Page 1 GAO-16-147R OFS’s Fiscal Years 2015 and 2014 Financial Statements

441 G St. N.W.

Washington, DC 20548

Accessible Version

November 10, 2015

Congressional Committees

Financial Audit: Office of Financial Stability (Troubled Asset Relief 

Program) Fiscal Years 2015 and 2014 Financial Statements

This report transmits the GAO auditor’s report on the results of our audits of the fiscal years 

2015 and 2014 financial statements of the Office of Financial Stability (Troubled Asset Relief 

Program), which is incorporated in the enclosed Office of Financial Stability (Troubled Asset 

Relief Program) Agency Financial Report for Fiscal Year 2015. 

As discussed more fully in the auditor’s report that begins on page 34 of the enclosed agency 

financial report, we found

· 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, 2015, and 2014, are 

presented fairly, in all material respects, in accordance with U.S. generally accepted 

accounting principles;

· OFS maintained, in all material respects, effective internal control over financial reporting for 

TARP as of September 30, 2015; and

· no reportable noncompliance for fiscal year 2015 with provisions of applicable laws, 

regulations, contracts, and grant agreements we tested.

The Emergency Economic Stabilization Act of 2008 (EESA)1that authorized TARP on October 

3, 2008, requires that TARP, which is implemented by OFS,2 annually prepare and submit to 

Congress and the public audited fiscal year financial statements that are prepared in 

accordance with U.S. generally accepted accounting principles.3 EESA further requires that 

GAO audit TARP’s financial statements annually.4 We are also required under EESA to report at 

least every 60 days on the findings resulting from our oversight of the actions taken under 

TARP.5 This report responds to both of these requirements. 

We are sending copies of this report to the Secretary of the Treasury, the Deputy Assistant 

Secretary for Financial Stability, the Financial Stability Oversight Board, the Special Inspector 

General for TARP, the Director of the Office of Management and Budget, interested 

 

1Pub. L. No. 110-343, div. A, 122 Stat. 3765 (Oct. 3, 2008), classified in part, as amended, at 12 U.S.C. §§ 5201-

5261. 

2Section 101 of EESA, 12 U.S.C. § 5211, established OFS within the Department of the Treasury to implement TARP. 

3EESA § 116(b), 12 U.S.C. § 5226(b).

4EESA § 116(b), 12 U.S.C. § 5226(b). 

5EESA § 116(a)(3), 12 U.S.C. § 5226(a)(3).
congressional committees and members, and other interested parties. In addition, the report is 

available at no charge on the GAO website at http://www.gao.gov.

If you or your staffs have questions about this report, please contact me at (202) 512-3406 or 

clarkce@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs 

may be found on the last page of this report. 

- - - - -

Cheryl E. Clark

Director

Financial Management and Assurance

Enclosure

Page 2 GAO-16-147R OFS’s Fiscal Years 2015 and 2014 Financial Statements
List of Committees

The Honorable Thad Cochran

Chairman

The Honorable Barbara A. Mikulski

Vice Chairwoman

Committee on Appropriations

United States Senate

The Honorable Richard Shelby

Chairman

The Honorable Sherrod Brown

Ranking Member

Committee on Banking, Housing, and Urban Affairs

United States Senate

The Honorable Mike Enzi

Chairman

The Honorable Bernie Sanders

Ranking Member

Committee on the Budget

United States Senate

The Honorable Orrin G. Hatch

Chairman

The Honorable Ron Wyden 

Ranking Member

Committee on Finance

United States Senate

The Honorable Harold Rogers

Chairman

The Honorable Nita M. Lowey

Ranking Member

Committee on Appropriations

House of Representatives

The Honorable Tom Price

Chairman

The Honorable Chris Van Hollen

Ranking Member

Committee on the Budget

House of Representatives

The Honorable Jeb Hensarling

Chairman

The Honorable Maxine Waters

Ranking Member

Committee on Financial Services

House of Representatives

Page 3 GAO-16-147R OFS’s Fiscal Years 2015 and 2014 Financial Statements
The Honorable Kevin Brady

Chairman

The Honorable Sander Levin

Ranking Member

Committee on Ways and Means

House of Representatives

(198745)

Page 4 GAO-16-147R OFS’s Fiscal Years 2015 and 2014 Financial Statements
The Department of the Treasury

Agency Financial Report

Office of Financial Stability – Troubled Asset Relief Program

Fiscal Year 2015

Page v GAO-16-147R OFS’s Fiscal Years 2015 and 2014 Financial Statements
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

Table of Contents

Financial Audit: Office of Financial Stability (Troubled Asset Relief Program) Fiscal 

Years 2015 and 2014 Financial Statements 1

Agency Financial Report Office of Financial Stability – Troubled Asset Relief Program 

Fiscal Year 2015 v

FOREWORD .............................................................................................................viii

MESSAGE FROM THE DEPUTY ASSISTANT SECRETARY FOR FINANCIAL 

STABILITY...................................................................................................................ix

EXECUTIVE SUMMARY............................................................................................xii

PART 1: Management’s Discussion and Analysis ....................................................... 1

Background, OFS Organization Structure, and Program ......................................... 3

OFS Programs ......................................................................................................... 4

OFS Operational Goal............................................................................................ 10

Operational Goal Two: Continue Helping Families in Need to Avoid Foreclosure . 12

Operational Goal Three: Minimize Cost to Taxpayer ............................................. 13

Operational Goal Four: Continue to Operate with the Highest Standards of 

Transparency, Accountability, and Integrity ........................................................... 14

Fiscal Year 2015 and 2014 Financial Summary and Cumulative Net Income ........... 16

TARP Program Summary ...................................................................................... 16

Key Factors Affecting TARP Future Activities and Ultimate Cost........................... 24

Federal Managers’ Financial Integrity Act (FMFIA)................................................ 26

Federal Financial Management Improvement Act (FFMIA) and Financial 

Management Systems ........................................................................................... 27

Other Management Information, Initiatives, and Issues ......................................... 29

Limitations of the Financial Statements.................................................................. 30

Part 2: Financial Report............................................................................................. 32

MESSAGE FROM THE CHIEF FINANCIAL OFFICER (CFO)............................... 34

GOVERNMENT ACCOUNTABILITY OFFICE AUDITOR’S REPORT ................... 34

Appendix I: Management’s Report on Internal Control over Financial Reporting ...... 42

Management's Report on Internal Control over Financial Reporting...................... 42

Appendix II: OFS Response to Auditor’s Report........................................................ 43

FINANCIAL STATEMENTS....................................................................................... 44

NOTES TO THE FINANCIAL STATEMENTS ........................................................... 51

NOTE 1. REPORTING ENTITY............................................................................. 51

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES...................... 52

NOTE 3. FUND BALANCES WITH TREASURY.................................................... 57

NOTE 4. CASH ON DEPOSIT FOR HOUSING PROGRAM.................................. 57

NOTE 5. TREASURY HOUSING PROGRAMS UNDER TARP............................. 58

NOTE 6. EQUITY INVESTMENTS, NET AND FHA-REFINANCE PROGRAM ..... 61

NOTE 7. DUE TO THE GENERAL FUND ............................................................. 72

NOTE 8. PRINCIPAL PAYABLE TO THE BUREAU OF THE FISCAL SERVICE 

(Fiscal Service) ...................................................................................................... 72

NOTE 9. COMMITMENTS AND CONTINGENCIES.............................................. 73

NOTE 10. STATEMENT OF NET COST ............................................................... 74

NOTE 11. STATEMENT OF BUDGETARY RESOURCES.................................... 74

TABLE OF CONTENTS vi
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

NOTE 12. RECONCILIATION OF OBLIGATIONS INCURRED TO NET COST OF 

OPERATIONS........................................................................................................ 76

Part 3: Other Information (Unaudited)........................................................................ 81

Section A – Combined Schedule of Spending\ ...................................................... 83

Section B – IPIA (as amended by IPERA and IPERIA)................................................ 84

Part 4: Appendices .................................................................................................... 87

Appendix A: TARP Glossary .................................................................................. 88

Appendix B: Abbreviations and Acronyms ............................................................. 90

WEBSITES 92

For the online version of this Report see www.FinancialStability.gov

TABLE OF CONTENTS vii

and search on Reports by Frequency, Yearly 
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

FOREWORD

The Office of Management and Budget (OMB) Circular A-136 provides agencies with the guidance 

for reporting financial and performance information to Congress, the President, and the American 

people on an annual basis. In lieu of the consolidated Performance and Accountability Report (PAR), 

the U.S. Department of the Treasury’s (Treasury) Office of Financial Stability (OFS) has chosen to 

prepare a series of separate reports to provide the fiscal year 2015 financial and performance 

information for the Troubled Asset Relief Program (TARP). The following Agency Financial Report 

(AFR) is the first in this series of reports, and includes the following components:

· Message from the Deputy Assistant Secretary: A statement from the Deputy Assistant 

Secretary providing his assessment of the reliability and completeness of the financial and 

performance data contained in the report, as well as a summary status of TARP programs.

· Management’s Discussion and Analysis: This section contains summary information about 

the history of TARP and the mission and organizational structure of OFS; background and 

analysis of OFS programs and Operational Goals; and analysis of financial statements, 

systems, controls, and legal compliance, including the Deputy Assistant Secretary’s 

Statement of Assurance.

· Financial Report: This section provides a message from the Chief Financial Officer, the 

Report of the Independent Auditors, the financial statements, the notes to the financial 

statements, and other statutory reporting.

· Other Information: This section includes the Combined Schedule of Spending and 

information regarding the Improper Payments Information Act (IPIA).

In addition to this AFR, the performance section of the OFS fiscal year 2017 Congressional Budget 

Justification and the Citizens’ Report satisfy the reporting requirements of the following major 

legislation:

· Reports Consolidation Act of 2000;

· Government Performance and Results Act of 1993 (GPRA) and GPRA Modernization Act of 

2010;

· Government Management Reform Act of 1994 (GMRA);

· Federal Managers’ Financial Integrity Act of 1982 (FMFIA);

· Federal Financial Management Improvement Act of 1996 (FFMIA); and

· Improper Payments Information Act of 2002 (IPIA), as amended by the Improper Payments 

Elimination and Recovery Act of 2010 (IPERA).

These reports will be available on the OFS website at: http://www.treasury.gov/initiatives/financialMESSAGE FROM THE DEPUTY ASSISTANT SECRETARY viii

stability/reports/Pages/default.aspx
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

MESSAGE FROM THE DEPUTY ASSISTANT SECRETARY FOR FINANCIAL 

STABILITY

November 5, 2015

I am pleased to present the Office of Financial Stability’s (OFS) Agency Financial Report for the 

Fiscal Year 2015. This report describes our financial and performance results for the seventh year of 

the Troubled Asset Relief Program (TARP). Within this report you will find the comparative fiscal 

years 2015 and 2014 financial statements for TARP, and the Government Accountability Office’s 

(GAO) auditor’s report with the audit opinion on these financial statements, an opinion from GAO on 

OFS’s internal control over financial reporting for TARP, and the results of the GAO’s tests of OFS’s 

compliance with selected provisions of laws, regulations, contracts, and grant agreements applicable 

to OFS. 

The Emergency Economic Stabilization Act of 2008 (EESA) established OFS within Office of 

Domestic Finance at the Department of the Treasury (Treasury) to implement the TARP. With the 

nation in the midst of the worst financial crisis since the Great Depression, TARP was created to 

“restore the liquidity and stability of the financial system.” It was an extraordinary response to an 

extraordinary crisis. 

Today, it is generally agreed that as a result of the forceful and coordinated response by the federal 

government through TARP and many other emergency programs, we helped avert what could have 

been a devastating collapse of our financial system. Although we are still repairing the damage from 

the crisis and many families still face challenges on a daily basis, the financial system is much more 

stable and our economy is growing, albeit not as fast as we would like. Credit is more available than 

would otherwise be the case for families, businesses, and local governments, banks are better 

capitalized, and we are implementing reforms to address the underlying causes of the crisis. 

OFS has made significant progress towards winding down TARP investments. As of September 30, 

2015, OFS had collected 103 percent of the $412.1 billion in program funds that were disbursed 

under TARP investment programs, as well as an additional $17.5 billion from Treasury’s equity

stake in AIG. Here is where we stand concerning the four categories of TARP investment programs: 

• Banking Programs. OFS has collected more than $275.4 billion (including $339 million 

collected in fiscal year 2015) for all TARP bank support programs through repayments, sales, 

dividends, interest, and other income, compared to $245.5 billion invested. As of September 

30, 2015, $714 million in banking program investments remained outstanding, primarily in 

community banks, and OFS is continuing to wind down these investments through 

repurchases by banks and asset sales. 

• Credit Market Programs. OFS has completed the wind-down of all of the TARP credit market 

programs, including investments made under the Public-Private Investment Program 

(PPIP), Term Asset-Backed Securities Loan Facility (TALF) program, and the SBA 7(a) 

Securities Purchase Program. As of the end of fiscal year 2015, OFS has collected $23.6

billion compared to $19.1 billion disbursed under these programs.

· Auto Industry Financing Program. In December 2014, OFS completed the wind-down of the 

Auto Industry Finance Programs (AIFP) with the sale of its remaining 55 million shares of 

Ally Financial. In total, OFS collected $70.5 billion through sales, repayments, dividends, 

interest, recoveries, and other income, compared to $79.7 billion disbursed under the 

program. 

• American International Group. In fiscal year 2013, OFS exited all remaining holdings in the 

American International Group, Inc. (AIG). During the financial crisis, the peak amount of 

assistance committed by OFS and the Federal Reserve to prevent the collapse of AIG totaled 

$182.3 billion, a portion of which was later canceled. As a result of the combined efforts of 

AIG, Treasury, and the Federal Reserve, $22.7 billion in excess of the total of funds 

disbursed to AIG was recovered through sales and other income. Of the $67.8 billion total 

MESSAGE FROM THE DEPUTY ASSISTANT SECRETARY ix
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

disbursed to AIG by OFS, TARP’s cumulative net collections from repayments, sales,

dividends, interest, and other income related to AIG assets totaled $55.3 billion. Treasury’s 

non-TARP AIG shares generated proceeds in excess of cost of $17.5 billion, resulting in net 

proceeds in excess of cost of $5.0 billion for Treasury as a whole.

While OFS carefully winds down the investment programs under TARP, we are continuing to 

implement and enhance the TARP Housing Programs to continue helping struggling homeowners 

avoid foreclosure, primarily through mortgage modifications and other forms of direct assistance.

These programs (which include the government sponsored enterprises (GSE) programs) have also 

created new mortgage modification and consumer protection standards that have helped transform 

the mortgage servicing industry, thereby indirectly helping millions more families. On June 26, 

2014, the Obama Administration announced the extension of the application deadline for the Making 

Home Affordable Program (MHA) through at least December 2016 in order to provide struggling 

homeowners additional time to access these foreclosure prevention programs.

The financial and performance data contained in this report are reliable and complete. For the 

seventh consecutive year, OFS has earned unmodified opinions from the Government Accountability 

Office (GAO) on its financial statements for TARP, and its internal control over financial reporting 

for TARP.

Sincerely, 

Mark McArdle

Deputy Assistant Secretary for Financial Stability

MESSAGE FROM THE DEPUTY ASSISTANT SECRETARY x
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

FOREWORD xi
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

EXECUTIVE SUMMARY

Seven years ago, the U.S. financial system faced 

challenges on a scale not seen since the Great 

Depression. The banks and financial markets,

that American families and businesses rely on to 

meet their everyday financing needs, were on 

the brink of failure. By October 2008, major 

financial institutions of all sizes were threatened 

and many of them tried to shore up their balance 

sheets by shedding risky assets and hoarding 

cash. People were rapidly losing trust and 

confidence in the stability of America’s financial 

system and the capacity of the government to 

contain the damage. Without immediate and 

forceful action by Congress and the federal 

government, the U.S. economy faced the risk of 

falling into a second Great Depression.

It was out of these extraordinary circumstances 

that the Troubled Asset Relief Program (TARP)

and the Office of Financial Stability (OFS) were 

created. They were a central part of the

emergency measures taken by the federal 

government pursuant to the Emergency 

Economic Stabilization Act of 2008 (EESA).

Collectively, TARP and the federal government’s 

other emergency programs helped to prevent the 

collapse of our financial system. As a result of 

the careful design, implementation, and 

coordination of these programs, the federal 

government was able to limit the broader 

financial and economic damage caused by the 

crisis. Although we are still recovering, these 

measures were critical to restarting economic 

growth, and in restoring access to capital and 

credit. 

Since late 2010, when OFS’s authority to make 

new commitments under TARP expired, OFS 

has focused on carefully winding down TARP’s 

investment programs, recovering the OFS’s 

outstanding investments, and continuing to 

implement the various housing programs under 

TARP to help struggling homeowners avoid 

foreclosure. While the total disbursed for TARP 

programs was $430.1 billion, OFS has collected 

$424.9 billion (or $442.4 billion if including the 

$17.5 billion in proceeds from the additional 

Treasury AIG shares) through repayments, 

sales, dividends, interest, and other income. As 

of September 30, 2015, only $714 million in bank 

investments remain outstanding.

The MD&A describes the establishment of OFS, 

its background, mission, organizational 

structure, and programs. OFS administers 

programs that fall into two major categories: 

Investments and Housing. In total, OFS had

responsibility for 13 individual programs. Most 

of these programs have either been closed or are 

in the process of winding down. 

Each year, OFS reports on our Operational 

Goals, which were developed by management to 

achieve our strategic goal to promote domestic 

economic growth and stability while continuing 

reforms of the financial system. These goals 

include:

1. Completing the wind-down of remaining 

TARP investment programs;

2. Continuing to help struggling 

homeowners avoid foreclosure;

3. Minimizing the cost of the TARP 

programs to the taxpayer; and

4. Operating with the highest standards of 

transparency, accountability, and 

integrity.

The first operational goal is to complete the 

wind-down of the remaining TARP investment 

programs. OFS continues to implement the 

three-pronged exit strategy announced in May 

2012 for the Capital Purchase Program (CPP).

That strategy includes: (i) waiting for those 

banks that are able to repay in full in the near 

future to do so; (ii) restructuring OFS’s 

investments in limited cases; and (iii) selling 

investments through auctions when the bank is 

not expected to repay in the near future.

As of September 30, 2015, OFS has completed 

the wind-down of all three TARP credit market 

programs: the Public-Private Investment 

Program, the Term-Asset-Backed Securities 

Loan Facility, and the Small Business 

Administration 7(a) Securities Purchase 

Program. These programs resulted in collections 

in excess of disbursements of $4.5 billion on 

behalf of taxpayers.

OFS completed the wind-down of the 

Automotive Industry Financing Program (AIFP) 

during fiscal year 2015. In December 2014, OFS 

sold the remaining 55 million shares of Ally 

FOREWORD xii
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

Financial common stock for $1.3 billion in an 

underwritten offer. 

OFS’s second operational goal is to continue 

helping struggling homeowners avoid 

foreclosure. The Making Home Affordable 

Program (MHA) is helping homeowners and 

assisting in stabilizing the housing market. On 

June 26, 2014, the Administration extended the 

application deadline for MHA programs for at 

least one additional year through 2016, to 

provide struggling homeowners additional time 

to access sustainable mortgage relief.

In December 2014 and July 2015, OFS 

announced enhancements to MHA programs to 

better assist struggling homeowners and 

communities still recovering from the effects of 

the financial crisis.

The largest program within MHA is the Home 

Affordable Modification Program (HAMP). 

Under this program more than 1.5 million 

homeowners have had their mortgages modified 

permanently. HAMP has also set new standards 

and changed practices throughout the mortgage 

servicing industry in fundamental ways.

In addition, the Hardest Hit Fund (HHF) 

provides funding to 18 states and the District of 

Columbia through each state’s Housing Finance 

Agency (HFA) to provide assistance to struggling 

homeowners through locally-tailored programs.

HFAs have implemented a number of different 

programs to help homeowners, including 

mortgage payment assistance, reinstatement, 

short sale/transition assistance, principal 

reduction, and modification assistance. As the 

housing recovery has evolved, HFAs have 

undertaken initiatives such as blight elimination 

and down payment assistance programs to stem 

foreclosures by stabilizing neighborhoods and 

property values. Seven HFAs have closed their 

HHF application portals in anticipation of full 

commitment of program funds.

The third operational goal of OFS is to minimize 

the cost of the TARP programs to the taxpayer. 

OFS pursues this goal by carefully managing the 

timely exit of these investments to reduce 

taxpayers’ exposure, returning TARP funds to 

reduce the federal debt, and continuing to 

replace government assistance with private 

capital in the financial system. OFS also takes 

steps to confirm that TARP recipients comply 

with any TARP-related statutory or contractual 

obligations such as executive compensation 

requirements and restrictions on dividend 

payments.

OFS’s final operational goal is to continue 

operating with the highest possible standards of 

transparency, accountability, and integrity. OFS 

posts a variety of reports online that provide 

taxpayers with regular and comprehensive 

information about how TARP funds are being 

spent, who has received them and on what 

terms, and how much has been collected to date.

In addition to discussing program performance, 

the MD&A addresses OFS’s financial 

performance in the Fiscal Year 2015 and 2014 

Financial Summary and Cumulative Net Income 

section. OFS provides an overview of its 

financial data and explains its fiscal year 2015

net income from operations and related loans, 

equity investments, and other credit programs. 

Finally, the Systems, Controls, and Legal 

Compliance section of the MD&A provides a 

discussion of the actions OFS has taken to 

address its management control responsibilities.

This section includes OFS’s assurance related to 

the Federal Managers’ Financial Integrity Act 

and the determination of its compliance with the 

Federal Financial Management Improvement 

Act.

EXECUTIVE SUMMARY xiii
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

PART 1: Management’s Discussion and Analysis

MANAGEMENT’S DISCUSSION AND ANALYSIS 1
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

MANAGEMENT’S DISCUSSION AND ANALYSIS 2
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

Background, OFS Organization Structure, and Program

Background

In response to the worst financial crisis since the 

Great Depression, the Troubled Asset Relief 

Program (TARP) was created on October 3, 2008 

pursuant to the Emergency Economic 

Stabilization Act (EESA). To carry out the 

authorities given to the Secretary of the 

Treasury to implement TARP, the U.S. 

Department of the Treasury (Treasury)

established the Office of Financial Stability 

(OFS) within the Office of Domestic Finance.

EESA authorized the Secretary of the Treasury 

to establish TARP to “purchase, and to make 

and fund commitments to purchase, troubled 

assets from any financial institution, on terms 

and conditions as are determined by the 

Secretary” to restore the liquidity and stability 

of the financial system. The terms “troubled 

assets” and “financial institution” are defined 

within EESA, which can be found at: 

http://www.gpo.gov/fdsys/pkg/BILLS110hr1424enr/pdf/BILLS-110hr1424enr.pdf

In addition, Section 109 of EESA provides 

authority to assist homeowners.

The Dodd-Frank Wall Street Reform and 

Consumer Protection Act (the Dodd-Frank Act), 

signed into law in July 2010, reduced total 

TARP purchase authority from $700 billion to a 

cumulative $475 billion. OFS’s authority to 

make new commitments under TARP expired on 

October 3, 2010. OFS is carefully managing the 

disposition of TARP financial assets to recover 

OFS’s outstanding investments while continuing 

to implement initiatives to help struggling 

homeowners avoid foreclosure.

OFS Organization Structure

OFS is currently headed by the Deputy 

Assistant Secretary for Financial Stability.

Reporting to the Deputy Assistant Secretary are 

four major organizations: the Office of Finance 

and Operations, the Office of the Chief Home 

Ownership Preservation Officer, the Office of the 

Chief Investment Officer, and the Office of the 

Chief Compliance Officer. A Chief Counsel’s 

Office and an Office of Financial Agents also 

reports to the Deputy Assistant Secretary as 

well as to other Departmental Officers.

OFS organization chart follows:

· Deputy Assistant Secretary for 

Financial Stability (4 direct reports)

· Office of Finance and Operations

· Office of the Chief Home Ownership 

Preservation Officer 

· Office of the Chief Investment Officer

· Office of the Chief Compliance Officer

2 attached reports

· Office of Financial Agents

· Chief Counsel

The OFS is not envisioned as a permanent 

organization, so to the maximum extent possible 

when economically efficient and appropriate, 

OFS utilizes private sector expertise to support 

the execution and liquidation of TARP programs.

These firms assist in the areas of custodial 

services, accounting and internal controls, 

administrative support, legal advisory, financial 

advisory, and information technology.

MANAGEMENT’S DISCUSSION AND ANALYSIS 3
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

OFS Programs

Bank Support Programs (CPP, TIP, AGP, 

CDCI, SCAP) 

By late September 2008, several major financial 

institutions had already failed. Many others 

were at risk of failure, and people were rapidly 

losing confidence in the nation’s financial system 

as a whole. Therefore beginning in early October 

2008, OFS launched five bank support programs 

to help stabilize the nation’s banking 

institutions. 

Capital Purchase Program

The Capital Purchase Program (CPP) was 

launched in October 2008 to help stabilize the 

financial system by providing capital to viable 

financial institutions of all sizes throughout the 

nation. Without a viable banking system, 

lending to businesses and consumers could have 

frozen and the financial crisis might have 

spiraled further out of control. Based on market 

indicators at the time, it was clear that financial 

institutions needed additional capital to absorb 

losses and restart the flow of credit.

With the additional capital that OFS offered, 

CPP participants were better equipped to 

undertake new lending and continue to provide 

other services to consumers and businesses. OFS 

received preferred stock or subordinated debt 

securities in exchange for the CPP investments.

Most financial institutions participating in the 

CPP paid OFS a five percent dividend on 

preferred shares for the first five years and a 

nine percent rate thereafter. In addition, OFS 

received warrants to purchase common shares or 

other securities from the banks to enable OFS to 

receive additional returns on its investments as 

banks recovered.

OFS has focused on winding down the CPP 

according to the exit strategy announced on May 

3, 2012. That strategy includes repayments by 

those institutions that are able to do so, selling 

OFS’s positions in banks that are unlikely to 

repay in the near-term, and restructuring some 

investments.

Targeted Investment Program

OFS established the Targeted Investment 

Program (TIP) in December 2008. The program 

gave OFS the necessary flexibility to provide 

funding to financial institutions that were 

critical to the functioning of the U.S. financial 

system. 

OFS invested a total of $40.0 billion in two 

institutions – Bank of America (BofA) and 

Citigroup – under the TIP. Similar to the CPP, 

OFS invested in preferred stock and received 

warrants to purchase common stock in each 

institution. The TIP investments provided for 

annual dividends of eight percent. The program 

also imposed greater reporting requirements 

and other restrictions on BofA and Citigroup. 

