under Various Assumptions, 2022-2096

(Dollar values in trillions; values of assumptions shown in parentheses)

Financing Shortfall Range

Assumption Low Intermediate High

Average annual growth in health costs ....................................... (5.0)1 5.1 21.2 

(2.7) (3.7) (4.7)

Total fertility rate....................................................................... 4.3 5.1 6.3 

(2.2) (2.0) (1.7)

Real wage differential ............................................................... 1.9 5.1 7.3 

(1.8) (1.2) (0.5)

CPI change .............................................................................. 3.7 5.1 7.0 

(3.0) (2.4) (1.8)

Net immigration ........................................................................ 4.5 5.1 5.8 

(1,736)2 (1,281)2 (847)2

Real interest rate ...................................................................... 4.4 5.1 5.8 

(2.8) (2.3) (1.8)

1

Average annual growth in health cost is projected to be negative for 2022. 2

Per thousands of persons.

Source: Centers for Medicare & Medicaid Services

The decrease and increase discussed below represent how much the low and high alternatives differ from the 

intermediate alternative shown in the table above over the 75-year projection period.

• Average annual growth in health care costs: The financial status of the HI Trust Fund is extremely sensitive to the 

growth rates for health care service costs. Slower growth rates will produce a lower aggregate cost of providing 

covered health care services. If a slower growth rate is attained Medicare Part A income relative to cost would 

decrease by $10.1 trillion; if the growth rate is higher the shortfall would increase by $16.1 trillion.

• Total fertility rate: Higher rates of fertility increase the ratio of workers to beneficiaries, all else equal. If there are 

more workers compared to beneficiaries Medicare Part A income relative to cost would decrease by $0.8 trillion; if 

there are fewer workers compared to beneficiaries, the shortfall would increase by $1.2 trillion.

• Real-wage differential: Faster real-wage growth results in smaller HI cash flow deficits. If real-wage growth is 

higher Medicare Part A income relative to cost would decrease by $3.2 trillion; if real wage growth is lower, the 

shortfall would increase by $2.2 trillion.

• CPI change: If the ultimate annual increase in the CPI percentage is higher Medicare Part A income relative to cost 

would decrease by $1.4 trillion; if the ultimate annual increase in the CPI percentage is lower the shortfall would 

increase by $1.9 trillion.

• Net immigration: If there is a larger increase in immigration levels then Medicare Part A income relative to cost 

would decrease by $0.6 trillion; if there is a smaller increase in immigration levels the shortfall would increase by 

$0.7 trillion.

• Real interest rate: If the ultimate real interest rate is higher, Medicare Part A income relative to cost would decrease 

by $0.7 trillion; if the ultimate real interest rate is lower, then the shortfall would increase by $0.7 trillion.
197 REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

Present Values of Estimated Medicare Parts B and D Future Expenditures 

Less Premium Income and State Transfers Under Three Health Care Cost

Growth Assumptions, 2022-2096

Medicare Program1 Government-wide Resources Needed

Low Intermediate High

(in trillions of dollars) (2.7) (3.7) (4.7)

Part B ................................................................................................ 28.1 39.5 57.5

Part D ................................................................................................ 5.7 8.0 11.8

1 Annual growth rate is the aggregate cost of providing covered health care services to beneficiaries. The low and high scenarios

assume that costs increase 1.0 percent slower or faster, respectively, than the intermediate assumption.

Source: Centers for Medicare & Medicaid Services

The table above shows the effects of various assumptions about the growth in health care costs on the PV of estimated 

Part B and D expenditures in excess of income in the terms of government-wide resources needed due to the financing 

mechanism (General Fund transfers) for Medicare Parts B and D. As with Part A, net Part B and D expenditures are very 

sensitive to the health care cost growth assumption. If a slower growth rate is attained government-wide resources needed for

Part B would decrease by $11.4 trillion and Part D by $2.3 trillion; if the growth rate is higher, government-wide resources 

needed would increase to $18.0 trillion for Part B and to $3.8 trillion for Part D.

Sustainability of Social Security and Medicare

75-Year Horizon

According to the 2022 Medicare Trustees Report, the HI Trust Fund is projected to remain solvent until 2028 and, 

according to the 2022 Social Security Trustees Report, the OASI Trust Fund is projected to have sufficient reserves to pay 

full benefits on time until 2034 while the DI Trust Fund is not projected to be depleted within the projection period. In each 

case, some trust fund interest income and balances accumulated during prior years are needed to pay benefits. This leads to a

repayment of loans made to the General Fund by the trust funds. The General Fund will pay back the trust funds and then the 

monies will be paid out to beneficiaries. Moreover, under current law, General Fund transfers to the SMI Trust Fund will 

occur into the indefinite future and will continue to grow with the growth in health care expenditures.

The potential magnitude of future financial obligations under these three social insurance programs is, therefore, 

important from a budget perspective as well as for understanding generally the growing resource demands of the programs on 

the economy. From the 75-year budget perspective, the PV of the additional resources that would be necessary to meet

projected expenditures, for the three programs combined, is $75.9 trillion. To put this figure in perspective, it would represent

4.4 percent of the PV of projected GDP over the same period ($1,724.0 trillion). These resource needs would be in addition

to the payroll taxes, benefit taxes, and premium payments. Asset redemptions and Medicare Part B and D general revenue

transfers represent formal budget commitments, but no provision exists for covering the Medicare Part A and Social Security

Trust Fund deficits once assets are depleted.

The table below shows the magnitudes of the primary expenditures and sources of financing for the three trust funds 

computed on an open-group basis for the next 75 years and expressed in PV terms. The data are consistent with the SOSI 

included in the principal financial statements. 

From the government-wide perspective, the PV of the total resources needed for the Social Security and Medicare 

Programs over and above current-law funding sources (payroll taxes, benefit taxes, and premium payments from the public) 

is $75.8 trillion. From the trust fund perspective, which counts the trust funds ($3.3 trillion) and the general revenue transfers 

to the SMI Program ($47.5 trillion) as dedicated funding sources, additional resources needed to fund the programs are $25.0 

trillion.
REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) 198

Present Values of Costs Less Revenues of 75-Year Open Group Obligations

HI, SMI, and OASDI as of January 1, 2022

SMI

(In trillions of dollars) HI Part B Part D OASDI Total

Revenues from the public:

 Taxes....................................................................... 29.7 - - 84.2 113.9

 Premiums and state transfers .................................... 0.5 17.1 3.7 - 21.3

 Total...................................................................... 30.2 17.1 3.7 84.2 135.2

 Total costs to the public............................................. 35.2 56.6 11.7 107.5 211.0

Net results - budget perspective1 .................................. 5.0 39.5 8.0 23.3 75.8

Revenues from other government accounts................... - 39.5 8.0 - 47.5

Trust fund balances as of 1/1/2022 ............................... 0.2 0.2 - 2.9 3.3

Net results - trust fund perspective1 ............................... 4.8 (0.2) - 20.4 25.0

1 Net results are computed as costs less revenues and trust fund balances. Negative values are indicative of surpluses.

Source: 2022 OASDI Trustees Reports and Centers for Medicare & Medicaid Services

Infinite Horizon

The 75-year horizon is consistent with the primary focus of the Social Security and Medicare Trustees Reports. Experts

have noted that limiting the projections to 75 years understates the magnitude of the long-range unfunded obligations because

summary measures (such as the actuarial balance and open-group unfunded obligations) reflect the full amount of taxes paid

by the next two or three generations of workers, but not the full amount of their benefits. One approach to addressing the

limitation of 75-year summary measures is to extend the projections horizon indefinitely, so that the overall results reflect the

projected costs and revenues after the first 75 years. The open-group infinite horizon net obligation is the PV of all expected 

future program outlays less the PV of all expected future program tax and premium revenues. Such a measure is provided in 

the following table for the three trust funds represented above.

From the budget or government-wide perspective, the values in line 1 plus the values in line 4 are summed in the last 

line of the table and represent the value of resources needed to finance each of the programs into the infinite future. The total 

resources needed for all the programs sums to $177.0 trillion in PV terms. This need can be satisfied only through increased 

borrowing, higher taxes, reduced program spending, or some combination.

The second line shows the value of the trust fund at the beginning of 2022. For the HI and OASDI Programs this 

represents the extent the programs are funded from the trust fund perspective. From that perspective, when the trust fund is 

subtracted, an additional $61.8 trillion is needed to sustain the Social Security program into the infinite future, while the

Medicare Part A program reflects a projected surplus of $12.7 trillion over the infinite horizon. As described above, from the 

trust fund perspective, the SMI Program is fully funded; from a government-wide basis, the substantial gap that exists 

between premiums, state transfer revenue, and program expenditures in the Part B and D Program ($97.2 trillion and $27.4 

trillion, respectively) represents future general revenue obligations of the federal budget.

In comparison to the analogous 75-year number in the table above, extending the calculations beyond 2096, captures the 

full lifetime benefits, plus taxes and premiums of all current and future participants. The shorter horizon understates the total 

financial needs by capturing relatively more of the revenues from current and future workers and not capturing all the 

benefits that are scheduled to be paid to them.
199 REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

Present Values of Costs Less Tax, Premium and State Transfer Revenue

through the Infinite Horizon, HI, SMI, OASDI as of January 1, 2022

SMI

(In trillions of dollars) HI Part B Part D OASDI Total

Present value of future costs less future taxes, 

premiums, and state transfers for current participants ..... 14.7 32.3 5.9 48.6 101.5

Less current trust fund balance...................................... 0.2 0.2 - 2.9 3.3

Equals net obligations for past and current participants ... 14.5 32.1 5.9 45.7 98.2

Plus net obligations for future participants ...................... (27.2) 65.1 21.5 16.1 75.5

Equals net obligations through the infinite future for

all participants .............................................................. (12.7) 97.2 27.4 61.8 173.7

Present values of future costs less the present

values of future income over the infinite horizon.............. (12.5) 97.4 27.4 64.7 177.0

Source: 2022 OASDI and Medicare Trustees Reports
REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) 200

Railroad Retirement, Black Lung, and Unemployment Insurance

Railroad Retirement

The RRB was created in the 1930s to establish a retirement benefit program for the nation’s railroad workers. The RRB

and the SSA share jurisdiction over the payment of retirement and survivor benefits. Railroad retirement pays full retirement

annuities at age 60 to railroad workers with 30 years of service and disability annuities based on total or occupational

disability. It also pays annuities to certain beneficiaries of deceased railroad workers.

Payroll taxes paid by railroad employers and their employees provide a primary source of income for the Railroad 

Retirement and Survivors’ Benefit Program. Other sources of program income include: the RRB-SSA-CMS Financial 

Interchanges with the Social Security and Medicare Trust Funds, federal income taxes on railroad retirement benefits, 

appropriations, and earnings on investments. 

Revenues in excess of benefit payments are invested to provide additional trust fund income. Legislation enacted in

2001 allowed for Railroad Retirement Account funds transferred to the NRRIT to be invested in non-governmental assets, as

well as in governmental securities.

Since its inception, NRRIT has received $21.3 billion from RRB and returned $31.7 billion. During FY 2022, the

NRRIT made net transfers of $2.0 billion to the RRB to pay retirement benefits. Administrative expenses of the trust are paid

out of trust assets. The balance as of September 30, 2022, and 2021, of non-federal securities and investments of the NRRIT

are disclosed in Note 7—Investments.

Black Lung

The Federal Coal Mine Health and Safety Act of 1969 created the BLDBP to provide compensation, medical, and

survivor benefits for eligible coal miners who are totally disabled due to pneumoconiosis (Black Lung Disease) arising out of

their coal mine employment and the BLDTF provides benefit payments when no responsible mine operator can be assigned

the liability.

Black lung disability benefit payments are funded by excise taxes from coal mine operators based on the domestic sale

of coal, as are the program’s administrative costs. These taxes are collected by the IRS and transferred to the BLDTF.

P.L. 110-343, Division B-Energy Improvement and Extension Act of 2008, enacted on October 3, 2008, among other

things, restructured the BLDTF debt by refinancing the outstanding high interest rate repayable advances with low interest

rate discounted debt instruments similar in form to zero-coupon bonds, plus a one-time appropriation. This Act also allowed

that any subsequent debt issued by the BLDTF may be used to make benefit payments, other authorized expenditures, or to

repay debt and interest from the initial refinancing.

Unemployment Insurance

The UI Program was created in 1935 to provide income assistance to unemployed workers who lose their jobs generally

through no fault of their own and are unemployed due to a lack of suitable work. The program protects workers during

temporary periods of unemployment through the provision of unemployment compensation benefits. The program is

administered through a unique system of federal and state partnerships established in federal law but executed through

conforming state laws by state officials. The federal government provides broad policy guidance and program direction

through the oversight of DOL, while program details are established through individual state UI statutes, administered

through state UI entities.

The UI Program is financed through the collection of federal and state unemployment taxes levied on subject employers

and deposited in the UTF and federal appropriations. The fund was established to account for the receipt, investment, and

disbursement of unemployment taxes. Federal unemployment taxes are used to pay for the administrative costs of the UI

Program, including grants to each state to cover the costs of state UI operations and the federal share of extended UI benefits.

Federal unemployment taxes are also used to fund an account within the UTF to make advances to state UI accounts when a

state’s UI account balance has been exhausted and the state is unable to make benefit payments.

Cash Flow Projections

Railroad Retirement Income and Expenditures. Railroad retirement cash flow projections are based on the intermediate

set of assumptions used in the RRB’s actuarial valuation of the program. Estimated railroad retirement annual revenue

exceeds annual expenditures in the years 2047 through 2096. Without investment income, however, annual expenditures are

greater than annual revenue throughout the entire period, expect in 2054 and 2055.
201 REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

Sensitivity Analysis. The projections of the future financial status of the RRP depend on many economic and

demographic assumptions. For additional information on the sensitivity of the long-range projections of the RRP and how the

projections are impacted by changes in certain key assumptions, refer to RRB’s financial statements.

Black Lung Projected Cash Inflows and Outflows, in Constant Dollars, for the Open Group. The significant

assumptions used in the projections show that cash inflows from excise taxes will exceed cash outflows for benefit payments

and administrative expenses for all years in the projection period.

Sensitivity Analysis. For the projected cash inflows and outflows with sensitivity analysis, in constant dollars for the

open group, the significant assumption for medical cost inflation was increased while other significant assumptions were left

unchanged. For additional information on the sensitivity of the projections of the BLDBP and how the projections are

impacted by changes in assumptions, refer to DOL’s financial statements.

Unemployment Insurance Projected Cash Inflows and Outflows, in Constant Dollars, Under Expected Economic

Conditions. The significant assumptions used in the cash flow projections of the UTF show total cash inflow exceeds total

cash outflow in all years in the projection period.

Sensitivity Analysis. The effect on the accumulated UTF assets of projected total cash inflows and cash outflows of the

UTF, in constant dollars, over the ten-year period ending September 30, 2032, are demonstrated in two sensitivity analyses.

Each sensitivity analysis uses an open group, which includes current and future participants in the UI Program. Sensitivity

Analysis I assumes higher rates of unemployment and Sensitivity Analysis II assumes even higher rates of unemployment. In

Sensitivity Analysis I, there are net cash inflow in FY 2023, net cash outflows in FYs 2024 and 2025, and then net cash

inflows again in FYs 2026 through 2032. In Sensitivity Analysis II, net cash outflows are projected in FY 2023 through 2026,

but inflows exceed outflows in FY 2027 through 2032; net cash inflows are reestablished in FY 2027 and peak in FY 2032

with a decrease in unemployment rate in FY 2032. For additional information on the sensitivity of the projections of the UI

Program, refer to DOL’s financial statements.

Sustainability

Sustainability of Railroad Retirement from a trust fund perspective, when the trust fund balance ($30.5 billion) and the 

financial interchange and transfers ($99.4 billion) are included, the combined balance of the NRRIT, the Railroad Retirement 

Account, and the Social Security Equivalent Benefit Account show a slight surplus ($1.4 billion). For additional information 

related to the sustainability of the RRP, refer to RRB’s financial statements.

On September 30, 2022, total liabilities of the BLDTF exceeded assets by nearly $6.3 billion. This net position deficit

represents the accumulated shortfall of excise taxes necessary to meet benefit payments, administrative costs, and interest

expense incurred prior to and subsequent to the debt refinancing pursuant to P.L. 110-343. Prior to the enactment of P.L. 110-

343, this shortfall was funded by repayable advances to the BLDTF, which were repayable with interest. Pursuant to P.L.

110-343, any shortfall will be financed with debt instruments similar in form to zero-coupon bonds, with a maturity date of

one year and bear interest at Treasury’s 1-year rate.

The ability of the UI Program to meet a participant’s future benefit payment needs depends on the availability of

accumulated taxes and earnings within the UTF. The effect of projected benefit payments on the accumulated net assets of

the UTF is measured, under an open group scenario, which includes current and future participants in the UI Program. As of

September 30, 2022, total assets within the UTF exceeded total liabilities by nearly $39.0 billion. At the present time there is

a surplus; any surplus of tax revenues and earnings on these revenues over benefit payment expenses is available to finance

benefit payments in future periods when tax revenues may be insufficient.

For additional information related to the sustainability of the RRP, BLDBP, and UI refer to RRB’s and DOL’s financial

statements.

Unemployment Trust Fund Solvency

Each state’s accumulated UTF net assets or reserve balance should provide a defined level of benefit payments over a 

defined period. To be minimally solvent, a state’s reserve balance should provide for one year’s projected benefit payment 

needs based on the highest levels of benefit payments experienced by the state over the last 20 years. A ratio of 1.00 or 

greater indicates that the state UTF account balance is minimally solvent. States below this level are vulnerable to exhausting 

their funds in a recession. States exhausting their reserve balance must borrow funds from either FUA or the private markets 

to make benefit payments. During FY 2022, the balances in the FUA and EUCA were depleted and the FUA and EUCA 

borrowed from the General Fund as advances from Treasury. FUA and EUCA outstanding advances were $30.0 billion and 

$9.5 billion, respectively, as of September 30, 2022. Several Unemployment Programs were created due to the COVID-19 

pandemic and funded by the CARES Act. Please refer to Note 29—COVID-19 Activity for additional information.

