AGENCY FINANCIAL REPORT | FISCAL YEAR 2019
AGENCY FINANCIAL REPORT | FISCAL YEAR 2019
AGENCY FINANCIAL REPORT | FISCAL YEAR 2019

TABLE OF CONTENTS i

TABLE OF CONTENTS

Contents

FOREWORD........................................................................................................................................................................ ii

MESSAGE FROM THE AGENCY HEAD FOR THE OFFICE OF FINANCIAL STABILITY.........................iii

EXECUTIVE SUMMARY................................................................................................................................................. iv

Part 1: Management's Discussion and Analysis

Program Background, Organization Structure, and Operational Goals .................................................... 1

Active TARP Programs .................................................................................................................................................. 2

Analysis of Fiscal Years 2019 and 2018 Financial Summary and Cumulative Net Income .............. 6

Analysis of Systems, Controls, and Legal Compliance....................................................................................12

Limitations of the Financial Statements...............................................................................................................16

Part 2: Financial Section

GOVERNMENT ACCOUNTABILITY OFFICE AUDITOR’S REPORT .............................................................19

Appendix I: Management’s Report on Internal Control over Financial Reporting.............................24

Appendix II: OFS Response to Auditor’s Report...............................................................................................25

FINANCIAL STATEMENTS .........................................................................................................................................26

NOTES TO THE FINANCIAL STATEMENTS.........................................................................................................31

REQUIRED SUPPLEMENTARY INFORMATION.................................................................................................55

Part 3: Other Information (Unaudited)

Section A – Payment Integrity..................................................................................................................................59

Section B – Fraud Reduction and Data Analytics Act......................................................................................61

Section C – Reduce the Footprint............................................................................................................................62

Additional TARP Historical Information..............................................................................................................63

TARP Glossary.................................................................................................................................................................67

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

and search on Reports by Frequency, Yearly
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

ii FOREWARD

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 2019 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 Agency Head: A statement from the Deputy Assistant Secretary for 

Community and Economic Development 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 TARP mission and organizational structure of OFS; background and analysis of OFS 

programs, initiatives and operational goals; and analysis of financial statements, systems, 

controls, and legal compliance, including the Management’s Statement of Assurance.

 Financial Section: This section provides the Independent Auditor’s Report, the financial 

statements, the notes to the financial statements, and other statutory reporting.

 Other Information: This section includes the information regarding Payment Integrity, 

Fraud Reduction and Data Analytics Act, and Reduce the Footprint.

In addition to this AFR, the performance section of the OFS fiscal year 2019 Congressional Budget 

Justification satisfies 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;

 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: OFS Financial Reports Archive.
AGENCY FINANCIAL REPORT | FISCAL YEAR 2019

MESSAGE FROM THE AGENCY HEAD iii

MESSAGE FROM THE AGENCY HEAD FOR THE OFFICE OF 

FINANCIAL STABILITY

November 4, 2019

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

Year 2019. This report describes our financial and performance results for the 11th year of the 

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

2019 and 2018 financial statements for TARP, the U.S. Government Accountability Office (GAO) 

independent 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 GAO’s tests of 

OFS’s compliance with selected provisions of laws, regulations, contracts, and agreements applicable 

to OFS.

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

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

to make new commitments through TARP ended October 3, 2010. Since then, Treasury has focused 

on the orderly wind-down of TARP.

As of September 30, 2019, 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 American International Group, Inc. Of the original ten investment 

programs, eight are effectively closed. Investment programs with remaining outstanding balances 

include the Capital Purchase Program (CPP, $17 million) and the Community Development Capital 

Initiative (CDCI, $23 million). OFS continues to wind-down those positions as quickly as 

practicable.

Hardest Hit Fund (HHF) has assisted approximately 397 thousand homeowners in preventing 

foreclosures, and helped stabilize neighborhoods in 18 states and the District of Columbia. In 2019, 

HHF programs assisted approximately 25 thousand households even as the majority of the states 

closed programs signifying the start of the orderly wind-down. Making Home Affordable (MHA) 

closed to new applications in December 2016, as required by the Consolidated Appropriations Act, 

2016. Although MHA is closed to new applicants, OFS continues to monitor servicer compliance 

with guidelines that pertain to post-modification activities.

The financial and performance data contained in this report are reliable and complete. For the 11th

consecutive year, OFS has earned unmodified opinions from the GAO on its financial statements for 

TARP, and its internal control over financial reporting for TARP.