OFS completed the wind-down of the TIP in 

December 2009 when both BofA and Citigroup 

repaid their TIP investments in full. OFS 

received net proceeds of $4.4 billion in excess of 

disbursements.

Asset Guarantee Program

Under the Asset Guarantee Program (AGP), 

TARP commitments were used to support two 

institutions – BofA and Citigroup. OFS selected 

them because of the large number of illiquid 

assets they held at the time of the financial 

crisis and the severe impact that their failure 

would have had on the broader economy. BofA, 

however, ultimately decided not to participate in 

this program, and paid OFS a termination fee of 

$276 million. In January 2009, OFS, the Federal 

Reserve, and the Federal Deposit Insurance 

Corporation (FDIC) agreed to share potential 

losses on a $301 billion pool of Citigroup's 

covered assets. As a premium for the guarantee

to Citigroup, OFS received $4.0 billion of 

Citigroup preferred stock, which was reduced to 

$1.8 billion upon early termination of the 

agreement. OFS completed the wind-down of the 

AGP in February 2013, and received more than 

$4.1 billion in proceeds from the AGP without 

disbursing any claim payments.

Community Development Capital Initiative

On February 3, 2010, OFS created the 

Community Development Capital Initiative 

(CDCI) to help viable certified Community 

Development Financial Institutions (CDFIs) and 

MANAGEMENT’S DISCUSSION AND ANALYSIS 4
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

the communities they serve cope with effects of 

the financial crisis. It was put in place to help 

keep day-to-day financing available to families 

and businesses in hard-hit communities that are 

underserved by traditional banks.

Since many CDFIs don’t have the same access to 

capital markets as larger banks, the program 

was designed with more generous terms than 

the CPP. Under this program, CDFI banks, 

thrifts, and credit unions received investments 

aggregating $570 million in capital with an 

initial dividend or interest rate of two percent.

To encourage repayment while recognizing the 

unique circumstances facing CDFIs, the 

dividend rate increases to nine percent after 

eight years. CDFIs that participated in the CPP 

and were in good standing were allowed to 

exchange their CPP securities for securities 

under the more favorable terms of this program. 

Supervisory Capital Assessment Program 

(SCAP)

In 2009, Treasury worked with federal banking 

regulators to develop a comprehensive "stress 

test" known as the Supervisory Capital 

Assessment Program (SCAP). The purpose of the 

SCAP was to determine the health of the 

nation’s 19 largest bank holding companies with 

unprecedented transparency and thereby help 

restore confidence in the banking system. In 

conjunction with the SCAP, Treasury announced 

that it would provide capital under TARP 

through the Capital Assistance Program (CAP) 

to those institutions that needed additional 

capital but were unable to raise it through 

private sources. The CAP closed on November 9, 

2009, without making any investments.

For additional information on the bank support 

programs please visit the OFS website at:

http://www.treasury.gov/initiatives/financialstability/TARP-Programs/bank-investmentprograms/Pages/default.aspx

Credit Market Programs (PPIP, TALF, 

SBA 7(a))

As the financial crisis reached its peak, banks 

were not making new loans to businesses or each

other. As a result, many businesses could not get 

loans for new investments, municipalities and 

state governments could not issue bonds at 

reasonable rates, and families could not get 

credit. The securitization markets—which 

provide financing for credit cards, student loans, 

auto loans, and other consumer loans as well as 

small business loans—had basically stopped 

functioning. OFS launched three programs in 

2009 to help unfreeze these markets and bring 

down the cost of borrowing for families and 

businesses: the Public-Private Investment 

Program (PPIP), the Term Asset‐Backed 

Securities Loan Facility (TALF), and the Small 

Business Administration (SBA) 7(a) Securities 

Purchase Program. Although the specific goals 

and implementation methods of each program 

differed, the overall goal of these three programs 

was the same—to restart the flow of credit to 

meet the critical needs of small businesses and 

consumers.

Public-Private Investment Program

On March 23, 2009, OFS launched the Legacy 

Securities Public-Private Investment Program 

(PPIP) to help restart the market for non-agency 

residential mortgage-backed securities (RMBS) 

and commercial mortgage-backed securities 

(CMBS).

The purpose of PPIP was to draw new private 

capital into the market for legacy RMBS and 

CMBS by providing financing on attractive 

terms as well as a matching equity investment 

from OFS. Using up to $22.1 billion of TARP 

funds alongside equity capital raised from 

private investors, PPIP was designed to 

generate significant purchasing power and 

demand for troubled RMBS and CMBS. 

Term Asset-Backed Securities Loan 

Facility (TALF)

The Term Asset-Backed Securities Loan Facility 

(TALF) was a joint OFS-Federal Reserve 

program that was designed to restart the 

markets for asset-backed securities (ABS) and 

commercial mortgage-backed securities (CMBS),

which had ground to a virtual standstill during 

the early months of the financial crisis.

Under the TALF, the Federal Reserve Bank of 

New York (FRBNY) provided non-recourse 

funding to any qualified borrower that owned 

eligible collateral. On fixed days each month, 

borrowers were allowed to request three-year, or 

in certain cases, five-year TALF loans. If the 

borrower did not repay the loan, the FRBNY 

MANAGEMENT’S DISCUSSION AND ANALYSIS 5
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

would enforce its rights to the collateral and sell 

it to TALF, LLC-a special purpose vehicle (SPV) 

established specifically to purchase and manage 

these assets. OFS initially committed $20.0 

billion in subordinated loans to the SPV but did 

not directly lend to TALF borrowers.

Small Business Administration 7(a) 

Securities Purchase Program

OFS launched the SBA 7(a) Securities Purchase 

Program to help facilitate the recovery of the 

secondary market for small business loans, and 

thus help free up credit for small businesses. 

Under this program, OFS purchased securities 

comprised of the guaranteed portion of SBA 7(a) 

loans, which finance a wide range of small 

business needs. OFS invested approximately 

$367 million in 31 SBA 7(a) securities between 

March and September 2010. These securities 

were comprised of 1,001 loans from 17 different 

industries, including retail, food services, 

manufacturing, scientific and technical services, 

healthcare, and educational services. 

Investments under the SBA 7(a) program were 

fully liquidated by January 2012, resulting in 

proceeds in excess of cost of $9 million.

For additional information on the credit market 

programs, please visit the OFS website at: 

http://www.treasury.gov/initiatives/financialstability/TARP-Programs/credit-marketprograms/Pages/default.aspx

Automotive Industry Financing Program 

(AIFP)

The Automotive Industry Financing Program 

(AIFP) was launched in December 2008 to help 

prevent the disorderly liquidations of General 

Motors (GM) and Chrysler, and thus significant 

disruption of the U.S. auto industry. The 

potential for such a disruption at that time 

threatened the overall economy as it could have 

led to a loss of as many as one million American 

jobs. Recognizing that both GM and Chrysler 

were on the verge of collapse, OFS extended 

loans to both companies and their financing 

entities.

In 2009, OFS agreed to provide additional funds 

conditioned on each company and its 

stakeholders participating in a fundamental 

restructuring that was achieved in record time.

In total OFS disbursed $79.7 billion in loans and 

equity investments to GM, Chrysler, and 

General Motors Acceptance Corporation (now 

known as Ally Financial). As a result, General 

Motors Company (New GM), Chrysler Group 

LLC (New Chrysler), and Ally are more 

competitive and viable companies, supporting 

American jobs and the economy. Operating

results have improved, the industry added jobs, 

and TARP investments have been liquidated.

OFS collected $70.5 billion through sales, 

repayments, dividends, interest, recoveries, and 

other income, compared to $79.7 billion 

disbursed under the program. Recoveries from 

the bankruptcy liquidation of Old Chrysler and 

Old GM remain possible.

For additional information on the AIFP, please 

visit the OFS website at:

http://www.treasury.gov/initiatives/financialstability/TARP-Programs/automotiveprograms/Pages/default.aspx

American International Group, Inc. (AIG) 

Investment Program

On September 15, 2008, Lehman Brothers filed 

for bankruptcy. This triggered the start of a run 

on money market funds generally. The day after, 

AIG – one of the largest and most complex 

financial firms in the world – was on the verge of 

failure. When the financial crisis hit, AIG had 

hundreds of billions of dollars in commitments 

without the capital and liquidity to back them.

Millions of people depended on AIG for their life 

savings and it had a huge presence in many 

critical financial markets, including municipal 

bonds. Therefore, with AIG facing potentially 

fatal liquidity problems and with the crisis 

threatening to intensify and spread more 

broadly throughout the economy, OFS and the 

Federal Reserve provided assistance to AIG.

The initial assistance to AIG was provided by 

the FRBNY before the passage of EESA. After 

EESA became law, OFS and the FRBNY 

continued to work together to address the 

challenges posed by AIG. In 2008 and 2009, OFS 

funds were used to provide further support to 

AIG. In fiscal year 2011, OFS, the FRBNY, the 

trustees of the AIG Credit Facility Trust (the 

Trust)1 and AIG completed a restructuring of the 

MANAGEMENT’S DISCUSSION AND ANALYSIS 6

 

1 The independent trust established to manage the 

Department of the Treasury’s beneficial interest in 

Series C preferred AIG shares.
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

assistance provided by OFS and the FRBNY. A 

series of integrated transactions and corporate 

actions were executed to accelerate the 

repayment of taxpayer funds and to promote 

AIG’s transition from a majority governmentowned and supported entity to a financially 

sound and independent entity.

In fiscal year 2013, OFS exited all remaining 

holdings in AIG through the sale of common 

stock and AIG’s repurchase of warrants. During 

the financial crisis, the OFS’s and the FRBNY’s 

peak support for AIG totaled $182.3 billion. That 

included $69.8 billion that OFS committed and 

$112.5 billion committed by the FRBNY, 

including $22.1 billion in commitments which 

were later canceled. As a result of the combined 

efforts of AIG, OFS, and the FRBNY, $22.7 

billion in excess of the total of funds disbursed 

were recovered through sales and other income.

OFS’s cumulative net proceeds from 

repayments, sales, dividends, interest, and other 

income related to AIG assets totaled $55.3 

billion. While TARP recovered less than its $67.8 

billion total investment, this was offset by the 

proceeds from the additional Treasury shares of 

AIG, resulting in overall proceeds exceeding 

disbursements by $5.0 billion for Treasury as a 

whole.

For additional information on the AIG 

Investment Program, please visit the Office of 

Financial Stability website at:

http://www.treasury.gov/initiatives/financialstability/TARP-Programs/aig/Pages/default.aspx

Housing Programs

OFS established several housing programs 

under TARP to address the historic housing 

crisis and help struggling homeowners avoid 

foreclosure wherever possible. These programs 

have helped homeowners avoid foreclosure and 

introduced important new reforms for the 

mortgage servicing industry to help make 

mortgage modifications become more 

sustainable and affordable. 

Making Home Affordable (MHA)

In early 2009, OFS launched the Making Home 

Affordable® Program (MHA) to help struggling 

homeowners avoid foreclosure and stabilize the 

housing market. OFS has committed $29.8

billion to the MHA program.

MHA is aimed at helping homeowners 

experiencing financial hardships to remain in 

their homes until their financial position 

improves or they relocate to a more sustainable 

living situation. At the same time, MHA protects 

the interests of taxpayers by disbursing funds 

only when transactions are completed and only 

as long as contracts remain in place. 

The cornerstone of MHA is the Home Affordable 

Modification Program (HAMP), which provides 

eligible homeowners the opportunity to reduce 

their monthly mortgage payments to more 

affordable and sustainable levels and avoid 

foreclosure. In addition to HAMP, OFS 

introduced programs under MHA to help 

homeowners who are unemployed, “underwater” 

on their loan (i.e. those who owe more on their 

home than it is currently worth), or are 

struggling with a second lien. MHA also includes 

options for homeowners who would like to 

transition to a more affordable living situation 

through a short sale or deed-in-lieu of 

foreclosure.

On June 26, 2014, the Administration 

announced that the application deadline for 

MHA would be extended at least a year to 

December 31, 2016. MHA has set new standards 

for mortgage assistance and consumer 

protection, which have contributed to millions of 

homeowners receiving assistance to avoid 

foreclosure through other government programs 

and proprietary mortgage modifications.

In addition to HAMP, MHA includes programs 

to help homeowners address specific types of 

mortgages, in conjunction with the Federal 

Housing Administration (FHA) and the United 

States Department of Agriculture (USDA).

Housing Finance Agency (HFA) 

Innovation Fund for the Hardest Hit 

Housing Markets (Hardest Hit Fund)

The Administration established the Hardest Hit 

Fund in February 2010 to provide targeted aid 

to homeowners in states hit hardest by the 

economic and housing market downturn. As part 

of the Administration’s overall strategy for 

restoring stability to housing markets, the 

Hardest Hit Fund provides funding for state 

Housing Finance Agencies (HFAs) to develop 

locally-tailored foreclosure prevention solutions 

in areas that have been hardest hit by home 

price declines and high unemployment. The $7.6 

MANAGEMENT’S DISCUSSION AND ANALYSIS 7
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

billion in HHF funds were allocated among 18 

states and the District of Columbia (DC).

Hardest Hit Fund programs vary state to state, 

but may include such programs as mortgage 

payment assistance for unemployed or 

underemployed homeowners, principal reduction 

to help homeowners get into more affordable 

mortgages, funding to eliminate homeowners’ 

second lien loans, funding for blight elimination 

activities, funding for down payment assistance 

to homebuyers, and help for homeowners who 

are transitioning out of their homes into more 

affordable living situations.

For additional information on the housing 

programs, please visit the OFS website at:

http://www.treasury.gov/initiatives/financialstability/TARPPrograms/housing/Pages/default.aspx

Support for FHA Refinance Program

In March 2010, the Administration announced 

enhancements to an existing FHA program that 

will permit lenders to provide additional 

refinancing options to homeowners who owe 

more than their homes are worth because of 

large declines in home prices in their local 

markets. This program, known as the FHA 

Refinance program, is intended to provide more 

opportunities for qualifying mortgage loans to be 

restructured and refinanced into FHA-insured 

loans. TARP funds have been made available up 

to $100 million to provide additional coverage to 

lenders for a share of potential losses on these 

loans.

MANAGEMENT’S DISCUSSION AND ANALYSIS 8
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

OFS Operational Goal

OFS’s Operational Goals were developed by 

management to achieve our strategic objective to 

wind down emergency financial crisis response 

programs under our strategic goal of promoting 

domestic economic growth and stability while 

continuing reforms of the financial system. The 

following discussion of OFS operational goals 

focuses on significant events that occurred 

during fiscal years 2015 and 2014.

Operational Goal One: Complete the 

Wind-down of the Investment Programs

Banking Support Programs

OFS disbursed a total of $245.5 billion under the 

various TARP bank programs. As of September 

30, 2015, OFS has collected more than $275.4

billion through repayments, dividends, interest, 

warrant sales, and other income, representing 

$29.9 billion in excess of disbursements. OFS is 

focused on recovering TARP funds in a manner 

that continues to promote the nation’s financial 

stability while maximizing returns on behalf of 

the taxpayers. 

Capital Purchase Program

In fiscal year 2015, OFS continued to make

substantial progress winding down the CPP 

according to its three-pronged exit strategy. 

Each dollar collected from CPP participants now 

represents additional collections in excess of 

disbursements on behalf of taxpayers. From 

inception of the program through September 30, 

2015, OFS has received $199.6 billion in CPP 

repayments/sales, along with $12.1 billion in 

dividends and interest, and $14.9 billion of 

proceeds in excess of cost, which totals $226.6 

billion. As of September 30, 2015, $268 million 

in CPP gross investments remained outstanding

in 19 institutions.

OFS received preferred stock or debt in each 

bank in which it made an investment, as well as 

warrants. Under the terms of the CPP, 

participating financial institutions may repay 

the funds they received at any time, with the 

approval of their regulators. 

Throughout fiscal year 2015, OFS continued to 

implement the CPP exit strategy by periodically 

selling preferred stock and subordinated debt in 

CPP participants through private auctions. OFS 

held two preferred placement auctions with 

combined net proceeds of $50 million during 

fiscal year 2015 compared to six auctions with 

$289 million in net proceeds in fiscal year 2014.

During fiscal year 2015 and 2014, 22 and 62

investments were repaid or sold for a total of 

$148 million and $1.5 billion, respectively.

Another component of OFS’s exit strategy for the 

CPP is to restructure certain investments in 

limited cases. This is typically done in 

connection with a merger or the bank’s plan to 

raise new capital and is generally proposed by 

the bank. 

Under the CPP, OFS has also received warrants 

to purchase common shares or other securities 

from the banks. OFS has followed a policy of 

disposing of warrants as soon as practicable if no 

agreement is reached on a repurchase. OFS held 

one warrant auction in fiscal year 2015, with net 

proceeds of $49 million. As of September 30, 

2015, OFS has collected $8.1 billion in net 

proceeds from the sale of warrants since 

inception. 

Additional information on the CPP, including 

details on the program’s purpose, overview, and 

status can be found at the following website:

http://www.treasury.gov/initiatives/financialstability/TARP-Programs/bank-investmentprograms/cap/Pages/default.aspx

Community Development Capital Initiative

Unlike the CPP, OFS did not take substantial 

actions during fiscal year 2015 to wind down the 

CDCI because of the unique circumstances 

facing participating institutions. In particular, 

many CDCI participants lack the same access to 

capital markets that CPP institutions have, 

making it more challenging for them to repay 

the TARP investments in their institutions.

OFS completed funding through this program in 

September 2010 with a total investment amount 

of $570 million for 84 institutions. Of this 

amount, $363 million (nearly $356 million from 

principal and nearly $8 million from warrants) 

represented exchanges by 28 CPP institutions 

converting into the CDCI. During fiscal years 

MANAGEMENT’S DISCUSSION AND ANALYSIS 10
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

2015 and 2014, OFS collected a total of $28

million and $20 million, respectively, in 

repayments, dividends, and interest from 

institutions in the CDCI program. As of 

September 30, 2015, $446 million in CDCI 

investments remained outstanding.

OFS will continue to closely monitor the 

performance of the CDCI and make decisions 

regarding the program’s wind-down at a later 

date. Additional information on CDCI, including 

details on the program’s purpose, overview, and 

status can be found at the following website:

http://www.treasury.gov/initiatives/financialstability/TARP-Programs/bank-investmentprograms/cdci/Pages/default.aspx

Credit Market Programs

OFS has now completed the wind-down of all 

three credit market programs that were 

launched under TARP. A total of $19.1 billion 

was disbursed through these programs and a 

total of $23.6 billion has been collected through 

September 30, 2015.

Public Private Investment Program

OFS completed the wind-down of the PPIP

during fiscal year 2015, with no debt or equity 

investments outstanding after the final 

outstanding equity repayment was made in June 

2013. During fiscal year 2015, OFS received the 

final termination notice from the one remaining 

Public Private Investment Fund (PPIF) as well 

as $63,311 in investment income. From 

inception of the program through September 30, 

2015, OFS has received $2.4 billion in interest 

and investment income and $1.5 billion in net 

proceeds in excess of cost. The total of $22.5 

billion of repayments, sales, and investment 

income exceeds the original investment by $3.9 

billion. 

Additional information on PPIP, including 

details on fund performance can be found at the 

following website:

http://www.treasury.gov/initiatives/financialstability/reports/Pages/Public-PrivateInvestment-Program-Quarterly-Report.aspx

Term Asset-Backed Securities Loan 

Facility

OFS originally committed to provide credit 

protection of up to $20.0 billion in the form of a 

subordinated loan commitment to TALF, LLC to 

support up to $200.0 billion of lending by the 

FRBNY. After subsequent reductions in OFS’s 

commitments in 2013, the commitment was 

$100 million – the initial loan amount disbursed 

by OFS to fund the TALF, LLC.

During fiscal year 2013, OFS’s original $100 

million loan disbursed was fully repaid with 

interest. As of September 30, 2015, all TALF 

loans provided by FRBNY have been repaid in 

full and the program is closed. Since inception, 

accumulated income earned from investments in 

TALF, LLC totaled $685 million, including $39 

million in fiscal year 2015.

Additional information on TALF, including 

details on the program’s purpose, overview, and 

status can be found at the following website:

http://www.treasury.gov/initiatives/financialstability/TARP-Programs/credit-marketprograms/talf/Pages/default.aspx

Automotive Industry Financing Program 

OFS fully wound down the AIFP during fiscal 

year 2015 selling its remaining stake in Ally 

Financial. OFS disbursed $79.7 billion in loans 

and equity investments to the auto industry 

through the AIFP. As of September 30, 2015, 

OFS has collected $70.5 billion through sales, 

repayments, dividends, interest, recoveries, and 

other income under this program.

OFS invested $17.2 billion in Ally Financial –

formerly known as GMAC – $16.3 billion in 

initial GMAC investments and an $884 million 

loan to Old GM on behalf of GMAC. 

OFS took significant action in fiscal years 2015 

and 2014 to exit its remaining investment in 

Ally Financial. During fiscal year 2014, OFS 

sold Ally common stock through a private 

offering, an initial public offering, and a series of 

pre-arranged written trading plans. OFS held 55 

million shares of Ally common stock after the 

last trading plan, which ended in October 2014. 

In December 2014, OFS sold all of its remaining 

shares in Ally Financial generating cumulative 

receipts of $19.6 billion or $2.4 billion in 

proceeds in excess of cost.

MANAGEMENT’S DISCUSSION AND ANALYSIS 11
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

During fiscal year 2015, OFS collected $100 

million in recoveries from the Old Carco 

Liquidation Trust, set up in accordance with the 

plan of liquidation for the debtors of Old 

Chrysler. 

Additional information on the AIFP, including 

details on the program’s purpose, overview, and 

status can be found at the following website:

http://www.treasury.gov/initiatives/financialstability/TARP-Programs/automotiveprograms/Pages/default.aspx

Operational Goal Two: Continue 

Helping Families in Need to Avoid 

Foreclosure

Making Home Affordable (MHA)

Consistent with OFS’s goal of continuing to help 

struggling homeowners find solutions to avoid 

foreclosure wherever possible, OFS is continuing 

to implement the MHA program and to reach as 

many homeowners as possible. As of September 

30, 2015, 77 servicers are participating in

Treasury’s MHA program for non-GSE loans. As 

of September 30, 2015, OFS has commitments to 

fund up to $29.8 billion in MHA payments and 

has disbursed $12.2 billion since inception.

OFS publishes quarterly assessments of servicer 

performance containing data on compliance with 

program guidelines as well as program results 

metrics. OFS believes that these assessments 

have set the standard for transparency about 

mortgage servicer efforts to assist homeowners 

at risk of foreclosure, and encourage servicers to 

improve processes and performance for 

foreclosure prevention activities.

MHA performance highlights for fiscal year 2015

can be found at: 

http://www.treasury.gov/initiatives/financialstability/reports/Pages/Making-HomeAffordable-Program-Performance-Report.aspx

The largest program within MHA is the Home 

Affordable Modification Program (HAMP). 

HAMP offers eligible homeowners at risk of 

foreclosure the opportunity to obtain reduced 

monthly mortgage payments that are affordable 

and sustainable over the long-term.

As of September 30, 2015, approximately 1.5 

million homeowners have received permanent 

modifications through HAMP.2 Homeowners 

participating in HAMP have collectively 

experienced nearly a 35 percent median 

reduction in their mortgage payments—

representing more than $481 per month. MHA 

has also encouraged the mortgage industry to 

adopt similar programs that have helped 

millions more at no cost to taxpayers by 

establishing standards and best practices for 

loss mitigation evaluations.

In fiscal year 2015, OFS made changes to MHA 

programs to better assist homeowners avoid 

foreclosure and create a safety net for borrowers 

facing rate step-ups in a HAMP modification. In 

fiscal year 2014, the deadline for applications 

under the MHA programs was extended from 

December 31, 2015, to at least December 31, 

2016. In fiscal year 2015, OFS made additional 

changes by enhancing borrower pay-forperformance incentives; requiring servicers to 

offer to recast a borrower’s loan which provides 

payment relief; reducing the HAMP Tier 2 

interest rate; and increasing borrower relocation 

assistance for Home Affordable Foreclosure 

Alternative (HAFA) short sale or deed-in-lieu

transactions. In July 2015, OFS announced a 

streamlined modification process under HAMP 

to assist homeowners who are seriously 

delinquent and have not completed a HAMP 

application.

Additional information on MHA, including 

details on the program’s purpose, overview, and 

status can be found at the following website:

http://www.treasury.gov/initiatives/financialstability/TARPPrograms/housing/mha/Pages/default.aspx

Housing Finance Agency (HFA) 

Innovation Fund for the Hardest Hit 

Housing Markets (Hardest Hit Fund)

In addition to MHA, OFS operates the Hardest 

Hit Fund, which allows participating HFAs in 

the nation’s hardest hit housing and 

unemployment markets to design innovative, 

locally-targeted foreclosure prevention 

programs.

MANAGEMENT’S DISCUSSION AND ANALYSIS 12

 

2

Includes modifications on both non-GSE loans and 

GSE loans. 923,226 of these modifications were OFS 

funded consisting of 893,568 non-GSE modifications 

and 29,658 GSE modifications.
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

In fiscal year 2015, state HFAs continued to 

adapt their programs to best meet borrower 

needs in evolving economic and housing 

markets. A total of fifteen HFAs now offer 

principal reduction to induce a loan 

modification, refinance, or recast. In addition, 

Alabama, Tennessee, and South Carolina joined 

Illinois, Indiana, Ohio, and Michigan in 

allocating a portion of their HHF funds to blight 

elimination in an effort to stabilize 

neighborhoods and prevent foreclosures. Finally, 

Florida, Illinois, and North Carolina now offer 

Down Payment Assistance Programs, making 

assistance available to moderate-income 

homebuyers in targeted counties that continue 

to demonstrate housing market distress. 

As of September 30, 2015, the 19 HFAs have 

collectively drawn approximately $5.7 billion (75

percent) of the $7.6 billion allocated under the 

program. For fiscal years 2015 and 2014, this 

program has disbursed $1.3 billion and $1.6 

billion, respectively. Each state draws down 

funds as they are needed, but must have no 

more than five percent of their allocation on 

hand before they can draw down additional 

funds. States have until December 31, 2017 to 

enter into agreements with borrowers. As of 

September 30, 2015, seven HFAs had stopped 

accepting new applications for assistance in 

anticipation of full commitment of program 

funds: the District of Columbia, Illinois, New 

Jersey, Ohio, Oregon, Rhode Island and 

Tennessee.