The results of DOL’s state by state analysis indicate 34 state UTF accounts and the accounts of the D.C., Puerto Rico, 

and the Virgin Islands were below the minimal solvency ratio of 1.00 at September 30, 2022. 
REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) 202

Deferred Maintenance and Repairs

DM&R result from maintenance not being performed on a timely basis and is the estimated cost to bring governmentowned PP&E to an acceptable condition. DM&R exclude the cost of expanding the capacity of assets or upgrading them to 

serve needs different from those originally intended. The consequences of not performing regular maintenance and repairs 

could include increased safety hazards, poor service to the public, higher costs in the future, and inefficient operations. 

Estimated DM&R costs are not accrued in the Statements of Net Cost or recognized as a liability on the Balance Sheets.

The amounts disclosed for DM&R are allowed to be measured using one of the following three methods:

• Condition assessment surveys which are periodic inspections of government-owned property to determine the 

current condition and estimated cost to bring the property to an acceptable condition.

• Life-cycle cost forecast that is an acquisition or procurement technique that considers operation, maintenance, and 

other costs in addition to the acquisition cost of assets.

• Any other method of choice that is similar to the condition assessment survey or life-cycle costing methods.

The table below of DM&R is presented as a single estimate in accordance with SFFAS No. 42, Deferred Maintenance 

and Repairs: Amending Statements of Federal Financial Accounting Standards 6, 14, 29, and 32. These amounts were all 

measured using the condition assessment survey method. Please refer to the individual financial statements of DOD, DOI, 

VA, DOE, USDA, NASA, HHS, GSA, DHS, State, and DOT for additional information on DM&R. 

Deferred Maintenance and Repairs as of September 30, 2022, and 2021

(In billions of dollars) 2022 2021

Asset category:

General property, plant, and equipment .................................................................. 186.8 174.8

Heritage assets ..................................................................................................... 28.1 24.8

Stewardship land ................................................................................................... 0.8 0.7

Total deferred maintenance and repairs................................................................. 215.7 200.3

Other Claims for Refunds

Other claims for refunds are claims filed for which specific administrative actions such as review by the courts are 

required before payments can be made and unasserted claims for refund by taxpayers or importers that may or may not 

become payable depending upon the resolution of subsequent events. As stated in SFFAS No. 7, Accounting for Revenue and 

Other Financing Sources and Concepts for Reconciling Budgetary and Financial Accounting, unasserted claims for refund 

such as unfiled claims for refunds or drawbacks for which no claim has been filed, are not known, therefore estimates are not 

able to be determined, and are not recognized on the Balance Sheet. Claims filed for refunds where required administrative 

actions are not yet complete as of the close of the reporting period may not be known however, the refunds, may be 

reasonably estimable.

Management has estimated amounts that may be paid out as other claims for tax refunds. This estimate represents an 

amount (principal and interest) that may be paid for claims pending judicial review by the federal courts or, internally, by 

appeals. The total estimated payout (including principal and interest) for claims pending judicial review by the federal courts 

is $2.1 billion and $1.5 billion for FYs 2022 and 2021, respectively. For those under appeal, the estimated payout is $1.3 

billion and $1.0 billion for FYs 2022 and 2021, respectively. To the extent judgments against the government for these claims

prompt other similarly situated taxpayers to file similar refund claims, these amounts could become significantly greater.
203 REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

Tax Assessments

The government is authorized and required to make inquiries, determinations, and assessments of all taxes that have not 

been duly paid. Unpaid assessments result from taxpayers filing returns without sufficient payment, as well as enforcement 

programs such as examination, under-reporter, substitute for return, and combined annual wage reporting. Under federal 

accounting standards, unpaid assessments are categorized as taxes receivable if taxpayers agree or a court has determined the 

assessments are owed. If neither of these conditions are met, the unpaid assessments are categorized as compliance 

assessments. Assessments with little or no future collection potential are called write-offs. Although compliance assessments 

and write-offs are not considered receivables under federal accounting standards, they represent legally enforceable claims of 

the government. There is, however, a significant difference in the collection potential between compliance assessments and 

receivables.

Compliance assessments and pre-assessment work in process are $90.9 billion and $83.9 billion for FYs 2022 and 2021, 

respectively. The amount of allowance for uncollectible amounts pertaining to compliance assessments cannot be reasonably 

estimated, and thus the net realizable value of the pre-assessment work-in-process cannot be determined. The amount of 

assessments that entities have statutory authority to collect at the end of the period but that have been written off and 

excluded from accounts receivable are $77.3 billion and $85.5 billion for FYs 2022 and 2021, respectively.

Federal Oil and Gas Resources

The DOI is responsible for managing the nation’s oil and natural gas resources and the mineral revenues on federal 

lands, both onshore and on the Outer Continental Shelf. This management process can be broken down into six essential 

analysis components: pre-leasing, post-leasing and pre-production, production and post-production, revenue collection, fund 

disbursement, and compliance.

Federal Oil and Gas Resources as of September 30, 2022, and 2021

Offshore Onshore Total

(In billions of dollars) 2022 2021 2022 2021 2022 2021

Oil and lease condensate........................ 34.7 30.8 29.1 19.9 63.8 50.7

Natural gas, wet after lease separation .... 2.0 2.3 22.4 20.1 24.4 22.4

Total.................................................... 36.7 33.1 51.5 40.0 88.2 73.1

The above table presents the estimated PV of future federal royalty receipts on estimated proved reserves13 as of 

September 30, 2022, and 2021. The federal government’s estimated petroleum royalties have as their basis the DOE’s EIA 

estimates of proved reserves. The EIA provides such estimates directly for federal offshore areas and they are adjusted to 

extract the federal subset of onshore proved reserves. The federal proved reserves were then further adjusted to correspond 

with the effective date of the actual production for calendar year 2020, the most recently published EIA proved reserves 

report and then are projected, separately for oil and natural gas, over time to simulate a schedule of when the reserves would 

be produced. Future royalties are then calculated from these production streams by applying future price estimates by the 

OMB, production growth estimates from the EIA’s 2022 Annual Energy Outlook, and effective royalty rates, adjusted for 

transportation allowances and other allowable deductions. The valuation method used for gas captures royalties from three 

13 Per the EIA, lease condensate is a mixture consisting primarily of pentanes and heavier hydrocarbons which is recovered as a liquid from natural gas in 

lease separation facilities. This category excludes natural gas plant liquids, such as butane and propane, which are recovered at downstream natural gas 

processing plants or facilities. Also, per the EIA, natural gas, wet after lease separation, is the volume of natural gas remaining after removal of lease 

condensate in lease and/or field separation facilities, if any, and after exclusion of nonhydrocarbon gases where they occur in sufficient quantity to render the 

gas unmarketable. Natural gas liquids may be recovered from volume of natural gas, wet after lease separation, and at natural gas processing plants 

(https://www.eia.gov/dnav/ng/TblDefs/ng_prod_deep_tbldef2.asp).
REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) 204

products–dry gas, wet gas, and natural gas liquids–which collectively are reported as natural gas, wet after lease separation. 

The PV of these royalties are then determined by discounting the revenue stream back to the effective date at a public 

discount rate assumed to be equal to the OMB’s estimates of future 30-year Treasury bill rates. The 30-year rate was chosen 

because this maturity life most closely approximates the productive lives of the proved reserves estimates. 

Estimated Federal Oil and Gas Petroleum Royalties (Proved Reserves)

as of September 30, 2022, and 2021

Average Purchase Average Royalty

Quantity (In millions) Price ($) Rate (%)

Petroleum Category 2022 2021 2022 2021 2022 2021

Oil and lease condensate (Bbl):

Offshore............................................ 4,142.4 5,001.6 92.74 59.43 13.29 13.06 

Onshore............................................ 2,946.7 3,702.5 93.43 57.72 12.38 12.25 

Total................................................ 7,089.1 8,704.1

Natural gas, wet after lease 

separation (Mcf):

Offshore............................................ 3,911.4 5,476.6 6.92 3.71 12.41 11.59 

Onshore............................................ 37,663.1 40,171.3 6.96 3.50 11.22 10.62 

Total................................................ 41,574.5 45,647.9

Bbl = barrels

Mcf = 1,000 cubic feet

The table above provides the estimated quantity, a weighted average purchase price, and a weighted average royalty rate 

by category of estimated federal petroleum royalties at the end of FYs 2022 and 2021.14 The estimated quantities, average 

purchase prices and royalty rates vary by region; the above table reflects an overall weighted average purchase price and 

royalty rate, and is not presented on a regional basis, but is instead calculated based on regional averages. The prices and 

royalty rates are based upon historical (or estimated) averages, excluding prior-period adjustments, if any, and are affected by 

such factors as accounting adjustments and transportation allowances, resulting in effective average prices and royalty rates. 

Prices are valued at the lease rather than at the market center and differ from those used to compute the asset estimated PV,

which are forecasted and discounted based upon OMB economic assumptions. For additional details on federal oil and gas 

resources, refer to the financial statements of DOI. In addition to the oil and gas resources discussed above, the federal 

government also owns oil and gas resources that are not currently under lease. 

14 Gulf of Mexico proved reserves are royalty-bearing volumes. In the Gulf of Mexico, an additional 522.2 million Bbl for FY 2022 and 518.8 million Bbl 

for FY 2021 of proved oil reserves, and 412.0 million Mcf for FY 2022 and 374.4 million Mcf for FY 2021 of proved gas reserves are not reflected in these 

totals as they are estimated to be producible royalty-free under various royalty relief provisions. The NPV of the royalty value of the royalty-free proved 

reserves volumes in the Gulf of Mexico is estimated to be $4.6 billion for FY 2022 and $3.2 billion for FY 2021.
205 REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

Federal Natural Resources Other than Oil and Gas

Federal Natural Resources Other than Oil and Gas as of September 30, 2022, and 2021

(In billions of dollars) 2022 2021

Coal royalties ......................................................................................................... 9.5 8.2

Total ................................................................................................................... 9.5 8.2

The ONRR within DOI is responsible for the management and collection of revenues associated with federal coal leases 

which are managed by the BLM within DOI. The ONRR achieves optimal value by ensuring that all natural resource

revenues are efficiently and accurately collected as well as disbursed to recipients in a timely manner by performing audit and 

revenue compliance activities.

The Mineral Leasing Act of 1920, as amended, and the Mineral Leasing Act for Acquired Lands of 1947, as amended, 

gives DOI the responsibility for coal leasing on approximately 700 million acres of federal mineral estate which includes 570 

million of acres where coal development is allowed. The surface estate of these lands may be under the control of BLM, the 

U.S. Forest Service (within USDA), private or state landowners, or other federal entities. 

Public lands are available for coal leasing after the lands have been evaluated through a multiple-use planning process. 

DOI receives coal leasing revenues from a bonus paid at the time of the lease, an annual rent payment of $3.0 per acre, and 

royalties paid on the value of the coal after it has been mined. The royalty rate for surface-mining methods is 12.5 percent 

and is 8.0 percent for underground mining, and the BLM can approve reduced royalty rates based on maximum economic 

recovery. Regulations that govern BLM’s coal leasing program are contained in Title 43, Groups 3000 and 3400 of the CFR.

The above table presents the estimated PV of future federal coal royalty receipts on estimated recoverable reserves as of 

September 30, 2022, and 2021. The federal government’s estimated coal royalties have as their basis the DOI’s BLM 

estimates of recoverable reserves. The federal recoverable reserves are then further adjusted to correspond with the effective 

date of the analysis and then are projected over time to simulate a schedule of when the reserves would be produced. Future 

royalties are then calculated by applying future price estimates and effective royalty rates, adjusted for transportation 

allowances and other allowable deductions. The PV of these royalties are then determined by discounting the revenue stream 

back to the effective date at a public discount rate assumed to be equal to the OMB’s estimates of future 30-year Treasury bill 

rates. The 30-year rate was chosen because this maturity life most closely approximates the productive lives of the 

recoverable reserves estimates. 

In addition to the coal resources discussed above, the federal government has other natural resources under lease 

contract whereby the lessee is required to pay royalties on the sale of the natural resource. These natural resources include

soda ash, potash (including muriates of potash and langbeinite phosphate), lead concentrate, copper concentrate, and zinc 

concentrate. Soda ash and potash have the largest estimated PV of future royalties. The federal government also owns coal 

resources and certain other natural resources that are not currently under lease. For additional details on federal natural 

resources-other than oil and gas, refer to the financial statements of DOI. 
REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) 206

Land and Permanent Land Rights

Estimated Acreage by Predominant Use as of September 30, 2022

Conservation Total

Commercial and Estimated

(In thousands of acres) Use Preservation Operational Acreage

General Property, Plant, and Equipment Land1:

Acreage - end of current year............................... 55 263 36,414 36,732

Stewardship Land1:

Acreage - end of current year............................... 192,810 1,081,832 12,886 1,287,528

Acreage held for disposal or exchange - end of 

current year........................................................... 12

1

.Land includes land and permanent land rights. Temporary land rights (those for a specified period of time or a limited duration) are

excluded, per SFFAS No. 59.

SFFAS No. 59, Accounting and Reporting of Government Land requires that the estimated acres of land and permanent 

land rights of general PP&E land and stewardship land be presented as unaudited RSI for FYs 2022 through 2025. The 

estimated acreage will transition to note disclosures in FY 2026.

General PP&E land is land used within the ordinary course of business to support the mission of the federal government

and includes land acquired for or in connection with other general PP&E. General PP&E land excludes withdrawn public 

lands or land restricted for conservation, preservation, historical, or other like restrictions. Such land is categorized as

stewardship land. Stewardship land includes both public domain and acquired land and land rights owned by the federal 

government intended to be held indefinitely and the majority was acquired by the government during the first century of the 

nation’s existence. Land rights are interests and privileges held by the entity in land owned by others, such as leaseholds, 

easements, water and waterpower rights, diversion rights, submersion rights, rights-of-way, mineral rights, and other like 

interests in land. General PP&E land rights and stewardship land rights that are for an unspecified period of time or unlimited 

duration are considered permanent land rights and are included in the estimated acreage table above. Land rights that are only 

for a specified period of time or a limited duration are considered temporary land rights. All temporary land rights will 

continue to be recorded under general PP&E and depreciated over their time period after SFFAS No. 59 implementation.

All land and permanent land rights are reported in estimated acres using three predominant use categories including 

commercial use, conservation and preservation, and operational. The reporting of estimated acres of land held for disposal or 

exchange is also required. Commercial use land includes land or land rights that are predominantly used to generate inflows 

of resources from non-federal third parties, usually through special use permits, right-of-way grants, and leases. Examples of 

commercial use land are concession arrangements, grants for specific projects, and sales or land exchanges. Conservation and 

preservation land includes land or land rights that are predominantly used for the conservation of natural resources and 

preservation of buildings, objects, and landscapes. Examples of conservation and preservation land are national parks, 

geological resource sites, and wildlife and plant life refuges. Operational land includes land or land rights predominantly used 

for general or administrative purposes. Examples of operational land include land used for military, scientific, and nuclear 

functions.

Additional information concerning the estimated acres of land and permanent land rights can be obtained from the 

financial statements of DOD, DOE, DOI, and USDA. Please refer to Note 6—General Property, Plant, and Equipment, Net 

and Note 26—Stewardship Property, Plant, and Equipment for additional information concerning general PP&E land and

stewardship land.
207 REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

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OTHER INFORMATION (UNAUDITED) 208

United States Government

Other Information (Unaudited) for the 

Years Ended September 30, 2022, and 2021

Tax Burden

The IRC provides for progressive tax rates, whereby higher earned income is generally subject to higher tax rates. The 

following tables present the latest available information on income tax and related income, deductions, and credit for 

individuals by income level, and for corporations by size of assets.

Individual Income Tax Liability for Tax Year 2020

Average Average

Total Adjusted Income Income

Number of Adjusted Income Gross Tax per Tax as a 

Taxable Gross Income Tax per Return Return Percentage

Returns (In millions (In millions (In whole (In whole of Adjusted

Adjusted Gross Income (In thousands) of dollars) of dollars) dollars) dollars) Gross Income

Under $15,000 ................. 31,045 232,112 491 7,477 16 0.2%

$15,000 under $30,000 ..... 29,265 655,347 12,849 22,394 439 2.0%

$30,000 under $50,000 ..... 29,930 1,173,046 50,346 39,193 1,682 4.3%

$50,000 under $100,000 ... 36,983 2,635,417 192,163 71,260 5,196 7.3%

$100,000 under $200,000 . 22,415 3,060,066 334,648 136,519 14,930 10.9%

$200,000 under $500,000 . 7,615 2,187,229 366,794 287,226 48,167 16.8%

$500,000 or more ............. 1,845 2,923,397 753,251 1,584,497 408,266 25.8%

 Total............................. 159,098 12,866,614 1,710,542
 209 OTHER INFORMATION (UNAUDITED)

Corporate Income Tax Liability for Tax Year 2019

Percentage of

Income Subject Total Income Tax Income Tax After

Total Assets to Tax After Credits Credits to 

(In thousands of dollars) (In millions of dollars) (In millions of dollars) Taxable Income

Zero assets ................................... 26,676 5,240 19.6%

$1 under $500............................... 8,235 1,669 20.0%

$500 under $1,000 ........................ 5,279 1,080 20.5%

$1,000 under $5,000...................... 18,004 3,629 20.2%

$5,000 under $10,000.................... 11,642 2,281 19.6%

$10,000 under $25,000 .................. 15,884 3,122 19.7%

$25,000 under $50,000 .................. 14,549 2,821 19.4%

$50,000 under $100,000 ................ 16,588 3,166 19.1%

$100,000 under $250,000 .............. 25,381 4,781 18.8%

$250,000 under $500,000 .............. 25,573 4,652 18.2%

$500,000 under $2,500,000 ........... 111,437 19,156 17.2%

$2,500,000 or more ....................... 1,453,939 205,533 14.1%

 Total......................................... 1,733,187 257,130

Tax Gap

The gross tax gap is the difference between the amount of tax imposed by law and what taxpayers actually pay on time. 