Sincerely, 

Gavin Beske

Deputy Assistant Secretary for Community and Economic Development
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

iv EXECUTIVE SUMMARY

EXECUTIVE SUMMARY

It was out of extraordinary circumstances over a 

decade ago that TARP and OFS were created. 

Both were a central part of the emergency 

measures taken by the federal government 

pursuant to EESA. Collectively, TARP and the 

federal government’s other emergency programs 

helped to prevent the collapse of the U.S.

financial system. Through EESA, the federal 

government was able to limit the broader 

financial and economic damage caused by the 

crisis. Although we are recovering, these 

measures were critical to restarting economic 

growth, and in restoring access to capital and 

credit.

Since late 2010, 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 amount disbursed for TARP programs 

was $442.2 billion, OFS has collected $425.5

billion (or $443.0 billion if including the $17.6

billion in proceeds from the additional Treasury 

American International Group, Inc. [AIG] 

shares) through repayments, sales, dividends, 

interest, and other income. As of September 30, 

2019, only $40 million in bank investments 

remain outstanding.

The Management’s Discussion & Analysis 

(MD&A) within this AFR describes the 

establishment of OFS, its background, mission, 

and organizational structure. OFS administers 

programs that fall into two major categories: 

Investments and Housing. In total, OFS had 

responsibility for 13 individual programs. All 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 transform 

government-wide financial stewardship.

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, the CPP and CDCI. OFS continues to 

exit CPP and CDCI by either: (i) allowing banks 

that are able to repurchase in full in the near 

future to do so; or (ii) restructuring and selling 

OFS’s investments in limited cases. The

dividend rate step-ups for CDCI banks took

effect in 2018, which increased the rate of bank 

repayments.

OFS’s second Operational Goal is to continue 

helping struggling homeowners avoid 

foreclosure. The Consolidated Appropriations 

Act, 2016, signed into law on December 18, 2015, 

provided that the MHA program would 

terminate on December 31, 2016, except with 

respect to certain loan modification applications 

made before such date. As set forth in program 

guidelines, MHA servicers were required to 

evaluate applications submitted before the 

deadline and offer trial modifications to eligible 

applicants. All MHA transactions, including 

first and second lien permanent modifications, 

short sales or deeds-in-lieu of foreclosure, and 

unemployment forbearance plans, were required 

to be completed per program guidelines by 

December 1, 2017.
AGENCY FINANCIAL REPORT | FISCAL YEAR 2019

EXECUTIVE SUMMARY v

The largest program within MHA is HAMP. 

Under this program approximately 1.7 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.

Another OFS housing program, 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 many types of 

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 additional initiatives such as blight

elimination and down payment assistance 

programs, which help prevent foreclosures by 

stabilizing neighborhoods and property values. 

As of September 30, 2019, 11 of 19 HFAs have 

drawn 100 percent in HHF funding and all but 

one have drawn at least 80 percent in HHF 

funding, including 4 HFAs that have closed all 

their HHF programs to new applicants.

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’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 Analysis of 

Fiscal Years 2019 and 2018 Financial Summary 

and Cumulative Net Income section. OFS 

provides an overview of its financial data and 

explains its fiscal year 2019 net cost from 

operations and related loans, equity 

investments, and other credit programs.

Finally, the Analysis of 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 

FMFIA and FFMIA.
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

vi EXECUTIVE SUMMARY

This page intentionally left blank.
AGENCY FINANCIAL REPORT | FISCAL YEAR 2019

EXECUTIVE 

SUMMARY vi

i
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

viii EXECUTIVE SUMMARY
AGENCY FINANCIAL REPORT | FISCAL YEAR 2019

MANAGEMENT’S DISCUSSION AND ANALYSIS 1

Program Background, Organization Structure, and Operational Goals

Program Background

TARP was created on October 3, 2008, pursuant 

to EESA. Treasury established OFS within the 

Office of Domestic Finance to carry out the 

authorities given to the Secretary of the 

Treasury to implement TARP. 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: House Resolution 

110-1424. In addition, Section 109 of EESA

provides the authority to assist homeowners.