Each HFA submits a quarterly report on the 

progress of its program. These reports measure 

the states’ performance against metrics set by 

OFS for various aspects of their programs.

Direct links to each state’s most recent 

performance report can be found at:

http://www.treasury.gov/initiatives/financialstability/TARPPrograms/housing/Pages/ProgramDocuments.aspx

OFS also publishes a Quarterly Performance 

Summary, a companion reference to the HFAs’ 

Quarterly Performance Reports. The Summary 

contains performance data and trends, key 

economic and loan performance indicators, and 

brief program descriptions for each HFA. The 

Quarterly Performance Summary can be found 

at:

http://www.treasury.gov/initiatives/financialstability/reports/Documents/FINAL%20Q1%202

014%20Hardest%20Hit%20Fund%20Program%2

0Performance%20Summary.pdf

Additional information on the Hardest Hit Fund, 

including details on the program’s purpose, 

overview, and status can be found at the 

following website:

http://www.treasury.gov/initiatives/financialstability/TARPPrograms/housing/hhf/Pages/default.aspx

FHA Refinance Program 

On March 26, 2010, FHA and OFS announced 

enhancements to the Federal Housing 

Administration Refinance Program (FHA 

Refinance), designed to make homeownership 

more affordable for borrowers whose homes are 

worth less than the remaining amounts on their 

mortgage loans (negative equity). TARP funds 

were made available by OFS through an $8.0 

billion letter of credit facility, in order to fund a 

share of the losses associated with this program 

(subsequently reduced to $100 million as of

fiscal year 2015 due to low utilization). As of 

September 30, 2015, FHA has guaranteed 6,639

refinance loans with a total face value of almost 

$955 million, of which, 4,156 loans are subject to 

OFS coverage with a face value of $611 million. 

Operational Goal Three: Minimize Cost 

to Taxpayer

OFS manages TARP investments to minimize 

costs to taxpayers by managing the timely exit of 

these investments to reduce taxpayers’ exposure, 

return TARP funds to reduce the federal debt, 

and continue to replace government assistance 

with private capital in the financial system. OFS 

has taken a number of steps during fiscal years 

2015 and 2014 to dispose of OFS’s outstanding 

investments in a manner that balances the 

desire to exit these investments as quickly as 

practicable with maximizing returns on behalf of

taxpayers. OFS continues to take steps to ensure 

that TARP recipients comply with any TARPrelated statutory or contractual obligations such 

as executive compensation requirements and 

restrictions on dividend payments.

OFS takes a disciplined portfolio approach –

reviewing each investment and closely 

monitoring risk and performance. In addition to 

repayments by participants, OFS has disposed of 

MANAGEMENT’S DISCUSSION AND ANALYSIS 13
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

investments to third parties through public and 

private offerings and auctions with approval 

from regulators.

Risk Assessment

OFS has developed procedures to identify and 

mitigate investment risk. These procedures are 

designed to identify TARP recipients that face a 

heightened financial risk and determine 

appropriate responses to preserve OFS’s 

investment on behalf of taxpayers, while 

maintaining financial stability. Specifically, 

OFS’s external asset managers review publicly 

available information to identify recipients for 

which pre-tax, pre-provision earnings and 

capital may be insufficient to offset future losses 

and maintain required capital. For certain 

institutions, OFS and its external asset 

managers engage in heightened monitoring and 

due diligence that reflects the severity and 

timing of the challenges. 

Compliance 

OFS monitors certain TARP-related statutory 

and contractual obligations of remaining TARP 

recipients. Statutory obligations include 

certification and disclosures related to executive 

compensation restrictions. Contractual 

obligations vary by investment type. For most of 

OFS’s preferred stock investments, TARP 

recipients must comply with restrictions on 

payment of dividends and on repurchases of 

junior securities. Recipients of exceptional 

assistance were required to comply with 

additional restrictions on executive 

compensation, lobbying, and corporate expenses. 

Ally Financial was the last such recipient, but is 

no longer subject to these restrictions since 

December 2014.

OFS also performs periodic reviews of the 19 

HFAs participating in the HHF program, to 

evaluate each HFA’s ongoing compliance with 

their contractual agreement with OFS, as well 

as compliance with HHF program terms and 

underwriting requirements.

In addition, all mortgage servicers participating 

in MHA are subject to program guidelines that

require the servicer to offer MHA assistance to 

all eligible borrowers and to have effective

systems, processes, and controls to administer 

the programs. Servicers are subject to periodic, 

on-site compliance reviews performed by OFS’s 

compliance agent, Making Home AffordableCompliance (MHA-C), a separate, independent 

division of Freddie Mac, to monitor whether 

servicers’ obligations under MHA requirements 

are being met.

In fiscal year 2011, OFS began publishing 

quarterly assessments for the largest servicers 

that currently comprise approximately 86% of 

the HAMP mortgage servicing. These 

assessments have been used to ensure focus on 

emerging areas of interest, draw servicer 

attention to higher risk areas, and prompt the 

industry to improve its practices. As the 

program has evolved and servicers have 

significantly improved their performance, OFS 

has updated the assessment to ensure it 

includes metrics that address current areas of 

interest and concern.

Beginning with the second quarter 2015, OFS 

transitioned to the third iteration of quarterly 

assessments which rely on enhanced loan file 

review testing. The updated assessment

provides additional insight into the impact of 

servicer performance on the borrower experience 

and fosters further improvement in servicer 

performance by tightening performance 

benchmarks.

Operational Goal Four: Continue to 

Operate with the Highest Standards of 

Transparency, Accountability, and 

Integrity

To protect taxpayers and help ensure that every 

dollar is directed toward promoting financial 

stability, OFS established comprehensive 

accountability and transparency measures. OFS 

is committed to operating its investment and 

housing programs in full view of the public. This 

includes providing regular and comprehensive 

information about how TARP funds are being 

spent, who has received them and on what 

terms, and how much has been collected to date. 

All of this information, along with numerous 

reports of different frequencies, is posted in the 

Financial Stability section of the Treasury.gov 

website, which can be found at: 

http://www.treasury.gov/initiatives/financialstability/reports/Pages/default.aspx

These reports include: 

· A Monthly TARP Update (formerly the 

Daily TARP Update) that features 

MANAGEMENT’S DISCUSSION AND ANALYSIS 14
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

detailed financial data related to each 

TARP investment program, including 

the status of disbursements and all 

collections by category;

· A monthly report to Congress that 

details how TARP funds have been used, 

the status of recovery of such funds by 

program, and information on the 

estimated cost of TARP;

· A monthly report on dividend and 

interest payments;

· A quarterly report on Making Home 

Affordable; 

· A report of each transaction (such as an 

investment or repayment) within two 

business days of each transaction;

· A quarterly report on the Hardest Hit 

Fund; and

· A quarterly report to Congress on 

administrative expense activities.

In addition, OFS regularly publishes data files 

related to MHA and transaction reports that 

show activity related to MHA and HHF. The 

release of the data file fulfills a requirement 

within the Dodd-Frank Act to make available 

loan-level data about the program. OFS updates 

the file monthly. Researchers interested in using 

the MHA Data File can access the file and user 

guide at:

http://www.treasury.gov/initiatives/financialstability/reports/Pages/mha_publicfile.aspx

Audited Financial Statements 

OFS prepares separate financial statements for 

TARP on an annual basis. This is the seventh

OFS Agency Financial Report (AFR), which 

includes the audited financial statements for the 

fiscal years ended September 30, 2015 and 

September 30, 2014. Additional reports for prior 

periods are available at:

http://www.treasury.gov/initiatives/financialstability/reports/Pages/Annual-AgencyFinancial-Reports.aspx

In its seven years of operation, TARP’s financial 

statements have received seven unmodified 

audit opinions from its auditor, the GAO.

TARP Tracker

During fiscal year 2013, OFS launched an 

expanded version of its existing TARP Tracker, 

which is an online, interactive tool that allows 

users to track the flow of TARP funds in greater 

detail over the lifetime of each individual TARP 

investment area. The expanded capability allows 

users to view each investment area separately to 

get a clearer sense of what has occurred in a 

particular program, including a scroll of events, 

major transactions, and legislative actions that 

have impacted the program.

Readers are invited to refer to these documents 

at: http://www.treasury.gov/initiatives/financialstability/reports/Pages/default.aspx

Oversight by Three Separate Agencies

OFS activities are currently reviewed by three 

oversight entities:

· The Financial Stability Oversight Board, 

established by EESA Section 104;

· Specific responsibilities for the GAO as 

set out in EESA Section 116;

· The Special Inspector General for TARP, 

established by EESA Section 121.

OFS has productive working relationships with 

all of these bodies, and cooperates with each 

oversight agency’s effort to produce periodic 

audits and reports that focus on the many 

aspects of TARP. Individually and collectively, 

the oversight bodies’ audits and reports have 

made and continue to make important 

contributions to the development, strengthening, 

and transparency of TARP programs.

Congressional Hearings and Testimony

OFS officials have testified in numerous 

Congressional hearings since TARP was created.

Copies of their written testimony are available 

at: 

http://www.treasury.gov/initiatives/financialstability/news-room/Pages/default.aspx

MANAGEMENT’S DISCUSSION AND ANALYSIS 15
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

Fiscal Year 2015 and 2014 Financial Summary and Cumulative Net Income

OFS’s fiscal year 2015 net cost of operations of 

$4.4 billion includes the reported net income 

related to TARP investment and FHA-Refinance 

programs, as well as expenses for the Treasury 

housing programs under TARP and 

administrative expenses. For the fiscal year 

ended September 30, 2015, OFS reported net 

subsidy income for 6 programs – [CPP, CDCI, 

PPIP, TALF, AIFP, and FHA-Refinance]. These 

programs collectively reported net subsidy 

income of $0.2 billion. Fiscal year 2015 expenses 

for the Treasury housing programs under TARP 

are $4.5 billion and administrative costs are 

$146 million. For the fiscal year ended 

September 30, 2014, the net cost of operations 

was $3.0 billion. These net cost amounts 

reported in the financial statements reflect only 

transactions through September 30, 2015 and 

September 30, 2014, respectively, and therefore 

are different than lifetime cost estimates made 

for budgetary purposes. Over time the cost of 

TARP programs will change. As described later 

in the OFS audited financial statements, these 

estimates are based in part on currently 

projected economic factors. These economic 

factors will likely change, either increasing or 

decreasing the lifetime cost of TARP.

TARP Program Summary

Table 1 provides a financial summary for TARP 

programs since its inception on October 3, 2008, 

through September 30, 2015. For each program, 

the table provides utilized TARP authority 

(which includes purchases made, legal 

commitments to make future purchases, and 

offsets for guarantees made), the amount 

actually disbursed, repayments to OFS from 

program participants or from sales of the 

investments, write-offs and losses, net 

outstanding balance as of September 30, 2015, 

and cash inflows on the investments in the form 

of dividends, interest or other fees. 

Table 1: TARP Summary1

From TARP Inception through September 30, 2015

(Dollars in millions)

Bank Support Programs

MANAGEMENT’S DISCUSSION AND ANALYSIS 16

Purchase 

Price or 

Guarantee 

Amounts 

Total $ 

Disbursed 

Investment 

Repayments 

Write-offs 

and Losses6 

Outstanding 

Balance7 

Received 

from 

Investments 

Capital Purchase Program2 $ 204,895 $ 204,895 $ (199,560)5 $ (5,067) $ 268 $ 27,080 

Targeted Investment 

Program 40,000 40,000 (40,000) - - 4,432 

Asset Guarantee Program 5,000 - - - - 4,126 

Community Development 

Capital Initiative 570 570 (117) (7) 446 52 

Credit Market Programs

Purchase 

Price or 

Guarantee 

Amounts 

Total $ 

Disbursed 

Investment 

Repayments 

Write-offs 

and Losses6 

Outstanding 

Balance7 

Received 

from 

Investments 

Public Private Investment 

Program 18,625 18,625 (18,625) - 0 3,852 

Term Asset-Backed 

Securities Loan Facility 100 100 (100) - - 685 
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

MANAGEMENT’S DISCUSSION AND ANALYSIS 20

Purchase 

Price or 

Guarantee 

Amounts

Total $ 

Disbursed

Investment 

Repayments

Write-offs 

and Losses6

Outstanding 

Balance7

Received 

from 

Investments

SBA 7(a) Securities 

Purchase Program 367 367 (363) (4) 0 13 

Other Programs

Purchase 

Price or 

Guarantee 

Amounts 

Total $ 

Disbursed 

Investment 

Repayments 

Write-offs 

and Losses6 

Outstanding 

Balance7 

Received 

from 

Investments 

Automotive Industry 

Financing Program 79,692 79,692 (63,037) (16,655) - 7,502 

American International 

Group Investment 

Program3

67,835 67,835 (54,350) (13,485) - 959 

Sub-total for Investment 

Programs 

417,085 412,085 (376,153) (35,218) 714 48,700 

Treasury Housing 

Programs under TARP 37,5074 17,991 N/A N/A N/A -

Total for TARP Program $ 454,591 $ 430,075 $ (376,153) $ (35,218) $ 714 $ 48,700 

Notes:

1 This table shows TARP activity for the period from inception through September 30, 2015, on a cash basis. 

Received from investments includes dividends and interest income reported in the Statement of Net Cost, and 

Proceeds from sale and repurchases of assets in excess of costs.

2 OFS received $31.9 billion in proceeds from sales of Citigroup common stock, of which $25.0 billion is included 

at cost in investment repayments, and $6.9 billion of net proceeds in excess of cost is included in Received from 

Investments.

3 The amounts for AIG reflect only the operations of TARP and do not reflect proceeds received from the sale of 

shares of AIG common stock held by Treasury outside of TARP (additional Treasury shares). 

4 Individual obligation amounts are $29.8 billion for the Making Home Affordable Program, $7.6 billion for the 

Hardest Hit Fund, and $125 million committed for the FHA-Refinance Program.

5 Includes $2.2 billion of SBLF refinancing outside of TARP and CDCI exchanges from CPP of $363 million.

6 Losses represent proceeds less than cost on sales of assets, which are reflected in the financial statements 

within “net proceeds from sales and repurchases of assets in excess of (less than) cost”.

7 Total disbursements less repayments, write-offs and losses do not equal the total outstanding balance because 

the disbursements for the Treasury housing programs under TARP do not require (and OFS does not expect) 

repayments.

Most TARP funds were used to make 

investments in preferred stock or to make loans.

OFS has generally received dividends on the 

preferred stock and interest payments on the 

loans from the institutions participating in 

TARP programs. These payments represent 

additional proceeds received on OFS’s TARP 

investments. From inception through September 

30, 2015 OFS received a total of $24.5 billion in 

dividends and interest.

OFS has conducted several sales of its 

investments in banking institutions as part of its 

exit strategy for winding down TARP. OFS plans 

to continue to sell its investments in banks that 

are not expected to repay OFS in the foreseeable 

future. These sales are being conducted over 

time and in stages and include both common and 

preferred stock and debentures. During fiscal 

years 2015 and 2014, OFS sold its investments 

in 8 and 31 banks for combined principal

receipts of $49 million and $263 million, 

respectively, through individual private 

auctions. These auctions resulted in net 

proceeds less than cost of $32 million and $73

million for those investments during fiscal years 

2015 and 2014, respectively.

OFS also received warrants in connection with 

most of its investments, which provides an 

opportunity for OFS on behalf of taxpayers to 

realize additional proceeds on investments.
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

Since the program’s inception, through 

September 30, 2015, OFS has received $9.6

billion in gross proceeds from the disposition of 

warrants associated with 241 CPP, TIP, AGP, 

and AIG, consisting of (i) $4.0 billion from issuer 

repurchases at agreed upon values and (ii) $5.6

billion from auctions.

Summary of TARP Equity Investments

Table 2 provides information on the estimated 

values of TARP investment programs, as of the 

end of fiscal years 2015 and 2014. OFS housing 

programs under TARP are excluded from the 

chart because no repayments are expected. The 

Outstanding Balance column represents the 

amounts disbursed by OFS relating to the loans 

and equity investments that were outstanding 

as of September 30, 2015 and 2014. The 

Estimated Value of the Investment column 

represents the present value of net cash inflows 

that OFS estimates it will receive from the

programs. These estimates include market risk 

assumptions. For equity investments, this 

amount represents fair value. The total 

difference of $232 million (2015) and $679

million (2014) between the two columns is 

considered the “subsidy cost allowance” under 

the Federal Credit Reform Act methods OFS 

follows for budget and accounting purposes. 

See Note 6 in the financial statements for 

further discussion.

MANAGEMENT’S DISCUSSION AND ANALYSIS 21
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

Table 2: Summary of TARP Equity Investments

(Dollars in millions)

Bank Support Programs

MANAGEMENT’S DISCUSSION AND ANALYSIS 22

Program 

Outstanding 

Balance as of 

September 

30, 20151 

Estimated Value 

of Investment as 

of September 30, 

2015 

Outstanding 

Balance as of 

September 30, 

20141 

Estimated 

Value of 

Investment as 

of September 

30, 2014 

Capital Purchase Program $ 268 $ 99 $ 625 $ 281 

Community Development 

Capital Initiative 446 383 465 410 

Credit Market Programs

Program 

Outstanding 

Balance as of 

September 

30, 20151 

Estimated Value 

of Investment as 

of September 30, 

2015 

Outstanding 

Balance as of 

September 30, 

20141 

Estimated 

Value of 

Investment as 

of September 

30, 2014 

Public Private Investment 

Program 0 0 0 0

Term Asset-Backed Securities 

Loan Facility 0 0 0 0

SBA 7(a) Securities Purchase 

Program 0 0 0 0

Other Programs

Program 

Outstanding 

Balance as of 

September 

30, 20151 

Estimated Value 

of Investment as 

of September 30, 

2015 

Outstanding 

Balance as of 

September 30, 

20141 

Estimated 

Value of 

Investment as 

of September 

30, 2014 

Automotive Industry Financing 

Program 0 0 1,763 1,483

American International Group 

Investment Program 0 0 0 0

Total $ 714 $ 482 $ 2,853 $ 2,174 

1 Before subsidy cost allowance.

The ultimate cost of TARP will not be known for 

some time, but it is not expected to change 

significantly as only a few investment programs 

remain open with many of the original disbursed 

investments repaid. The financial performance 

of the remaining programs will depend on many 

factors, such as future economic and financial 

conditions and the business prospects of specific 

institutions. The cost estimates are sensitive to 

slight changes in model assumptions, such as 

general economic conditions, specific stock price 

volatility of the entities in which OFS has an 

equity interest, estimates of expected defaults, 

and prepayments. Wherever possible, OFS uses 
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

market prices of tradable securities to estimate 

the fair value of TARP investments. Use of 

market prices is possible for TARP investments 

that trade in public markets or are closely 

related to tradable securities. For those TARP 

investments that do not have direct analogs in 

private markets, OFS uses internal marketbased models to estimate the market value of 

these investments. All future cash flows are 

adjusted for market risk. Further details on 

asset valuation can be found in Note 6 of the 

Financial Statements.

Comparison of Estimated Lifetime TARP 

Costs over Time

Market conditions and the performance of 

specific financial institutions are critical 

determinants of TARP’s estimated lifetime 

cost. The changes in OFS estimates since 

TARP’s inception through September 30, 

2015, provide a good illustration of this 

impact. Table 3 provides information on how 

OFS’s estimated lifetime cost of TARP has 

changed over time. The cost estimates for the 

non-housing programs have fluctuated in 

large part due to changes in the market prices 

of common stock for AIG, GM and Ally. This 

table assumes that all expected investments 

and disbursements for Treasury housing 

programs under TARP are completed, and 

adhere to general government budgeting 

guidance. This table will not match the 

financial statements since the table includes 

repayments and disbursements expected to be 

made in the future. Table 3 is consistent with 

the estimated TARP lifetime cost disclosures 

on the OFS website at:

http://www.treasury.gov/initiatives/financialstability/Pages/default.aspx

The cost amounts in Table 3 are based on 

assumptions regarding future events, which 

are inherently uncertain.

MANAGEMENT’S DISCUSSION AND ANALYSIS 23
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

Table 3: Estimated Lifetime TARP Costs (Income)1

(Dollars in billions)

MANAGEMENT’S DISCUSSION AND ANALYSIS 24

Category 

Program 

Estimated Lifetime Cost (Income) as of September 30 

2009 5 2010 2011 2012 2013 2014 2015 

Bank 

Support 

Programs

Capital Purchase 

Program ($14.6) ($11.2) ($13.0) ($14.9) ($16.1) ($16.1) ($16.3)

Targeted Investment 

Program (1.9) (3.8) (4.0) (4.0) (4.0) (4.0) (4.0)

Asset Guarantee 

Program2

(2.2) (3.7) (3.7) (3.9) (4.0) (4.0) (4.0)

Community Development 

Capital Initiative 0.4 0.3 0.2 0.2 0.1 0.1 0.1 

Credit 

Market 

Programs

Public Private Investment 

Program 1.4 (0.7) (2.4) (2.4) (2.7) (2.7) (2.7)

Term Asset-Backed 

Securities Loan Facility (0.3) (0.4) (0.4) (0.5) (0.6) (0.6) (0.6)

SBA 7(a) Securities 

Purchase Program N/A 0.0 0.0 0.0 0.0 0.0 0.0

Other 

Programs

Automotive Industry 

Financing Program 34.5 14.7 23.6 24.3 14.7 12.2 12.1

American International 

Group Investment 

Program3

56.8 36.9 24.3 15.3 15.2 15.2 15.2 

Subtotal Subtotal 74.1 32.1 24.6 14.1 2.6 0.1 (0.2)

Treasury Housing 

Programs under TARP4

50.0 45.6 45.6 45.6 37.7 37.4 37.4 

Total Total $124.1 $77.7 $70.2 $59.7 $40.3 $37.5 $37.2 

1 Estimated program costs (+) or savings (in parentheses) over the life of the program, 

including interest on reestimates and excluding administrative costs.

2 Prior to the termination of the guarantee agreement, OFS guaranteed up to $5.0 

billion of potential losses on a $301.0 billion portfolio of loans.

3 The amounts for AIG reflect only the operations of TARP and do not reflect proceeds 

received from the sale of shares of AIG common stock held by Treasury outside of 

TARP (additional Treasury shares). 

4 The estimated lifetime cost for Treasury Housing Programs under TARP represent the 

total commitment except for the FHA Refinance Program, which is accounted for under 

credit reform. The estimated lifetime cost of the FHA Refinance Program represents the 

total estimated subsidy cost associated with total obligated amount.

5 Estimated lifetime cost for 2009 includes funds for projected disbursements and 

anticipated obligations.

Key Factors Affecting TARP Future Activities and Ultimate Cost

TARP investment programs are nearly wound 

down with only $714 million of the total 

$412.1 billion disbursed still outstanding, 

representing 81 small banks in the CPP and 

CDCI portfolios. The estimated lifetime 

income associated with investment programs 

is currently $194 million and may fluctuate in 

the future. Going forward, the expenditures 

for Treasury housing programs under TARP 

are expected to most significantly affect 

changes to the lifetime cost of TARP. The 

ultimate cost of Treasury housing programs 

will depend on macroeconomic factors, 

including real-estate values, financing 

available in capital markets, and the market 

demand for housing. 
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

Systems, Controls, and Legal Compliance

Management Assurance Statement

The Office of Financial Stability’s (OFS) management is responsible for establishing and maintaining

effective internal control and financial management systems that meet the objectives of the Federal

Managers’ Financial Integrity Act (FMFIA), 31 U.S.C. 3512(c),(d). OFS has evaluated its management

controls, internal controls over financial reporting, and compliance with the federal financial systems

standards. As part of the evaluation process, we considered the results of extensive documentation,

assessment and testing of controls across OFS, as well as the results of independent audits. We

conducted our reviews of internal controls in accordance with FMFIA and Office of Management and

Budget (OMB) Circular A-123.

As a result of our reviews, management concludes that the management control objectives described

below, taken as a whole, were achieved as of September 30, 2015. Specifically, this assurance is

provided relative to Section 2 (internal controls) and 4 (systems controls) of FMFIA. OFS further

assures that the financial management systems relied upon by OFS are in substantial compliance

with the requirements imposed by the Federal Financial Management Improvement Act (FFMIA).

OFS’ internal controls are designed to meet the management objectives established by Treasury 

and listed below:

(a) Programs achieve their intended results; 

(b) Resources are used consistent with overall mission;

(c) Programs and resources are free from waste, fraud, and mismanagement;

(d) Laws and regulations are followed;

(e) Controls are sufficient to minimize any improper or erroneous payments;

(f) Performance information is reliable; 

(g) Systems security is in substantial compliance with all relevant requirements;

(h) Continuity of operations planning in critical areas is sufficient to reduce risk to reasonable 

levels; 

(i) Financial management systems are in compliance with federal financial systems standards, 

i.e., FMFIA Section 4 and FFMIA;

(j) Complete and accurate data is reported on USAspending; and

(k) Controls and policies are in place to prevent fraud and inappropriate use of government 

charge cards.

In addition, OFS management conducted its assessment of the effectiveness of internal control over 

financial reporting which includes the safeguarding of assets and compliance with applicable laws and 

regulations, in accordance with OMB Circular A-123, Management’s Responsibility for Internal Control, 

Appendix A, Internal Control over Financial Reporting. Based on the results of this evaluation, OFS 

provides unqualified assurance that internal control over financial reporting is appropriately designed 

and operating effectively as of September 30, 2015, with no related material weaknesses noted.

Sincerely,

Mark McArdle

Deputy Assistant Secretary for Financial Stability

MANAGEMENT’S DISCUSSION AND ANALYSIS 25
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

Federal Managers’ Financial Integrity 

Act (FMFIA)

The management control objectives under 

FMFIA are to reasonably ensure that:

• Obligations and costs are in 

compliance with applicable law;

• Funds, property, and other assets are 

safeguarded against waste, loss, 

unauthorized use, or 

misappropriation; and

• Revenues and expenditures applicable 

to agency operations are properly 

recorded and accounted for to permit 

the preparation of accounts, reliable 

financial and statistical reports, and 

to maintain accountability over the 

assets.

FMFIA requires agencies to evaluate and 

report on the effectiveness of controls over 

operations and financial reporting (FMFIA 

Section 2), compliance with applicable laws 

and regulations, and conformance with 

financial management systems requirements 

(FMFIA Section 4 and Federal Financial 

Management Improvement Act or FFMIA) 

that protect the integrity of federal programs.