The tax gap provides an estimate of the level of overall noncompliance and voluntary compliance during the relevant tax 

periods. Tax gap estimates provide periodic appraisals about the nature and extent of noncompliance for use in formulating 

tax administration strategies. Estimating the tax gap is inherently challenging and requires assessing the merits of alternative 

methods, assumptions, and data sources. There is no single approach that can be used for estimating all the components of the

tax gap, so multiple methods are used. The most recent estimates covering the Tax Year 2014-2016 timeframe were released 

in FY 2022.

The gross tax gap is the amount of a tax liability that is not paid voluntarily and on time. The estimated annual average

gross tax gap is $496.0 billion. The gross tax gap is comprised of three components: non-filing, underreporting, and

underpayment. The estimated gross tax gap for each of these components is $39.0 billion, $398.0 billion, and $59.0 billion,

respectively. The gross tax gap estimates are also segmented by type of tax: individual income tax, corporation income tax,

employment tax, and estate and excise tax. The estimated gross tax gap for each of these types of tax is $357.0 billion, $41.0

billion, $93.0 billion, and $5.0 billion, respectively.

The net tax gap is the gross tax gap less tax that subsequently will be paid either late through voluntary payments or

collected through IRS administrative and enforcement activities and is the portion of the gross tax gap that will not be paid. It

is estimated that $68.0 billion of the gross tax gap will eventually be paid resulting in a net tax gap of $428.0 billion. The net

tax gap estimates are also segmented by type of tax: individual income tax, corporation income tax, employment tax, and

estate and excise tax. The estimated net tax gap for each of these types of tax is $306.0 billion, $34.0 billion, $87.0 billion,

and $2.0 billion, respectively. 1 For additional information on the tax gap, refer to Treasury’s financial statements.

1 Individual amounts may not add to totals due to rounding.
OTHER INFORMATION (UNAUDITED) 210

Tax Expenditures

As discussed in greater detail in Note 19—Collections and Refunds of Federal Revenue, tax and other revenues reported 

reflect the effects of tax expenditures, which are special exclusions, exemptions, deductions, tax credits, preferential tax rates,

and tax deferrals that allow individuals and businesses to reduce taxes they may otherwise owe.

Tax expenditures are estimated using data from previous years and the economic forecast from the FY 2023 Midsession 

Review. The largest tax expenditures in FY 2022 are the following (and see the table below):

• The exclusion from workers’ taxable income of employers’ contributions for health care, health insurance 

premiums, and premiums for long-term care insurance;

• The exclusion of contributions to and the earnings of employer defined benefit and defined contribution pension 

funds (minus pension benefits that are included in taxable income);

• Imputed rental income forms part of the total value of goods and services produced in a country. But unlike returns 

from other investments, the return on homeownership “imputed rent” is excluded from taxable income. In contrast, 

landlords must count as income the rent they receive, and renters may not deduct the rent they pay. A homeowner is 

effectively both landlord and renter, but the tax code treats homeowners the same as renters while ignoring their 

simultaneous role as their own landlords and exempting potential rent they would have paid themselves;

• Preferential tax rates on long-term capital gains; and

• Taxpayers who donate capital assets to charitable organizations can deduct the asset’s current value without being 

taxed on any appreciation in value.

Largest Income Tax Expenditures as of September 30, 2022

(In billions of dollars) 2022

Exclusion of employer contributions for medical insurance premiums & health care ............................ 224.5

Defined benefit & defined contribution pension funds ........................................................................ 176.1

Exclusion of net imputed rental income ............................................................................................ 129.0

Preferential tax rates on long term capital gains................................................................................ 112.1

Deductibility of charitable contributions, other than education and health............................................ 55.5

Generally, identifying and measuring a tax expenditure requires defining a baseline tax system against which identified 

tax provisions are exceptions. The tax expenditures prepared for the Budget are estimated relative to a simplified 

comprehensive income tax, which defines income as the sum of consumption and the change in net wealth in a given period 

of time. Tax expenditure estimates do not necessarily equal the increase in federal revenues (or the change in the budget 

balance) that would result from repealing these special provisions, for the following reasons:

• Eliminating a tax expenditure may have incentive effects that alter economic behavior, which can affect the resulting 

magnitudes of the activity or of other tax provisions or government programs. For example, if capital gains were 

taxed at ordinary rates, capital gain realizations would be expected to decline, resulting in lower tax receipts. Such 

behavioral effects are not reflected in the estimates.

• Tax expenditures are interdependent even without incentive effects. Repeal of a tax expenditure provision can 

increase or decrease the tax revenue effect of other provisions. For example, even if behavior does not change, 

repeal of an itemized deduction could increase revenue costs from other deductions as some taxpayers move into 

higher tax brackets. Alternatively, an itemized deduction repeal could lower the revenue foregone from other 

deductions if taxpayers choose to claim the standard deduction over itemizing. Similarly, if two provisions were 

repealed simultaneously, the tax liability increase could be greater or less than the sum of the two separate tax 

expenditures, because each is estimated assuming that the other remains in force.

• Repeal effects may depend on concurrent tax rate changes. Lowering or raising tax rates can decrease or increase the 

estimated revenues from a particular provision. A $10,000 charitable contributions deduction is worth $3,500 in 

corporate tax revenues at a 35.0 percent tax rate, but only $2,100 at a 21.0 percent tax rate.
 211 OTHER INFORMATION (UNAUDITED)

A more comprehensive ranking, including rankings over a 10-year period, and descriptions of tax expenditures can be 

found at the following location from Treasury’s Office of Tax Policy: https://home.treasury.gov/policy-issues/tax-policy/taxexpenditures.

Unmatched Transactions and Balances

Unmatched Transactions and Balances as of September 30, 2022, and 2021

(In millions of dollars) 2022 2021

Statement of Operations and Changes in Net Position:

Custodial transfers non-exchange ..................................................................... - (532.4)

Benefit program revenue/cost............................................................................ 309.6 651.5

Non-reciprocating ............................................................................................. (1,987.2) (3,761.3)

Custodial and non-entity collections transferred out/in......................................... 586.8 629.5

Accrual amounts collected/transferred in............................................................ (83.9) (209.4)

Other............................................................................................................... 1,000.9 3,057.0

(173.8) (165.1)

Balance Sheet:

Accounts payable/receivable............................................................................. 270.2 556.3

Advances from/to others & deferred credits/prepayments.................................... (778.8) (898.3)

Non-reciprocating ............................................................................................. (205.6) (320.2)

Fund balance with Treasury .............................................................................. - (899.2)

Other............................................................................................................... (576.4) (116.1)

(1,290.6) (1,677.5)

Unmatched transactions and balances, net........................................................... (1,464.4) (1,842.6)

( ) Parentheses indicate a decrease to Net Position.

The unmatched transactions and balances are needed to balance the accrual-based financial statements. Both the

Statement of Operations and Changes in Net Position and the Balance Sheet include a line for the unmatched transactions and 

balances, while the unmatched transactions and balances are recorded in existing lines in the Statement of Net Cost, and thus, 

are not reported in the table above. Transactions and balances between federal entities must be eliminated in consolidation to 

calculate the financial position of the government. The amounts included in the table represent intra-governmental activity

and balances that differed between federal entity trading partners and often totaled significantly more in the absolute than the 

net amounts shown. The table also reflects other consolidating adjustments and other adjustments that contributed to the 

unmatched transactions and balances amount. A number of lines in the “Unmatched Transactions and Balances” table were 

adjusted to zero after intra-governmental difference analysis determined they were immaterial at or below $0.1 billion, and 

thus, are not reported in the table above. The adjustments were added to, or subtracted from, gross cost in the Statement of 

Net Cost in the year they were recorded. Unresolved intra-governmental differences (i.e., unmatched transactions and 

balances) result in errors in the consolidated financial statements.

Unmatched transactions and balances between federal entities impact not only in the period in which differences 

originate but also in the periods where differences are resolved. As a result, it would not be proper to conclude that increases 

or decreases in the unmatched amounts shown in the “Unmatched Transactions and Balances” table reflect improvements or 

deteriorations in the government’s ability to resolve intra-governmental transactions. The federal community considers the 

identification and accurate reporting of intra-governmental activity a priority.

The unmatched transactions and balances, net reflects the combined impact that each statement line has on the overall 

net position of the Financial Report.
APPENDIX A 212

Appendix A: Reporting Entity

This appendix lists the entities (consolidation entities, disclosure entities, or related parties) included in the U.S. 

government’s Financial Report. SFFAS No. 47, Reporting Entity, provides guidance for identifying entities that are 

consolidation entities, disclosure entities, and related parties. 

The Financial Report includes all organizations meeting the inclusion principles of: a) budgeted for by elected officials 

of the government; b) owned by the government; and c) controlled by the government with risk of loss or expectation of 

benefits. In addition, the Financial Report includes organizations where it would be misleading to exclude even though the 

organization does not meet any of the three inclusion principles. If an organization meets the inclusion principles, a 

determination of consolidation or disclosure is made.

SFFAS No. 47 identifies consolidation entities as organizations that are consolidated in the financial statements based 

on the assessment of the following characteristics as a whole, the organization: a) is financed through taxes and other nonexchange revenues; b) is governed by the Congress or the President; c) imposes or may impose risks and rewards to the 

government; and d) provides goods and services on a non-market basis. It also includes organizations that would result in 

misleading or incomplete financial statements, if excluded. 

Disclosure entities are entities with which the federal government has relationships that meet the inclusion criteria in 

SFFAS No. 47, but are afforded a greater degree of autonomy than consolidation entities. These entities may maintain a 

separate legal identity, have a governance structure that vests most decision-making authorities in a governing body to 

insulate the organization from political influence, and/or have relative financial independence. Other organizations that are 

owned or controlled by the government as a result of regulatory actions, or other government intervention actions are,

generally, deemed to be disclosure entities if the relationship with the government is not expected to be permanent. 

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

significant influence over the other 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.

1. Consolidation Entities included in the Financial Report:

There are a total of 164 entities that meet the consolidation criteria, and as such are included in the Financial Report. 

The lists below describe three groups of consolidation entities that comprise the consolidated government-wide reporting 

entity for the Financial Report and include entities from all three branches of government.

Twenty-Four Chief Financial Officer Act Consolidation Entities

Department of Agriculture

www.usda.gov

Department of Labor

www.dol.gov

Department of Commerce

www.doc.gov

Department of State

www.state.gov

Department of Defense

www.defense.gov

Department of Transportation

www.dot.gov

Department of Education

www.ed.gov

Department of the Treasury

www.treasury.gov

Department of Energy

www.energy.gov

Department of Veterans Affairs

www.va.gov

Department of Health and Human Services

www.hhs.gov

Environmental Protection Agency

www.epa.gov

Department of Homeland Security

www.dhs.gov

General Services Administration

www.gsa.gov

Department of Housing and Urban Development

www.hud.gov

National Aeronautics and Space Administration

www.nasa.gov

Department of the Interior

www.doi.gov

National Science Foundation

www.nsf.gov

Department of Justice

www.usdoj.gov

Office of Personnel Management

www.opm.gov

Small Business Administration

www.sba.gov

U.S. Agency for International Development

www.usaid.gov

Social Security Administration

www.ssa.gov

U.S. Nuclear Regulatory Commission

www.nrc.gov
 213 APPENDIX A

Sixteen Additional Significant Consolidation Entities

Export-Import Bank of the U.S. 

www.exim.gov

Farm Credit System Insurance Corporation

www.fcsic.gov

Federal Communications Commission

www.fcc.gov

Federal Deposit Insurance Corporation

www.fdic.gov

General Fund of the U.S. Government

www.fiscal.treasury.gov/general-fund

Millennium Challenge Corporation

www.mcc.gov

National Credit Union Administration

www.ncua.gov

National Railroad Retirement Investment Trust

www.rrb.gov

Pension Benefit Guaranty Corporation

www.pbgc.gov

Railroad Retirement Board 

www.rrb.gov

Securities and Exchange Commission

www.sec.gov

Security Assistance Accounts

www.dsca.mil

Smithsonian Institution

www.si.edu

Tennessee Valley Authority

www.tva.com

U.S. International Development Finance Corporation

www.dfc.gov

U.S. Postal Service

www.usps.com

One Hundred Twenty-four Additional Consolidation Entities

400 Years of African-American History Committee for Purchase from People Who Are Blind or 

 Commission Severely Disabled 

Access Board Commodity Futures Trading Commission

Administrative Conference of the U.S. Congressional Budget Office

Advisory Council on Historic Preservation Congressional-Executive Commission on the People’s 

African Development Foundation Republic of China

Alyce Spotted Bear and Walter Soboleff Consumer Product Safety Commission

 Commission on Native Children Corporation for National and Community Service

American Battle Monuments Commission Council of the Inspectors General on Integrity and

Appalachian Regional Commission Efficiency

Architect of the Capitol Court of Appeals for Veterans Claims

Armed Forces Retirement Home Court Services and Offender Supervision Agency for DC

Barry Goldwater Scholarship and Excellence in DC Courts

 Education Foundation DC Courts–Defender Services

Bureau of Consumer Financial Protection Defense Nuclear Facilities Safety Board

Central Intelligence Agency Delta Regional Authority

Chemical Safety and Hazard Investigation Board Denali Commission

Christopher Columbus Fellowship Foundation Dwight D. Eisenhower Memorial Commission

Commission for the Preservation of America’s Election Assistance Commission

 Heritage Abroad Environmental Dispute Resolution Fund

Commission of Fine Arts Equal Employment Opportunity Commission

Commission on Civil Rights Executive Office of the President

Commission on Combating Synthetic Opioid Farm Credit Administration

 Trafficking Federal Election Commission

Commission on International Religious Freedom Federal Financial Institutions Examination Council

Commission on Security and Cooperation in Europe Federal Housing Finance Agency

Commission on the State of U.S. Olympics Federal Labor Relations Authority

 and Paralympics Federal Maritime Commission

Federal Mediation and Conciliation Service National Security Commission on Artificial Intelligence

Federal Mine Safety and Health Review Commission National Transportation Safety Board

Federal Permitting Improvement Steering Council Neighborhood Reinvestment Corporation

Federal Trade Commission Northern Border Regional Commission

Government Accountability Office Nuclear Waste Technical Review Board

Government Publishing Office Occupational Safety and Health Review Commission
APPENDIX A 214

Gulf Coast Ecosystem Restoration Council Office of Congressional Workplace Rights

Harry S. Truman Scholarship Foundation Office of Government Ethics

House of Representatives Office of Navajo and Hopi Indian Relocation

Institute of Museum and Library Services Office of Nuclear Waste Negotiator*

Intelligence Community Management Account Office of Special Counsel

Inter-American Foundation Open World Leadership Center

International Trade Commission Patient Centered Outcomes Research Trust Fund

James Madison Memorial Fellowship Foundation Peace Corps

Japan-U.S. Friendship Commission Presidio Trust

John C. Stennis Center for Public Service Privacy and Civil Liberties Oversight Board

 Training and Development Public Buildings Reform Board

John F. Kennedy Center for the Performing Arts Public Defender Service for the DC

Judiciary Selective Service System

Library of Congress Senate Commission on Art

Marine Mammal Commission Southeast Crescent Regional Commission

Medicaid and Children’s Health Insurance Program St. Lawrence Seaway Development Corporation

 Payment and Access Commission State Justice Institute

Medicare Payment Advisory Commission Surface Transportation Board

Merit Systems Protection Board Thrift Savings Fund

Military Compensation and Retirement Modernization U.S. Agency for Global Media

 Commission* U.S. Capitol Police

Morris K. Udall and Stewart L. Udall U.S. Capitol Preservation Commission

 Foundation U.S. China Economic and Security Review Commission

National Archives and Records Administration U.S. Holocaust Memorial Museum

National Capital Planning Commission U.S. Institute of Peace

National Commission on Military Aviation Safety U.S. Interagency Council on Homelessness

National Commission on Military, National and Public U.S. Semiquincentennial Commission

 Service U.S. Senate

National Council on Disability U.S. Tax Court

National Endowment for the Arts U.S. Trade and Development Agency

National Endowment for the Humanities Vietnam Education Foundation

National Gallery of Art Western Hemisphere Drug Policy Commission

National Labor Relations Board Women’s Suffrage Centennial Commission

National Mediation Board Woodrow Wilson International Center for Scholars

National Railroad Passenger Corporation, Office of the WWI Centennial Commission

 Inspector General

*These entities are no longer active and have either returned all remaining fund balances to Treasury during FY 2022 or have 

remaining fund balances pending final return to Treasury as of September 30, 2022.
 215 APPENDIX A

2. Disclosure Entities and Related Parties of the Financial Report

The entities included below, after considering various factors including quantitative and qualitative materiality, meet the 

criteria of SFFAS No. 47 to be reported as disclosure entities or related parties in the Financial Report. Information about the 

government’s relationship with these entities is disclosed in Note 27—Disclosure Entities and Related Parties. Additionally, 

component entities have also identified additional disclosure entities and related parties that do not meet the qualitative or 

quantitative criteria in SFFAS No. 47 to be reported in the Financial Report and are not included in the entities below. The 

component entity of each disclosure entity is provided in the brackets below. Refer to the financial statements of the 

component entities for more information on additional disclosure entities and related parties.

Disclosure Entities

Amtrak (National Railroad Passenger Service Corp) [DOT]

Federal Home Loan Mortgage Corporation (Freddie Mac) [Treasury]/[FHFA] 

Federal National Mortgage Association (Fannie Mae) [Treasury]/[FHFA]

Federal Reserve System [Treasury]

Special Purpose Vehicles [Treasury]

Related Parties 

Federal Home Loan Banks [FHFA]

International Monetary Fund and Multilateral Development Banks [Treasury]

Private Export Funding Corporation [EXIM]
APPENDIX B 216

Appendix B: Glossary of Acronyms

This is the current list of acronyms used in the Financial Report. 