The Dodd-Frank Wall Street Reform and 

Consumer Protection Act (Dodd-Frank Act), 

signed into law in July 2010, reduced total 

TARP purchase authority from $700.0 billion to 

a cumulative $475.0 billion. OFS’s authority to 

make new program commitments under TARP 

originally expired on October 3, 2010. The 

Consolidated Appropriations Act, 2016 (the Act), 

gave the Secretary of the Treasury the ability to 

commit an additional $2.0 billion in TARP funds 

to current HHF participants. The additional 

funding committed under the Act was obligated 

by Treasury as of June 2016. OFS currently 

does not have the authority to commit new 

program funds.

OFS Organization Structure

OFS is part of, and reports to, the Office of the 

Deputy Assistant Secretary for Community and 

Economic Development in the Office of the 

Assistant Secretary for Financial Institutions. 

OFS staff is responsible for TARP program 

management, compliance, finance and 

operations Certain staff within the Treasury 

Office of General Counsel and the Treasury 

Office of Financial Agents also support OFS, as 

well as other Treasury Departmental Offices.

OFS is not envisioned as a permanent 

organization, so to the 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, program compliance, and information 

technology.

TARP Wind-Down Initiatives

As of September 30, 2019, ten of the 13 TARP 

programs are closed or closed to new applicants. 

For those active TARP programs, each is in a 

wind-down phase or steady state of operations.

Launched in fiscal year 2018 and more formally 

implemented in fiscal year 2019, OFS embarked 

on a number of administrative and

organizational operations wind-down initiatives

to mirror the state of the remaining TARP 

programs. These initiatives included, among 

others, the following:

 Realigning the OFS organization

structure;

 Implementing a structured planning

approach for OFS personnel departures

and transition of duties;

 Streamlining policies and procedures;

 Applying a risk-based approach to

simplifying financial, operational and

compliance processes and reporting;

 Planning for the decommissioning of

legacy operations and ancillary finance

management support systems; and

 Expanding use of collaborative

technology solutions for OFS staff
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

2 MANAGEMENT’S DISCUSSION AND ANALYSIS

knowledge sharing, cross-training, 

continuity, and succession planning; and

 Planning for the transfer for permanent

records to appropriate Federal Records

Centers at the National Archives.

Throughout these initiatives, OFS staff 

headcount continues to decrease commensurate 

with the orderly wind-down of the TARP 

programs. Despite this, OFS managers are 

responsible for identifying and proactively 

managing relevant program and administrative 

risks, and ensuring that effective internal 

controls are continuously designed and

maintained throughout the life of TARP.

Active TARP Programs

Bank Support Programs

OFS disbursed a total of $245.5 billion under the 

various TARP bank programs. As of September

30, 2019, OFS has collected more than $275.9

billion through repayments, dividends, interest, 

warrant sales, and other income, representing 

$30.5 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.

CPP

In fiscal year 2019, OFS continued to make 

progress winding down the CPP. 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, 2019, OFS has 

received $199.7 billion in CPP repayments/sales, 

along with $12.1 billion in dividends and 

interest, and $15.0 billion of other proceeds in 

excess of cost, which totals $226.8 billion. As of 

September 30, 2019, $17 million in CPP gross 

investments remained outstanding in two

institutions. 

During fiscal years 2019 and 2018, OFS 

collected a total of $5 million and $19 million, 

respectively, in repayments, warrants, 

dividends, and interest from institutions in the 

CPP program. 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. As of September 30, 2019, all 

warrant positions have expired.

OFS continues to work with CPP institutions to 

restructure certain investments that will allow 

them to exit TARP.

Additional information on the CPP, including 

details on the program’s purpose, overview, and 

status can be found at the following link:

TARP: Capital Purchase Program

CDCI

In fiscal year 2019, OFS continued to make 

progress winding down the CDCI. From 

inception through September 30, 2019, OFS has 

received $520 million in CDCI repayment/sales,

along with $66 million in dividends and interest.

As of September 30, 2019, $23 million in CDCI 

investments remained outstanding in five 

institutions. 

During fiscal years 2019 and 2018, OFS 

collected a total of $21 million and $34 million, 

respectively, in repayments, early repayments, 

dividends, and interest from institutions in the 

CDCI program. 
AGENCY FINANCIAL REPORT | FISCAL YEAR 2019

MANAGEMENT’S DISCUSSION AND ANALYSIS 3

Additional information on CDCI, including 

details on the program’s purpose, overview, and 

status can be found at the following link:

TARP: Community Development Capital 

Initiative

Automotive Industry Financing Program

OFS fully wound down the Automotive Industry 

Financing Program (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, 2019, 

OFS has collected $70.6 billion through sales, 

repayments, dividends, interest, recoveries, and 

other income. This includes $73 million 

collected during fiscal year 2019, related to the 

Motors Liquidation Company Debtor-inPossession Lenders Trust which made its final 

distribution in late 2018 and the Avoidance 

Action Trust (AAT) which finalized a settlement 

in 2019.