Deficiencies that seriously affect an agency’s 

ability to meet these objectives are deemed 

“material weaknesses.”

OFS continues to have a high performing 

internal control program in compliance with 

FMFIA. FMFIA and OMB Circular A-123, 

Management’s Responsibility for Internal 

Control, require agencies to evaluate and 

report on internal controls in place to help 

ensure effectiveness and efficiency of 

operations, compliance with applicable laws 

and regulations, and reliability of financial 

reporting. OFS has completed these rigorous 

assessments since fiscal year 2009.

OFS has a Senior Assessment Team (SAT) to 

guide the organization’s efforts to meet the 

statutory and regulatory requirements 

surrounding a sound system of internal 

control. OFS’s internal control framework is 

based on the principles of the Committee of 

Sponsoring Organizations of the Treadway

Commission (COSO). The SAT leverages this 

framework in communicating control 

objectives across OFS and its third-party 

service providers. Furthermore, managers 

throughout OFS are responsible for ensuring 

that effective internal controls are 

implemented in their areas of responsibility. 

Senior management throughout OFS provides 

sub-certification statements annually 

concerning whether there is reasonable 

assurance that the objectives of internal 

control are met. Senior management also 

reports on and takes steps to correct control 

weaknesses and tracks those weaknesses 

through resolution.

OFS management believes that maintaining 

integrity and accountability in all programs 

and operations is critical to its mission and 

demonstrates responsible stewardship over 

assets and resources. It also promotes 

responsible leadership and maximizes desired 

program outcomes. OFS has received 

unmodified opinions from the GAO on its 

financial statements and internal control over 

financial reporting for TARP since fiscal year 

2009, its first year of operation. OFS 

continues to execute its internal controls 

assessment process to ensure that 

management can identify risks and 

deficiencies and take timely corrective actions. 

The OFS fiscal year 2015 self-assessment of 

its system of internal controls did not identify 

any significant deficiencies or material 

weaknesses.

MANAGEMENT’S DISCUSSION AND ANALYSIS 26
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

Federal Financial Management 

Improvement Act (FFMIA) and 

Financial Management Systems

FFMIA

FFMIA mandates that agencies “...implement 

and maintain financial management systems 

that comply substantially with federal 

financial management systems requirements, 

applicable federal accounting standards, and 

the United States Government Standard 

General Ledger (USSGL) at the transaction 

level.” FFMIA also requires the development 

of remediation plans by any entity unable to 

report substantial compliance with these 

requirements. 

During fiscal year 2015, OFS used a riskbased approach to assess its financial 

management systems’ compliance with 

FFMIA, as required by OMB and in 

accordance with Treasury-wide guidance. OFS 

conducted its self-assessment to determine its 

risk levels and determined that all OFS 

financial management systems are in 

compliance with FFMIA.

Financial Management Systems 

Framework

OFS’s financial management systems 

framework consists of two fundamental 

components: 1) core financial and mixed 

systems maintained by OFS and Treasury 

bureaus that cross-service OFS; and 2) 

systems that are financially relevant operated 

and supported by financial agents. Combined, 

this framework satisfies OFS’s diverse 

financial operational and reporting needs as 

well as OFS’s internal and external reporting 

requirements.

In fiscal year 2015, OFS continued to utilize 

and improve the Core Investment Transaction 

Flow (CITF), TARP’s system of record and 

accounting translation engine. OFS continued 

to fine-tune standardized management reports 

from CITF to improve their usefulness to 

management’s decision-making and reduce 

reliance on manual processes. 

In addition, OFS utilizes financial systems 

maintained by Treasury Departmental Offices 

and various Treasury bureaus. These systems 

are also in substantial compliance with 

federal financial management systems 

requirements and undergo regular 

independent audits.

In fiscal year 2015, OFS continued to devote 

substantial attention to simplifying its 

technology foot-print in concert with the 

reduced activity and size of OFS operations.

The simplification effort helps ensure the 

reliability, maintainability, and controllability 

of OFS technology as TARP programs winddown.

Certain financially relevant systems are 

operated and supported by financial agents, 

which provide services to OFS. The financial 

agency agreements, maintained by the 

Treasury Office of the Fiscal Assistant 

Secretary in support of OFS, require financial 

agents to design and implement suitably 

robust security plans and internal control 

programs. These plans and programs are 

reviewed and approved by OFS at least on an 

annual basis.

Legal Compliance

OFS is subject to numerous legislative and 

regulatory requirements that promote and 

support an effective internal control 

environment. At least on an annual basis, 

OFS conducts a formal process to identify and 

document applicable laws and regulations. 

This process includes the review and

consideration of Treasury guidance, statutory 

and OMB requirements as well as 

consultation with OFS program management 

and the Treasury Office of General Counsel. 

OFS program managers are responsible for 

identifying laws and regulations which impact 

their areas, developing policies and 

procedures which ensure compliance with 

those laws and regulations, and disseminating 

information to employees regarding 

compliance responsibilities.

In order to test compliance with laws and 

regulations, OFS maps the requirements of 

each applicable law or regulation to controls 

that support the requirements. The majority 

of the laws and regulations applicable to OFS 

MANAGEMENT’S DISCUSSION AND ANALYSIS 27
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

are tested in this manner. In instances where 

OFS cannot leverage specific controls, OFS 

either performs alternative evaluation 

procedures or, through adherence to the 

guidance provided by Treasury, checks that 

controls are in place to meet guidance 

concerns and specifications where they apply.

The results of OFS’s evaluation of compliance 

with applicable laws and regulations are 

reflected in OFS’s assurance statement.

MANAGEMENT’S DISCUSSION AND ANALYSIS 28
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

Other Management Information, Initiatives, and Issues

Areas for Improvement

Over the next year, OFS management will focus on maintaining its internal control environment in 

several key areas as follows:

• As programs continue to wind-down, OFS will remain vigilant to maintain effective 

processes and controls. OFS management will take steps to sustain adequate segregation 

of duties and the right level of institutional knowledge among remaining staff as the size 

of the organization decreases. 

• Third-party service providers will continue to support critical services as programs 

continue to wind-down. OFS will oversee and monitor closely these third parties to 

safeguard OFS resources and help ensure the operational efficiency of programs and 

processes. Where necessary and appropriate to ensure fiscal responsibility, OFS will look 

to reduce the number of third-party service providers commensurate with the wind-down 

in OFS operations.

• As OFS programs conclude and staff continues to decrease, OFS plans to streamline the 

number and depth of policies and procedures to make them more efficient. OFS will 

manage this process through the SAT to ensure that any resulting risk is minimal and 

controlled.

MANAGEMENT’S DISCUSSION AND ANALYSIS 29
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

Limitations of the Financial Statements

The principal financial statements have been prepared to report the financial position and results of 

operations of OFS’s TARP programs, consistent with the requirements of 31 U.S.C. 3515(b). While 

the statements have been prepared from the books and records of OFS and the Department of the 

Treasury in accordance with section 116 of EESA and Generally Accepted Accounting Principles 

(GAAP) for Federal entities and the formats prescribed by OMB, the statements are in addition to 

the financial reports used to monitor and control budgetary resources which are prepared from the 

same books and records. 

The statements should be read with the realization that they are for a component of the U.S. 

Government, a sovereign entity.

MANAGEMENT’S DISCUSSION AND ANALYSIS 30
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

MANAGEMENT’S DISCUSSION AND ANALYSIS 31
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

Part 2: Financial Report

MANAGEMENT’S DISCUSSION AND ANALYSIS 32
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

MESSAGE FROM THE CHIEF FINANCIAL OFFICER 33
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

MESSAGE FROM THE CHIEF FINANCIAL OFFICER (CFO) 

The Office of Financial Stability’s (OFS) Agency Financial Report for fiscal year 2015 provides readers 

information on financial results relating to the Troubled Asset Relief Program (TARP) as required by the 

Emergency Economic Stabilization Act (EESA) of 2008 and other laws. It is a critical part of our efforts to 

ensure the highest level of transparency and accountability to the American people. 

For fiscal year 2015, the Government Accountability Office (GAO) provided OFS unmodified audit 

opinions on the fair presentation of our financial statements and the effectiveness of our internal control 

over financial reporting for TARP. In addition, the auditors determined that we had no material 

weaknesses or significant deficiencies relating to internal control over our accounting and financial 

reporting processes for TARP. Since the inception of TARP in 2009, the program has consistently received 

unmodified audit opinions. 

I would like to acknowledge senior management’s commitment to good governance as well as the 

discipline, transparency, and care exhibited by OFS employees in managing and executing our 

organization’s policies and procedures. 

For fiscal year 2015, net cost of operations was $4.4 billion, resulting in a cumulative net cost of 

operations of $20.0 billion since inception. Cumulative net cost of operations consists of (1) total net 

subsidy income of $189 million, and (2) housing costs and administrative costs of $18.5 billion and $1.6 

billion, respectively. Total cumulative net subsidy cost consists of net subsidy income from the CPP, TIP, 

AGP, PPIP, SBA, and TALF investments totaling $27.6 billion, offset by net subsidy costs of $27.4 billion 

from the AIG, AIFP, CDCI, and FHA-Refinance programs. 

During fiscal year 2015, OFS collected a total of $2.0 billion through repayments, sales, dividends, and 

other receipts. OFS’s gross outstanding equity investment balance as of September 30, 2015 was $714 

million, comprised of $268 million in CPP and $446 million in CDCI. OFS is committed to exiting 

investments in a timely manner while maximizing collections on behalf of the taxpayer. During fiscal year 

2015, 22 CPP institutions repaid, were auctioned, or were restructured and sold. 

In fiscal year 2015, as OFS continued to wind down, we have streamlined many of our processes to 

eliminate redundancy and become more efficient, making sure to maintain coverage over key controls. As 

an organization, OFS has and will continue to consolidate roles, as appropriate, without comprising the 

internal control environment. Consolidation allows for the continued retention of institutional knowledge 

and helps ensure that all control points are monitored and executed. Maintaining rigorous internal control 

processes around transaction processing, disbursements, collections, and financial reporting will continue 

to be one of OFS’s top priorities.

I feel fortunate to play a role in continuing the tradition of sound fiscal stewardship at OFS. This 

organization recognizes the importance of a robust control environment and will continue to uphold the 

highest standards of integrity as we carry out our fiduciary responsibilities to the American people. 

Sincerely, 

Lorenzo Rasetti 

Chief Financial Officer

GOVERNMENT ACCOUNTABILITY OFFICE AUDITOR’S REPORT

Independent Auditor’s Report

To the Deputy Assistant Secretary for Financial Stability

MESSAGE FROM THE CHIEF FINANCIAL OFFICER 34
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

In our audits of the fiscal years 2015 and 2014 financial statements of the Troubled 

Asset Relief Program (TARP), which is implemented by the Office of Financial Stability 

(OFS),

AUDITOR’S REPORT 35

6 we found 

· the OFS financial statements for TARP as of and for the fiscal years ended 

September 30, 2015, and 2014, are presented fairly, in all material respects, in 

accordance with U.S. generally accepted accounting principles;

· OFS maintained, in all material respects, effective internal control over financial 

reporting for TARP as of September 30, 2015; and

· no reportable noncompliance for fiscal year 2015 with provisions of applicable laws, 

regulations, contracts, and grant agreements we tested.

The following sections discuss in more detail (1) our report on the financial statements 

and on internal control over financial reporting, which includes two emphasis of matters 

related to certain factors affecting the valuation of TARP equity investments and the 

TARP reporting entity, and required supplementary information (RSI)7 and other 

information8included with the financial statements; (2) our report on compliance with 

laws, regulations, contracts, and grant agreements; and (3) agency comments. In 

addition to our responsibility to audit OFS’s annual financial statements for TARP, we 

are also required under the Emergency Economic Stabilization Act of 2008 (EESA)9to 

report at least every 60 days on the findings resulting from our oversight of the actions 

taken under TARP.10 This report responds to both of these requirements. We have 

issued numerous other reports on TARP in connection with this 60-day reporting 

responsibility, which can be found on GAO’s website at http://www.gao.gov.

Report on the Financial Statements and on Internal Control over Financial 

Reporting

In accordance with EESA, we have audited the OFS financial statements for TARP. The 

OFS financial statements for TARP comprise the balance sheets as of September 30, 

2015, and 2014; the related statements of net cost of operations, changes in net 

position, and budgetary resources for the fiscal years then ended; and the related notes 

to the financial statements. We also have audited OFS’s internal control over financial 

reporting for TARP as of September 30, 2015, based on criteria established under 31 

U.S.C. § 3512(c), (d), commonly known as the Federal Managers’ Financial Integrity Act 

(FMFIA).

 

6Section 101 of the Emergency Economic Stabilization Act of 2008, Pub. L. No. 110-343, div. A, 122 Stat. 3765, 3767 (Oct. 

3, 2008), classified at 12 U.S.C. § 5211, established OFS within the Department of the Treasury (Treasury) to implement TARP.

7RSI consists of “Management’s Discussion and Analysis” and the “Combined Statement of Budgetary Resources,” which 

are included with the financial statements.

8Other information consists of information included with the financial statements, other than RSI and the auditor’s report.

9EESA is classified, in part, as amended, as sections 5201 through 5261 of Title 31 of the United States Code. Section 116(b) 

of EESA, 12 U.S.C. § 5226(b), requires that Treasury annually prepare and submit to Congress and the public audited fiscal 

year financial statements for TARP that are prepared in accordance with generally accepted accounting principles. Section 116(b) 

further requires that GAO audit TARP’s financial statements annually in accordance with generally accepted auditing standards

(GAAS).

10EESA § 116(a)(3), 12 U.S.C. § 5226(a)(3).
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

We conducted our audits in accordance with U.S. generally accepted government 

auditing standards.

AUDITOR’S REPORT 36

11 We believe that the audit evidence we obtained is sufficient and 

appropriate to provide a basis for our audit opinions.

Management’s Responsibility 

OFS management is responsible for (1) the preparation and fair presentation of these 

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; (3) preparing and presenting other information included 

in documents containing the audited financial statements and auditor’s report, and 

ensuring the consistency of that information with the audited financial statements and 

the RSI; (4) maintaining effective internal control over financial reporting, including the 

design, implementation, and maintenance of internal control relevant to the preparation 

and fair presentation of financial statements that are free from material misstatement, 

whether due to fraud or error; (5) evaluating the effectiveness of internal control over 

financial reporting based on the criteria established under FMFIA; and (6) providing its 

assertion about the effectiveness of internal control over financial reporting as of 

September 30, 2015, based on its evaluation, included in the accompanying 

Management’s Report on Internal Control over Financial Reporting in appendix I.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements and an opinion 

on OFS’s internal control over financial reporting for TARP based on our audits. U.S. 

generally accepted government auditing standards require that we plan and perform the 

audits to obtain reasonable assurance about whether the financial statements are free 

from material misstatement, and whether effective internal control over financial 

reporting was maintained in all material respects. We are also responsible for applying 

certain limited procedures to the RSI and other information included with the financial 

statements. 

An audit of financial statements involves performing procedures to obtain audit evidence 

about the amounts and disclosures in the financial statements. The procedures selected 

depend on the auditor’s judgment, including the auditor’s assessment of the risks of 

material misstatement of the financial statements, whether due to fraud or error. In 

making those risk assessments, the auditor considers internal control relevant to the 

entity’s preparation and fair presentation of the financial statements in order to design 

audit procedures that are appropriate in the circumstances. An audit of financial 

statements also involves evaluating the appropriateness of the accounting policies used 

and the reasonableness of significant accounting estimates made by management, as 

well as evaluating the overall presentation of the financial statements. An audit of 

 

11Section 116(b) of EESA requires that GAO audit TARP’s financial statements annually in accordance with GAAS. U.S. 

generally accepted government auditing standards incorporate by reference the American Institute of Certified Public 

Accountants’ Statements on Auditing Standards, which constitute GAAS.
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

internal control over financial reporting includes obtaining an understanding of internal 

control over financial reporting, assessing the risk that a material weakness exists, 

evaluating the design and operating effectiveness of internal control over financial 

reporting based on the assessed risk, and testing relevant internal control over financial 

reporting. Our audit of internal control also considered the entity’s process for evaluating 

and reporting on internal control over financial reporting based on criteria established 

under FMFIA. Our audits also included performing such other procedures as we 

considered necessary in the circumstances.

We did not evaluate all internal controls relevant to operating objectives as broadly 

established under FMFIA, such as those controls relevant to preparing performance 

information and ensuring efficient operations. We limited our internal control testing to 

testing controls over financial reporting. Our internal control testing was for the purpose 

of expressing an opinion on whether effective internal control over financial reporting 

was maintained, in all material respects. Consequently, our audit may not identify all 

deficiencies in internal control over financial reporting that are less severe than a 

material weakness.

AUDITOR’S REPORT 37

12

Definitions 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. We also caution that 

projecting any evaluation of effectiveness to future periods is subject to the risk that 

controls may become inadequate because of changes in conditions, or that the degree 

of compliance with the policies or procedures may deteriorate.

Opinion on Financial Statements

In our opinion, OFS’s financial statements for TARP present fairly, in all material 

respects, TARP’s financial position as of September 30, 2015, and 2014, and its net 

cost of operations, changes in net position, and budgetary resources for the fiscal years 

then ended in accordance with U.S. generally accepted accounting principles. 

 

12A 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.
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

Emphasis of Matters

Valuation of TARP’s Equity Investments

As discussed in notes 2 and 6 to OFS’s financial statements for TARP, the valuation of 

TARP’s equity investments is based on estimates using economic and financial credit 

subsidy models. The estimates use entity-specific as well as relevant market data as 

the basis for assumptions about future performance, and incorporate an adjustment for 

market risk to reflect the variability around any unexpected losses. In valuing the equity 

investments, OFS management considered and selected assumptions and data that it 

believed provided a reasonable basis for the estimated subsidy allowance and related 

subsidy cost or income reported in the financial statements.

AUDITOR’S REPORT 38

13 However, there are 

numerous 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. The estimates have an added uncertainty 

resulting from the unique nature of certain TARP assets. As such, there will be 

differences between the net estimated values of the equity investments as of 

September 30, 2015, and 2014 (which totaled $482 million and $2,174 million, 

respectively), and the amounts that OFS will ultimately realize from these assets, and 

the differences may be material. These differences will also affect TARP’s ultimate 

cost.14

TARP Reporting Entity

As discussed in note 1 to the financial statements, while OFS’s financial statements for 

TARP reflect activity of OFS in implementing TARP, including providing resources to 

various entities to help stabilize the financial markets, the statements do not include the 

assets, liabilities, or results of operations of these entities in which OFS has a significant 

equity interest. As also discussed in note 1 to the financial statements, OFS’s 

investments were not made to engage in the business activities of the respective 

entities, and OFS has determined that none of these entities meet the criteria for a 

federal entity.

Our opinion on OFS’s financial statements for TARP is not modified with respect to 

these matters.

 

13The subsidy cost or income is composed of (1) the change in the subsidy cost allowance, net of write-offs; 

(2) net intragovernmental interest cost; (3) certain inflows from equity investments (e.g., dividends, interest, net proceeds

from sales and repurchases of assets in excess of cost, and other realized fees); and (4) the change in the estimated 

discounted net cash flows related to the Federal Housing Administration refinance program. 

14The Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, title XIII, § 1302, 124 Stat. 1376, 

2133 (July 21, 2010), (1) limited Treasury’s authority to purchase or guarantee troubled assets to a maximum of $475 billion;

(2) changed this limit to a cap on all purchases and guarantees made without regard to subsequent sale, repayment, or 

cancellation of assets or guarantees; and (3) prohibited Treasury, under EESA, from incurring any obligations for a program 

or initiative unless the program or initiative had already been initiated prior to June 25, 2010.
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

Opinion on Internal Control over Financial Reporting

In our opinion, OFS maintained, in all material respects, effective internal control over 

financial reporting for TARP as of September 30, 2015, based on criteria established 

under FMFIA.

During our fiscal year 2015 audit, we identified deficiencies in OFS’s internal control 

over financial reporting for TARP that we do not consider to be material weaknesses or 

significant deficiencies.

AUDITOR’S REPORT 39

15 Nonetheless, these deficiencies warrant OFS management’s 

attention. We have communicated these matters to OFS management and, where 

appropriate, will report on them separately.

Other Matters

Required Supplementary Information

U.S. generally accepted accounting principles issued by the Federal Accounting 

Standards Advisory Board (FASAB) require that RSI be presented to supplement the 

financial statements. Although RSI is not a part of the financial statements, FASAB 

considers this information to be an essential part of financial reporting for placing the 

financial statements in appropriate operational, economic, or historical context. We have 

applied certain limited procedures to the RSI in accordance with U.S. generally 

accepted government auditing standards, which consisted of inquiries of management 

about the methods of preparing the RSI and comparing the information for consistency 

with management’s responses to the auditor’s inquiries, the financial statements, and 

other knowledge we obtained during the audit of the financial statements, in order to 

report omissions or material departures from FASAB guidelines, if any, identified by 

these limited procedures. We did not audit and we do not express an opinion or provide 

any assurance on the RSI because the limited procedures we applied do not provide 

sufficient evidence to express an opinion or provide any assurance.

Other Information 

OFS’s other information contains a wide range of information, some of which is not 

directly related to the financial statements. This information is presented for purposes of 

additional analysis and is not a required part of the financial statements or RSI. We read 

the other information included with the financial statements in order to identify material 

inconsistencies, if any, with the audited financial statements. Our audit was conducted 

for the purpose of forming an opinion on OFS’s financial statements for TARP. We did 

not audit and do not express an opinion or provide any assurance on the other 

information.

Report on Compliance with Laws, Regulations, Contracts, and Grant Agreements

In connection with our audits of OFS’s financial statements for TARP, we tested 

compliance with selected provisions of applicable laws, regulations, contracts, and grant 

agreements consistent with our auditor’s responsibility discussed below. We caution 

 

15A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a 

material weakness, yet important enough to merit attention by those charged with governance.
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

that noncompliance may occur and not be detected by these tests. We performed our 

tests of compliance in accordance with U.S. generally accepted government auditing 

standards.

Management’s Responsibility

OFS management is responsible for complying with laws, regulations, contracts, and 

grant agreements applicable to OFS.

Auditor’s Responsibility

Our responsibility is to test compliance with selected provisions of laws, regulations, 

contracts, and grant agreements applicable to OFS that have a direct effect on the 

determination of material amounts and disclosures in the TARP financial statements, 

and perform certain other limited procedures. Accordingly, we did not test compliance 

with all laws, regulations, contracts, and grant agreements applicable to OFS. 

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 disclosed no instances of noncompliance for fiscal 

year 2015 that would be reportable under U.S. generally accepted government auditing 

standards. However, the objective of our tests was not to provide an opinion on 

compliance with laws, regulations, contracts, and grant agreements applicable to OFS. 

Accordingly, we do not express such an opinion.

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

In commenting on a draft of this report, OFS stated that it is proud to receive an 

unmodified opinion on its financial statements and its internal control over financial 

reporting. OFS also stated that it is committed to maintaining the high standards and 

transparency reflected in these audit results. The complete text of OFS’s response is 

reprinted in appendix II.

AUDITOR’S REPORT 40

Cheryl E. Clark

Director
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

Financial Management and Assurance

November 5, 2015

AUDITOR’S REPORT 41
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

Appendix I: Management’s Report on Internal Control over Financial Reporting

DEPARTMENT OF THE TREASURY

Management's Report on Internal Control over Financial Reporting 

The Office of Financial Stability’s (OFS) internal control over financial reporting (for TARP) 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.

OFS management is responsible for maintaining effective internal control over financial reporting, 

including the design, implementation, and maintenance of internal control relevant to the 

preparation and fair presentation of financial statements that are free from material misstatement, 

whether due to fraud or error. OFS management evaluated the effectiveness of OFS’s internal 

control over financial reporting as of September 30, 2015, based on the criteria established under 31 

U.S.C. 3512(c), (d) (commonly known as the Federal Managers’ Financial Integrity Act). 

Based on that evaluation, we conclude that, as of September 30, 2015, OFS’s internal control over 

financial reporting was effective. 

Office of Financial Stability

__________________________

Mark McArdle

Deputy Assistant Secretary for Financial Stability

_______________________

Lorenzo Rasetti

Chief Financial Officer 

November 5, 2015

AUDITOR’S REPORT 42
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

Appendix II: OFS Response to Auditor’s Report

November 5, 2015

Ms. Cheryl E. Clark

Director, Financial Management and Assurance

U.S. Government Accountability Office

441 G Street, N.W.

Washington, DC 20548

Dear Ms. Clark:

We have reviewed the Independent Auditor’s Report concerning your audit of the Office of Financial 

Stability’s (OFS) fiscal year 2015 financial statements. OFS is proud to receive unmodified opinions 

on our financial statements and our internal controls over financial reporting.

We appreciate the professionalism and commitment demonstrated by your staff throughout the audit 

process. The process was valuable for us and resulted in concrete improvements in our operations 

and financial management efforts.

OFS is committed to maintaining the high standards and transparency reflected in these audit 

results as we carry out our responsibilities for managing the Troubled Asset Relief Program.

Sincerely,

Mark McArdle

Deputy Assistant Secretary for Financial Stability

AUDITOR’S REPORT 43
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

FINANCIAL STATEMENTS

The Office of Financial Stability (OFS) prepares 

financial statements for the Troubled Asset 

Relief Program (TARP) as a critical aspect of 

ensuring the accountability and stewardship for 

the public resources entrusted to it and as 

required by Section 116 of the Emergency 

Economic Stabilization Act of 2008 (EESA).

Preparation of these statements is also an 

important part of the OFS’s financial 

management goal of providing accurate and 

reliable information that may be used to assess 

performance and allocate resources. The OFS 

management is responsible for the accuracy and 

propriety of the information contained in the 

financial statements and the quality of internal 

controls. The statements are, in addition to 

other financial reports, used to monitor and 

control budgetary resources. The OFS prepares 

these financial statements from its books and 

records in conformity with the accounting 

principles generally accepted in the United 

States for federal entities and the formats 

prescribed by the Office of Management and 

Budget (OMB).

While these financial statements reflect activity 

of the OFS in executing its programs, including 

providing resources to various entities to help 

stabilize the financial markets, they do not 

include, as more fully discussed in Note 1, the 

assets, liabilities, or results of operations of 

commercial entities in which the OFS has a 

significant equity interest.

The Balance Sheet summarizes the OFS assets, 

liabilities and net position as of September 30, 

2015 and 2014. Intragovernmental assets and 

liabilities resulting from transactions between 

federal agencies are presented separately from 

assets and liabilities resulting from 

transactions with the public.