APM Alternative Payment Models

ARP American Rescue Plan Act of 2021

ASC Accounting Standards Codification

AT&T American Telephone & Telegraph Company

BBA Bipartisan Budget Act

Bbl Barrels

BIA Bureau of Indian Affairs

BIL Bipartisan Infrastructure Law

BLDBP Black Lung Disability Benefit Program

BLDTF Black Lung Disability Trust Fund

BLM Bureau of Land Management

BPA Bonneville Power Administration 

BRS Blended Retirement System

BTFA Bureau of Trust Funds Administration 

Budget Budget of the U.S. Government

CAA Consolidated Appropriations Act, 2021

CARES Act Coronavirus Aid, Relief and Economic Security Act

CBO Congressional Budget Office

CERCLA Comprehensive Environmental Response, Compensation, and Liability Act

CFO Chief Financial Officers

CFO Act Chief Financial Officers Act of 1990

CFR Code of Federal Regulations 

CMS Centers for Medicare & Medicaid Services

COLA Cost of Living Adjustments

COVID-19 Coronavirus Disease 2019

CPI Consumer Price Index

CPIM Consumer Price Index–Medical

CSRDF Civil Service Retirement and Disability Fund

CSRS Civil Service Retirement System

D.C. District of Columbia 

DERP Defense Environmental Restoration Program 

DHS Department of Homeland Security

DI Disability Insurance

DIF Deposit Insurance Fund

DM&R Deferred Maintenance and Repairs

DOC Department of Commerce

DOD Department of Defense

DOE Department of Energy

DOI Department of the Interior
217 APPENDIX B

DOJ Department of Justice

DOL Department of Labor

DOT Department of Transportation

Education Department of Education

EIA Energy Information Administration

EIDL Economic Injury Disaster Loan 

EIP Economic Impact Payment

EO Executive Order

EPA Environmental Protection Agency

ESF Exchange Stabilization Fund

ESPC Energy Savings Performance Contract

EUCA Extended Unemployment Compensation Account 

EXIM Bank Export-Import Bank of the U.S.

Fannie Mae Federal National Mortgage Association

FASAB Federal Accounting Standards Advisory Board

FASB Financial Accounting Standards Board

FCC Federal Communications Commission

FCIC Federal Crop Insurance Corporation

FCSIC Farm Credit System Insurance Corporation

FDIC Federal Deposit Insurance Corporation

FECA Federal Employees’ Compensation Act

Federal Reserve Act Federal Reserve Act of 1913

Federal Reserve Board Federal Reserve Board of Governors

FEGLI Federal Employees’ Group Life Insurance

FEMA Federal Emergency Management Agency

FERS Federal Employees’ Retirement System

FFEL Federal Family Education Loan

FFMIA Federal Financial Management Improvement Act of 1996

FHA Federal Housing Administration

FHFA Federal Housing Finance Agency

FHLBanks Federal Home Loan Banks

FHWA Federal Highway Administration

FICA Federal Insurance Contribution Act

Financial Report Financial Report of the U.S. Government

FirstNet First Responder Network Authority

FOMC Federal Open Market Committee

FR System Federal Reserve System

FRB Federal Reserve Banks

FRBB Federal Reserve Bank of Boston

FRBNY Federal Reserve Bank of New York

Freddie Mac Federal Home Loan Mortgage Corporation

FRN Floating Rate Notes

FRTIB Federal Retirement Thrift Investment Board

FTO Fine Troy Ounce
APPENDIX B 218

FUA Federal Unemployment Account

FV Fair Value 

FY Fiscal Year

GAAP U.S. Generally Accepted Accounting Principles

GAO U.S. Government Accountability Office

GDP Gross Domestic Product

General Fund General Fund of the U.S. Government

Ginnie Mae Government National Mortgage Association

GSA General Services Administration

GSE Government-Sponsored Enterprise

HHS Department of Health and Human Services

HI Hospital Insurance

HQM High Quality Market

HUD Department of Housing and Urban Development 

IIJA Infrastructure Investment and Jobs Act

IIM Individual Indian Monies

IMF International Monetary Fund

IRC Internal Revenue Code

IRS Internal Revenue Service

LLC Limited Liability Company 

LP Limited Partnership

LPR Lawful Permanent Resident

MAC Moving Average Cost

MACRA Medicare Access and Children’s Health Insurance Program Reauthorization Act of 2015

MBS Mortgage-Backed Securities

Mcf One Thousand Cubic Feet

MD&A Management Discussion & Analysis 

MDB Multilateral Development Banks

MERHCF Medicare Eligible Retiree Health Care Fund

MHPI Military Housing Privatization Initiative 

MLF Municipal Liquidity Facility LLC

MRF Military Retirement Fund 

MSF Main Street Facilities LLC

MTF Military Treatment Facilities

MTS Monthly Treasury Statement

NAB New Arrangements to Borrow

NASA National Aeronautics and Space Administration

NAV Net Asset Value

NCUA National Credit Union Administration

NCUSIF The National Credit Union Share Insurance Fund

NDAA National Defense Authorization Act

NFIP National Flood Insurance Program

NPV Net Present Value

NRRIT National Railroad Retirement Investment Trust

NTIA National Telecommunication and Information Administration

NWPA Nuclear Waste Policy Act of 1982
219 APPENDIX B

OASDI Old-Age, Survivors, and Disability Insurance

OASI Old-Age and Survivors Insurance

OM&S Operating Materials and Supplies

OMB Office of Management and Budget

ONRR Office of Natural Resources Revenue

OPEB Other Postemployment Benefits

OPM Office of Personnel Management

ORB Other Retirement Benefits

P3s Public-Private Partnerships

PACT Act Sergeant First Class Heath Robinson Honoring Our Promise to Address Comprehensive Toxics Act 

of 2022

PAYGO Pay As You Go

PBGC Pension Benefit Guaranty Corporation

PCE Personal Consumption Expenditures 

PEFCO Private Export Funding Corporation

P.L. Public Law

PPACA Patient Protection and Affordable Care Act

PP&E Property, Plant, and Equipment

PPP Paycheck Protection Program

PSRHB Fund Postal Service Retiree Health Benefits Fund

PV Present Value

QSMO Quality Service Management Office

R&D Research and Development 

RCRA Resource Conservation and Recovery Act

RRB Railroad Retirement Board

RRP Railroad Retirement Program

RSI Required Supplementary Information

SAA Security Assistance Accounts

SARA Superfund Amendments and Reauthorization Act of 1986

SBA Small Business Administration

SCSIA Statements of Changes in Social Insurance Amounts

SDR Special Drawing Rights

SEC Securities and Exchange Commission 

SECA Self-Employment Contributions Act

SFA Special Financial Assistance

SFFAS Statement of Federal Financial Accounting Standards

SGLI Service Members Group Life Insurance

SLGS State and Local Government Series

SLTFP Statements of Long-Term Fiscal Projections

SMI Supplementary Medical Insurance

Smithsonian Smithsonian Institution

SNF Spent Nuclear Fuel

SOMA System Open Market Account

SOSI Statements of Social Insurance

SPSPA Senior Preferred Stock Purchase Agreement
APPENDIX B 220

SPV Special Purpose Vehicle

SSA Social Security Administration

State Department of State

TALF Term Asset Backed Securities II LLC

TCJA Tax Cuts and Jobs Act of 2017

TFL TRICARE for Life

TIPS Treasury Inflation-Protected Securities

TNC Yield Curve for Treasury Nominal Coupon Issues

Treasury Department of the Treasury

TRIP Terrorism Risk Insurance Program

TSF Thrift Savings Fund

TSP Thrift Savings Plan

TSP’s G Fund Thrift Savings Plan’s Government Securities Investment Fund 

TTD Time-to-Death

TVA Tennessee Valley Authority

UI Unemployment Insurance

U.S. United States

U.S.C. United States Code

USCG United States Coast Guard 

USDA U.S. Department of Agriculture

USPS United States Postal Service

UTF Unemployment Trust Fund

VA Department of Veterans Affairs

VR&E Vocational Rehabilitation and Employment

WHO World Health Organization
221 APPENDIX B

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U.S. GOVERNMENT ACCOUNTABILITY OFFICE INDEPENDENT AUDITOR’S REPORT 222

Independent Auditor’s Report

The President

The President of the Senate

The Speaker of the House of Representatives

In our audits of the U.S. government’s consolidated financial statements as of and for the fiscal years 

ended September 30, 2022, and 2021, we found the following:

• Certain material weaknesses1 in internal control over financial reporting and other limitations on the 

scope of our work resulted in conditions that continued to prevent us from expressing an opinion on 

the accompanying accrual-based consolidated financial statements as of and for the fiscal years 

ended September 30, 2022, and 2021.2

• 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 accompanying sustainability financial statements,3

which consist of the 2022 and 2021 Statements of Long-Term Fiscal Projections;4 the 2022, 2021, 

2020, 2019, and 2018 Statements of Social Insurance;5 and the 2022 and 2021 Statements of 

1A 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.

2The 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. We previously reported that certain material weaknesses and, for some years, other limitations on the scope of our 

work prevented us from expressing an opinion on the accrual-based consolidated financial statements of the U.S. government 

for fiscal years 1997 through 2021.

3We have previously reported that significant uncertainties prevented us from expressing an opinion on the sustainability 

financial statements (Statements of Social Insurance for fiscal years 2010 through 2021 and Statements of Long-Term Fiscal 

Projections for fiscal years 2015 through 2021). The Statements of Social Insurance were first presented for fiscal year 2006, 

and the Statements of Long-Term Fiscal Projections were first presented for fiscal year 2015.

4The 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 gross domestic product (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 shows 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.

5The 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. 
223 U.S. GOVERNMENT ACCOUNTABILITY OFFICE INDEPENDENT AUDITOR’S REPORT

Changes in Social Insurance Amounts. 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.

This audit report discusses the following in more detail.

• Our report on the accompanying consolidated financial statements, which includes (1) two 

emphasis of matters—long-term fiscal challenges and equity investments in the Federal National 

Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie 

Mac); (2) an other matter regarding information on Chief Financial Officers Act of 1990 (CFO Act) 

agency financial management systems; and (3) required supplementary information (RSI) included 

with the consolidated financial statements.6

• Our report on internal control over financial reporting. 

• Our report on compliance with laws, regulations, contracts, and grant agreements. 

• The Department of the Treasury’s and the Office of Management and Budget’s (OMB) comments 

on a draft of this audit report.

Appendix I discusses our audit objectives, scope, and methodology. 

Report on the Consolidated Financial Statements

Disclaimers of Opinion 

The Secretary of the Treasury, in coordination with the Director of OMB, is required to annually submit 

audited financial statements for the U.S. government to the President and Congress. GAO is required 

to audit these statements. The consolidated financial statements consist of the

• accrual-based consolidated financial statements, comprising 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 and 

• sustainability financial statements, comprising the 2022 and 2021 Statements of Long-Term Fiscal 

Projections; the 2022, 2021, 2020, 2019, and 2018 Statements of Social Insurance; the 2022 and 

2021 Statements of Changes in Social Insurance Amounts; and related notes to the financial 

statements. 

6The RSI consists of Management’s Discussion and Analysis and information in the Required Supplementary Information 

section of the Fiscal Year 2022 Financial Report of the United States Government, which are included with the consolidated 

financial statements. 
U.S. GOVERNMENT ACCOUNTABILITY OFFICE INDEPENDENT AUDITOR’S REPORT 224

Accrual-Based Consolidated Financial Statements 

Because of the significance of the related matters described in the Basis for Disclaimers of Opinion 

section below, we were not able to obtain sufficient appropriate audit evidence to provide a basis for 

an audit opinion on the accompanying accrual-based consolidated financial statements. 

Accordingly, we do not express an opinion on the accrual-based consolidated financial statements.

Sustainability Financial Statements

Because of the significance of the related matters described in the Basis for Disclaimers of Opinion 

section below, we were not able to obtain sufficient appropriate audit evidence to provide a basis for 

an audit opinion on the accompanying sustainability financial statements. Accordingly, we do not 

express an opinion on the sustainability financial statements.

We considered the limitations on the scope of our work regarding the accrual-based consolidated 

financial statements and the sustainability financial statements in forming our conclusions. We 

performed sufficient audit work to provide this report on the consolidated financial statements. We 

performed our work in accordance with U.S. generally accepted government auditing standards.

Basis for Disclaimers of Opinion 

Accrual-Based Consolidated Financial Statements 

The federal government is not able to demonstrate the reliability of significant portions of the 

accompanying accrual-based consolidated financial statements as of and for the fiscal years ended 

September 30, 2022, and 2021, principally because of limitations related to certain material 

weaknesses in internal control over financial reporting and other limitations affecting the reliability of 

these financial statements and the scope of our work.7 As a result of these limitations, readers are 

cautioned that amounts reported in the accrual-based consolidated financial statements and related 

notes may not be reliable.

The federal government did not maintain adequate systems or have sufficient appropriate evidence to 

support certain material information reported in the accompanying accrual-based consolidated financial 

statements. The underlying material weaknesses in internal control, which generally have existed for 

years, contributed to our disclaimer of opinion on the accrual-based consolidated financial statements. 

Specifically, these weaknesses concerned the federal government’s inability to

• satisfactorily determine that property, plant, and equipment and inventories and related property, 

primarily held by the Department of Defense (DOD), were properly reported in the accrual-based 

consolidated financial statements; 

7Such limitations include the following: (1) The Department of Defense received a disclaimer of opinion on its fiscal years 2022 

and 2021 financial statements. (2) The Small Business Administration (SBA) 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. 
225 U.S. GOVERNMENT ACCOUNTABILITY OFFICE INDEPENDENT AUDITOR’S REPORT

• reasonably estimate the value of loans receivable and loan guarantee liabilities, most notably at the 

Small Business Administration (SBA) and the Department of Education;

• reasonably estimate or adequately support amounts reported for certain liabilities, such as

environmental and disposal liabilities, or determine whether commitments and contingencies were 

complete and properly reported; 

• support significant portions of the reported total net cost of operations, most notably related to DOD, 

SBA, and Education, and adequately reconcile disbursement activity at certain federal entities;

• adequately account for intragovernmental activity and balances between federal entities; 

• reasonably assure that the consolidated financial statements are (1) consistent with the underlying 

audited entities’ financial statements, (2) properly balanced, and (3) in accordance with U.S. 

generally accepted accounting principles; and 

• reasonably assure that the information in the (1) Reconciliations of Net Operating Cost and Budget 

Deficit and (2) Statements of Changes in Cash Balance from Budget and Other Activities is 

complete, properly supported, and consistent with the underlying information in the audited entities’ 

financial statements and other financial data.

These material weaknesses continued to (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. Because of these material weaknesses and other limitations on the scope of our work 

discussed below, additional issues may exist that were not identified and could affect the accrual-based 

consolidated financial statements. Appendix II describes these material weaknesses in more detail and 

highlights the primary effects of these material weaknesses on the accompanying accrual-based 

consolidated financial statements, the sustainability financial statements, and the management of 

federal government operations.

In addition, the federal government did not adequately account for and report on the Special Financial 

Assistance (SFA) program established by the American Rescue Plan Act of 2021.8 The SFA program is 

to provide payments to eligible multiemployer pension plans to enable them to pay benefits at plan 

levels through 2051. Plans are not required to repay amounts received from the SFA program, which is 

funded by appropriations from the General Fund of the U.S. Government.9

Total cost of payments to eligible multiemployer pension plans under the SFA program is estimated to 

range from $66 billion to $100 billion, with an estimated mean of $83 billion.10 Fiscal year 2021 liabilities 

8Pub. L. No. 117-2, § 9704, 135 Stat. 4, 190-99 (Mar. 11, 2021), classified at 29 U.S.C. §§ 1305(i), 1432.

9The General Fund is a component of Treasury’s central accounting function. It is a stand-alone reporting entity that comprises 

the activities fundamental to funding the federal government (e.g., issued budget authority, cash activity, and debt financing 

activities).

10See Pension Benefit Guaranty Corporation, FY 2021 Projections Report (Sept. 2022), accessed on Feb. 8, 2023, 

https://www.pbgc.gov/sites/default/files/documents/fy-2021-projections-report.pdf.
U.S. GOVERNMENT ACCOUNTABILITY OFFICE INDEPENDENT AUDITOR’S REPORT 226

and net costs were reduced by $60 billion, representing the previously recorded multiemployer plan 

liability related to those plans expected to be eligible to receive SFA program payments. However, 

while the cost and liability reduction assumed that the SFA program payments would be made, the 

federal government did not recognize the liabilities and costs related to the estimated SFA program 

payments to those plans. In fiscal year 2022, the federal government approved SFA program 

applications for $7.6 billion and recorded the related cost. 

Sustainability Financial Statements

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

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

affect the sustainability financial statements. In addition, the material weakness related to the 

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

Balance from Budget and Other Activities hampers the federal government’s ability to demonstrate the 

reliability of historical budget information used for certain key inputs to the 2022 and 2021 Statements 

of Long-Term Fiscal Projections. As a result of these significant uncertainties and this material 

weakness, readers are cautioned that amounts reported in the 2022 and 2021 Statements of LongTerm Fiscal Projections; the 2022, 2021, 2020, 2019, and 2018 Statements of Social Insurance; the 

2022 and 2021 Statements of Changes in Social Insurance Amounts; and related notes to these 

financial statements may not fairly present, in all material respects, the sustainability information for 

those years in accordance with U.S. generally accepted accounting principles.