Additional information on the AIFP, including 

details on the program’s purpose, overview, and 

status can be found at the following link:

TARP: Automotive Industry Financing Program

Housing Programs

MHA

Consistent with OFS’s goal of continuing to help 

struggling homeowners avoid foreclosure, OFS 

developed and implemented a process to 

seamlessly transition the program from an 

active program to steady state. As of September 

30, 2019, 57 servicers are participating in OFS’s 

MHA program for non-Government Sponsored 

Enterprise (GSE) loans. As of September 30, 

2019, OFS has commitments to fund up to $23.5

billion in MHA payments and has disbursed 

$20.7 billion since inception.

Treasury continues to monitor servicer 

compliance with MHA guidelines that pertain to 

post-modification activities and which require 

remedial action.

Additional information on MHA, including 

details on the program’s purpose, overview, and 

status can be found at the following link:

TARP: Making Home Affordable Program

HHF

In addition to MHA, OFS operates the HHF, 

which allows participating state HFAs in the 

nation’s hardest hit states to design innovative, 

locally-tailored foreclosure prevention programs.

As of September 30, 2019, the 19 HFAs have 

collectively drawn approximately $9.4 billion (98

percent) of the $9.6 billion allocated under the 

program. For fiscal years 2019 and 2018, this 

program has disbursed $0.3 billion and $0.6 

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, 2020 to 

commit funds and December 31, 2021, to expend 

all HHF funding.

Each HFA submits a quarterly report on the 

progress of its programs. These reports measure 

states’ performance against metrics set by OFS 

for various aspects of their programs. 
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

4 MANAGEMENT’S DISCUSSION AND ANALYSIS

Direct links to each state’s most recent 

performance report can be found at:

TARP: Hardest Hit Fund Program Documents

OFS also publishes a Quarterly Performance 

Summary, a companion reference to the HFAs’ 

Quarterly Performance Reports. The Summary 

contains performance data and trends, and brief 

program descriptions for each HFA. The 

Quarterly Performance Summary can be found 

at: 

TARP: Hardest Hit Fund - Quarterly 

Performance Summary

Additional information on the HHF, including 

details on the program’s purpose, overview, and 

status can be found at the following link:

TARP: Hardest Hit Fund Program

Federal Housing Administration Refinance 

Program 

On March 26, 2010, the Federal Housing 

Administration (FHA) and OFS announced 

enhancements to the FHA Refinance Program, 

designed to make homeownership more 

affordable for borrowers whose homes are worth 

less than the remaining amounts on their 

mortgage loans (negative equity). As of 

September 30, 2019, FHA had guaranteed 7,234

refinance loans with a total face value of 

approximately $1.0 billion, of which 4,200 loans 

were subject to OFS coverage at the time of 

purchase with a face value of $620 million.

On-Going Operational Goals

Minimize Cost to Taxpayers

OFS manages TARP investments to minimize 

costs to taxpayers by ensuring 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 2019 and 2018 to dispose of OFS’s 

outstanding investments in a manner that 

balances speed of exit with maximizing returns 

for taxpayers.

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 

investments to third parties through public and 

private offerings and auctions with approval 

from regulators.

Compliance

OFS monitors certain TARP-related statutory 

and contractual obligations of remaining TARP 

recipients. Historically, statutory obligations 

have included certification and disclosures 

related to executive compensation restrictions. 

For most of OFS’s preferred stock investments, 

TARP recipients need to comply with 

restrictions on payment of dividends and on 

repurchases of junior securities. 

OFS also performs regular 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 their 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, 

compliance reviews by OFS’s compliance agent, 

Making Home Affordable-Compliance (MHA-C), 

a separate, independent division of Freddie Mac

serving as financial agent to Treasury, to
AGENCY FINANCIAL REPORT | FISCAL YEAR 2019

MANAGEMENT’S DISCUSSION AND ANALYSIS 5

monitor whether servicers’ obligations under 

MHA requirements are being met.