The Statement of Net Cost presents the net cost 

of (income from) operations for the fiscal years 

ended September 30, 2015 and 2014.

The Statement of Changes in Net Position 

presents the change in OFS’s net position for 

two components, Cumulative Results of 

Operations and Unexpended Appropriations, for 

the fiscal years ended September 30, 2015 and 

2014. The ending balances of both components 

of net position are also reported on the Balance 

Sheet.

The Statement of Budgetary Resources provides 

information about funding and availability of 

budgetary resources and the status of those 

resources for the fiscal years ended September 

30, 2015 and 2014. 

AUDITOR’S REPORT 44
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

Office of Financial Stability - Troubled Asset Relief Program

BALANCE SHEET 

As of September 30, 2015 and 2014

Dollars in Millions

FINANCIAL STATEMENTS 45

Category Type Specific 2015 2014

ASSETS Intragovernmental 

Assets Fund Balance with Treasury (Note 3) $ 28,099 $ 33,210 

Total 

Intragovernmental 

Assets 28,099 33,210 

Cash on Deposit for 

Housing Program 

(Note 4) 10 50 

Equity Investments, 

Net (Note 6) 482 2,174 

Total Assets $ 28,591 $ 35,434 

LIABILITIES Intragovernmental 

Liabilities:

Accounts Payable and Other Liabilities $ 4 $ 4 

Due to the General Fund (Note 7) 229 1,488 

Principal Payable to the Bureau of the 

Fiscal Service (Note 8) 418 1,304 

Total Intragovernmental Liabilities 651 2,796 

Accounts Payable and 

Other Liabilities 41 47 

Liabilities for 

Treasury Housing 

Programs Under 

TARP:

FHA-Refinance Program (Notes 5 and 6) 5 6 

Making Home Affordable Program (Note 

5) 497 243 

Total Liabilities $ 1,194 $ 3,092 

Commitments and Contingencies (Note 9)

Net Position 2015 2016

Unexpended Appropriations $ 27,408 $ 32,295 

Cumulative Results of Operations (11) 47 

Total Net Position $ 27,397 $ 32,342 

Total Liabilities and Net Position $ 28,591 $ 35,434 

The accompanying notes are an integral part of these financial statements.
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

Office of Financial Stability - Troubled Asset Relief Program

STATEMENT OF NET COST

For the Years Ended September 30, 2015 and 2014

Dollars in Millions

STRATEGIC GOAL: TO PROMOTE DOMESTIC ECONOMIC GROWTH AND STABILITY WHILE CONTINUING REFORMS OF 

THE FINANCIAL SYSTEM

FINANCIAL STATEMENTS 46

2015 2014

Gross Cost of Operations: Program Subsidy Cost (Income) (Note 5 and Note 

6) Equity Investment Programs $ (242) $ (1,492)

Gross Cost of Operations: Program Subsidy Cost (Income) (Note 5 and Note 

6)FHA-Refinance Program (1) (3)

Total Program Subsidy Cost (Income) (243) (1,495)

Interest Expense on Borrowings from the Bureau of the Fiscal Service (Note 

10) 30 218 

Treasury Housing Programs Under TARP (Note 5) 4,503 4,280 

Administrative Cost 146 186 

Total Gross Cost of Operations 4,436 3,189 

Earned Revenue:

Dividend and Interest Income - Programs (Note 6) (28) (245)

Interest Income on Financing Account (Note 10) (5) (29)

Subsidy Allowance Amortization (Note 10) 3 56 

Total Earned Revenue (30) (218)

Total Net Cost of Operations $ 4,406 $ 2,971 

The accompanying notes are an integral part of these financial statements.

AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

Office of Financial Stability - Troubled Asset Relief Program

STATEMENT OF CHANGES IN NET POSITION

For the Years Ended September 30, 2015 and 2014

Dollars in Millions

FINANCIAL STATEMENTS 48

2015 2014

Unexpended Appropriations

Cumulative 

Results of 

Operations 

Unexpended 

Appropriations

Cumulative 

Results of 

Operations 

Beginning Balances $ 32,295 $ 47 $ 50,663 $ 49 

Budgetary Financing 

Sources Appropriations 

Received 185 - 308 -

Budgetary Financing 

Sources Appropriations Used (4,614) 4,614 (4,556) 4,556 

Budgetary Financing 

Sources Other Adjustments -

Canceled Authority (458) - (14,120) -

Other Financing Sources - (266) - (1,587)

Total Financing Sources (4,887) 4,348 (18,368) 2,969 

Net Cost of Operations - (4,406) - (2,971)

Net Change (4,887) (58) (18,368) (2)

Ending Balances $ 27,408 $ (11) $ 32,295 $ 47 

The accompanying notes are an integral part of these financial statements.
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

Office of Financial Stability - Troubled Asset Relief Program

STATEMENT OF BUDGETARY RESOURCES

For the Years Ended September 30, 2015 and 2014

Dollars in Millions

FINANCIAL STATEMENTS 49

Category Subcategory 2015 2014

Budgetary 

Accounts

Nonbudgetary 

Financing 

Accounts

Budgetary 

Accounts

Nonbudgetary 

Financing 

Accounts

BUDGETARY 

RESOURCES

Unobligated Balance Brought 

Forward, October 1 $ 7,760 $ 614 $ 21,606 $ 1,462 

Recoveries of Prior-Year 

Unpaid Obligations 1,013 126 261 865 

Borrowing Authority 

Withdrawn - (90) - -

Actual Repayments of Debt, 

Prior-Year Balances - (309) - (1,444)

Canceled Authority (458) - (14,120) -

Unobligated Balance from 

Prior-Year Budget Authority, 

Net 8,315 341 7,747 883 

Appropriations 185 - 308 -

Borrowing Authority - - - 839 

Spending Authority from 

Offsetting Collections 40 1,367 - 7,394 

TOTAL BUDGETARY 

RESOURCES (Note 11) $ 8,540 $ 1,708 $ 8,055 $ 9,116 

STATUS OF 

BUDGETARY 

RESOURCES

Obligations Incurred $ 174 $ 1,558 $ 295 $ 8,502 

Unobligated Balance:

Apportioned 7,185 19 14 558 

Unapportioned 1,181 131 7,746 56 

Total Unobligated Balance 8,366 150 7,760 614 

TOTAL STATUS OF 

BUDGETARY RESOURCES $ 8,540 $ 1,708 $ 8,055 $ 9,116 

CHANGE IN 

OBLIGATED 

BALANCES Unpaid 

Obligations:

Unpaid Obligations Brought 

Forward, October 1 $ 24,828 $ 127 $ 29,406 $ 993 

Obligations Incurred 174 1,558 295 8,502 

Gross Outlays (4,407) (1,558) (4,612) (8,503)

Recoveries of Prior-Year 

Unpaid Obligations (1,013) (126) (261) (865)

Unpaid Obligations, End of 

Year 19,582 1 24,828 127 

CHANGE IN 

OBLIGATED 

BALANCES 

Uncollected 

Payments from 

Federal Sources:

Uncollected Payments 

Brought Forward, October 1 $ - $ (29) $ - $ (226)

Change in Uncollected 

Payments - 29 - 197 

Uncollected Payments from 

Federal Sources, End of Year - - - (29)

Obligated Balance, Net, End 

of Year $ 19,582 $ 1 $ 24,828 $ 98 

OBLIGATED 

BALANCES

(Net of Unpaid Obligations 

and Uncollected Payments 

Above)

Obligated Balance, Net, 

Brought Forward, October 1 $ 24,828 $ 98 $ 29,406 $ 767 

Obligated Balance, Net, End 

of Year $ 19,582 $ 1 $ 24,828 $ 98 

BUDGET Budget Authority, Gross $ 225 $ 1,367 $ 308 $ 8,233 
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

FINANCIAL STATEMENTS 50

Category Subcategory 2015 2014

Budgetary 

Accounts

Nonbudgetary 

Financing 

Accounts

Budgetary 

Accounts

Nonbudgetary 

Financing 

Accounts

AUTHORITY AND 

OUTLAYS, NET

Actual Offsetting Collections (40) (1,973) - (17,541)

Change in Uncollected 

Customer Payments from 

Federal Sources - 29 - 197 

BUDGET AUTHORITY, NET $ 185 $ (577) $ 308 $ (9,111)

Gross Outlays $ 4,407 $ 1,558 $ 4,612 $ 8,503 

Actual Offsetting Collections (40) (1,973) - (17,541)

Net Outlays 4,367 (415) 4,612 (9,038)

Distributed Offsetting 

Receipts (1,525) - (8,238) -

AGENCY OUTLAYS, NET $ 2,842 $ (415) $ (3,626) $ (9,038)

The accompanying notes are an integral part of these financial statements.
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

NOTES TO THE FINANCIAL STATEMENTS

NOTE 1. REPORTING ENTITY

The Troubled Asset Relief Program (TARP) was 

authorized by the Emergency Economic 

Stabilization Act of 2008, as amended (EESA or “the 

Act”). The Act gave the Secretary of the Treasury 

(the Secretary) broad and flexible authority to 

establish the TARP to purchase and insure 

mortgages and other troubled assets, which 

permitted the Secretary to inject capital into banks 

and other commercial companies by taking equity 

positions in those entities to help stabilize the 

financial markets.

The EESA established certain criteria under which 

the TARP would operate, including provisions that 

impact the budgeting, accounting, and reporting of 

troubled assets acquired under the Act. Section 115 of 

the EESA limited the authority of the Secretary to 

purchase troubled assets up to $700.0 billion 

outstanding at any one time, calculated as the 

aggregate purchase prices of all troubled assets held.

In July 2010, the Dodd-Frank Wall Street Reform and 

Consumer Protection Act amended Section 115 of the 

EESA, limiting the TARP’s authority to a total of 

$475.0 billion cumulative obligations (i.e. purchases 

and guarantees) and prohibiting any new obligations 

for programs or initiatives that had not been publicly 

announced prior to June 25, 2010. Of the maximum 

$475.0 billion authority under the EESA, OFS had 

utilized (including purchases made, legal 

commitments to make purchases and offsets for 

guarantees made) $454.6 billion as of September 30, 

2015 and $455.7 billion as of September 30, 2014. The 

reduction between 2015 and 2014 reflects the 

deobligation of unused funds in certain programs. 

During fiscal year 2015, the TARP administered the 

following programs: the Capital Purchase Program 

(CPP); the Community Development Capital 

Initiative (CDCI); the Treasury Housing Programs 

Under TARP; and the Automotive Industry Financing 

Program (AIFP), which was effectively wound down in 

December 2014. Also during fiscal year 2015, the final 

Public-Private Investment Fund (PPIF) and Term 

Asset-Backed Securities Loan Facility LLC (TALF) 

were terminated. See Notes 5 and 6 for details 

regarding these programs.

While these financial statements reflect the activity 

of the OFS in executing its programs, including 

providing resources to various entities to help 

stabilize the financial markets, they do not include 

the assets, liabilities, or results of operations of 

commercial entities in which the OFS has a 

significant equity interest. Through the purchase of 

troubled assets, the OFS entered into several 

different types of direct loan, equity investment, and 

other credit programs (which consists of the Federal 

Housing Administration (FHA) Refinance Program)

(collectively, the OFS programs) with private 

entities. The OFS programs were entered into with 

the intent of helping to stabilize the financial 

markets and mitigating, as best as possible, any 

adverse impact on the economy; they were not 

entered into to engage in the business activities of 

the respective private entities. Based on this intent, 

the OFS concluded that such programs are 

considered “bailouts,” under the provisions of 

paragraph 50 of Statement of Federal Financial 

Accounting Concepts (SFFAC) No. 2, Entity and 

Display. In addition, these entities are not included 

in the Federal budget and, therefore, do not meet 

the conclusive criteria in SFFAC No. 2. As such, the 

OFS determined that none of these entities should 

be classified as a federal entity. Consequently, their 

assets, liabilities and results of operations were not 

consolidated in these OFS financial statements, but 

the value of such investments was recorded in the 

OFS financial statements. In addition, the OFS has 

made loans and investments in certain Special 

Purpose Vehicles (SPV)3. SFFAC No. 2, paragraphs 

43 and 44, reference indicative criteria such as 

ownership and control to carry out government 

powers and missions, as criteria in the 

determination about whether an entity should be 

classified as a federal entity. The OFS has concluded 

that none of the SPVs meet the conclusive or 

indicative criteria to be classified as a federal entity.

As a result, the assets, liabilities and results of 

operations of the SPVs are not included in these 

OFS financial statements. 

The EESA established the OFS within the Office of 

Domestic Finance of the U. S. Department of the 

Treasury (Treasury) to administer the TARP and 

required its separate audited financial statements. 

NOTES TO THE FINANCIAL STATEMENTS 51

 

3 During fiscal year 2015, OFS held no equity interest in SPVs. 

During fiscal year 2014, the OFS held one remaining equity 

interest in an SPV under the TALF program.
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

The OFS prepares stand-alone financial statements

for TARP to satisfy EESA Section 116(b) (1). 

Additionally, as an office of the Treasury, its 

financial statements are consolidated into 

Treasury’s Agency Financial Report.

NOTES TO THE FINANCIAL STATEMENTS 49

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting and Presentation

The accompanying financial statements include the 

results of operations of the TARP and have been 

prepared from the accounting records of the OFS in 

conformity with accounting principles generally 

accepted in the United States for federal entities 

(Federal GAAP), and the OMB Circular A-136, 

Financial Reporting Requirements, as amended.

Federal GAAP includes the standards issued by the 

Federal Accounting Standards Advisory Board 

(FASAB). The FASAB is recognized by the American 

Institute of Certified Public Accountants (AICPA) as 

the official accounting standards-setting body for the 

U.S. Government. 

Section 123(a) of the EESA requires that the 

budgetary cost of purchases of troubled assets and 

guarantees of troubled assets, and any cash flows 

associated with authorized activities, be determined 

in accordance with the Federal Credit Reform Act of 

1990 (FCRA). Section 123(b) (1) of the EESA 

requires that the budgetary costs of troubled assets 

and guarantees of troubled assets be calculated by 

adjusting the discount rate for market risks. As a 

result of this requirement, the OFS considered 

market risk in its calculation and determination of 

the estimated net present value of its equity 

investment and FHA-Refinance programs for 

budgetary purposes. Similarly, market risk is 

considered in the valuations for financial reporting 

purposes (see Note 6 for further discussion).

Consistent with its accounting policy for equity 

investments in private entities, including SPVs, the 

OFS accounts for its equity investments at fair 

value. Since fair value is not defined in federal 

accounting standards, as established in Statement of 

Federal Financial Accounting Standards (SFFAS) 

No. 34, The Hierarchy of Generally Accepted 

Accounting Principles, Including the Application of 

Standards Issued by the Financial Accounting 

Standards Board, the OFS conforms to fair value 

definitions contained in the private sector Financial 

Accounting Standards Codification (ASC) 820, Fair 

Value Measurement. OFS defines fair value of its 

equity investments as the estimated amount of 

proceeds that would be received if the equity 

investments were sold to a market participant in an 

orderly transaction. Note 6 presents Equity 

Investments tabulated by the Level of Observation 

of the inputs used in the valuation process. Level 1 

assets are measured using quoted market prices for 

identical assets. Level 2 assets are measured using 

observable market inputs other than direct market 

quotes. Level 3 assets are measured using 

unobservable inputs.

The OFS uses the present value accounting concepts 

embedded in SFFAS No. 2, Accounting for Direct 

Loans and Loan Guarantees, as amended (SFFAS 

No. 2), to derive fair value measurements for its 

equity investments in Levels 2 and 3. The OFS 

concluded that some of the equity investments, such 

as preferred stock, were similar to direct loans since

there was a stated rate and a redemption feature 

which, if elected, required repayment of the amount 

invested. Furthermore, consideration of market risk 

provided a basis to arrive at a fair value 

measurement. Therefore, the OFS concluded that

SFFAS No. 2 (as more fully discussed below) should 

be followed for reporting and disclosure 

requirements of its equity investments.

The OFS applies the provisions of FCRA for 

budgetary accounting and the associated FASAB 

accounting standard SFFAS No. 2 for financial 

reporting for loan guarantee programs. Liabilities 

under the FHA-Refinance Program are recognized at 

the net present value of their estimated future cash 

flows when the FHA guarantees loans. 

For equity investments, the subsidy allowance 

account represents the difference between the face 

value of the outstanding equity investment balance 

and the net present value of the expected future 

cash flows or fair value, and is reported as an 
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

adjustment to the face value of the equity 

investment.

The OFS recognizes dividend income associated with 

equity investments when declared by the entity in 

which the OFS has invested and when received in 

relation to any repurchases, exchanges and 

restructurings. The OFS reflects changes, referred to 

as reestimates, in its determination of the value of 

equity investment and FHA-Refinance programs in 

the subsidy cost on the Statement of Net Cost 

annually.

In certain programs, the OFS has received common 

stock warrants, additional preferred stock (referred 

to as warrant preferred stock) or additional notes as 

additional consideration. The OFS accounts for any 

proceeds received from the sale of these investments 

as fees under SFFAS No. 2; as such, they are 

credited to the subsidy allowance rather than to 

income.

Use of Estimates

The OFS has made certain estimates and 

assumptions relating to the reporting of assets, 

liabilities, revenues, and cost to prepare these 

financial statements. Actual results could 

significantly differ from these estimates. Major 

financial statement lines that include estimates are 

Equity Investments, Net, and the Liabilities for 

Treasury Housing Programs Under TARP on the 

Balance Sheet, and related Program Subsidy Cost 

(Income) on the Statement of Net Cost (see Note 6).

The most significant differences between actual 

results and estimates may occur in the valuation of 

OFS programs. These valuation estimates are 

sensitive to slight changes in model assumptions, 

such as general economic conditions, specific stock 

price volatility of the entities in which the OFS has 

an equity interest, estimates of expected default, 

and prepayment rates. Forecasts of future financial 

results have inherent uncertainty, and Equity 

Investments, Net, as of fiscal year ends, include

relatively illiquid assets with values that are

sensitive to future economic conditions and other 

assumptions. Estimates are also prepared for the 

FHA-Refinance Program to determine the liability 

for losses. 

Credit Reform Accounting

The OFS accounts for the cost of equity investment 

and FHA-Refinance programs in accordance with 

Section 123(a) of the EESA and the FCRA for 

budgetary accounting, and fair value and SFFAS

No. 2 for financial reporting. The FCRA calls for the 

establishment of program, financing and general 

fund receipt accounts to segregate and report 

receipts and disbursements. These accounts are 

classified as either budgetary or non-budgetary in 

the Statement of Budgetary Resources. The OFS 

maintains budgetary program accounts which 

receive appropriations and obligate funds to cover 

the subsidy cost of equity investment and FHARefinance programs, and disburses the subsidy cost 

to the OFS financing accounts. The financing 

accounts are non-budgetary accounts that are used 

to record all of the cash flows resulting from the OFS 

equity investment and FHA-Refinance programs.

Cash flows include disbursements, borrower 

repayments, repurchases, fees, recoveries, interest, 

dividends, proceeds from the sale of stock and 

warrants, borrowings from and repayments to 

Treasury, negative subsidy and the subsidy cost 

received from the program accounts, as well as 

subsidy reestimates and modifications. 

Financing arrangements specifically for the TARP 

activities are provided for in EESA as follows: (1) 

borrowing for program funds under Section 118, 

reported as “appropriations” in these financial 

statements and (2) borrowing by financing accounts 

for amounts not covered by subsidy cost, under the 

FCRA and Section 123. The OFS uses budgetary 

general fund receipt accounts to record the receipt of 

amounts paid from the financing accounts when 

there is a negative subsidy or negative modification 

(a reduction in subsidy cost due to changes in 

program policy or terms that change estimated 

future cash flows) from the original estimate or a 

downward reestimate. Any assets in these accounts 

are non-entity assets, not available to the OFS, and 

are offset by intragovernmental liabilities. At the 

end of the fiscal year, the fund balance transferred 

to the U.S. Treasury through the general fund 

receipt accounts is not included in the OFS’s

reported Fund Balance with Treasury.

SFFAS No. 2 requires that the actual and expected 

costs of federal credit programs be fully recognized 

in financial reporting. The OFS calculated and 

recorded initial estimates of the future performance 

of equity investment and FHA-Refinance programs.

The data used for these estimates were reestimated 

annually, at fiscal year-end, to reflect adjustments 

for market risk, asset performance, and other key 

variables and economic factors. The reestimate data 

were then used to estimate and report the “Program 

Subsidy Cost (Income)” in the Statement of Net 

NOTES TO THE FINANCIAL STATEMENTS 53
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

Cost. A detailed discussion of the OFS subsidy 

calculation and reestimate assumptions, process and 

results is provided in Note 6.

Fund Balance with Treasury

The Fund Balance with Treasury includes general, 

financing and other funds available to pay current 

liabilities and finance authorized purchases. Cash 

receipts and disbursements are processed by the 

Treasury, and the OFS’s records are reconciled with 

those of the Treasury on a regular basis.

Available unobligated balances represent amounts 

that are apportioned for obligation in the current 

fiscal year. Unavailable unobligated balances 

represent unanticipated collections in excess of the 

amounts apportioned which are unavailable. 

Obligated balances not yet disbursed include 

undelivered orders and unpaid expended authority.

See Note 3.

Equity Investments, Net

Equity Investments, Net represents the estimated 

net outstanding amount of the OFS equity 

investments. The equity investment balances have 

been determined in accordance with the provisions 

of SFFAS No. 2 and are recorded at fair value (see 

Note 6). Write-offs of equity investment balances 

(presented in Note 6 table) are recorded when a 

legal event occurs, such as a bankruptcy or 

liquidation with suspension or termination of 

collection action, or extinguishment of a debt 

instrument by agreement and there is currently no 

expectation of further collection. Under SFFAS No.

2, write-offs do not affect the Statement of Net Cost 

because the written-off asset is fully reserved.

Therefore, the write-off removes the asset balance 

and the associated subsidy allowance. 

General Property and Equipment

Equipment with a cost of $50,000 or more per unit 

and a useful life of two years or more is capitalized 

at full cost and depreciated using the straight-line 

method over the equipment’s useful life. Other 

equipment not meeting the capitalization criteria is 

expensed when purchased. Software developed for 

internal use is capitalized and amortized over the 

estimated useful life of the software if the cost per 

project is greater than $250,000. However, OFS may 

expense such software if management concludes 

that total period costs would not be materially 

distorted and the cost of capitalization is not 

economically prudent. Based upon these criteria, the 

OFS reports no capitalized property, equipment or 

software on its Balance Sheet as of September 30, 

2015 and 2014.

Accounts Payable and Other Liabilities

Accounts Payable and Other Liabilities are amounts 

due to intragovernmental or public entities that are 

anticipated to be liquidated during the next 

operating cycle (within one year from the balance 

sheet date).

Due to the General Fund

Due to the General Fund represents the amount of 

accrued downward reestimates not yet funded, 

related to direct loan, equity investment, and FHARefinance programs as of September 30, 2015 and 

2014. See Notes 6 and 7.

Principal Payable to the Bureau of the Fiscal 

Service

Principal Payable to the Bureau of the Fiscal Service 

(Fiscal Service) is the net amount due for equity 

investments funded by borrowings from the Fiscal 

Service as of the end of the fiscal year. Additionally, 

OFS borrows from the Fiscal Service for payment of 

intragovernmental interest and payment of 

downward reestimates to the general fund, as 

necessary. See Note 8.

Liabilities for the Treasury Housing Programs 

Under TARP

There are three initiatives in the Treasury Housing 

Programs: the Making Home Affordable Program, 

the Housing Finance Agency Hardest-Hit Fund and 

the FHA-Refinance Program. The OFS has 

determined that credit reform accounting is not 

applicable to the Treasury Housing Programs Under 

TARP except for the FHA-Refinance Program.

Therefore, liabilities for the Making Home 

Affordable Program and Housing Finance Agency 

Hardest-Hit Fund are accounted for in accordance 

with SFFAS No. 5, Accounting for Liabilities of the 

Federal Government. In accordance with this 

standard, a liability is recognized for any unpaid 

amounts due and payable as of the reporting date.

The liability estimate, as of September 30, 2015 and 

2014, is based on information about loan 

NOTES TO THE FINANCIAL STATEMENTS 54
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

modifications reported by participating servicers for 

the Making Home Affordable Program. See Note 5.

At the end of fiscal year 2010, the OFS entered into 

a loss-sharing agreement with the FHA to support a 

program in which FHA would guarantee refinancing 

for borrowers whose homes are worth less than the 

remaining amounts owed under their mortgage 

loans, i.e. “underwater.” The liability for OFS’s

share of losses was determined under credit reform 

accounting and shown as FHA-Refinance Program, 

one of the Liabilities for Treasury Housing Programs 

Under TARP, on the Balance Sheet. See Notes 4, 5

and 6.

Unexpended Appropriations

Unexpended Appropriations represents the OFS 

undelivered orders and unobligated balances

reduced by canceled authority in budgetary 

appropriated funds as of September 30, 2015 and 

2014.

Cumulative Results of Operations

Cumulative Results of Operations, presented on the 

Balance Sheet and on the Statement of Changes in 

Net Position, represents the net results of the OFS 

operations not funded by appropriations or some 

other source, such as borrowing authority, from 

inception through fiscal year end. Cumulative 

Results of Operations in 2015 and 2014 included $10 

million and $50 million, respectively, reported as 

Cash on Deposit for Housing Program on the 

Balance Sheet, see Note 4.

Other Financing Sources

The Other Financing Sources line in the Statement 

of Changes in Net Position for each year consists 

primarily of downward reestimates. Each program’s 

reestimates, upward and downward, are recorded 

separately, not netted together.

Leave

A liability for the OFS employees’ annual leave is 

accrued as it is earned and reduced as leave is 

taken. Each year the balance of accrued annual 

leave is adjusted to reflect current pay rates as well 

as forfeited “use or lose” leave. Amounts are 

unfunded to the extent current or prior year 

appropriations are not available to fund annual 

leave earned but not taken. Sick leave and other 

types of non-vested leave are expensed as taken. The 

liability is included in the Balance Sheet amount for 

Accounts Payable and Other Liabilities.

Employee Health and Life Insurance and 

Workers’ Compensation Benefits

The OFS employees may choose to participate in the 

contributory Federal Employees Health Benefit and 

the Federal Employees Group Life Insurance 

Programs. The OFS matches a portion of the 

employee contributions to each program. Matching 

contributions are recognized as current operating 

expenses.