These significant uncertainties primarily arise from the following:

• Medicare projections in the 2022 and 2021 Statements of Long-Term Fiscal Projections and the 

2022, 2021, 2020, 2019, and 2018 Statements of Social Insurance were based on benefit formulas 

under current law and included a significant reduction in Medicare payment rate updates for 

productivity improvements for most categories of Medicare providers,11 based on full 

implementation of the provisions of the Patient Protection and Affordable Care Act, as amended 

(PPACA),12 and physician payment updates specified by the Medicare Access and CHIP 

Reauthorization Act of 2015 (MACRA).13

• Management14 has noted that certain features of current law may result in some challenges for the 

Medicare program, including physician payments, payment rate updates for most nonphysician 

categories, and productivity adjustments. The financial projections under current law presented in 

the 2022, 2021, 2020, 2019, and 2018 Statements of Social Insurance reflect substantial, but very 

uncertain, cost savings deriving from current-law provisions that lower increases in Medicare 

11Under the Patient Protection and Affordable Care Act’s productivity adjustment provisions, productivity improvements are 

expected to result in lower overall Medicare spending because of smaller annual increases in the Medicare payment rates paid 

to many health care providers. This is often referred to as a reduction in Medicare payment rate updates. The health care 

provider categories affected include inpatient and outpatient hospital services, skilled nursing facilities, home health care, 

ambulance, ambulatory surgical centers, durable medical equipment, and prosthetics.

12Pub. L. No. 111-148, 124 Stat. 119 (Mar. 23, 2010), as amended by the Health Care and Education Reconciliation Act of 

2010, Pub. L. No. 111-152, 124 Stat. 1029 (Mar. 30, 2010). In this report, references to PPACA include any amendments 

made by the Health Care and Education Reconciliation Act of 2010.

13Pub. L. No. 114-10, title I, § 101, 129 Stat. 87, 89 (Apr. 16, 2015). MACRA included many provisions that affect Medicare, 

including the repeal of the sustainable growth rate formula for calculating annual updates to Medicare reimbursement payment 

rates to physicians and certain nonphysician medical providers, and established an alternative set of annual updates.

14Management, as used in this audit report, refers to the management of the federal government.
227 U.S. GOVERNMENT ACCOUNTABILITY OFFICE INDEPENDENT AUDITOR’S REPORT

payment rates to most categories of health care providers. Without fundamental change in the 

current delivery system, these adjustments would probably not be viable indefinitely. Should 

payment rates prove to be inadequate for any service, beneficiaries’ access to and the quality of 

Medicare benefits would deteriorate over time, or future legislation would need to be enacted that 

would likely increase program costs beyond those projected under current law. The extent to which 

actual future costs exceed the amounts projected under current law because of changes to the 

scheduled reductions in Medicare payment rate updates for productivity adjustments and specified 

physician payment updates depends on both the specific changes that might be enacted and 

whether enacted legislation would include further provisions to help offset such costs. 

Consequently, there are significant uncertainties concerning the achievement of these projected 

reductions in Medicare payment rate updates.

• Management has developed an illustrative alternative projection intended to provide additional 

context regarding the long-term sustainability of the Medicare program and to illustrate and quantify 

the potential understatement in the Statement of Social Insurance projections. The present value of

future estimated expenditures in excess of future estimated revenue for Medicare, included in the 

illustrative alternative projection in Note 25, Social Insurance, exceeds the $52.5 trillion estimate in 

the 2022 Statement of Social Insurance by $11.3 trillion. 

• Management noted that these significant uncertainties about projected reductions in health care 

cost growth also affect the projected Medicare and Medicaid costs reported in the 2022 and 2021 

Statements of Long-Term Fiscal Projections.

Projections of Medicare costs are sensitive to assumptions about future policy decisions and consumer, 

employer, and health care provider behavioral responses as policy, incentives, and the health care 

sector change over time. Such secondary effects are not fully reflected in the sustainability financial 

statements but could be expected to influence the excess cost growth rate used in the projections.15

Key drivers of uncertainty about the excess cost growth rate include the future development and 

deployment of medical technology, the evolution of personal income, and the cost and availability of 

insurance, as well as federal policy changes. As discussed in the RSI section of the 2022 Financial 

Report of the United States Government (2022 Financial Report), the projections are very sensitive to 

changes in the health care cost growth assumption.

As discussed in Notes 24, Long-Term Fiscal Projections, and 25, Social Insurance, to the consolidated 

financial statements, the sustainability financial statements are based on management’s assumptions. 

These sustainability financial statements present the present value of the U.S. government’s estimated 

future receipts and spending using a projection period sufficient to illustrate long-term sustainability.16

The sustainability financial statements are intended to aid users in assessing whether future resources 

will likely be sufficient to sustain public services and to meet obligations as they come due. 

In preparing the sustainability financial statements, management selects assumptions and data that it 

believes provide a reasonable basis to illustrate whether current policy is sustainable. As discussed in 

15The excess cost growth rate is the increase in health care spending per person relative to the growth of GDP per person 

after removing the effects of demographic changes on health care spending.

16The projection period used in the Statements of Long-Term Fiscal Projections is 75 years. The projection period for the 

Statements of Social Insurance is 75 years for the Social Security, Medicare, and Railroad Retirement social insurance 

programs and 25 years for the Black Lung program.
U.S. GOVERNMENT ACCOUNTABILITY OFFICE INDEPENDENT AUDITOR’S REPORT 228

the 2022 Financial Report, current policy is based on current law but includes several adjustments. In 

the Statements of Long-Term Fiscal Projections, notable adjustments to current law include

• projected spending, receipts, and borrowing levels assume raising or suspending the current 

statutory limit on federal debt; 

• continued discretionary appropriations are assumed throughout the projection period; 

• scheduled Social Security and Medicare Hospital Insurance (Part A) benefit payments are assumed 

to occur beyond the projected point of trust fund depletion; and

• many mandatory programs with expiration dates prior to the end of the 75-year projection period 

are assumed to be reauthorized.

In the Statements of Social Insurance, the one adjustment to current law is that scheduled Social 

Security and Medicare Part A benefit payments are assumed to occur beyond the projected point of 

trust fund depletion. Assumptions underlying such sustainability information do not consider changes in 

policy or all potential future events that could affect future revenue and expenditures and, hence, 

sustainability. Also, the projections assume that debt could continuously rise without severe economic 

consequences. The RSI section of the 2022 Financial Report includes unaudited information on how 

changes in various assumptions would affect the Statements of Long-Term Fiscal Projections and 

Statements of Social Insurance. The projections in the sustainability financial statements are not 

forecasts or predictions. 

The 2022 sustainability financial statements are based on the economic assumptions that underlie the 

2022 Social Security Trustees’ Report. Those assumptions include the Trustees’ best estimates of the 

remaining effects of the COVID-19 pandemic. In the Statements of Long-Term Fiscal Projections, it was 

not possible to identify the portion of 2022 Medicaid spending that reflected temporary spending 

increases related to the COVID-19 pandemic. Future Medicaid outlays were projected from these 2022 

outlays, resulting in higher projections of future Medicaid spending, which increases the uncertainty 

surrounding the projections. 

As discussed in the unaudited RSI section of the 2022 Financial Report, the combined Social Security 

trust funds are projected to be depleted in 2035.17 Further, based on the achievement of the cost 

growth reductions discussed above, the Medicare Part A trust fund is projected to be depleted in 2028. 

After depletion, the trust funds would be unable to pay the full amount of scheduled benefits. For Social 

Security, future revenues were projected to be sufficient to pay 80 percent of scheduled benefits in 

2035, the year of projected combined trust funds depletion, and decreasing to 74 percent of scheduled 

benefits in 2096. For Medicare Part A, future revenues were projected to be sufficient to pay 90 percent 

of scheduled benefits in 2028, the year of projected trust fund depletion, declining to 80 percent by 

2046, and then increasing to 93 percent of scheduled benefits in 2096.

Because of the large number of factors that affect the sustainability financial statements and the fact 

that future events and circumstances cannot be projected with certainty, even if current policy is 

continued, there will be differences between the projections in the sustainability financial statements 

and the actual results, and those differences may be material.

17The projected depletion date for the combined Social Security trust funds is hypothetical and often used for simplicity to 

illustrate the solvency of the Social Security program by combining the separate Federal Old-Age and Survivors Insurance 

trust fund and the Federal Disability Insurance trust fund. For the Federal Old-Age and Survivors Insurance trust fund, future 

revenues were projected to be sufficient to pay 77 percent of scheduled benefits in 2034, the year of projected trust fund 

depletion, decreasing to 72 percent in 2096. For the Federal Disability Insurance trust fund, asset reserves are not projected to 

become depleted during the 75-year period ending in 2096. 
229 U.S. GOVERNMENT ACCOUNTABILITY OFFICE INDEPENDENT AUDITOR’S REPORT

Other Limitations on the Scope of Our Work

For fiscal years 2022 and 2021, there were other limitations on the scope of our work, in addition to the 

material weaknesses and significant uncertainties noted above, that contributed to our disclaimers of 

opinion on the consolidated financial statements. Such limitations primarily relate to our ability to obtain 

adequate representations from management regarding the financial statements. Treasury and OMB 

depend on representations from certain federal entities to provide their representations to us regarding 

the U.S. government’s consolidated financial statements. Treasury and OMB were unable to provide us 

with adequate representations regarding the U.S. government’s accrual-based consolidated financial 

statements for fiscal years 2022 and 2021, primarily because certain federal entities were not able to 

provide them sufficient representations.

Emphasis of Matters

The following matters deserve emphasis to put the information in the consolidated financial statements 

and the Management’s Discussion and Analysis section of the 2022 Financial Report into context. Our 

disclaimers of opinion are not modified with respect to these matters.

Long-Term Fiscal Challenges

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

Fiscal Projections, to the consolidated financial statements and the unaudited RSI section of the 2022 

Financial Report show that based on current revenue and spending policies, the federal government 

continues to face an unsustainable long-term fiscal path. At the end of fiscal year 2022, debt held by 

the public was approximately 97 percent of gross domestic product (GDP). The projections show that 

debt held by the public will reach its historical high of 106 percent of GDP in 2029 and will grow faster 

than the economy over the long term. For the 2022 projections, debt held by the public as a share of 

GDP (debt-to-GDP) at the end of the 75-year projection period is projected to be 566 percent. Annual 

budget deficits are projected to continue throughout the 75-year projection period. Over the long term, 

the imbalance between spending and revenue that is built into current policy and law is projected to 

lead to continued growth of debt-to-GDP. This situation—in which debt held by the public grows faster 

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

Under the 2022 Financial Report projections, spending for major health and retirement programs will 

increase more rapidly than GDP in the coming decades, in part because of an aging population and 

projected continued increases in health care costs. These projections for Social Security and Medicare 

are based on the same assumptions underlying the information presented in the Statement of Social 

Insurance and assume that the provisions enacted in PPACA designed to slow the growth of Medicare 

costs are sustained and remain in effect throughout the projection period. The projections also reflect 

the effects of MACRA, which, among other things, revised the methodology for determining physician 

payment rates. If, however, the Medicare cost containment measures and physician payment rate 

methodology are not sustained over the long term—concerns expressed by the Trustees of the 

Medicare trust funds, the Centers for Medicare & Medicaid Services’ Chief Actuary, the Congressional 

Budget Office (CBO), and others—spending on federal health care programs will grow more rapidly 

than assumed in the projections. 

In addition, based on the 2022 Financial Report projections, spending on net interest (primarily interest 

on debt held by the public) will surpass Social Security spending and become the largest category of 

spending in 2036. Net interest is projected to increase from 1.9 percent of GDP in fiscal year 2022 to 

6.0 percent of GDP in fiscal year 2036 (about 21 percent of 2036 projected total spending), and to 25.6 

percent of GDP in fiscal year 2097 (about 52 percent of 2097 projected total spending).
U.S. GOVERNMENT ACCOUNTABILITY OFFICE INDEPENDENT AUDITOR’S REPORT 230

GAO and CBO also prepare long-term federal fiscal simulations, which continue to show debt-to-GDP 

rising in the long term.18 GAO, CBO, and the 2022 Financial Report all project that debt-to-GDP will 

surpass its historical high (106 percent in 1946) by 2031. Each of these projections uses somewhat 

different assumptions, but their overall conclusions are the same: based on current revenue and 

spending policies, the federal government’s long-term fiscal path is unsustainable.

Further, these projections do not fully account for 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, also known as fiscal exposures, 

place additional pressure on the federal budget. They result in responsibilities, programs, and activities 

that may legally commit or create expectations for future federal spending based on current policy, past 

practices, or other factors. A more complete understanding of fiscal exposures can help policymakers 

anticipate changes in future spending and can enhance oversight of federal resources. 

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—over a 75-year period (fiscal years 

2023 through 2097), they would need to make policy changes that increase projected revenues by 26 

percent, reduce projected noninterest spending by 21 percent, or a combination of the two, over this 

period. The projections show that the longer policy changes are delayed, the more significant the 

changes will need to be.

Equity Investments in Fannie Mae and Freddie Mac

As discussed in Notes 8, Investments in Government-Sponsored Enterprises, and 20, Commitments, to 

the consolidated financial statements, in 2008, during the financial crisis, the federal government placed 

Fannie Mae and Freddie Mac under conservatorship and entered into preferred stock purchase 

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

The agreements with these GSEs could affect the federal government’s financial condition. As of 

September 30, 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 $254.1 billion.

In valuing these equity investments, management considered and selected assumptions and data that 

it believed provided a reasonable basis for the estimated values reported in the accrual-based 

consolidated financial statements. However, as discussed in Note 1, Summary of Significant 

Accounting Policies, to the consolidated financial statements, there are many factors affecting these 

assumptions and estimates that are inherently subject to substantial uncertainty arising from the 

likelihood of future changes in general economic, regulatory, and market conditions. As such, there will 

be differences between the estimated values as of September 30, 2022, and the actual results, and 

such differences may be material. 

Also, as discussed in Note 1, Summary of Significant Accounting Policies, to the consolidated financial 

statements, the assets, liabilities, and results of operations of Fannie Mae and Freddie Mac are not 

consolidated into the federal government’s consolidated financial statements. Treasury and OMB have 

18For 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 2022 Long-Term Budget Outlook (Washington, D.C.: July 27, 2022). 
231 U.S. GOVERNMENT ACCOUNTABILITY OFFICE INDEPENDENT AUDITOR’S REPORT

determined that these entities do not meet the criteria for consolidation.19 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. In addition, as discussed in Note 21, 

Contingencies, to the consolidated financial statements, the Government National Mortgage

Association (Ginnie Mae) guarantees the performance of about $2.3 trillion in securities backed by 

federally insured mortgages—$1.2 trillion of which were insured by FHA and $1.1 trillion by other 

federal entities, such as the Department of Veterans Affairs.

Other Matter

CFO Act Agency Financial Management Systems

The federal government’s ability to efficiently and effectively manage and oversee its day-to-day 

operations and programs relies heavily on the ability of entity financial management systems to 

produce complete, reliable, timely, and consistent financial information for use by executive branch 

agencies and Congress.20 The Federal Financial Management Improvement Act of 1996 (FFMIA) was 

designed to lead to system improvements that would result in CFO Act agency managers routinely 

having access to reliable, useful, and timely financial information with which to measure performance 

and increase accountability throughout the year. 

The 24 CFO Act agencies are responsible for implementing and maintaining financial management 

systems that comply substantially with FFMIA requirements. FFMIA also requires auditors, as part of 

the 24 CFO Act agencies’ financial statement audits, to report whether those agencies’ financial 

management systems comply substantially with (1) federal financial management systems 

requirements, (2) applicable federal accounting standards, and (3) the federal government’s U.S. 

Standard General Ledger at the transaction level. 

For fiscal years 2022 and 2021, auditors of eight (2022) and nine (2021) of the 24 CFO Act agencies 

reported that the agencies’ financial management systems did not comply substantially with one or 

more of the three FFMIA requirements. Agency management at the 24 CFO Act agencies also annually 

report on FFMIA compliance. For fiscal years 2022 and 2021, agency management of seven (2022) 

and eight (2021) of the 24 CFO Act agencies reported that their agencies’ financial management 

systems did not comply substantially with one or more of the three FFMIA requirements. Based on 

agency financial reports, differences in the assessments of substantial compliance between the 

auditors and agency management reflect differences in management’s and auditors’ views regarding 

the effect of reported deficiencies on agency financial management systems. 

Long-standing financial management systems weaknesses at several large CFO Act agencies, along 

with the size and complexity of the federal government, continue to present a formidable management 

19For additional information on the GSE preferred stock purchase agreements and valuation of the investment in the GSEs, 

see Note 8, Investments in Government-Sponsored Enterprises, to the consolidated financial statements. For additional 

information on the criteria used to determine which federal entities are included in the reporting entity for the consolidated 

financial statements, as well as the reasons for not including certain entities, such as Fannie Mae and Freddie Mac, see app. 

A of the 2022 Financial Report. 

20The Federal Financial Management Improvement Act of 1996, which is reprinted in 31 U.S.C. § 3512 note, defines “financial 

management systems” to include the financial systems and the financial portions of mixed systems necessary to support 

financial management, including automated and manual processes, procedures, controls, data, hardware, software, and 

support personnel dedicated to the operation and maintenance of system functions.
U.S. GOVERNMENT ACCOUNTABILITY OFFICE INDEPENDENT AUDITOR’S REPORT 232

challenge in providing accountability and contribute significantly to certain material weaknesses and 

other limitations discussed in this audit report.

Responsibilities of Management for the Consolidated Financial Statements

Management of the federal government is responsible for (1) the preparation and fair presentation of 

the consolidated financial statements in accordance with U.S. generally accepted accounting principles; 

(2) preparing, measuring, and presenting the RSI in accordance with U.S. generally accepted 

accounting principles; and (3) designing, implementing, and maintaining effective internal control 

relevant to the preparation and fair presentation of financial statements that are free from material 

misstatement, whether due to fraud or error. 

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

Our responsibility is to conduct an audit of the consolidated financial statements in accordance with 

U.S. generally accepted government auditing standards and to issue an auditor’s report. However, 

because of the matters described in the Basis for Disclaimers of Opinion section of our report, we were 

not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on the 

consolidated financial statements. 

We are required to be independent with respect to the U.S. government’s consolidated financial 

statements and to meet our other ethical responsibilities, in accordance with the relevant ethical 

requirements relating to our audit.

Required Supplementary Information

U.S. generally accepted accounting principles issued by the Federal Accounting Standards Advisory 

Board (FASAB) require that the RSI be presented in the 2022 Financial Report to supplement the 

financial statements. Such information is the responsibility of management and, although the RSI is not 

a part of the financial statements, is required by FASAB, which considers this information to be an 

essential part of financial reporting for placing the financial statements in appropriate operational, 

economic, or historical context. We were unable to apply certain limited procedures to the RSI in 

accordance with U.S. generally accepted government auditing standards because of the material 

weaknesses and other scope limitations discussed in this audit report. We did not audit and do not 

express an opinion or provide any assurance on the RSI.

Readers are cautioned that the material weaknesses, significant uncertainties, and other scope 

limitations discussed in this audit report may affect the reliability of certain information contained in the 

RSI that is taken from the same data sources as the accrual-based consolidated financial statements 

and the sustainability financial statements.

Report on Internal Control over Financial Reporting

In connection with our audits of the U.S. government’s consolidated financial statements, we 

considered the federal government’s internal control over financial reporting, consistent with our 

auditor’s responsibilities discussed below.

Results of Our Consideration of Internal Control over Financial Reporting

Our consideration of internal control was for the limited purpose described below, and was not 

designed to identify all deficiencies in internal control that might be material weaknesses or significant 

deficiencies or to express an opinion on the effectiveness of the U.S. government’s internal control over 
233 U.S. GOVERNMENT ACCOUNTABILITY OFFICE INDEPENDENT AUDITOR’S REPORT

financial reporting. Given this limitation and other limitations discussed in this audit report, material 

weaknesses or significant deficiencies may exist that have not been identified.21

The material weaknesses discussed in this audit report resulted in ineffective internal control over 

financial reporting. Consequently, the federal government’s internal control did not provide reasonable 

assurance that a material misstatement of the consolidated financial statements would be prevented, or 

detected and corrected, on a timely basis. 

In addition to the material weaknesses that contributed to our disclaimers of opinion on the accrualbased consolidated financial statements and the sustainability financial statements, which were 

discussed previously, we found two other continuing material weaknesses in internal control, related to 

the federal government’s inability to 

• determine the full extent to which improper payments occur and reasonably assure that appropriate 

actions are taken to reduce them and 

• identify and resolve information system control deficiencies and manage information security risks 

on an ongoing basis.

These other material weaknesses are discussed in more detail in appendix III, including the primary 

effects of the material weaknesses on the accrual-based consolidated financial statements and on the 

management of federal government operations.

We also found three significant deficiencies in internal controls related to the following areas:

• taxes receivable,

• federal grants management, and 

• Medicare social insurance information.

These significant deficiencies are discussed in more detail in appendix IV.

Further, individual federal entity financial statement audit reports identified additional control 

deficiencies that the entities’ auditors reported as either material weaknesses or significant deficiencies 

at the individual entity level. We do not consider these additional deficiencies to represent material 

weaknesses or significant deficiencies with respect to the U.S. government’s consolidated financial 

statements.

Basis for Results of Our Consideration of Internal Control over Financial Reporting

We performed our procedures related to the federal government’s internal control over financial 

reporting in accordance with U.S. generally accepted government auditing standards.

Responsibilities of Management for Internal Control over Financial Reporting

Management of the federal government is responsible for designing, implementing, and maintaining 

effective internal control over financial reporting relevant to the preparation and fair presentation of 

financial statements that are free from material misstatement, whether due to fraud or error.

21A 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. 
U.S. GOVERNMENT ACCOUNTABILITY OFFICE INDEPENDENT AUDITOR’S REPORT 234

Auditor’s Responsibilities for Internal Control over Financial Reporting

In planning and performing our audit of the U.S. government’s consolidated financial statements as of 

and for the fiscal year ended September 30, 2022, in accordance with U.S. generally accepted 

government auditing standards, we considered internal control relevant to the financial statement audit 

in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of 

expressing an opinion on the effectiveness of internal control over financial reporting. Accordingly, we 

do not express an opinion on the effectiveness of the federal government’s internal control over 

financial reporting. We are required to report significant deficiencies or material weaknesses identified 

during our audit. We did not consider all internal controls relevant to operating objectives, such as those 

controls relevant to preparing performance information and ensuring efficient operations.

Definition and Inherent Limitations of Internal Control over Financial Reporting

An entity’s internal control over financial reporting is a process effected by those charged with 

governance, management, and other personnel, the objectives of which are to provide reasonable 

assurance that (1) transactions are properly recorded, processed, and summarized to permit the

preparation of financial statements in accordance with U.S. generally accepted accounting principles, 

and assets are safeguarded against loss from unauthorized acquisition, use, or disposition, and (2) 

transactions are executed in accordance with provisions of applicable laws (including those governing 

the use of budget authority), regulations, contracts, and grant agreements, noncompliance with which 

could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent, or detect 

and correct, misstatements due to fraud or error.

Intended Purpose of Report on Internal Control over Financial Reporting

The purpose of this report is solely to describe the scope of our consideration of the federal 

government’s internal control over financial reporting and the results of our procedures, and not to 

provide an opinion on the effectiveness of the federal government’s internal control over financial 

reporting. This report is an integral part of an audit performed in accordance with U.S. generally 

accepted government auditing standards in considering internal control over financial reporting. 

Accordingly, this report on internal control over financial reporting is not suitable for any other purpose.

Report on Compliance with Laws, Regulations, Contracts, and Grant Agreements

In connection with our audits of the U.S. government’s consolidated financial statements, we tested 

compliance with selected provisions of applicable laws, regulations, contracts, and grant agreements 

consistent with our auditor’s responsibilities discussed below.

Results of Our Tests for Compliance with Laws, Regulations, Contracts, and Grant Agreements

Our tests for compliance with selected provisions of applicable laws, regulations, contracts, and grant 

agreements were limited by certain of the material weaknesses and other scope limitations discussed 

in this audit report. The objective of our tests was not to provide an opinion on compliance with laws, 

regulations, contracts, and grant agreements applicable to the federal government. Accordingly, we do 

not express such an opinion. U.S. generally accepted government auditing standards and OMB 

guidance require auditors to report on entities’ compliance with selected provisions of applicable laws, 

regulations, contracts, and grant agreements. Certain significant component entity audit reports contain 

instances of noncompliance. None of these instances were deemed to be reportable noncompliance 

with regard to the accompanying U.S. government’s consolidated financial statements. 
235 U.S. GOVERNMENT ACCOUNTABILITY OFFICE INDEPENDENT AUDITOR’S REPORT

Basis for Results of Our Tests for Compliance with Laws, Regulations, Contracts, and Grant 

Agreements

We performed our tests of compliance in accordance with U.S. generally accepted government auditing 

standards. Our responsibilities under those standards are further described in the Auditor’s 

Responsibilities for Tests of Compliance with Laws, Regulations, Contracts, and Grant Agreements 

section below.

Responsibilities of Management for Compliance with Laws, Regulations, Contracts, and Grant 

Agreements

Management of the federal government is responsible for the federal government’s compliance with 

laws, regulations, contracts, and grant agreements. 

Auditor’s Responsibilities for Tests of Compliance with Laws, Regulations, Contracts, and Grant 

Agreements 

Our responsibility is to test compliance with selected provisions of laws, regulations, contracts, and 

grant agreements applicable to the federal government that have a direct effect on the determination of 

material amounts and disclosures in the U.S. government’s consolidated financial statements, and to 

perform certain other limited procedures. Accordingly, we did not test compliance with all laws, 

regulations, contracts, and grant agreements applicable to the federal government. We caution that, 

because of the limitations discussed above and the scope of our procedures, noncompliance may 

occur and not be detected by these tests. 

Intended Purpose of Report on Compliance with Laws, Regulations, Contracts, and Grant Agreements

The purpose of this report is solely to describe the scope of our testing of compliance with selected 

provisions of applicable laws, regulations, contracts, and grant agreements, and the results of that 

testing, and not to provide an opinion on compliance. This report is an integral part of an audit 

performed in accordance with U.S. generally accepted government auditing standards in considering 

compliance. Accordingly, this report on compliance with laws, regulations, contracts, and grant 

agreements is not suitable for any other purpose.

Agency Comments

We provided a draft of this audit report to Treasury and OMB officials, who provided technical 

comments that we have incorporated as appropriate. Treasury and OMB officials expressed their 

continuing commitment to addressing the problems this report outlines.

Robert F. Dacey

Chief Accountant

U.S. Government Accountability Office

February 8, 2023
U.S. GOVERNMENT ACCOUNTABILITY OFFICE INDEPENDENT AUDITOR’S REPORT 236

Appendix I

Objectives, Scope, and Methodology

Our objectives were to audit the consolidated financial statements consisting of the accrual-based 

consolidated financial statements and sustainability financial statements. The accrual-based 

consolidated financial statements consist of 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. The sustainability financial statements consist of the 2022 

and 2021 Statements of Long-Term Fiscal Projections; the 2022, 2021, 2020, 2019, and 2018 

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

Amounts; and related notes to these financial statements. Our objectives also included reporting on 

internal control over financial reporting and on compliance with selected provisions of applicable laws, 

regulations, contracts, and grant agreements. 

The Chief Financial Officers Act of 1990 (CFO Act), as expanded by the Government Management 

Reform Act of 1994 (GMRA), requires the inspectors general of the 24 CFO Act agencies to be 

responsible for annual audits of agency-wide financial statements that these agencies prepare.22

GMRA requires GAO to be responsible for the audit of the U.S. government’s consolidated financial 

statements.23 The Accountability of Tax Dollars Act of 2002 requires most other executive branch 

entities to prepare financial statements annually and have them audited.24 The Office of Management 

and Budget and the Department of the 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.25 We consider these 40 entities to be significant component entities for purposes of our audit 

of the consolidated financial statements.

For the significant component entities audited by inspectors general or independent public accountants, 

we performed our work in coordination and cooperation with them to achieve our respective audit 

objectives. Our audit approach regarding the accrual-based consolidated financial statements primarily

focused on determining the current status of the material weaknesses that contributed to our disclaimer 

of opinion on the accrual-based consolidated financial statements and the other material weaknesses 

affecting internal control that were included in our audit report on the consolidated financial statements 

for fiscal year 2021.26 We also separately audited the financial statements of certain component 

entities, and parts of a significant component entity, including the following.

2231 U.S.C. § 3521(e). GMRA authorized the Office of Management and Budget to designate agency components that also 

must report financial statements and have them audited. See 31 U.S.C. § 3515(c).

2331 U.S.C. § 331(e)(2). 

2431 U.S.C. § 3515.

25See app. A of the Fiscal Year 2022 Financial Report of the United States Government for a list of the 40 entities.

26GAO, Financial Audit: FY 2021 and FY 2020 Consolidated Financial Statements of the U.S. Government, GAO-22-105122

(Washington, D.C.: Feb. 17, 2022).
237 U.S. GOVERNMENT ACCOUNTABILITY OFFICE INDEPENDENT AUDITOR’S REPORT

• We audited and expressed an unmodified opinion on the Internal Revenue Service’s (IRS) financial 

statements as of and for the fiscal years ended September 30, 2022, and 2021.27 In fiscal years 

2022 and 2021, IRS collected taxes of about $4.9 trillion (2022) and $4.1 trillion (2021) and paid 

refunds and other payments to taxpayers of about $642 billion (2022) and $1.1 trillion (2021). We 

also reported that although internal controls could be improved, IRS maintained, in all material 

respects, effective internal control over financial reporting as of September 30, 2022. In addition, we 

reported that we found no reportable noncompliance for fiscal year 2022 with provisions of 

applicable laws, regulations, contracts, and grant agreements we tested. 

• We audited and expressed an unmodified opinion on the Schedules of Federal Debt managed by 

Treasury’s Bureau of the Fiscal Service (Fiscal Service) for the fiscal years ended September 30, 

2022, and 2021.28 For these fiscal years, the schedules reported (1) federal debt held by the public 

of about $24.3 trillion (2022) and $22.3 trillion (2021),29 (2) intragovernmental debt holdings of about 

$6.6 trillion (2022) and $6.1 trillion (2021),30 and (3) interest on federal debt held by the public of 

about $497 billion (2022) and $392 billion (2021). We also reported that Fiscal Service maintained, 

in all material respects, effective internal control over financial reporting relevant to the Schedule of 

Federal Debt as of September 30, 2022. In addition, we reported that we found no reportable 

noncompliance for fiscal year 2022 with provisions of applicable laws, regulations, contracts, and 

grant agreements we tested related to the Schedule of Federal Debt.

• We audited and expressed unmodified opinions on the U.S. Securities and Exchange 

Commission’s (SEC) and its Investor Protection Fund’s (IPF) financial statements as of and for the 

fiscal years ended September 30, 2022, and 2021.31 We also reported that SEC maintained, in all 

material respects, effective internal control over financial reporting for both the entity as a whole and 

IPF as of September 30, 2022. In addition, we reported that we found no reportable noncompliance 

for either SEC or IPF for fiscal year 2022 with provisions of applicable laws, regulations, contracts, 

and grant agreements we tested. 

• We audited and expressed an unmodified opinion on the Federal Housing Finance Agency’s 

(FHFA) financial statements as of and for the fiscal years ended September 30, 2022, and 2021.32

We also reported that FHFA maintained, in all material respects, effective internal control over 

financial reporting as of September 30, 2022. In addition, we reported that we found no reportable 

noncompliance for fiscal year 2022 with provisions of applicable laws, regulations, contracts, and 

grant agreements we tested.

27GAO, Financial Audit: IRS’s FY 2022 and FY 2021 Financial Statements, GAO-23-105564 (Washington, D.C.: Nov. 10, 

2022). 

28GAO, Financial Audit: Bureau of the Fiscal Service’s FY 2022 and FY 2021 Schedules of Federal Debt, GAO-23-105586

(Washington, D.C.: Nov. 9, 2022). 

29Debt held by the public on the Schedules of Federal Debt represents federal debt that Treasury issued and that is held by 

investors outside of the federal government, including individuals, corporations, state or local governments, the Federal 

Reserve, and foreign governments.

30Intragovernmental debt holdings represent federal debt that Treasury owes to federal government accounts, primarily federal 

trust funds, such as those established for Social Security and Medicare.

31GAO, Financial Audit: Securities and Exchange Commission’s FY 2022 and FY 2021 Financial Statements, GAO-23-105791

(Washington, D.C.: Nov. 15, 2022).

32GAO, Financial Audit: Federal Housing Finance Agency’s FY 2022 and FY 2021 Financial Statements, GAO-23-105910

(Washington, D.C.: Nov. 15, 2022). 
U.S. GOVERNMENT ACCOUNTABILITY OFFICE INDEPENDENT AUDITOR’S REPORT 238

• We audited and expressed an unmodified opinion on the Office of Financial Stability’s (OFS) 

financial statements for the Troubled Asset Relief Program (TARP) as of and for the fiscal years 

ended September 30, 2022, and 2021.33 We also reported that OFS maintained, in all material 

respects, effective internal control over financial reporting for TARP as of September 30, 2022. In 

addition, we reported that we found no reportable noncompliance for fiscal year 2022 with 

provisions of applicable laws, regulations, contracts, and grant agreements we tested.

• We audited and expressed an unmodified opinion on the Consumer Financial Protection Bureau’s 

(CFPB) financial statements as of and for the fiscal years ended September 30, 2022, and 2021.34

We also reported that CFPB maintained, in all material respects, effective internal control over 

financial reporting as of September 30, 2022. In addition, we reported that we found no reportable 

noncompliance for fiscal year 2022 with provisions of applicable laws, regulations, contracts, and 

grant agreements we tested. 

We performed work related to Treasury’s processes and controls used to prepare the consolidated 

financial statements. We also considered our ongoing audit work on the General Fund of the U.S. 

Government.35

We considered the significant entities’ fiscal years 2022 and 2021 financial statements and the related 

auditors’ reports that the inspectors general or independent public accountants prepared. We did not 

audit, and we do not express an opinion on, any of these individual federal entity financial statements. 

We considered the disclaimers of opinion that the Department of Defense (DOD) Office of Inspector 

General (OIG) issued on DOD’s department-wide financial statements as of and for the fiscal years 

ended September 30, 2022, and 2021.36 The disclaimers of opinion were partially based on the 

disclaimers of opinion for multiple DOD components, including the Army, Navy, Air Force, U.S. Marine 

Corps,37 Defense Health Program, Defense Information Systems Agency, Defense Logistics Agency, 

U.S. Special Operations Command, and U.S. Transportation Command. DOD OIG also reported 

material weaknesses in internal control over financial reporting (28 in both fiscal year 2022 and fiscal 

year 2021), including those related to (1) property, plant, and equipment; (2) inventory and related 

property; (3) environmental and disposal liabilities; (4) reconciliations of disbursement activity; (5) 

intragovernmental transactions; and (6) information system controls. 

33GAO, Financial Audit: Office of Financial Stability’s (Troubled Asset Relief Program) FY 2022 and FY 2021 Financial 

Statements, GAO-23-106015 (Washington, D.C.: Nov. 10, 2022). 

34GAO, Financial Audit: Consumer Financial Protection Bureau’s FY 2022 and FY 2021 Financial Statements, GAO-23-

105879 (Washington, D.C.: Nov. 15, 2022). 

35The General Fund of the U.S. Government is a component of Treasury’s central accounting function. It is a stand-alone 

reporting entity that comprises the activities fundamental to funding the federal government (e.g., issued budget authority, 

cash activity, and debt financing activities). 

36Department of Defense, United States Department of Defense Agency Financial Report for Fiscal Year 2022 (Arlington, Va.: 

Nov. 15, 2022).