The Federal Employees’ Compensation Act (FECA) 

provides income and medical cost protection to 

covered Federal civilian employees injured on the 

job, and employees who have incurred a workrelated injury or occupational disease. Future 

workers’ compensation estimates are generated from 

an application of actuarial procedures developed to 

estimate the liability for FECA benefits. The 

actuarial liability estimates for FECA benefits 

include the expected liability for death, disability, 

medical, and miscellaneous costs for approved 

compensation cases. Any FECA amounts relating to 

OFS employees are expensed as incurred.

Employee Pension Benefits

The OFS employees participate in either the Civil 

Service Retirement System (CSRS) or the Federal 

Employees’ Retirement System (FERS) and Social 

Security. These systems provide benefits upon 

retirement and in the event of death, disability or 

other termination of employment and may also

provide pre-retirement benefits. They may also 

include benefits to survivors and their dependents, 

and may contain early retirement or other special 

features. The OFS contributions to retirement plans 

and Social Security, as well as imputed costs for 

pension and other retirement benefit costs 

administered by the Office of Personnel 

Management, are recognized on the Statement of 

Net Cost as Administrative Cost. Federal employee 

benefits also include the Thrift Savings Plan (TSP). 

For FERS employees, a TSP account is 

automatically established and the OFS matches 

employee contributions to the plan, subject to 

limitations. The matching contributions are 

recognized as Administrative Costs on the 

Statement of Net Cost.

NOTES TO THE FINANCIAL STATEMENTS 55
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

Related Parties There are no related parties for OFS. 

NOTES TO THE FINANCIAL STATEMENTS 56
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

NOTE 3. FUND BALANCES WITH TREASURY

NOTES TO THE FINANCIAL STATEMENTS 57

Fund Balances with Treasury, by fund type and status, as of September 30, 2015 and 2014, are presented in 

the following table.

NOTE 4. CASH ON DEPOSIT FOR HOUSING PROGRAM

As of September 30, 2015 and 2014, the OFS had $10 million and $50 million, respectively, on deposit with a 

commercial bank to facilitate its payments of claims under the FHA-Refinance Program as OFS’s agent. See 

Note 5 for further details regarding the FHA-Refinance Program. Under terms of the agreement with the 

commercial bank, unused funds will be returned to the OFS upon the termination of the program. 

(Dollars in Millions) 2015 2014

Fund Balances:

 General Funds $ 27,949 $ 32,231

 Program Funds - 358

 Financing Funds 150 621

Total Fund Balances $ 28,099 $ 33,210

Status of Fund Balances:

 Unobligated Balances

 Available $ 7,204 $ 572

 Unavailable 1,312 7,802

 Obligated Balances Not Yet Disbursed 19,583 24,836

Total Status of Fund Balances $ 28,099 $ 33,210

As of September 30,
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

NOTE 5. TREASURY HOUSING PROGRAMS UNDER TARP

Fiscal years 2015 and 2014 saw continued 

advancement of programs designed to provide 

stability for both the housing market and 

homeowners. These programs assist homeowners

who are experiencing financial hardships to remain 

in their homes until their financial position 

improves or they relocate to a more sustainable

living situation.

The programs fall into three initiatives: 

1) Making Home Affordable Program (MHA); 

2) Hardest-Hit Fund (HHF); and 

3) FHA-Refinance Program.

Features of these initiatives follow:

NOTES TO THE FINANCIAL STATEMENTS 58

Housing Program Features

MHA

 Home Affordable Modification Program (HAMP)

 First Lien Modification Program (Tier 1, Tier 2, and

 Streamline)

Provides for upfront, monthly and annual incentives to servicers, borrowers 

and investors who participate, whereby the investor and OFS share the costs 

of modifying qualified first liens, conditional on borrower performance.

 Principal Reduction Alternative Program (PRA) Pays financial incentives to investors for principal reduction in conjunction 

with a first lien HAMP modification.

 Home Affordable Foreclosure Alternatives (HAFA ) Designed to assist eligible borrowers unable to retain their homes through a 

HAMP modification, by simplifying and streamlining the short sale and deedin-lieu of foreclosure processes and providing financial incentives to servicers 

and investors as well as relocation assistance to borrowers who pursue short 

sales and deeds-in-lieu.

 Unemployment Forebearance Program (UP) Offers assistance to unemployed homeowners through temporary 

forebearance of a portion of their mortgage payments. This program does not 

require any payments from OFS. 

 FHA-HAMP Provides mortgage modifications similar to HAMP, but for FHA-insured or 

guaranteed loans offered by the FHA.

 Second Lien Program (2MP) Offers financial incentives to participating servicers who modify second liens 

in conjunction with a HAMP modification.

 Rural Development Program (RD-HAMP) Provides for lower monthly payments on USDA guaranteed loans.

HHF Provides targeted aid to homeowners in the states hardest hit by the housing 

market downturn and unemployment.

FHA-Refinance Program Joint initiative with HUD to encourage refinancing of existing underwater 

mortgage loans not currently insured by FHA into FHA insured mortgages.
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

MHA 

In early 2009, Treasury launched the Making 

Home Affordable Program (MHA) to help 

struggling homeowners avoid foreclosure. Since 

its inception, MHA has helped homeowners avoid 

foreclosure by providing a variety of solutions to 

modify their mortgages, get temporary 

forbearance if they are unemployed, or transition 

out of homeownership via a short sale or deed-inlieu of foreclosure. The cornerstone of MHA is the 

Home Affordable Modification Program (HAMP), 

which provides eligible homeowners the 

opportunity to reduce their monthly mortgage 

payments to more affordable levels. Treasury also 

launched programs under MHA to help 

homeowners who are unemployed, “underwater” 

on their loans (those who owe more on their home 

than it is currently worth), or struggling with 

second liens. It also includes options for 

homeowners who would like to transition to a 

more affordable living situation through a short 

sale or deed-in-lieu of foreclosure. MHA includes 

several additional programs to help homeowners 

refinance or address specific types of mortgages, 

in conjunction with the Federal Housing 

Administration (FHA) and the U.S. Department of 

Agriculture (USDA).

All MHA disbursements are made to servicers 

either for themselves or for the benefit of 

borrowers and investors, and all payments are 

contingent on borrowers remaining in good 

standing.

Fannie Mae, as the MHA Program Administrator,

provides direct programmatic support as a third 

party agent on behalf of the OFS. Freddie Mac 

provides compliance oversight of servicers as a 

third party agent on behalf of the OFS, and the 

servicers work directly with the borrowers to 

modify and service the borrowers’ loans. Fees paid 

to Fannie Mae and Freddie Mac are included in 

administrative costs reported on the Statement of 

Net Cost.

NOTES TO THE FINANCIAL STATEMENTS 59

HHF

The HHF was implemented in fiscal year 2010, 

and provides targeted aid to homeowners in the 

states hit hardest by the housing market 

downturn and unemployment through each state’s 

Housing Finance Agency (HFA). States that meet 

the criteria for this program, consisting of 

Alabama, Arizona, California, Florida, Georgia, 

Illinois, Indiana, Kentucky, Michigan, Mississippi, 

Nevada, New Jersey, North Carolina, Ohio, 

Oregon, Rhode Island, South Carolina, Tennessee, 

as well as the District of Columbia, receive 

funding from the OFS. Approved states develop 

and roll out their own programs with timing and 

types of programs targeted to address the specific 

needs and economic conditions of their state.

States have until December 31, 2017 to enter into 

agreements with borrowers.

FHA-Refinance Program

The FHA-Refinance Program is intended to 

encourage refinancing of existing underwater 

mortgage loans not currently insured by FHA into 

FHA-insured mortgages. OFS established a letter 

of credit that obligated the OFS portion of any 

claims associated with the FHA-guaranteed

mortgages. The OMB determined that for 

budgetary purposes, the FHA-Refinance Program 

cost is calculated under the FCRA, and 

accordingly OFS determined that it was 

appropriate to follow SFFAS No. 2 for financial 

reporting. Therefore, the liability is calculated at 

the net present value of estimated future cash 

flows. Homeowners can refinance into FHAguaranteed mortgages through December 31, 

2016 and OFS will honor its share of claims 

against the letter of credit through December 31, 

2022. Cumulatively, as of September 30, 2015 and 

September 30, 2014, 6,639 and 4,963 loans had 

been refinanced through the program, of which 

4,156 and 3,015 are subject to potential Treasury 

reimbursement, respectively. 

OFS originally deposited $50 million with a 

commercial bank as its agent to administer 

payment of claims under the program; that 

amount was reduced to $10 million in 2015; 

cumulatively, $145,330 in claim payments have 

been made as of September 30, 2015, of which 

$97,490 was disbursed during fiscal year 2015. 

See Notes 4 and 6 for further details about the 

deposit and the program. OFS paid $0.7 million in 

fiscal year 2015 and $0.8 million in fiscal year 

2014 to maintain the letter of credit.

The table below recaps housing program 

commitments as of September 30, 2015, and 

payments and accruals as of September 30, 2015

and 2014.
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

Treasury Housing Programs Under TARP

(Dollars in Millions)

NOTES TO THE FINANCIAL STATEMENTS 60

Program

Total Commitments as of

September 30, 20151

Fiscal Year Payments through 

September 30, Accruals as of September 30, 

2015 2014 2015 2014

MHA $ 29,782 $ 2,991 $ 2,739 $ 497 $ 243 

HFA Hardest Hit Fund 7,600 1,257 1,560 - -

FHA - Refinance2125 1 1 - -

Totals $ 37,507 $ 4,249 $ 4,300 $ 497 $ 243 

1

Total commitments represent amounts obligated to support all of OFS's Housing programs. As of September 30, 2015, $19,019 million 

remains available to be spent. FHA- Refinance commitments include $25 million for administrative expenses to administer the Letter of 

Credit facility.

2

Payments do not include $10 million of reserve funds transferred, shown on Balance Sheet as Cash on Deposit for Housing Program, nor 

the subsidy cost to fund OFS's estimated share of defaults, which establishes the liability for losses, see Note 6. Payments are the FHARefinance Letter of Credit administrative expense only.
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

NOTE 6. EQUITY INVESTMENTS, NET AND FHA-REFINANCE PROGRAM

The OFS administers a number of programs 

designed to help stabilize the financial system and 

restore the flow of credit to consumers and 

businesses. The OFS made direct loans and equity 

investments under TARP. The OFS also entered into 

other credit programs, which currently consists of a 

loss-sharing program under the TARP. The table 

below recaps OFS programs by title and type: 

NOTES TO THE FINANCIAL STATEMENTS 61

Program 

Category Program Program Type

Direct Loans 

and Equity 

Investments

Capital Purchase

Program

Equity Investment/Subordinated Debentures

Community Development 

Capital Initiative

Equity Investment/Subordinated Debentures

Automotive Industry Financing 

Program

Equity Investment and Direct Loan

Term Asset-Backed Securities 

Loan Facility*

Subordinated Debentures

Public-Private Investment 

Program*

Equity Investment and Direct Loan

Other Credit 

Program

HA-Refinance Program Loss-sharing Program with FHA

*These programs have had no assets remaining since fiscal year 2013, but collections were recorded in these programs 

during fiscal year 2015. Refer to AFR for fiscal year 2014 or prior for detailed descriptions on these programs.

Equity Investment Programs

Capital Purchase Program (CPP)

In October 2008, the OFS began implementation of 

the TARP with the Capital Purchase Program 

(CPP), designed to help stabilize the financial 

system by assisting in building the capital base of 

certain viable U.S. financial institutions to increase 

the capacity of those institutions to lend to 

businesses and consumers and support the economy. 

The OFS invested a total of $204.9 billion in 707 

institutions under the CPP program between 

October 2008 and December 2009. 

Under this program, the OFS purchased senior 

perpetual preferred stock from qualifying U.S. 

controlled banks, savings associations, and certain 

bank and savings and loan holding companies 

(Qualified Financial Institution or QFI). The senior 

preferred stock has a stated dividend rate of 5.0

percent through year five, increasing to 9.0 percent

in subsequent years. The dividends are cumulative 

for bank holding companies and non-cumulative for 

others; they are payable when and if declared by the 

institution’s board of directors. In addition to the 

senior preferred stock, the OFS received warrants, 

with a 10-year term, as required by Section 113(d) of 

EESA, from public QFIs to purchase a number of 

shares of common stock. QFIs that are Subchapter S 

corporations issued subordinated debentures instead 

of preferred stock (to comply with tax code 

regulations) with interest rates of 7.7 percent for the 

first five years and 13.8 percent thereafter. 

The OFS received warrants from non-public QFIs for 

the purchase of additional senior preferred stock (or 

subordinated debentures if appropriate) with a 

stated dividend rate of 9.0 percent (13.8 percent

interest rate for subordinate debentures) and a 

liquidation preference equal to 5.0 percent of the 

total senior preferred stock (additional subordinate 

debenture) investment. These warrants were 

immediately exercised and resulted in the OFS 

holding additional senior preferred stock 

(subordinated debentures) (collectively referred to as 

“warrant preferred stock”) of non-public QFIs. 
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

In addition to the above transactions, the OFS 

entered into other transactions with various 

financial institutions including exchanging existing 

preferred shares for a like amount of non-taxdeductible Trust Preferred Securities, exchanging 

preferred shares for shares of mandatorily 

convertible preferred securities and selling preferred 

shares to financial institutions that were acquiring 

the QFIs that have issued the preferred shares. 

Generally, these transactions are entered into with 

financial institutions in poor financial condition with 

a high likelihood of failure. As such, in accordance 

with SFFAS No. 2, these transactions are considered 

workouts and not modifications. The changes in cost 

associated with these transactions are captured in 

the year-end reestimates. 

During fiscal year 2015 and 2014, OFS continued 

preferred stock auction sales of selected remaining 

CPP investments. During fiscal year 2015, OFS 

elected to also sell CPP warrants in public auctions, 

with net proceeds of $49 million.

In fiscal year 2015, OFS sold eight CPP investments 

in two separate preferred stock auctions for total net 

proceeds of $50 million. These auction sales resulted 

in net proceeds less than cost of $32 million. In 

addition, other sales and redemptions for 14 

institutions resulted in net proceeds less than cost of 

$20 million. In fiscal year 2014, OFS sold 31 CPP 

investments in six separate auctions for total net 

proceeds of $289 million. These auction sales 

resulted in net proceeds less than cost of $73 million. 

In addition, other sales and redemptions for 31 

institutions resulted in net proceeds less than cost of 

$96 million.

During fiscal year 2015, two institutions, in which 

OFS had invested $13 million, were either closed by 

their regulators or declared bankruptcy. During 

fiscal year 2014, three institutions, in which OFS 

had invested $27 million, were either closed by their 

regulators or declared bankruptcy. The ultimate 

amount received, if any, from the investments in 

institutions that filed for bankruptcy and 

institutions closed by regulators primarily depends 

upon the outcome of the bankruptcy proceedings and 

of each institution’s receivership. At closing or 

bankruptcy, they are valued by OFS at zero.

During fiscal year 2015, two CPP institutions were

written off for $13 million, the amount of OFS’s 

original investment. During fiscal year 2014, 27 

institutions that entered bankruptcy or were closed 

by their regulators between 2009 to 2014 were 

written off for $797 million, the amount of OFS’s 

original investments. The write-offs reduced gross 

investment outstanding and subsidy allowance by 

equal offsetting amounts, since the investments 

were valued at zero through the subsidy cost 

reestimates.

The following tables provide key data points related 

to the CPP for the fiscal years ending September 30, 

2015 and 2014:

NOTES TO THE FINANCIAL STATEMENTS 62

 

CPP Participating Institutions

Cumulative as of September 30,

2015 2014

Number of Institutions Funded 707 707 

Institutions Paid in Full, Merged or Investments Sold (491) (469)

Institutions Transferred to CDCI (28) (28)

Institutions Refinanced to SBLF (137) (137)

Institutions Written Off After Bankruptcy or Receivership (32) (30)

Number of Institutions with Outstanding OFS Investments 19 43

Institutions in Bankruptcy or Receivership (not written off) - -

Number of CPP Institutions Valued at Year-End 19 43 

Of the Institutions Valued, Number that Have Missed One or More 

Dividend Payments 17 36 

(Dollars in Millions)
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

NOTES TO THE FINANCIAL STATEMENTS 63

CPP Investments Fiscal Year 2015 Fiscal Year 2014

Outstanding Beginning Balance, Investment in CPP Institutions, Gross $ 625 $ 3,143 

Repayments and Sales of Investments (197) (1,454)

Write-Offs (13) (797)

Losses from Sales and Repurchases of Assets (147) (267)

Outstanding Balance, Investment in CPP Institutions, Gross $ 268 $ 625 

Interest and Dividend Collections $ 19 $ 88 

Net Proceeds from Sales and Repurchases of Assets Less Than Cost $ (52) $ (169)

 

Community Development Capital 

Initiative (CDCI) 

In February 2010, the OFS announced the 

Community Development Capital Initiative (CDCI) 

to invest lower cost capital in Community 

Development Financial Institutions (CDFIs). Under 

the terms of the program, the OFS purchased senior 

preferred stock (or subordinated debt) from eligible 

CDFIs. The senior preferred stock had an initial 

dividend rate of 2 percent. CDFIs could apply to 

receive capital up to 5 percent of risk-weighted 

assets. To encourage repayment while recognizing 

the unique circumstances facing CDFIs, the 

dividend rate increases to 9 percent after eight 

years.

For CDFI credit unions, the OFS purchased 

subordinated debt at rates equivalent to those 

offered to CDFIs and with similar terms. These 

institutions could apply for up to 3.5 percent of total 

assets - an amount approximately equivalent to the 

5 percent of risk-weighted assets available to banks 

and thrifts.

CDFIs participating in the CPP, subject to certain 

criteria, were eligible to exchange, through 

September 30, 2010, their CPP preferred shares 

(subordinated debt) then held by OFS for CDCI 

preferred shares (subordinated debt). These 

exchanges were treated as disbursements from 

CDCI and repayments to CPP. OFS invested a total 

of $570 million ($363 million as a result of 

exchanges from CPP) in 84 institutions under the 

CDCI.

During fiscal years 2015 and 2014, there were no 

CDCI institutions written off. 

In fiscal year 2015, OFS received $19 million in 

repayments and $9 million in dividends and interest 

from its CDCI investments with, as of September 30, 

2015, an outstanding balance of $446 million and 

value of $383 million. In fiscal year 2014, OFS 

received $10 million in repayments and $10 million 

in dividends and interest from its CDCI investments 

with, as of September 30, 2014, an outstanding 

balance of $465 million and value of $372 million. 

Public-Private Investment Program 

(PPIP)

The PPIP was part of the OFS’s efforts to help 

restart the financial securities market and provide 

liquidity for legacy securities. Under this program, 

the OFS (as a limited partner) made equity 

investments in and loans to nine investment 

vehicles (referred to as Public Private Investment 

Funds or “PPIFs”) established by private investment 

managers between September and December 2009.

As of September 30, 2014, OFS had no PPIF equity 

investments or loans outstanding.

Of the legal commitments to disburse up to $984 

million to remaining PPIFs as of September 30, 

2013, $858 million were canceled in 2014 and the 

remaining $126 million was canceled in 2015, since 

all PPIFs had ceased operations and termination 

notices had been received from all of them. 

During fiscal year 2015, OFS received a collection of 

$63,311 recognized as net proceeds in excess of cost. 

During fiscal year 2014, the OFS received $10 

million, of which $6 million was recognized as 

investment income and $4 million as net proceeds in 

excess of cost. 

Term Asset-Backed Securities Loan 

Facility (TALF)

The Term Asset-Backed Securities Loan Facility 

(TALF) was created by the Federal Reserve Board 

(FRB) to provide low cost funding to investors in 

certain classes of Asset-Backed Securities (ABS).
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

The OFS agreed to participate in the program by 

providing liquidity and credit protection to the FRB.

Under the TALF, the Federal Reserve Bank of New 

York (FRBNY), as implementer of the TALF

program, originated loans on a non-recourse basis to 

purchasers of certain AAA-rated ABS secured by 

consumer and commercial loans and commercial 

mortgage backed securities (CMBS). The FRBNY

ceased issuing new loans on June 30, 2010. As of 

September 30, 2015, no loans due to the FRBNY 

remained outstanding. As of September 30, 2014, 

one loan due to FRBNY of approximately $14.3 

million remained outstanding. 

The OFS disbursed $100 million upon the creation of 

TALF, LLC in 2009. This $100 million was repaid in 

2013. Upon its wind-down, after collateral was sold, 

available cash was disbursed to FRBNY and OFS 

according to the legal agreement between them.

In fiscal year 2015, OFS received $39 million of 

contingent interest, recorded as proceeds in excess of 

cost. In fiscal year 2014, OFS received $62 million of 

contingent interest, recorded as proceeds in excess of 

cost. 

As of September 30, 2015 or 2014, no TALF loans 

were in default and consequently no collateral was 

purchased by the TALF, LLC.

Automotive Industry Financing Program 

(AIFP)

The Automotive Industry Financing Program (AIFP) 

was designed to help prevent a significant 

disruption of the American automotive industry, 

which could have had a negative effect on the 

economy of the United States. 

General Motors Company (New GM) 

and General Motors Corporation (Old 

GM)

In the period ended September 30, 2009, the OFS 

provided $51.0 billion to General Motors 

Corporation (Old GM) through various loan 

agreements including the initial loan for general and 

working capital purposes, auto supplier and 

warranty programs, and the final loan for debtor in 

possession (DIP) financing while Old GM was in 

bankruptcy. As of September 30, 2013, after various 

sales and restructurings of its investment, the OFS 

held 101 million shares of common stock of New GM, 

the post-bankruptcy GM entity, and had received a 

cumulative total of $35.9 billion in stock sale 

proceeds, loan repayments, dividends and interest.

During fiscal year 2014, OFS sold its remaining 101 

million shares of GM common stock for $3.8 billion. 

The sales resulted in net proceeds less than cost of 

$639 million. After this sale, OFS no longer retained 

ownership in the common stock of New GM.

In fiscal year 2011, $986 million of OFS’s loan to Old 

GM was converted to an administrative claim. OFS 

retains the right to recover additional proceeds but 

recoveries are dependent on actual liquidation 

proceeds and pending litigation. OFS recovered $1 

million in fiscal year 2014 on the administrative 

claim. Because OFS did not expect to recover any 

significant additional proceeds from this claim, OFS 

recognized a write-off of the remaining $826 million 

in fiscal year 2014 resulting in no outstanding 

balance since September 30, 2014. During fiscal year 

2015, OFS recovered $8 million on this 

administrative claim. 

Chrysler Group LLC (New Chrysler) 

and Chrysler Holding LLC (Old 

Chrysler)

During fiscal years 2009 and 2010, OFS invested 

$7.8 billion in Chrysler Holding LLC (Old Chrysler), 

including the auto supplier and warranty programs, 

and an additional $4.6 billion in Chrysler Group 

LLC (New Chrysler) under the terms of Chrysler’s 

bankruptcy agreement. Prior to fiscal year 2012, 

pursuant to several agreements with New Chrysler 

that included write-offs, OFS had received loan 

repayments, interest and additional payments

totaling $11.1 billion and had no remaining interest 

in New Chrysler. 

OFS continues to hold a right to receive proceeds 

from a bankruptcy liquidation trust related to Old 

Chrysler, but no significant cash flows are expected. 

OFS received $100 million from the trust in fiscal 

year 2015. No proceeds were received from the trust 

in 2014. The underlying loan balance was 

extinguished in the Chrysler bankruptcy, and was 

written off by OFS in fiscal year 2010.

NOTES TO THE FINANCIAL STATEMENTS 64
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

Ally Financial Inc. (formerly known as 

GMAC)

The OFS invested a total of $16.3 billion in GMAC 

between December 2008 and December 2009, to help 

support its ability to originate new loans to GM and 

Chrysler dealers and consumers and to help 

addreGMAC’s capital needs. In addition, in May 

2009, under the terms of a separate $884 million 

loan to Old GM, OFS exercised its exchange option 

and received 190,921 shares of GMAC common stock 

from Old GM in full satisfaction of the loan. In May 

2010, GMAC changed its corporate name to Ally 

Financial, Inc. (Ally), a private bank holding 

company. As a result of original investments, 

exchanges, conversions, warrant exercises and sales, 

at the beginning of fiscal year 2014, OFS had 

received $6.2 billion in sales proceeds, dividends, 

and additional payments on its initial investment 

and held 981,971 shares of common stock (73.8 

percent of Ally’s outstanding common stock) and 119 

million shares of Series F-2 mandatorily convertible 

preferred securities (Series F-2). The Series F-2 were

convertible into at least 513,000 shares of common 

stock. 

Per an August 2013 agreement, all of the Series F-2 

were repurchased by Ally from OFS for $5.2 billion 

in November 2013 along with an additional $725 

million for the elimination of certain rights under 

the original agreement. This transaction resulted in 

proceeds in excess of cost of $300 million. The 

August 2013 agreement also included terms for Ally 

to issue a November 2013 private offering of new 

common stock at a price of $6,000 per share. 

Following the private offering, OFS’s ownership was 

reduced to 63.4 percent of Ally’s outstanding 

common stock. A stock split of 310/1 was also 

announced by Ally following the private offering. 

The OFS received no dividends in fiscal year 2015 

from the Ally investment. The OFS received $141 

million from the Ally investment in fiscal year 2014.

During fiscal year 2015, OFS sold its remaining 

64,110,418 shares of Ally common stock (post-split) 

for $1.5 billion, resulting in net proceeds less than 

cost of $290 million.

During fiscal year 2014, OFS sold 410,000 pre-split 

shares and 113 million post-split shares of Ally 

common stock (or an equivalent total of 240.1 

million post-split shares) for $5.8 billion. The sales 

resulted in net proceeds less than cost of $1.4 billion.

At September 30, 2015, the OFS retained no 

ownership in the common stock of Ally.

At September 30, 2014, the OFS held 64,110,418 

shares of Ally common stock (post-split), with a 

market value of $1.5 billion, representing 13.4 

percent ownership in Ally.

Valuation Methodology 

The OFS applies fair value and the provisions of 

SFFAS No. 2 to account for equity investments and 

the FHA-Refinance Program. This standard requires 

measurement of the asset or liability at the net 

present value of the estimated future cash flows.

The cash flow estimates for each transaction reflect 

the actual structure of the instruments. For each of 

these instruments, analytical cash flow models 

generate estimated cash flows to and from the OFS 

over the estimated term of the instrument. Further, 

each cash flow model reflects the specific terms and 

conditions of the program, technical assumptions 

regarding the underlying assets, risk of default or 

other losses, and other factors as appropriate. The 

models also incorporate an adjustment for market 

risk to reflect the additional return required by the 

market to compensate for variability around the 

expected losses reflected in the cash flows (the 

“unexpected loss”).