37The U.S. Marine Corps is undergoing a 2-year audit cycle, which will conclude in November 2023. The U.S. Marine Corps’ 

financial statements as of and for the fiscal year ended September 30, 2022, were not audited. A disclaimer of opinion was 

issued for the U.S. Marine Corps’ financial statements as of and for the fiscal year ended September 30, 2021.
239 U.S. GOVERNMENT ACCOUNTABILITY OFFICE INDEPENDENT AUDITOR’S REPORT

We considered the disclaimers of opinion that the Small Business Administration’s (SBA) auditor issued 

on SBA’s balance sheets as of September 30, 2022, and 2021 (its remaining statements were 

unaudited).38 The disclaimers of opinion were based on SBA’s inability to provide adequate evidential 

matter in support of a significant number of transactions and account balances related to COVID-19 

relief programs, such as the Paycheck Protection Program and the COVID-19 Economic Injury Disaster 

Loan program, because of inadequate processes and controls. SBA’s auditor also reported six material 

weaknesses in internal control over financial reporting in fiscal years 2022 and 2021, largely because of 

deficiencies related to these programs.

We considered the disclaimer of opinion that the Department of Education’s auditor issued on the 

department’s financial statements as of and for the fiscal year ended September 30, 2022. The 

disclaimer of opinion was based on Education’s inability to provide adequate evidential matter to 

support certain key assumptions used to estimate the cost it recorded for the broad-based debt relief 

for eligible student loan borrowers that was announced during fiscal year 2022.39 Education’s auditor 

reported a material weakness in internal control over financial reporting in fiscal years 2022 and 2021 

related to loans receivable and loan guarantees. 

Our audit approach for the 2022 and 2021 Statements of Long-Term Fiscal Projections focused 

primarily on determining whether the information relating to the Statements of Social Insurance is 

properly reflected therein and testing the methodology used, as well as evaluating key assumptions. 

We also evaluated whether the internal control deficiencies related to the accrual-based consolidated 

financial statements affected certain key inputs used in generating the projections.

Because of the significance of the amounts presented in the Statements of Social Insurance and 

Statements of Changes in Social Insurance Amounts related to the Social Security Administration 

(SSA) and the Department of Health and Human Services (HHS), our audit approach regarding these 

statements focused primarily on reviewing audit work performed with respect to these two federal 

entities. For each federal entity preparing a Statement of Social Insurance and Statement of Changes 

in Social Insurance Amounts,40 we considered the entity’s 2022, 2021, 2020, 2019, and 2018 

Statements of Social Insurance and the 2022 and 2021 Statements of Changes in Social Insurance 

Amounts, as well as the related auditor’s reports that the inspectors general or independent public 

accountants prepared. 

We performed sufficient audit work to provide our reports on (1) the consolidated financial statements; 

(2) internal control over financial reporting; and (3) compliance with selected provisions of applicable 

laws, regulations, contracts, and grant agreements. We considered the limitations on the scope of our 

work regarding the accrual-based consolidated financial statements and the sustainability financial 

statements in forming our conclusions. We performed our work in accordance with U.S. generally 

accepted government auditing standards. 

38Small Business Administration, Agency Financial Report for Fiscal Year 2022 (Washington, D.C.: Nov. 15, 2022).

39Education 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. 

40These entities are SSA, HHS, the Railroad Retirement Board, and the Department of Labor.
U.S. GOVERNMENT ACCOUNTABILITY OFFICE INDEPENDENT AUDITOR’S REPORT 240

Appendix II

Material Weaknesses Contributing to Our Disclaimer of Opinion on the Accrual-Based 

Consolidated Financial Statements

This appendix describes material weaknesses that contributed to our disclaimer of opinion on the 

federal government’s accrual-based consolidated financial statements and highlights the primary 

effects of these material weaknesses on the accompanying accrual-based consolidated financial 

statements, the sustainability financial statements, and the management of federal government 

operations.41 The federal government did not have sufficient appropriate evidence to support 

information reported in the accompanying accrual-based consolidated financial statements, as 

described below. 

Property, Plant, and Equipment and Inventories and Related Property 

The federal government could not satisfactorily determine that property, plant, and equipment (PP&E) 

and inventories and related property were properly reported in the accrual-based consolidated financial 

statements. Most of the PP&E and inventories and related property are the responsibility of the 

Department of Defense (DOD). As in past years, DOD did not maintain adequate systems or have 

sufficient records to provide reliable information on these assets. Certain other entities’ auditors 

reported continued deficiencies in internal control procedures and processes related to PP&E.

Deficiencies in internal control over PP&E and inventories and related property could affect the federal 

government’s ability to fully know the assets it owns, including their location and condition. They can 

also affect the government’s ability to effectively (1) safeguard assets from physical deterioration, theft, 

or loss; (2) account for acquisitions and disposals of such assets and reliably report asset balances; (3) 

ensure that these assets are available for use when needed; (4) prevent unnecessary storage and 

maintenance costs or purchase of assets already on hand; and (5) determine the full costs of programs

that use these assets.

Loans Receivable and Loan Guarantee Liabilities

The auditor of the Small Business Administration (SBA), which had substantial activity related to the 

COVID-19 pandemic response, reported internal control deficiencies related to SBA’s implementation 

of provisions in the CARES Act and related COVID-19 relief laws. SBA’s auditor reported several 

material weaknesses in internal control related to the Paycheck Protection Program (PPP) and COVID19 Economic Injury Disaster Loan program. In addition, the auditor reported that SBA did not properly 

design and implement effective entity-level controls, such as risk assessment and monitoring controls 

that produce reliable and accurate financial reporting. 

The auditor of the Department of Education 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 

41The material weakness related to the Reconciliations of Budget Deficit to Net Operating Cost and Changes in Cash Balance 

also contributed to our disclaimer of opinion on the 2022 and 2021 Statements of Long-Term Fiscal Projections.
241 U.S. GOVERNMENT ACCOUNTABILITY OFFICE INDEPENDENT AUDITOR’S REPORT

estimate the cost it recorded for the broad-based debt relief for eligible student loan borrowers that was 

announced during fiscal year 2022.42 

In addition, internal control deficiencies related to loans receivable and loan guarantee liabilities 

continued to exist at other federal entities. These deficiencies, and the complexities associated with 

accounting and reporting for loan and loan guarantee programs, significantly increase the risk that 

misstatements in federal entity and government-wide financial statements could occur and go 

undetected. Further, these deficiencies can adversely affect the entities’ ability to support annual 

budget requests for these programs, make future budgetary decisions, manage program costs, and 

measure the performance of lending activities.

Liabilities and Commitments and Contingencies 

The federal government could not reasonably estimate or adequately support amounts reported for 

certain liabilities. For example, the DOD auditor was not able to substantiate the completeness and 

accuracy of DOD’s environmental and disposal liabilities. In addition, the DOD auditor reported that 

DOD could not support a significant amount of its estimated military postretirement health benefits 

liabilities included in federal employee and veteran benefits payable. These unsupported amounts 

relate to the cost of direct health care that DOD-managed military treatment facilities provided. In 

addition, auditors reported internal control deficiencies at several other federal entities that related to 

material liabilities. Further, the federal government could not determine whether commitments and 

contingencies, including any related to treaties and other international agreements entered into to 

further the federal government’s interests, were complete and properly reported. 

Problems in accounting for liabilities affect the determination of the full cost of the federal government’s 

current operations and the extent of its liabilities. Also, deficiencies in internal control related to 

estimating environmental and disposal liabilities could result in improperly stated liabilities. They also 

could adversely affect the federal government’s ability to determine priorities for cleanup and disposal

activities and to appropriately consider future budgetary resources needed to carry out these activities. 

In addition, to the extent disclosures of commitments and contingencies are incomplete or incorrect, 

reliable information is not available about the extent of the federal government’s obligations.

Cost of Government Operations and Disbursement Activity 

Reported net cost was affected by the other material weaknesses that contributed to our disclaimer of 

opinion on the accrual-based consolidated financial statements. As a result, the federal government 

was unable to support significant portions of the reported total net cost of operations, most notably 

those related to DOD, SBA, and Education.

With respect to disbursements, auditors of DOD and certain other federal entities reported (1) 

continued control deficiencies in reconciling disbursement activity between federal entities’ and the 

Department of the Treasury’s records of disbursements and (2) unsupported federal entity adjustments, 

which could also affect the balance sheet.

Unreliable cost information affects the federal government’s ability to control and reduce costs, assess 

performance, evaluate programs, and set fees to recover costs where required or authorized. 

42Education 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.
U.S. GOVERNMENT ACCOUNTABILITY OFFICE INDEPENDENT AUDITOR’S REPORT 242

Improperly recorded disbursements could result in misstatements in the financial statements and in 

certain data that federal entities provide for inclusion in The Budget of the United States Government

(President’s Budget) concerning obligations and outlays. 

Intragovernmental Activity and Balances 

Significant progress has been made over the past several years, but the federal government continues 

to be unable to adequately account for intragovernmental activity and balances between federal 

entities. Federal entities are responsible for properly accounting for and reporting their 

intragovernmental activity and balances in their entity financial statements. When preparing the 

consolidated financial statements, intragovernmental activity and balances between federal entities 

should be in agreement and must be subtracted out, or eliminated, from the financial statements. If the 

two federal entities engaged in an intragovernmental transaction do not both record the same 

intragovernmental transaction in the same year and for the same amount, the intragovernmental 

transactions will not be in agreement and, if not properly resolved, would result in misstatements (i.e., 

differences or unmatched amounts) in the consolidated financial statements. 

The Office of Management and Budget (OMB) and Treasury have issued guidance directing 

component entities to reconcile intragovernmental activity and balances with their trading partners and 

resolve identified differences. In addition, the guidance directs the chief financial officers (CFO) of 

significant component entities to report to Treasury, their respective inspectors general, and GAO on 

the extent and results of their intragovernmental activity and balance reconciliation efforts as of the end 

of the fiscal year.

To support this process during fiscal year 2022, Treasury continued to provide information and 

assistance to significant component entities to aid in resolving their intragovernmental differences. 

Treasury also issued additional guidance to entities for specific types of trading partner transactions. In 

addition, Treasury’s quarterly scorecard process43 highlights differences needing the entities’ attention, 

identifies differences that need to be resolved through a formal dispute resolution process,44 and 

reinforces the entities’ responsibilities to resolve intragovernmental differences. Treasury continued to 

identify and monitor systemic root causes of intragovernmental differences and related corrective action 

plans. As a result of these and other actions, a significant number of intragovernmental differences 

were identified and resolved. 

While progress was made, we continued to note that amounts federal entity trading partners reported to 

Treasury were not in agreement by significant amounts. Several CFOs cited that the reasons for these 

differences included differing accounting methodologies, accounting errors, and timing differences. 

Auditors for several significant component entities continued to report that the entities did not have 

effective processes for reconciling intragovernmental activity and balances with their trading partners. 

For example, the DOD auditor reported that DOD, which has a substantial amount of intragovernmental 

activity and balances, did not have accounting systems that were able to capture the trading partner 

data required to eliminate intradepartmental and intragovernmental transactions, which resulted in a 

43Treasury produces a quarterly scorecard for each significant entity, as well as any other component entity reporting 

significant intragovernmental balances or differences, that reports various aspects of the entity’s intragovernmental differences 

with its trading partners, including the composition of the differences by trading partner and category. Pursuant to Treasury 

guidance, entities are expected to resolve, with their respective trading partners, the differences identified in their scorecards. 

44When an entity and its respective trading partner cannot resolve an intragovernmental difference, Treasury guidance directs 

the entity to request that Treasury resolve the dispute. Treasury will review the dispute and issue a decision on how to resolve 

the difference, which the entities must follow.
243 U.S. GOVERNMENT ACCOUNTABILITY OFFICE INDEPENDENT AUDITOR’S REPORT

risk of material misstatements. In addition, other material weaknesses reported by DOD’s auditor could 

contribute to this material weakness. 

These control deficiencies over intragovernmental activity and balances along with the unresolved 

intragovernmental differences could result in misstatements that are material to the accrual-based 

consolidated financial statements. Addressing the intragovernmental transactions problem remains a 

difficult challenge and will require federal entities’ strong and sustained commitment to resolving 

differences with their trading partners timely, as well as Treasury’s and OMB’s continued strong 

leadership. 

Preparation of Consolidated Financial Statements

Treasury, in coordination with OMB, has implemented corrective actions in recent years related to the 

preparation of the consolidated financial statements. Corrective actions included improving systems 

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

guidance for collecting data from component entities, and implementing procedures to address certain 

internal control deficiencies detailed in our previously issued management reports.45 However, the 

federal government’s systems, controls, and procedures were not adequate to reasonably assure that 

the consolidated financial statements are consistent with the underlying audited entity financial 

statements, properly balanced, and in accordance with U.S. generally accepted accounting principles 

(U.S. GAAP). During our fiscal year 2022 audit, deficiencies in the preparation of the consolidated 

financial statements included the following.

• For fiscal year 2022, auditors reported internal control deficiencies at several component entities 

related to their entity-level controls, including the control environment, risk assessment, information 

and communication, and monitoring components of internal control, that could affect Treasury’s 

ability to obtain reliable financial information from federal entities for consolidation. For example, 

DOD and SBA reported material weaknesses in entity-level controls. 

• For fiscal year 2022, auditors reported internal control deficiencies at several component entities 

related to the entities’ financial reporting processes that could affect information included in the 

consolidated financial statements. For example, DOD could not demonstrate that its financial 

statements were consistent with underlying records. 

• While progress has been made, Treasury is unable to properly balance the accrual-based 

consolidated financial statements because of its inability to fully eliminate intragovernmental activity 

and balances. To make the fiscal years 2022 and 2021 consolidated financial statements balance, 

Treasury recorded unmatched transactions and balances in the Statements of Operations and 

Changes in Net Position, Balance Sheets, and Statements of Net Cost. Unmatched transactions 

and balances primarily represent unresolved differences in intragovernmental activity and balances 

between federal entities. The Statement of Operations and Changes in Net Position and the 

Balance Sheet include specific lines for the unmatched transactions and balances, while the 

unmatched transactions and balances are recorded in existing lines in the Statement of Net Cost. 

45Most of the issues that we identified in fiscal year 2022 existed in fiscal year 2021 and many have existed for a number of 

years. Most recently, in August 2022, we reported on the status of the issues we identified to Treasury and OMB and provided 

recommendations for corrective action. See GAO, 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). 
U.S. GOVERNMENT ACCOUNTABILITY OFFICE INDEPENDENT AUDITOR’S REPORT 244

Specifically, for fiscal years 2022 and 2021, Treasury recorded a net decrease to net position of 

$0.2 billion (2022 and 2021) on the Statements of Operations and Changes in Net Position. 

Treasury recorded net unmatched transactions and balances of $1.3 billion (2022) and $1.7 billion 

(2021) on the Balance Sheets as of September 30. Treasury recorded additional net unmatched 

transactions of $0.6 billion (2022) and $1.5 billion (2021) in the Statements of Net Cost. 

• Over the past several years, Treasury has taken significant actions to work toward reporting and 

disclosing financial information in the consolidated financial statements in accordance with U.S. 

GAAP. For example, Treasury has developed and improved U.S. GAAP compliance operating 

procedures and checklists. Also, Treasury, along with the Department of State, performed the first 

two phases of a multiphase approach to review existing treaties and other international agreements 

to determine which of these agreements may result in commitments or contingencies. 

However, Treasury’s reporting of certain financial information required by U.S. GAAP continues to 

be impaired. Because of certain control deficiencies noted in this audit report, Treasury is precluded 

from determining if U.S. GAAP requires additional disclosure in the consolidated financial 

statements, which could be material. In addition, for fiscal years 2022 and 2021, Treasury did not 

have adequate policies and procedures to reasonably assure appropriate accounting and reporting 

for significant, unusual transactions or events, such as the Special Financial Assistance (SFA) 

program established by the American Rescue Plan Act of 2021 (ARPA).46 Further, Treasury’s ability 

to report information in accordance with U.S. GAAP will also remain impaired until federal entities 

can provide Treasury with the complete and reliable information required to be reported in the 

consolidated financial statements.

In fiscal year 2022, Treasury continued to take corrective actions intended to resolve internal control 

deficiencies in the processes used to prepare the consolidated financial statements. For example, 

Treasury enhanced existing procedures to reasonably assure that significant accounting policies are 

appropriately disclosed in Note 1, Summary of Significant Accounting Policies, to the consolidated 

financial statements and, as applicable, are consistent with significant component entity audited 

financial statements. In addition, Treasury and OMB continued to enhance guidance for component 

entity financial reporting, including guidance for reporting funds from dedicated collections.

However, until these deficiencies have been fully addressed, the federal government’s ability to 

reasonably assure that the consolidated financial statements are consistent with the underlying audited 

federal component entities’ financial statements, properly balanced, and in accordance with U.S. GAAP 

will be impaired. It is important that Treasury (1) continues to improve its systems and processes and 

(2) remains committed to maintaining the progress that has been made in this area and building on that 

progress to make needed improvements that fully address the magnitude of the financial reporting 

challenges it faces. Resolving the remaining internal control deficiencies continues to be a difficult 

challenge and will require a strong and sustained commitment from Treasury, OMB, and federal 

entities.

Reconciliations of Budget Deficit to Net Operating Cost and Changes in Cash Balance 

The Reconciliations of Net Operating Cost and Budget Deficit and the Statements of Changes in Cash 

Balance from Budget and Other Activities (Reconciliation Statements) reconcile (1) the accrual-based 

net operating cost to the primarily cash-based budget deficit and (2) the budget deficit to changes in 

46Pub. L. No. 117-2, § 9704, 135 Stat. 4, 190-99 (Mar. 11, 2021), classified at 29 U.S.C. §§ 1305(i), 1432. ARPA established 

the SFA program to provide payments to eligible multiemployer pension plans to enable them to pay benefits at plan levels 

through 2051.
245 U.S. GOVERNMENT ACCOUNTABILITY OFFICE INDEPENDENT AUDITOR’S REPORT

cash balances. The budget deficit is calculated by subtracting actual budget outlays (outlays) from 

actual budget receipts (receipts).47 The outlays and receipts are key inputs to the Statements of LongTerm Fiscal Projections.

Treasury continued to develop its process for preparing the Reconciliation Statements. One of the two 

Schedules of the General Fund of the U.S. Government provides information supporting the 

Statements of Changes in Cash Balance from Budget and Other Activities.48 However, as reported in 

our disclaimer of opinion on the fiscal year 2020 Schedules of the General Fund, Treasury was unable 

to readily provide sufficient appropriate evidence to support certain information reported in the 

Schedules of the General Fund.49 With regard to the Reconciliation Statements, such limitations 

primarily related to readily identifying and tracing transactions to determine whether they were complete 

and properly recorded in the Schedules of the General Fund. Specifically, certain amounts are netted 

and recorded at a summarized level, thus preventing Treasury from readily obtaining the necessary 

details, at the transaction level, to support financial reporting for certain line items in the Statements of 

Changes in Cash Balance from Budget and Other Activities. 

As of the end of fiscal year 2022, Treasury continued to coordinate with federal entities on the 

implementation of newly developed transaction codes designed to improve the accounting for and

reporting of General Fund transactions and balances that Treasury uses to compute the budget deficit 

reported in the Reconciliation Statements. However, while assessing alternative options, Treasury 

paused the development of any additional transaction codes. Final remediation is expected to occur 

over the next couple of years and will largely depend on federal entities implementing and properly 

reporting activity using the new transaction codes. 

As of the end of fiscal year 2022, Treasury’s processes and procedures for preparing the Reconciliation 

Statements were not effective in (1) identifying and reporting all the items in the Reconciliation 

Statements, (2) properly supporting amounts used in calculating the budget deficit, and (3) reasonably 

assuring that the information in these statements was fully consistent with the underlying information in 

the significant component entities’ audited financial statements and other financial data. Consequently, 

there may be misstatements in the Reconciliation Statements.

In fiscal year 2022, as in prior years, we noted that several entities’ auditors reported internal control 

deficiencies related to monitoring, accounting, reconciliation, and reporting of budgetary transactions, 

including deficiencies related to federal entities’ budget and accrual reconciliations.50 These control 

deficiencies could affect the reporting and calculation of the net outlay amounts in the entities’ 

47The budget deficit, receipts, and outlays amounts, with minor adjustments, are reported in Treasury’s Monthly Treasury 

Statement and the President’s Budget.

48The General Fund is a component of Treasury’s central accounting function. It is a stand-alone reporting entity that 

comprises the activities fundamental to funding the federal government (e.g., issued budget authority, cash activity, and debt 

financing activities).

49GAO, Financial Audit: Bureau of the Fiscal Service’s FY 2020 Schedules of the General Fund, GAO-21-362 (Washington, 

D.C.: Apr. 15, 2021). As of the date of this 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 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.

50Statement of Federal Financial Accounting Standards (SFFAS) 53, Budget and Accrual Reconciliation: Amending SFFAS 7, 

and 24, and Rescinding SFFAS 22, became effective for periods beginning after September 30, 2018, and provides for the 

budget and accrual reconciliation to replace the statement of financing. The reconciliation explains the relationship between an 

entity’s net outlays on a budgetary basis and its net cost of operations during the period. 
U.S. GOVERNMENT ACCOUNTABILITY OFFICE INDEPENDENT AUDITOR’S REPORT 246

Statements of Budgetary Resources. In addition, such deficiencies may also affect the entities’ ability to 

report reliable budgetary information to Treasury and OMB and may affect the budget deficit reported in 

the Reconciliation Statements. Treasury also reports the budget deficit in its Combined Statement of 

Receipts, Outlays, and Balances and in other federal government publications.51

51Treasury’s Combined Statement of Receipts, Outlays, and Balances presents budget results and cash-related assets and 

liabilities of the federal government with supporting details. According to Treasury, this report is the recognized official 

publication of receipts and outlays of the federal government based on entity reporting.
247 U.S. GOVERNMENT ACCOUNTABILITY OFFICE INDEPENDENT AUDITOR’S REPORT

Appendix III

Other Material Weaknesses

Material weaknesses in internal control discussed in this audit report resulted in ineffective controls 

over financial reporting. In addition to the material weaknesses discussed in appendix II that contributed 

to our disclaimer of opinion on the accrual-based consolidated financial statements, we found two other 

continuing material weaknesses in internal control. This appendix describes these weaknesses and 

highlights their primary effects on the accrual-based consolidated financial statements and on the 

management of federal government operations.

Improper Payments 

We have reported improper payments—payments that should not have been made or that were made 

in an incorrect amount—as a material deficiency or material weakness in internal control in our audit 

reports on the U.S. government’s consolidated financial statements since fiscal year 1997.52 The 

federal government is unable to determine the full extent to which improper payments occur and 

reasonably assure that appropriate actions are taken to reduce them. Reducing improper payments is 

critical to safeguarding federal funds. The Payment Integrity Information Act of 2019 (PIIA)53 requires 

federal executive agencies54 to do the following: 

1. Review all programs and activities. 

2. Identify those that may be susceptible to significant improper payments. 

3. Estimate the annual amount of improper payments for those programs and activities identified as 

susceptible to significant improper payments. 

4. Implement actions to reduce improper payments and set reduction targets with respect to the risksusceptible programs and activities. 

5. Report on the results of addressing the foregoing requirements.55

Eighteen agencies reported improper payment estimates totaling about $247 billion for fiscal year 2022, 

based on improper payment estimates reported individually by 82 federal programs or activities in 

www.paymentaccuracy.gov.56 Most of the estimate was concentrated in the following areas: 

Department of Health and Human Services’ (HHS) Medicaid ($81 billion); HHS’s Medicare—consisting 

52Under the Payment Integrity Information Act of 2019 (PIIA), Pub. L. No. 116-117, 134 Stat. 113 (Mar. 2, 2020), an improper 

payment is statutorily defined as any payment that should not have been made or that was made in an incorrect amount 

(including overpayments and underpayments) under statutory, contractual, administrative, or other legally applicable 

requirements. It includes any payment to an ineligible recipient, any payment for an ineligible good or service, any duplicate 

payment, any payment for a good or service not received (except for such payments where authorized by law), and any 

payment that does not account for credit for applicable discounts. See 31 U.S.C. § 3351(4). PIIA also provides that when an 

executive agency’s review is unable to discern whether a payment was proper as a result of insufficient or lack of 

documentation, this payment must also be included in the improper payment estimate. 31 U.S.C. § 3352(c)(2).

53PIIA, codified at 31 U.S.C. §§ 3351-58.

54An executive agency, as that term is defined under title 31 of the U.S. Code, means a department, an agency, or an 

instrumentality in the executive branch of the U.S. government. 31 U.S.C. § 102.

55See 31 U.S.C. § 3352. 

56An official U.S. government website managed by Office of Management and Budget (OMB), www.paymentaccuracy.gov 

contains, among other things, information about current and historical rates and amounts of estimated improper payments. 
U.S. GOVERNMENT ACCOUNTABILITY OFFICE INDEPENDENT AUDITOR’S REPORT 248

of several parts—($47 billion);

57 and Small Business Administration’s (SBA) Paycheck Protection 

Program ($29 billion). In addition, six other programs reported improper payment estimates of $5 billion 

or more.58

The fiscal year 2022 government-wide total of reported estimated improper payments, among programs 

and activities that reported estimates, decreased by about $34 billion from the fiscal year 2021 estimate

of about $281 billion. The specific programs and activities included in the government-wide total of 

reported improper payment estimates may change from year to year. While increases in estimated 

improper payments were reported for several programs and activities, these were more than offset by 

decreases for certain other programs and activities.59 For example, the Department of Labor reported a 

decrease of estimated improper payments of about $59 billion for Unemployment Insurance in fiscal 

year 2022, due to a decrease in outlays. In addition, HHS reported a decrease of about $18 billion in 

estimated improper payments for Medicaid in fiscal year 2022. This decrease was due to certain 

flexibilities afforded to states during the COVID-19 pandemic, such as postponed eligibility 

determinations and reduced requirements around provider enrollment or revalidations.

It is important to note that reported improper payment estimates include overpayments, 

underpayments, and payments for which the agency could not find sufficient documentation, and may 

also be based on payment data and sampling drawn from periods that do not coincide with the fiscal 

year for which the estimates are reported. Federal agencies reported over 80 percent of the 

government-wide estimate as overpayments.

The $247 billion of reported improper payment estimates for fiscal year 2022 does not include 

estimates related to certain significant expenditures to fund response and recovery efforts for the 

COVID-19 pandemic, such as Labor’s Pandemic Unemployment Assistance program. In addition to the 

COVID-19 programs, we also identified some risk-susceptible programs for which agencies did not 

report fiscal year 2022 estimated improper payment amounts, including HHS’s Temporary Assistance 

for Needy Families and the Department of Agriculture’s Supplemental Nutrition Assistance Program.

If an agency’s inspector general determines that the entity is not in compliance with the criteria listed in 

PIIA, such as reporting an improper payment rate of 10 percent or greater for any risk-susceptible 

program or activity, that agency must submit a plan to Congress describing the actions that it will take 

to come into compliance. For example, the Department of Defense (DOD) Office of Inspector General 

(OIG) found that DOD did not comply with one such criteria. Specifically, DOD OIG reported that DOD 

did not publish reliable improper payment estimates for nine of its 11 risk-susceptible programs. For 

57The Medicare program consists of Fee-For-Service (Part A and Part B), Medicare Advantage (Part C), and Medicare 

Prescription Drug (Part D). 

58The other six programs with reported improper payment estimates greater than $5 billion in fiscal year 2022 were (1) 

Department of Education’s Education Stabilization Fund, (2) Education’s Title I Grants to Local Education Agencies, (3) 

Department of Labor’s Unemployment Insurance, (4) SBA’s COVID-19 Economic Injury Disaster Loans, (5) Department of the 

Treasury’s Additional Child Tax Credit, and (6) Treasury’s Earned Income Tax Credit.

59For fiscal year 2022, agencies reported decreases in total estimated improper payments in excess of $1 billion for four 

programs and activities and increases in total estimated improper payments in excess of $1 billion for six programs and 

activities. The four programs and activities with a decrease in excess of $1 billion were Department of Labor’s Unemployment 

Insurance, HHS’s Children's Health Insurance Program, HHS’s Medicaid, and HHS’s Medicare Advantage (Part C). The six 

programs and activities with increases in excess of $1 billion were Education’s Education Stabilization Fund, Education’s 

Special Education Grants to States, Education’s Title I Grants, HHS’s Medicare Fee-For-Service, SBA’s COVID-19 Economic 

Injury Disaster Loans, and SBA’s Paycheck Protection Program. Education’s Education Stabilization Fund, Education’s 

Special Education Grants to States, SBA’s COVID-19 Economic Injury Disaster Loans, and SBA’s Paycheck Protection 

Program did not report improper payment estimates for fiscal year 2021.
249 U.S. GOVERNMENT ACCOUNTABILITY OFFICE INDEPENDENT AUDITOR’S REPORT

fiscal year 2022, agencies reported estimated improper payment rates of 10 percent or greater for 17 

risk-susceptible programs and activities,60 accounting for about 59 percent of the government-wide total 

of reported estimated improper payments. 

Further, agency auditors continued to report internal control deficiencies over financial reporting in their 

fiscal year 2022 financial statement audit reports, such as financial system limitations and information 

system control weaknesses. Such deficiencies could significantly increase the risk that improper 

payments may occur and not be detected promptly. 

The fiscal year 2022 President’s Budget included program integrity proposals at multiple agencies 

aimed at reducing improper payments.61 Also, efforts continue to implement PIIA requirements to better 

identify and prevent improper payments, waste, fraud, and abuse, as well as to recover overpayments. 

In addition, the statutory Do Not Pay initiative under PIIA requires agencies to review prepayment and 

pre-award procedures and ensure a thorough review of available databases to determine program or 

award eligibility before the release of any federal funds. PIIA also directs the Office of Management and 

Budget to annually identify a list of high-priority federal programs for greater levels of oversight and 

review and requires each agency responsible for administering one of these high-priority programs to 

submit a program report to its inspector general annually and make the report available to the public.62

Finally, the federal government reported recovery of over $23 billion in overpayments for fiscal year 

2022.

Until the federal government has implemented effective processes to determine the full extent to which 

improper payments occur and has taken appropriate actions across agencies and programs and 

activities to effectively reduce improper payments, it will not have reasonable assurance that the use of 

federal funds is adequately safeguarded. 

Information System Controls 

We have reported information security (controls in information systems) as a government-wide material 

weakness since fiscal year 1997.63 During our fiscal year 2022 audit, we found that serious and 

widespread information system control deficiencies continued to place the federal government at risk of 

inadvertent or deliberate misuse of federal assets, unauthorized modification or destruction of financial 

information, inappropriate disclosure of sensitive information, and disruption of critical operations. 

Twelve of the 24 agencies covered by the Chief Financial Officers Act of 1990 reported material 

weaknesses or significant deficiencies in information system controls. Specifically, auditors identified 

control deficiencies related to (1) security management; (2) access to computer data, equipment, and 

facilities; (3) changes to and configuration of information system resources; (4) segregation of 

incompatible duties; and (5) contingency planning. 

60The improper payment rate reflects the estimated improper payments as a percentage of total annual outlays.

61Office of Management and Budget, Budget of the United States Government, Fiscal Year 2022 (Washington, D.C.: May 28, 

2021).

62OMB has designated high-priority programs as those programs and activities with improper payment monetary loss 

estimates that exceed $100 million annually. 

63We have also designated information security as a government-wide high-risk area since 1997. For more information, see 

GAO, High-Risk Series: Dedicated Leadership Needed to Address Limited Progress in Most High-Risk Areas, GAO-21-119SP

(Washington, D.C.: Mar. 2, 2021).
U.S. GOVERNMENT ACCOUNTABILITY OFFICE INDEPENDENT AUDITOR’S REPORT 250

Most of the significant component entities that reported information system controls as a material 

weakness or significant deficiency for fiscal year 2022 identified weaknesses related to security 

management, access controls, configuration management, or combinations thereof. Security 

management is the foundation of a security-control structure and reflects senior management’s 

commitment to addressing security risks. Security management programs should provide a framework 

and continuous cycle of activity for managing risk, developing and implementing effective security 

policies, assigning responsibilities, and monitoring the adequacy of the entity’s information system 

controls. Without a well-designed security management program, information system controls may be 

inadequate; responsibilities may be unclear, misunderstood, or improperly implemented; and controls 

may be inconsistently applied. In addition, such conditions may lead to insufficient protection of 

sensitive or critical resources, improper or unauthorized changes to information systems, and 

disproportionately low expenditures for controls over high-risk resources. 

Recent information security events highlight the urgent need for federal entities to strengthen their 

security management programs to identify and resolve deficiencies. Over the past 3 years, the 

Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency has issued nine 

emergency directives and alerts identifying certain vulnerabilities that posed an unacceptable risk to 

federal entities. Additionally, in February 2022, the Department of Homeland Security reported that it 

had established a Cyber Safety Review Board, in accordance with the May 2021 Executive Order 

14028, Improving the Nation’s Cybersecurity.64 The Cyber Safety Review Board was established to 

review and assess the threat activity, vulnerabilities, and mitigation activities of, and federal entity 

responses to, significant cyber incidents.65

Until federal entities strengthen security management programs and resolve reported information 

system control deficiencies, the federal government will continue to be at increased risk of inadvertent 

or deliberate misuse of federal assets, unauthorized modification or destruction of financial information, 

inappropriate disclosure of sensitive information, and disruption of critical operations. 

64Department of Homeland Security, DHS Launches First-Ever Cyber Safety Review Board (Feb. 3, 2022).

65The White House, Improving the Nation’s Cybersecurity, Executive Order 14028 (Washington, D.C.: May 12, 2021), 

reprinted in 86 Fed. Reg. 26,633 (May 17, 2021).
251 U.S. GOVERNMENT ACCOUNTABILITY OFFICE INDEPENDENT AUDITOR’S REPORT

Appendix IV

Significant Deficiencies

In addition to the material weaknesses discussed in appendixes II and III, we found three significant 

deficiencies in the federal government’s internal control related to maintaining effective internal controls 

at certain federal entities, as described below. 

Taxes Receivable

During fiscal year 2022, a significant deficiency continued to affect the federal government’s ability to 

manage its taxes receivable effectively. While the Department of the Treasury’s Internal Revenue 

Service (IRS) made necessary and appropriate adjustments derived from a statistical estimation 

process to correct its financial statements, IRS’s underlying records did not always reflect the correct 

amount of taxes owed to the federal government because of financial system limitations and other 

control deficiencies that led to errors in taxpayers’ accounts. Such inaccurate tax records impair 

management’s ability to effectively manage taxes receivable throughout the year and place an undue 

burden on taxpayers, who may be compelled to respond to IRS inquiries caused by errors in taxpayer 

accounts.

Federal Grants Management

In fiscal year 2022, several federal entities’ auditors continued to identify internal control deficiencies 

related to grants management.66 Reported deficiencies primarily related to accounting for grants, 

monitoring of grant activities, and estimating grant accruals. These internal control deficiencies could 

adversely affect the federal government’s ability to provide reliable financial statements as well as 

reasonable assurance that grants are awarded properly, recipients are eligible, and federal grant funds 

are used as intended. 

Medicare Social Insurance Information

In fiscal year 2022, auditors for the Department of Health and Human Services (HHS) continued to 

identify internal control deficiencies in certain controls related to the sufficiency of the review of 

methodologies and related calculations and estimates that HHS used to prepare its Statement of Social 

Insurance for the Medicare program. Specifically, HHS’s auditor identified formula errors and input 

errors of source information in certain spreadsheets used to prepare the Statement of Social Insurance 

that HHS’s monitoring and review function did not detect. Such control deficiencies could result in 

misstatements to the Statement of Social Insurance.

66Key entities contributing to the significant deficiency for federal grants management include the Small Business 

Administration, Department of Homeland Security, and Department of Housing and Urban Development.