The adjustment for market risk requires the OFS to 

determine the return that would be required by 

market participants to enter into similar 

transactions or to purchase the assets held by OFS.

Accordingly, the measurement of the assets 

attempts to represent the proceeds expected to be 

received if the assets were sold to a market 

participant in an orderly transaction. The 

methodology employed for determining market risk 

for equity investments generally involves using 

market prices of similar securities to estimate an 

appropriate market-adjusted discount rate that 

results in measuring equity investments at fair 

value. The adjustment for market risk for loans is 

intended to capture the risk of unexpected losses, 

but not intended to represent fair value, i.e. the 

proceeds that would be expected to be received if the 

loans were sold to a market participant. The OFS 

uses market observable inputs, when available, in 

developing cash flows and incorporating the 

adjustment required for market risk. For purposes of 

this disclosure, the OFS has classified its programs’ 

asset valuations as follows, based on the 

observability of inputs that are significant to the 

measurement of the asset:

· Quoted prices for Identical Assets (Level 1): The 

measurement of assets in this classification is 

based on direct market quotes for the specific 

asset, e.g. quoted prices of common stock.

NOTES TO THE FINANCIAL STATEMENTS 65
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

· Significant Observable Inputs (Level 2): The 

measurement of assets in this classification is 

primarily derived from market observable data, 

other than a direct market quote, for the asset. 

This data could be market quotes for similar 

assets for the same entity. 

· Significant Unobservable Inputs (Level 3): The 

measurement of assets in this classification is 

primarily derived from inputs which generally 

represent management’s best estimate of how a 

market participant would assess the risk 

inherent in the asset. These unobservable inputs 

are used because there is little to no direct 

market activity.

The following table displays the assets held by the 

observability of inputs significant to the 

measurement of each value:

As of September 30, 2015

(Dollars in Millions)

NOTES TO THE FINANCIAL STATEMENTS 66

Program

Quoted Prices for 

Identical Assets

(Level 1)

Significant 

Observable Inputs

(Level 2)

Significant 

Unobservable Inputs

(Level 3) Total

CPP $ 49 $ - $ 50 $ 99 

CDCI 15 - 368 383 

Total TARP Programs $ 64 $ - $ 418 $ 482 

As of September 30, 2014

(Dollars in Millions)

Program

Quoted Prices for 

Identical Assets

(Level 1)

Significant 

Observable Inputs

(Level 2)

Significant 

Unobservable Inputs

(Level 3) Total

CPP $ 106 $ - $ 175 $ 281 

CDCI and TALF 38 - 372 410 

AIFP 1,483 - - 1,483 

Total TARP Programs $ 1,627 $ - $ 547 $ 2,174 

The following provides a description of the 

methodology used to develop the cash flows and 

incorporate the market risk into the measurement of 

the OFS assets.

Financial Institution Equity Investments4

The estimated values of preferred equity 

investments are the net present values of the 

expected dividend payments and proceeds from 

repurchases and sales. The model assumes that the 

key decisions affecting whether or not institutions 

pay their preferred dividends are made by each 

institution based on the strength of its balance 

sheet. The model assumes a probabilistic approach 

to estimate the projected cash flows due to the 

 

4This consists of equity investments made under CPP and CDCI.

Treasury based on market pricing data and the 

strength of a given institution’s balance sheet. Each 

institution’s performance is subject to uncertainty. 

In fiscal year 2014, OFS implemented a new 

estimation methodology in its model for its 

remaining equity investments. The new model was 

implemented as the risk profile of the remaining 

equity investments within the TARP portfolio 

evolved over time and as the portfolio as a whole 

continued to wind down. Within the new model, 

some institutions are increasingly likely to default 

or to miss the preferred dividends as the quality of 

their assets deteriorates or the level of capital they 

have available to absorb losses declines as a share of 

their assets. The probability of default was 

estimated based on the performance of a large 

sample of U.S. banks over time and on the historical 
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

behavior of the TARP’s own equity investments. At 

the other end of the spectrum, institutions are 

increasingly likely to call their preferred shares over 

time as their balance sheets improve. Inputs to the 

model included institution-specific accounting data 

obtained from regulatory filings, an institution’s 

stock price volatility and historical bank failure 

information, as well as market pricing data of 

comparable securities trading in the market. The 

market risk adjustment is estimated by grouping 

institutions with similar financial performance and 

applying credit spreads from similar securities.

For both its fiscal year 2015 and 2014 models, OFS 

estimates the values and projects the cash flows of 

warrants using an option-pricing approach based on 

the current stock price and its volatility. 

Investments in common stock that are exchange 

traded are valued at the quoted market price as of 

year-end.

Public-Private Investment Program 

At September 30, 2014, since the PPIFs no longer 

held security portfolios, their valuation represented 

expected proceeds to OFS upon final liquidation 

notice from the remaining PPIFs. No further 

significant collections are expected from the PPIFs.

Term Asset-Backed Securities Loan 

Facility 

For fiscal year 2014, the valuation represents

expected proceeds to the OFS upon final wind down 

of the Federal Reserve Bank of New York (FRBNY) 

TALF LLC SPV because the OFS loan was fully 

repaid in fiscal year 2013 and only one FRBNY 

TALF loan remained outstanding as of September 

30, 2014. 

Automotive Industry Financing 

Program 

At September 30, 2014, shares of common stock in 

Ally, held by OFS, were valued by multiplying the 

publicly traded share price by the number of shares 

held plus the value of any traded but not settled 

shares as of September 30, 2014. Traded but not 

settled shares as of September 30, 2014, were valued 

based on the actual trade proceeds. OFS had no 

investment in Ally common stock remaining as of 

September 30, 2015.

Subsidy Cost and Reestimates

The recorded subsidy cost of a direct loan, equity 

investment or other credit program is based upon 

the calculated net present value of expected future 

cash flows. The OFS’s actions, as well as changes in 

legislation that change these estimated future cash

flows change subsidy cost, and are recorded as 

modifications. The cost or reduction in cost of a 

modification is recognized when it occurs.

During fiscal years 2015 or 2014, there were no 

modifications to any of the remaining programs. 

The purpose of reestimates is to update original 

program subsidy cost estimates to reflect actual cash 

flow experience as well as changes in equity 

investment valuations or forecasts of future cash 

flows. Forecasts of future cash flows are updated 

based on actual program performance to date, 

additional information about the portfolio, 

additional publicly available relevant historical 

market data on securities performance, revised 

expectations for future economic conditions, and 

enhancements to cash flow projection methods. 

For fiscal years 2015 and 2014, financial statement 

reestimates for all programs, except the FHARefinance program, were performed using actual 

financial transaction data through September 30. 

For fiscal years 2015 and 2014 market and security 

specific data publicly available as of September 30 

were used. For fiscal year 2015, for the 2015 cohort, 

FHA guaranteed loan volume is actual data through 

August 31, with an estimate for the month of 

September.

Net downward reestimates for the fiscal years ended 

September 30, 2015 and 2014, totaled $245 million 

and $1.5 billion, respectively. Descriptions of the 

reestimates, by OFS Program, are as follows:

CPP

The $124 million downward reestimate for CPP for 

the fiscal year ended September 30, 2015 was the 

result of revenues from asset sales in 2015 being 

higher than projected and repayments. 

The $88 million downward reestimate for CPP for 

the fiscal year ended September 30, 2014 was the 

result of a reduction in the projected number of 

institutions that would be sold via asset sales, 

revenues from asset sales in 2014 being higher than 

projected, and repayments.

NOTES TO THE FINANCIAL STATEMENTS 67
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

CDCI

The CDCI program experienced improved 

investment performance with some institutions 

repaying in full, resulting in a $26 million 

downward reestimate for the fiscal year ended 

September 30, 2015. 

The CDCI program experienced improved market 

values and repayments in full, resulting in a $6 

million downward reestimate for the fiscal year 

ended September 30, 2014. 

Public-Private Investment Program

There was a nominal reestimate for the PPIP for the 

year ended September 30, 2015, due to a collection 

from a PPIF. 

There was a nominal reestimate for the PPIP for the 

year ended September 30, 2014, due to the winddown of expenses being nearly as projected. 

TALF

The $0.5 million downward reestimate for TALF for 

the fiscal year ended September 30, 2015, was due to 

small collections and final closing of the program.

The investments in the TALF experienced lower 

than anticipated expenses resulting in a $1 million 

downward reestimate for the fiscal year ended 

September 30, 2014.

AIFP

For the fiscal year ended September 30, 2015 a $92 

million downward reestimate was due mostly to 

recoveries from GM and Chrysler bankruptcy 

liquidation trusts.

Improvements in the value of Treasury’s investment 

in Ally resulted in $1.0 billion in downward 

reestimates and improvements in Treasury’s 

investments for GM resulted in $349 million for a 

total of $1.4 billion in downward reestimates for 

AIFP for the fiscal year ended September 30, 2014.

In April, 2014 an initial public offering (IPO) of Ally 

common stock occurred with Treasury selling 95 

million shares at $25.00 per share. In May 2014, 7.2

million shares were sold at that price. As of 

September 30, 2014 the remaining shares of Ally 

common were valued at $23.14 per share.

Summary Table

The following table recaps gross equity investments, 

subsidy allowance, net equity investments, 

reconciliation of subsidy cost allowance and subsidy 

cost, by TARP program, as of and for the fiscal years 

ended September 30, 2015 and 2014. OFS authority 

expired October 3, 2010 and no commitments were 

made thereafter, so there were no investment 

program budget execution subsidy rates for fiscal 

years 2015 and 2014.

NOTES TO THE FINANCIAL STATEMENTS 68
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

Troubled Asset Relief Program Equity Investments As of September 30, 2015

(Dollars in Millions)

NOTES TO THE FINANCIAL STATEMENTS 69

Equity Investment Programs: TOTAL CPP PPIP AIFP CDCI-TALF

Equity Investments Outstanding, 

Gross $ 714 $ 268 $ - $ - $ 446 

Subsidy Cost Allowance (232) (169) - - (63)

Equity Investments Outstanding, 

Net $ 482 $ 99 $ - $ - $ 383 

Obligations for Investments not 

yet Disbursed $ - $ - $ - $ - $ -

Reconciliation of Subsidy Cost 

Allowance: TOTAL CPP PPIP AIFP CDCI-TALF

Balance, Beginning of Period $ 679 $ 344 $ - $ 280 $ 55 

Interest and Dividend Revenue 28 19 - - 9 

Net Proceeds from Sales and 

Repurchases of Assets

in Excess of (Less than) Cost (195) (52) - (182) 39 

Write-Offs (13) (13) - - -

Net Interest Expense on 

Borrowings from Fiscal Service

and Financing Account Balance (25) (5) - (6) (14)

Balance, End of Period, Before 

Reestimates 474 293 - 92 89 

Subsidy Reestimates Upward 

(Downward), Net (242) (124) - (92) (26)

Balance, End of Period $ 232 $ 169 $ - $ - $ 63 

Reconciliation of Subsidy Cost 

(Income): TOTAL CPP PPIP AIFP CDCI-TALF

Subsidy Reestimates Upward 

(Downward), Net (242) (124) - (92) (26)

Total Equity Investment Programs

Subsidy Cost (Income) $ (242) $ (124) $ - $ (92) $ (26)

Troubled Asset Relief Program Equity Investments As of September 30, 2014

Equity Investment Programs: TOTAL CPP PPIP AIFP CDCI-TALF

Equity Investments Outstanding, 

Gross $ 2,853 $ 625 $ - $ 1,763 $ 465 

Subsidy Cost Allowance (679) (344) - (280) (55)

Equity Investments Outstanding, 

Net $ 2,174 $ 281 $ - $ 1,483 $ 410 

Obligations for Investments not 

yet Disbursed $ 126 $ - $ 126 $ - $ -

Reconciliation of Subsidy Cost 

Allowance: TOTAL CPP PPIP AIFP CDCI-TALF

Balance, Beginning of Period $ 5,627 $ 1,350 $ (10) $ 4,281 $ 6 

Interest and Dividend Revenue 245 88 6 141 10 

Net Proceeds from Sales and 

Repurchases of Assets

in Excess of (Less than) Cost (1,889) (169) 4 (1,786) 62 

Write-Offs (1,623) (797) - (826) -

Net Interest Expense on 

Borrowings from Fiscal Service
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

NOTES TO THE FINANCIAL STATEMENTS 70

Reconciliation of Subsidy Cost 

Allowance: TOTAL CPP PPIP AIFP CDCI-TALF

and Financing Account Balance (189) (40) - (133) (16)

Balance, End of Period, Before 

Reestimates 2,171 432 - 1,677 62 

Subsidy Reestimates Upward 

(Downward), Net (1,492) (88) - (1,397) (7)

Balance, End of Period $ 679 $ 344 $ - $ 280 $ 55 

Reconciliation of Subsidy Cost 

(Income): TOTAL CPP PPIP AIFP CDCI-TALF

Subsidy Reestimates Upward 

(Downward), Net (1,492) (88) - (1,397) (7)

Total Equity Investment Programs

Subsidy Cost (Income) $ (1,492) $ (88) $ - $ (1,397) $ (7)

FHA-Refinance Program

As discussed in Note 5, the OFS entered into a losssharing agreement with the FHA to support a 

program in which FHA guarantees refinancing of 

borrowers whose homes were worth less than the 

remaining amounts owed under their mortgage 

loans. OFS originally established a $50 million 

account, held by a commercial bank serving as its 

agent, from which any required reimbursements for 

losses will be paid to third party claimants, 

including banks or other investors. This amount was 

reduced to $10 million in fiscal year 2015 with $40 

million being returned to OFS along with $156,741 

in investment income. 

During fiscal year 2015, $122 million of new loans 

were guaranteed by the FHA under this program 

that could require a Treasury contribution. 

During fiscal year 2014, no new loans were 

guaranteed by FHA under this program that 

required a Treasury contribution.

Cumulatively, as of September 30, 2015 and 

September 30, 2014, 4,156 and 3,015 loans that FHA 

guaranteed, with a total value of $611 and $489 

million, respectively, had been refinanced under the 

program that could require a Treasury contribution. 

OFS’s maximum exposure related to FHA’s 

guarantee totaled $38 million and $34 million at 

September 30, 2015 and 2014, respectively. OFS’s 

guarantee resulted in a liability of $5 million at 

September 30, 2015 and a liability of $6 million at 

September 30, 2014. The liability was calculated, 

using credit reform accounting, as the present value 

of the estimated future cash outflows for the OFS’s

share of losses incurred on any defaults of the FHA 

guaranteed loans. Cumulatively, as of September 30, 

2015 and 2014, $145,330 and $47,840 of claims had 

been paid by OFS under the program. 

At September 30, 2015 and 2014, OFS’s obligation 

for subsidy for potential new FHA guaranteed loans 

under the program was $100 million and $1.0 

billion, respectively.

Budget subsidy rates for the program, entirely for 

defaults, were set at 1.64 percent for loans 

guaranteed in fiscal year 2015.

The program recorded $3 million in downward 

reestimates, for each of the fiscal years 2015 and 

2014, due to lower than projected defaults.

The following table details the changes in the FHARefinance Program Liability and the Subsidy Cost 

for the program during fiscal years 2015 and 2014:

(dollars in millions)

Category 2015 2014

Balance, Beginning of Period $ 6 $ 9 

Subsidy Cost for Guaranties (Defaults) 2 -

Balance, End of Period, Before Reestimates 8 9 

Subsidy Reestimates - Upward (Downward), Net (3) (3)

Balance, End of Period $ 5 $ 6 

Reconciliation of Subsidy Cost (Income)

Reconciliation of Subsidy Cost (Income) Subsidy Cost for Guaranties $ 2 $ -
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

NOTES TO THE FINANCIAL STATEMENTS 71

(Defaults)

Reconciliation of Subsidy Cost (Income) Subsidy Reestimates - Upward 

(Downward), Net (3) (3)

Total Subsidy Cost (Income) $ (1) $ (3)
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

NOTE 7. DUE TO THE GENERAL FUND

As of September 30, 2015, the OFS accrued $229 

million of downward reestimates payable to the 

General Fund. As of September 30, 2014, the OFS 

accrued $1.5 billion of downward reestimates 

payable to the General Fund. Due to the General 

Fund is a Non-Entity liability on the Balance Sheet.

NOTE 8. PRINCIPAL PAYABLE TO THE BUREAU OF THE FISCAL SERVICE (Fiscal 

Service) 

The equity investment and the FHA-Refinance 

Programs, accounted for under federal credit reform,

are funded by subsidy appropriations and 

borrowings from the Fiscal Service. The OFS also 

borrows funds to pay the Treasury General Fund for 

downward reestimates (these reduce program 

subsidy cost) in advance of receiving the expected 

cash flows that cause the downward reestimate. The 

OFS makes periodic principal repayments to the 

Fiscal Service based on the analysis of its cash 

balances and future disbursement needs. All debt is 

intragovernmental and covered by budgetary 

resources. See additional details on borrowing 

authority in Note 11, Statement of Budgetary 

Resources.

Debt transactions for the fiscal years ended 

September 30, 2015 and 2014 were as follows: 

(Dollars in Millions)

NOTES TO THE FINANCIAL STATEMENTS 72

Category

As of 

September 

30, 2015

As of 

September 

30, 2014

Beginning Balance, Principal Payable to the Fiscal Service $ 1,304 $ 11,949 

New Borrowings - 749 

Repayments (886) (11,394)

Ending Balance, Principal Payable to the Fiscal Service $ 418 $ 1,304 

Borrowings from the Fiscal Service by TARP program, outstanding as of September 30, 2015 and 2014, were 

as follows:

(Dollars in Millions)

Program As of September 30, 2015 As of September 30, 2016

CPP $ 28 $ 291 

CDCI and TALF 370 418 

PPIP - 7 

AIFP 20 588 

Total Borrowings Outstanding $ 418 $ 1,304 

As of September 30, 2015, borrowings carried remaining terms ranging from 1 to 26 years, with interest 

rates from 2.96 percent to 3.8 percent. As of September 30, 2014, borrowings carried remaining terms 

ranging from 2 to 27 years, with interest rates from 2.5 percent to 3.8 percent. 
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

NOTE 9. COMMITMENTS AND CONTINGENCIES

The OFS is party to various legal actions and claims brought by or against it. In the opinion of management 

and the Chief Counsel, the ultimate resolution of these legal actions and claims will not have a materially 

adverse effect on the OFS financial statements, except for the pending legal action described below which 

may have a materially adverse impact on the financial statements depending on the outcome of the case. 

Contingent liabilities related to litigation are recorded in the financial statements if and when losses are 

determined to be probable and estimable. Contingent liabilities are disclosed where the conditions for 

liability recognition have not been met and the likelihood of unfavorable outcome is more than remote. If 

litigation losses are to be paid by the Treasury Judgment Fund, the related cost is allocated to the 

appropriate federal entity, which records the cost and an offsetting financing source in its financial 

statements. 

Starr International Co., Inc. v. United States: Plaintiff is an AIG shareholder that brought suit on behalf of 

two putative classes of shareholders alleging that the government violated the Fifth Amendment by illegally 

exacting or taking property without just compensation. One class, the Credit Agreement Class, claimed that 

the Fifth Amendment was violated when a majority share of AIG’s equity and voting rights was conveyed in 

connection with an $85 billion loan that rescued AIG during the 2008 financial crisis. Starr also asserted a 

Fifth Amendment violation on behalf of the second class, the Reverse Stock Split Shareholder Class, that a 

June 2009 reverse stock split constituted a taking of the common stockholders’ asserted right to a 

shareholder vote on whether to approve a reverse split of AIG’s common stock. The Court of Federal Claims 

held that the Credit Agreement Shareholder Class shall prevail on liability, but shall recover zero damages, 

and that the Reverse Stock Split Shareholder Class shall not prevail on liability or damages. Both the 

Plaintiff and the United States have appealed. 

The Department of Justice (DOJ), which is representing the United States Treasury and the Board of 

Governors of the Federal Reserve System in this lawsuit, is unable to determine the likelihood of a favorable 

or unfavorable outcome or make an estimate of potential loss, if any, at this time. In addition, if an 

unfavorable outcome were to occur, OFS believes that the settlement would be paid by the Treasury 

Judgment Fund. Accordingly, if an unfavorable outcome were deemed probable and measureable and the 

related cost is allocated to OFS, then OFS would record an imputed cost and offsetting financing source in 

its financial statements.

In addition, the OFS pays for a portion of the Starr litigation expenses incurred by DOJ based on an InterAgency Agreement (IAA) between the OFS and DOJ. Under the terms of the IAA, OFS paid approximately 

$1 million per year to DOJ for expenses invoiced during fiscal years 2015 and 2014. 

Refer to Note 5 for additional commitments relating to the Treasury Housing Programs under TARP and 

Note 6 relating to Equity Investments, Net and FHA-Refinance Programs.

NOTES TO THE FINANCIAL STATEMENTS 73
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

NOTE 10. STATEMENT OF NET COST

The Statement of Net Cost (SNC) presents the net cost of (income from) operations for the OFS under the 

strategic goal to promote domestic economic growth and stability while continuing reforms of the financial 

system. The OFS has determined that all initiatives and programs under the TARP fall within this strategic 

goal.

The OFS SNC reports the annual accumulated full cost of the TARP’s output, including both direct and 

indirect costs of the program services and output identifiable to TARP, in accordance with SFFAS No. 4, 

Managerial Cost Accounting Concepts and Standards.

The OFS SNC for fiscal year 2015 includes $30 million of intragovernmental costs relating to interest 

expense on borrowings from the Fiscal Service and $5 million in intragovernmental revenues relating to 

interest income on financing account balances. The OFS SNC for fiscal year 2014 includes $218 million of 

intragovernmental costs relating to interest expense on borrowings from the Fiscal Service and $29 million

intragovernmental revenues relating to interest income on financing account balances.

Subsidy allowance amortization on the SNC is the difference between interest income on financing fund 

account balances, dividends and interest income on equity investments and FHA-Refinance programs from 

TARP participants, and interest expense on borrowings from the Fiscal Service. The subsidy allowance 

account is used to present the equity investments at the estimated net present value of future cash flows.

The OFS SNC includes $3 million and $56 million of subsidy allowance amortization for fiscal years 2015 

and 2014, respectively.

NOTE 11. STATEMENT OF BUDGETARY RESOURCES

The Statement of Budgetary Resources (SBR) presents information about total budgetary resources 

available to the OFS and the status of those resources. For the fiscal year ended September 30, 2015, the 

OFS’s total resources in budgetary accounts were $8.5 billion and resources in non-budgetary financing 

accounts, including spending authority from collections of loan principal, liquidation of equity investments, 

interest, dividends and fees were $1.7 billion. For the fiscal year ended September 30, 2014, the OFS’s total 

resources in budgetary accounts were $8.1 billion and resources in non-budgetary financing accounts were 

$9.1 billion. 

Permanent Indefinite Appropriations

The OFS receives permanent indefinite appropriations annually, if necessary, to fund increases in the 

projected subsidy costs of equity investments and FHA-Refinance programs as determined by the 

reestimation process required by the FCRA.

Additionally, Section 118 of the EESA states that the Secretary may issue public debt securities and use the 

resulting funds to carry out the Act and that any such funds expended or obligated by the Secretary for

actions authorized by this Act, including the payment of administrative expenses, shall be deemed 

appropriated at the time of such expenditure or obligation.

Borrowing Authority 

The OFS is authorized to borrow from the Fiscal Service to pay interest costs in excess of interest income 

and to fund downward reestimates transfers to the General Fund. For the fiscal year ended September 30, 

2015, the OFS had no borrowing authority available or authorized. For the fiscal year ended September 30, 

2014, the OFS had borrowing authority available of $90 million, of the $839 million current year authority 

authorized.

The OFS uses dividends and interest received as well as recoveries on direct loans and liquidation of equity 

investments to repay debt in the non-budgetary direct loan, equity investment and FHA-Refinance program 

financing accounts. These receipts are not available for any other use per credit reform accounting guidance.

NOTES TO THE FINANCIAL STATEMENTS 74
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

Apportionment Categories of Obligations Incurred: Direct versus Reimbursable Obligations

All of the OFS apportionments are Direct and are Category B. Category B apportionments typically 

distribute budgetary resources on a basis other than calendar quarters, such as by activities, projects, 

objects or a combination of these categories. The OFS obligations incurred are direct obligations (obligations 

not financed from intragovernmental reimbursable agreements).

Undelivered Orders

Undelivered orders as of September 30, 2015 were $19 billion in budgetary accounts and $1 million in nonbudgetary financing accounts. Undelivered orders as of September 30, 2014 were $24.5 billion in budgetary 

accounts and $0.1 billion in non-budgetary financing accounts.

Explanation of Differences Between the Statement of Budgetary Resources and the Budget of 

the United States Government

Federal agencies and entities are required to explain material differences between amounts reported in the 

SBR and the actual amounts reported in the Budget of the U.S. Government (the President’s Budget). 

The President’s Budget for 2017, with the “Actual” column completed for fiscal year 2015, has not yet been 

published as of the date of these financial statements. The President’s Budget is currently expected to be 

published and delivered to Congress in early February 2016. It will be available from the Government 

Printing Office.

The 2016 President’s Budget, with the “Actual” column completed for the fiscal year ended September 30, 

2014, was published in February 2015, and reconciled to the SBR. The only differences between the two 

documents were due to:

· Rounding;

· Expired funds that are not shown in the “Actual” column of the President’s Budget.

NOTES TO THE FINANCIAL STATEMENTS 75
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

NOTE 12. RECONCILIATION OF OBLIGATIONS INCURRED TO NET COST OF 

OPERATIONS

The OFS presents the SNC using the accrual basis of accounting. This differs from the obligation-based 

measurement of total resources supplied, both budgetary and from other sources, on the SBR. The 

reconciliation of obligations incurred to net cost of operations shown below categorizes the differences 

between the two, and illustrates that the OFS maintains reconcilable consistency between the two types of 

reporting.

The Reconciliation of Obligations Incurred to Net Cost of (Income from) Operations for the fiscal years ended 

September 30, 2015 and 2014 follows:

(Dollars in Millions) 2015 2014

Resources Used to Finance Activities:

Budgetary Resources Obligated

 Obligations Incurred $ 1,732 $ 8,797

 Actual Offsetting Collections, Net of Change in Uncollected Customer Payments, and Recoveries (3,123) (18,471)

 Offsetting Receipts (1,525) (8,238)

Net Obligations (2,916) (17,912)

Other Resources - -

Total Resources Used to Finance Activities (2,916) (17,912)

Resources Used to Finance Items Not Part of Net Cost of Operations:

 Net Obligations in Direct Loan, Equity Investment and FHA-Refinance Program Financing Funds 512 9,707

 Change in Resources Obligated for Goods, Services and Benefits Ordered but not yet Provided 5,493 4,523

 Resources that Fund the Acquisition of Assets 40 -

 Resources that Fund Prior Period Expenses and Reestimates 1,485 8,138

Total Resources Used to Finance Items Not Part of Net Cost of Operations 7,530 22,368

Total Resources Used to Finance the Net Cost of Operations 4,614 4,456

Components of Net Cost of (Income from) Operations that Will Not Require or Generate Resources 

in the Current Period:

 Accrued Net Downward Reestimates at Year-End (209) (1,486)

 Other 1 1

Total Components of Net Cost of (Income from) Operations that Will Not Require or Generate 

Resources in the Current Period (208) (1,485)

Net Cost of Operations $ 4,406 $ 2,971

Fiscal Year

NOTES TO THE FINANCIAL STATEMENTS 76
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

Office of Financial Stability - Troubled Asset Relief Program

REQUIRED SUPPLEMENTARY INFORMATION

COMBINED STATEMENT OF BUDGETARY RESOURCES

For the Year Ended September 30, 2015

(Unaudited)

Dollars in Millions

REQUIRED SUPPLEMENTARY INFORMATION 77

BUDGETARY RESOURCES

2015

Combined TARP Programs TARP Administrative

Budgetary 

Accounts

Nonbudgetary 

Financing 

Accounts

Budgetary 

Accounts

Nonbudgeta

ry Financing 

Accounts

Budgetary 

Accounts

Nonbudgetary 

Financing 

Accounts

Unobligated Balances 

Brought Forward, October 1 $ 7,760 $ 614 $ 7,500 $ 614 $ 260 $ -

Recoveries of Prior-Year 

Unpaid Obligations 1,013 126 976 126 37 -

Borrowing Authority 

Withdrawn - (90) - (90) - -

Actual Repayment of Debt, 

Prior-Year Balances - (309) - (309) - -

Canceled Authority (458) - (357) - (101) -

Unobligated Balance from 

Prior-Year Budget Authority, 

Net 8,315 341 8,119 341 196 -

Appropriations 185 - 3 - 182 -

Borrowing Authority - - - - - -

Spending Authority from 

Offsetting Collections 40 1,367 40 1,367 - -

TOTAL BUDGETARY 

RESOURCES (Note 11) $ 8,540 $ 1,708 $ 8,162 $ 1,708 $ 378 $ -

STATUS OF BUDGETARY 

RESOURCES

Combined TARP Programs TARP Administrative

Nonbudgetar

y Financing 

Accounts

Budgetary 

Accounts

Nonbudgeta

ry Financing

Accounts

Nonbudgeta

ry Financing 

Accounts

Budge

tary 

Accou

nts

Nonbudgetary 

Financing 

Accounts

Obligations Incurred $ 174 $ 1,558 $ 3 $ 1,558 $ 171 $ -

Unobligated Balance:

Apportioned 7,185 19 7,172 19 13 -

Unapportioned 1,181 131 987 131 194 -

Total Unobligated Balance 8,366 150 8,159 150 207 -

TOTAL STATUS OF 

BUDGETARY RESOURCES $ 8,540 $ 1,708 $ 8,162 $ 1,708 $ 378 $ -

CHANGE IN OBLIGATED 

BALANCES Unpaid 

Obligations:

Combined TARP Programs TARP Administrative

Nonbudgetar

y Financing 

Accounts

Budgetary 

Accounts

Nonbudgeta

ry Financing 

Accounts

Nonbudgeta

ry Financing 

Accounts

Budge

tary 

Accou

nts

Nonbudgetary 

Financing 

Accounts

Unpaid Obligations Brought 

Forward, October 1 $ 24,828 $ 127 $ 24,686 $ 127 $ 142 $ -

Obligations Incurred 174 1,558 3 1,558 171 -

Gross Outlays (4,407) (1,558) (4,254) (1,558) (153) -

Recoveries of Prior-Year 

Unpaid Obligations (1,013) (126) (976) (126) (37) -

Unpaid Obligations, End of 

Year 19,582 1 19,459 1 123 -

Uncollected Payments from 

Federal Sources:
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

REQUIRED SUPPLEMENTARY INFORMATION 78

CHANGE IN OBLIGATED 

BALANCES Unpaid 

Obligations:

Combined TARP Programs TARP Administrative

Nonbudgetar

y Financing 

Accounts

Budgetary 

Accounts

Nonbudgeta

ry Financing 

Accounts

Nonbudgeta

ry Financing 

Accounts

Budge

tary 

Accou

nts

Nonbudgetary 

Financing 

Accounts

Uncollected Payments 

Brought Forward, October 1 - (29) - (29) - -

Change in Uncollected 

Payments - 29 - 29 - -

Uncollected Payments from 

Federal Sources, End of Year - - - - - -

Obligated Balance, Net, End 

of Year 19,582 1 19,459 1 123 -

OBLIGATED BALANCES (Net 

of Unpaid Obligations and 

Uncollected Payments 

Above)

Combined TARP Programs TARP Administrative

Nonbudgetar

y Financing 

Accounts

Budgetary 

Accounts

Nonbudgeta

ry Financing 

Accounts

Nonbudgeta

ry Financing 

Accounts

Budge

tary 

Accou

nts

Nonbudgetary 

Financing 

Accounts

Obligated Balance, Net, 

Brought Forward, October 1 $ 24,828 $ 98 $ 24,686 $ 98 $ 142 $ -

Obligated Balance, Net, End 

of Year $ 19,582 $ 1 $ 19,459 $ 1 $ 123 $ -

BUDGET AUTHORITY AND 

OUTLAYS, NET

Combined TARP Programs TARP Administrative

Nonbudgetar

y Financing 

Accounts

Budgetary 

Accounts

Nonbudgeta

ry Financing 

Accounts

Nonbudgeta

ry Financing 

Accounts

Budge

tary 

Accou

nts

Nonbudgetary 

Financing 

Accounts

Budget Authority, Gross $ 225 $ 1,367 $ 43 $ 1,367 $ 182 $ -

Actual Offsetting Collections (40) (1,973) (40) (1,973) - -

Change in Uncollected 

Customer Payments from 

Federal Sources - 29 - 29 - -

BUDGET AUTHORITY, NET $ 185 $ (577) $ 3 $ (577) $ 182 $ -

Combined TARP Programs TARP Administrative

Nonbudgetar

y Financing 

Accounts

Budgetary

Accounts

Nonbudgeta

ry Financing 

Accounts

Nonbudgeta

ry Financing 

Accounts

Budge

tary 

Accou

nts

Nonbudgetary 

Financing 

Accounts

Gross Outlays $ 4,407 $ 1,558 $ 4,254 $ 1,558 $ 153 $ -

Actual Offsetting Collections (40) (1,973) (40) (1,973) - -

Net Outlays 4,367 (415) 4,214 (415) 153 -

Distributed Offsetting 

Receipts (1,525) - (1,525) - - -

AGENCY OUTLAYS, NET $ 2,842 $ (415) $ 2,689 $ (415) $ 153 $ -
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

Dollars in Millions

Budgetary 

Accounts

Nonbudgetary 

Financing 

Accounts

Budgetary 

Accounts

Nonbudgetary 

Financing 

Accounts

Budgetary 

Accounts

Nonbudgetary 

Financing 

Accounts

BUDGETARY RESOURCES

 Unobligated Balances Brought Forward, October 1 $ 21,606 $ 1,462 $ 21,290 $ 1,462 $ 316 $ -

 Recoveries of Prior-Year Unpaid Obligations 261 865 235 865 26 -

 Actual Repayment of Debt, Prior-Year Balances - (1,444) - (1,444) - -

 Canceled Authority (14,120) - (14,024) - (96) -

 Unobligated Balance from Prior-Year Budget Authority, Net 7,747 883 7,501 883 246 -

 Appropriations 308 - 90 - 218 -

 Borrowing Authority - 839 - 839 - -

 Spending Authority from Offsetting Collections - 7,394 - 7,394 - -

TOTAL BUDGETARY RESOURCES (Note 11) $ 8,055 $ 9,116 $ 7,591 $ 9,116 $ 464 $ -

STATUS OF BUDGETARY RESOURCES

 Obligations Incurred $ 295 $ 8,502 $ 90 $ 8,502 $ 205 $ -

 Unobligated Balance: - -

 Apportioned 14 558 - 558 14 -

 Unapportioned 7,746 56 7,500 56 246 -

 Total Unobligated Balance 7,760 614 7,500 614 260 -

TOTAL STATUS OF BUDGETARY RESOURCES $ 8,055 $ 9,116 $ 7,590 $ 9,116 $ 465 $ -

CHANGE IN OBLIGATED BALANCES

Unpaid Obligations:

 Unpaid Obligations Brought Forward, October 1 $ 29,406 $ 993 $ 29,221 $ 993 $ 185 $ -

 Obligations Incurred 295 8,502 90 8,502 205 -

 Gross Outlays (4,612) (8,503) (4,390) (8,503) (222) -

 Recoveries of Prior-Year Unpaid Obligations (261) (865) (235) (865) (26) -

Unpaid Obligations, End of Year 24,828 127 24,686 127 142 -

Uncollected Payments from Federal Sources:

 Uncollected Payments Brought Forward, October 1 - (226) - (226) - -

 Change in Uncollected Payments - 197 - 197 - -

Uncollected Payments from Federal Sources, End of Year - (29) - (29) - -

Obligated Balance, Net, End of Year 24,828 98 24,686 98 142 -

OBLIGATED BALANCES 

 (Net of Unpaid Obligations and Uncollected Payments Above)

Obligated Balance, Net, Brought Forward, October 1 $ 29,406 $ 767 $ 29,221 $ 767 $ 185 $ -

Obligated Balance, Net, End of Year $ 24,828 $ 98 $ 24,686 $ 98 $ 142 $ -

BUDGET AUTHORITY AND OUTLAYS, NET

 Budget Authority, Gross $ 308 $ 8,233 $ 90 $ 8,233 $ 218 $ -

 Actual Offsetting Collections - (17,541) - (17,541) - -

 Change in Uncollected Customer Payments from Federal Sources - 197 - 197 - -

BUDGET AUTHORITY, NET $ 308 $ (9,111) $ 90 $ (9,111) $ 218 $ -

 Gross Outlays $ 4,612 $ 8,503 $ 4,390 $ 8,503 $ 222 $ -

 Actual Offsetting Collections - (17,541) - (17,541) - -

 Net Outlays 4,612 (9,038) 4,390 (9,038) 222 -

 Distributed Offsetting Receipts (8,238) - (8,238) - - -

AGENCY OUTLAYS, NET $ (3,626) $ (9,038) $ (3,848) $ (9,038) $ 222 $ -

2014

Combined TARP Programs TARP Administrative

Office of Financial Stability - Troubled Asset Relief Program

REQUIRED SUPPLEMENTARY INFORMATION

COMBINED STATEMENT OF BUDGETARY RESOURCES

For the Year Ended September 30, 2014 

(Unaudited)

REQUIRED SUPPLEMENTARY INFORMATION 79
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

OTHER INFORMATION 80
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

Part 3: Other Information (Unaudited)

OTHER INFORMATION 81
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

OTHER INFORMATION 82
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

Section A – Combined Schedule of Spending\

Office of Financial Stability - Troubled Asset Relief Program

COMBINED SCHEDULE OF SPENDING

For the Years Ended September 30, 2015 and 2014

Dollars in Millions

OTHER INFORMATION 83

WHAT MONEY IS AVAILABLE TO 

SPEND?

2015 2014

Budgetary Accounts

Nonbudgeta

ry Financing 

Accounts

Budgetary 

Accounts

Nonbudget

ary 

Financing 

Accounts

Total Resources (per Statement of 

Budgetary Resources) $ 8,540 $ 1,708 $ 8,055 $ 9,116 

Less Amount Available, but not 

agreed to be spent (7,185) (19) (14) (558)

Less Amount not available to be 

spent (1,181) (131) (7,746) (56)

TOTAL AMOUNTS AGREED TO BE 

SPENT (OBLIGATIONS INCURRED 

PER SBR) $ 174 $ 1,558 $ 295 $ 8,502 

HOW WAS THE AMOUNT SPENT?

2015 2014

Budgetary Accounts

Nonbudgeta

ry Financing 

Accounts

Budgetary 

Accounts

Nonbudget

ary 

Financing 

Accounts

Personnel Compensation $ 10 $ - $ 12 $ -

Personnel Benefits 3 - 4 -

Other Services 158 3 189 46 

Interest - 30 - 218 

Subsidies, including Reestimates for 

Previously

Disbursed Loans and Investments 

Outstanding1 3 1,525 90 8,238 

TOTAL AMOUNTS AGREED TO BE 

SPENT (OBLIGATIONS INCURRED 

PER SBR) $ 174 $ 1,558 $ 295 $ 8,502 

WHO DID THE MONEY GO TO?

2015 2014

Budgetary Accounts

Nonbudgeta

ry Financing 

Accounts

Budgetary 

Accounts

Nonbudget

ary 

Financing 

Accounts

Federal Agencies and Entities $ 22 $ 1,555 $ 114 $ 8,456 

Non-Federal Companies - Freddie 

Mac/Fannie Mae for Housing 114 - 129 -

Non-Federal Companies - All Other 28 3 39 46 

Non-Federal Individuals 10 - 13 -

TOTAL AMOUNTS AGREED TO BE 

SPENT (OBLIGATIONS INCURRED 

PER SBR) $ 174 $ 1,558 $ 295 $ 8,502 
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

1

Subsidies obligated in nonbudgetary accounts consist of downward reestimates, which are reductions of subsidy cost, 

transferred from the financing accounts to the Treasury General Fund. These transactions occur in the same fiscal year as the

obligations.

OTHER INFORMATION 84

The Combined Schedule of Spending presents an overview of obligations incurred subtotaled by 

purpose and again by type of entity to be paid. Obligations are legally binding agreements that 

usually result in outlays, immediately or in the future. The schedule presents more detail than the 

Statement of Budgetary Resources (SBR), although the data used to populate both is the same. 

The section “How Was the Amount Spent” presents obligations committed to in each fiscal year for 

services received, supplies purchased, subsidies and program loans or investments made, even if 

actual receipt of services or goods has not yet occurred or payments have not yet been made for 

particular obligations. While most obligations become contractual agreements for which services and 

goods are received in the same fiscal year as established, certain obligations or portions of 

obligations reported here may never be used. These unused amounts, when closed, are reported as 

“Recoveries of Prior-Year Unpaid Obligations” on the SBR.

Section B – IPIA (as amended by IPERA and IPERIA)

Risk Assessment

The central purpose of the Improper Payments Information Act of 2002 (IPIA, Pub. L. 107-300) is to 

enhance the accuracy and integrity of federal payments. To achieve this objective, IPIA provided an 

initial framework for federal agencies to identify the causes of and solutions for reducing improper 

payments.

On July 22, 2010, President Obama signed into law the Improper Payments Elimination and 

Recovery Act of 2010 (IPERA, Pub. L. 111-204). IPERA amends IPIA, generally repeals the Recovery 

Auditing Act, and significantly increases agency payment recapture efforts by expanding the types of 

payments to be reviewed and lowering the dollar threshold of annual payments that requires 

agencies to conduct payment recapture audit programs. Agencies continue to be required to review 

their programs and activities periodically to identify those susceptible to significant improper 

payments. OMB Circular No. A-123, Management’s Responsibility for Internal Control, Appendix C, 

“Requirements for Effective Estimation and Remediation of Improper Payments” (A-123, Appendix 

C), amended October 20, 2014, defines “significant improper payments” as gross annual improper 

payments in a program exceeding both the threshold of 1.5 percent and $10 million, or exceeding 

$100 million regardless of the improper payment percentage. A-123, Appendix C, also requires 

agencies to review all programs with annual payments of $1 million or more, if cost-effective.

OFS managers are held accountable for developing and strengthening financial management 

controls to detect and prevent improper payments, and thereby better safeguard taxpayer dollars.

OFS carried out its fiscal year 2015 IPERA review per Treasury-wide guidance and did not assess 

any programs or activities as susceptible to significant improper payments.

Recapture of Improper Payment Reporting

In accordance with IPIA, as amended, and OMB Circular No. A-123, Appendix C, OFS performs and 

reports annually on its payment recapture program for all programs and payment activities that 

expend $1 million or more, including contracts, benefits, and other payment types. During fiscal year 

2015, OFS reviewed administrative and program payments totaling approximately $4.4 billion.
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

OFS does not have an improper payment recapture audit contingency contract or formal 

management improvement program in place. Instead, OFS performs both targeted post-award 

audits and improper payment recapture audits designed to identify erroneous payments, principally 

applying payment offsets for any identified erroneous payments. OFS has in place extensive annual 

audit and testing procedures to monitor administrative and program payments for errors. To date, 

these procedures have identified no significant erroneous payments or audit findings.

More specifically, with respect to administrative payments, OFS works externally with the Bureau of 

the Fiscal Service – Administrative Resource Center (BFS) and Internal Revenue Service – Office of 

Treasury Procurement Services (OTPS) to support payment recapture reporting. BFS processes 

OFS’s contract and administrative payments, including payments to OFS’s financial agents. OTPS 

solicits, negotiates, and awards contracts on behalf of OFS. Both organizations have extensive 

payment recapture audit and improper payments reporting capabilities.

OFS also performs extensive payment recapture audit activities to identify erroneous incentive 

payments under the MHA program. OFS ensures that the Investor Reporting 2 (IR/2) system, the 

MHA system of record, is configured to calculate incentive payments in accordance with program 

guidelines based on data provided by servicers. The MHA program administrator performs a 

validation of all incentive payments which is then reconciled with OFS loan level payment and 

accounting files on a monthly basis. In addition, the MHA compliance agent performs post-award 

loan level reviews of MHA incentive payments to ensure validity in accordance with the MHA 

Handbook and Supplemental Directives issued by Treasury.

OFS reports annually improper payments identified through its recapture audit activities. Improper 

payments, recapture audit results, and disposition of recaptured funds are disclosed within the U.S. 

Department of the Treasury Agency Financial Report. In summary, OFS has a strong internal 

control environment in place to prevent, detect, and correct improper payments associated with its 

administrative and program payments.

IPERIA Do Not Pay Initiative

The Improper Payments Elimination and Recovery Improvement Act of 2012 (IPERIA, Pub. L. 112-

248) was signed into law by the President on January 10, 2013, and also amends IPIA. It is 

important to note that Section 5 of IPERIA, regarding the “Do Not Pay” Initiative, is treated 

separately from Circular No. A-136 reporting requirements.

BFS partnered with the Saint Louis and Kansas City Federal Reserve Banks to operate the “Do Not 

Pay Business Center” as part of a government wide “Do Not Pay” solution. During fiscal year 2013, 

OFS implemented the “Do Not Pay” solution to monitor administrative disbursements to ensure, to 

the extent permitted by law, a thorough review of available databases with relevant information on 

eligibility occurs before the release of any Federal funds.

To date, the BFS “Do Not Pay” Business Center has not identified any potential OFS improper 

payments. Additional “Do Not Pay” analysis is disclosed within the U.S. Department of the Treasury 

Agency Financial Report.

OTHER INFORMATION 85
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

APPENDIX A: TARP GLOSSARY 86
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

Part 4: Appendices

APPENDIX A: TARP GLOSSARY 87
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

Appendix A: TARP Glossary

Asset-Backed Security (ABS): A financial instrument representing an interest in a pool of other 

assets, typically consumer loans. Most ABS are backed by credit card receivables, auto loans, student 

loans, or other loan and lease obligations.

Asset Guarantee Program (AGP): A TARP program under which OFS, together with the Federal 

Reserve and the FDIC, agreed to share losses on certain pools of assets held by systemically 

significant financial institutions that faced a high risk of losing market confidence due in large part 

to a portfolio of distressed or illiquid assets.

Automotive Industry Financing Program (AIFP): A TARP program under which OFS provided loans 

or equity investments in order to avoid a disorderly bankruptcy of one or more auto companies that 

would have posed a systemic risk to the country’s financial system.

Capital Purchase Program (CPP): A TARP program pursuant to which OFS invested in preferred 

equity securities and other securities issued by financial institutions.

Commercial Mortgage-Backed Securities (CMBS): A financial instrument representing an interest in 

a commercial real estate mortgage or a group of commercial real estate mortgages.

Community Development Capital Initiative (CDCI): A TARP program that provides low-cost capital 

to Community Development Financial Institutions to encourage lending to small businesses and help 

facilitate the flow of credit to individuals in underserved communities.

Community Development Financial Institution (CDFI): A financial institution that focuses on 

providing financial services to low- and moderate- income, minority and other underserved 

communities, and is certified by the CDFI Fund, an office within OFS that promotes economic 

revitalization and community development.

Debtor-In-Possession (DIP): A debtor-in-possession in U. S. bankruptcy law has filed a bankruptcy 

petition but still remains in possession of its property. DIP financing usually has priority over 

existing debt, equity and other claims.

Emergency Economic Stabilization Act (EESA): The law that created the Troubled Asset Relief 

Program (TARP).

Government-Sponsored Enterprises (GSEs): Private corporations created by the U.S. Government.

Fannie Mae and Freddie Mac are GSEs.

Home Affordable Modification Program (HAMP): A TARP program OFS established to help 

responsible but struggling homeowners reduce their mortgage payments to affordable levels and 

avoid foreclosure.

Legacy Securities: CMBS and non-agency RMBS issued prior to 2009 that were originally rated AAA 

or an equivalent rating by two or more nationally recognized statistical rating organizations without 

ratings enhancement and that are secured directly by actual mortgage loans, leases or other assets 

and not other securities.

Making Home Affordable (MHA): A comprehensive plan to stabilize the U.S. housing market and 

help responsible, but struggling, homeowners reduce their monthly mortgage payments to more 

affordable levels and avoid foreclosure. HAMP is part of MHA.

Morgage-Backed Securities (MBS): A type of ABS representing an interest in a pool of similar 

mortgages bundled together by a financial institution.

APPENDIX A: TARP GLOSSARY 88

Non-Agency Residential Mortgage-Backed Securities: RMBS that are not guaranteed or issued by 

Freddie Mac, Fannie Mae, any other GSE, Ginnie Mae, or a U.S. federal government agency.
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

APPENDIX A: TARP GLOSSARY 89

Preferred Stock: Equity ownership that usually pays a fixed dividend and gives the holder a claim on 

corporate earnings superior to common stock owners. Preferred stock also has priority in the 

distribution of assets in the case of liquidation of a bankrupt company.

Public-Private Investment Fund (PPIF): An investment fund established to purchase Legacy 

Securities from financial institutions under PPIP.

Public-Private Investment Program (PPIP): A TARP program designed to support the secondary 

market in mortgage-backed securities. The program is designed to increase the flow of credit 

throughout the economy by partnering with private investors to purchase Legacy Securities from 

financial institutions.

Qualifying Financial Institution (QFI): Private and public U.S.-controlled banks, savings 

associations, bank holding companies, certain savings and loan holding companies, and mutual 

organizations.

Residential Mortgage-Backed Securities (RMBS): A financial instrument representing an interest in 

a group of residential real estate mortgages.

SBA: U.S. Small Business Administration.

SBA 7(a) Securities Purchase Program: A TARP program under which OFS purchased securities 

backed by the guaranteed portions of the SBA 7(a) loans.

Servicer: An administrative third party that collects mortgage payments, handles tax and insurance 

escrows, and may even bring foreclosure proceedings on past due mortgages for institutional loan 

owners or originators. The loan servicer also generates reports for borrowers and mortgage owners 

on the collections. 

Targeted Investment Program (TIP): A TARP program created to stabilize the financial system by 

making investments in institutions that are critical to the functioning of the financial system.

Term Asset-Backed Securities Loan Facility (TALF): A program under which the Federal Reserve 

Bank of New York made term non-recourse loans to buyers of AAA-rated Asset-Backed Securities in 

order to stimulate consumer and business lending. 

Troubled Asset Relief Program (TARP): The Troubled Asset Relief Program, which was established 

under EESA to stabilize the financial system and help prevent a systemic collapse.

Warrant: A financial instrument that represents the right, but not the obligation, to purchase a 

certain number of shares of common stock of a company at a fixed price.
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

Appendix B: Abbreviations and Acronyms

APPENDIX B: ABBREVIATIONS AND ACRONYMS 90

 

ABS Asset-Backed Securities

AGP Asset Guarantee Program

AIFP Automotive Industry Financing Program

AIG American International Group, Inc.

CAP Capital Assistance Program

CDFI Community Development Financial Institution

CMBS Commercial Mortgage-Backed Securities

CPP Capital Purchase Program

CDCI Community Development Capital Initiative

DIP Debtor-In-Possession

EESA Emergency Economic Stabilization Act of 2008

FCRA Federal Credit Reform Act of 1990

FHA Federal Housing Administration

FRBNY Federal Reserve Bank of New York

GAO Government Accountability Office

GM General Motors

GMAC General Motors Acceptance Corporation

GSE Government-Sponsored Enterprise

HAFA Home Affordable Foreclosure Alternatives

HFA Housing Finance Agency

HHF Hardest Hit Fund

 HAMP Home Affordable Modification Program

MBS Mortgage-Backed Security

MHA Making Home Affordable Program

OFS Office of Financial Stability

OMB Office of Management and Budget

PPIF Public-Private Investment Fund

PPIP Public-Private Investment Program

QFI Qualifying Financial Institution
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

RMBS Residential Mortgage-Backed Securities

SBR Statement of Budgetary Resources 

SBLF Small Business Lending Fund

SCAP Supervisory Capital Assessment Program

SIGTARP Special Inspector General for the Troubled Asset Relief Program

SPV Special Purpose Vehicle

TALF Term Asset-Backed Securities Loan Facility

TARP Troubled Asset Relief Program

TIP Targeted Investment Program

USDA U. S. Department of Agriculture

APPENDIX B: ABBREVIATIONS AND ACRONYMS 91
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

WEBSITES

APPENDIX B: ABBREVIATIONS AND ACRONYMS 92
AGENCY FINANCIAL REPORT | FISCAL YEAR 2015

APPENDIX B: ABBREVIATIONS AND ACRONYMS 93