In fiscal year 2011, OFS began publishing 

quarterly assessments for the largest

participating servicers. These assessments were

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.

In fiscal year 2019, OFS continued to perform 

quarterly assessments of participating servicer 

performance through the managed servicer 

testing (MST) model, which was first 

implemented in fiscal year 2018 and focuses on 

servicer compliance with MHA guidelines 

pertaining to post-modification activities.

Continue to Operate with the Highest 

Standards of Transparency, Accountability, 

and Integrity

To protect taxpayers and help ensure that every 

dollar is directed towards 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 that features 

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 performance report on MHA

(the last comprehensive issue which was 

published as of September 10, 2018, 

when all MHA programs were officially 

closed; streamlined one-page 

performance summaries continue to be 

published quarterly); 

 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 obligations.

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 11th OFS 

AFR, which includes the audited financial

statements for the fiscal years ended September
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

6 MANAGEMENT’S DISCUSSION AND ANALYSIS

30, 2019 and September 30, 2018. Additional 

reports for prior periods are available at:

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

In its 11 years of operation, TARP’s financial 

statements have received unmodified audit 

opinions from its auditor, the Government 

Accountability Office (GAO). 

TARP Tracker

Since 2013, OFS has offered an interactive tool 

called the TARP Tracker, which allows users to 

track the flow of TARP funds over the lifetime of 

each individual TARP investment area. The 

TARP Tracker allows users to view each 

investment area separately to get a clearer sense 

of what has occurred in a particular program, 

and includes 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; and

 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 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

Analysis of Fiscal Years 2019 and 2018 Financial Summary and 

Cumulative Net Income

Comparative Summary of Net Costs

OFS’s fiscal year 2019 net cost of operations of 

$1.4 billion includes the reported net income 

related to TARP investment and FHA Refinance 

programs, as well as expenses for TARP 

Investment Programs, the Treasury housing 

programs under TARP, and administrative 

expenses.

For the fiscal year ended September 30, 2019, 

OFS reported net subsidy income for three

programs – Public-Private Investment Program

(PPIP), AIFP, and FHA Refinance. These 

programs collectively reported net subsidy 

income of $74 million. For the fiscal year ended 

September 30, 2019, OFS reported costs for two 

programs – CPP and CDCI totaling $6 million. 

Fiscal year 2019 costs for the Treasury housing 

programs under TARP were $1.4 billion and 

administrative costs were $51 million. For the 

fiscal year ended September 30, 2018, the net 

cost of operations was $2.2 billion. These net 

cost amounts reported in the financial 
AGENCY FINANCIAL REPORT | FISCAL YEAR 2019

MANAGEMENT’S DISCUSSION AND ANALYSIS 7

statements reflect only transactions through 

September 30, 2019 and September 30, 2018, 

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.

Comparative Summary of TARP 

Equity Investments

As of the end of fiscal years 2019 and 2018, 

TARP had a combined CPP and CDCI 

investment Outstanding Balance of $40 million 

and $65 million, respectively. Comparatively, 

the combined Estimated Value of Investment for 

CPP and CDCI during these fiscal years was $23

million and $54 million, respectively. Estimated

Value of Investment represents the present 

value of net cash inflows that OFS estimates it 

will receive from the programs. These estimates 

include market risk assumptions. The total 

difference of $17 million and $11 million as of 

the end of fiscal years 2019 and 2018

respectively is considered the “subsidy cost 

allowance” under the Federal Credit Reform Act 

methodology OFS follows for budget and 

accounting purposes.

Inception to Date TARP Program 

Summary

Table 1 provides a financial summary for TARP 

programs since its inception on October 3, 2008, 

through September 30, 2019. 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, 2019, 

and cash inflows on the investments in the form 

of dividends, interest or other fees.

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, 2019, OFS received a total of 

$24.5 billion in dividends and interest.

OFS has conducted numerous sales or auctions 

of its investments in banking institutions as part 

of its exit strategy for winding down TARP. As 

of September 30, 2019, OFS has sold its 

investments in 190 banks for combined principal 

receipts of $3.1 billion through individual 

private auctions.

OFS also received warrants in connection with 

most of its investments, which provide an 

opportunity for OFS on behalf of taxpayers to 

realize additional proceeds on investments. 

Since the program’s inception through 

September 30, 2019, OFS has received $9.7

billion in gross proceeds from the disposition of 

warrants associated with CPP, TIP, AGP, and 

AIG. As of September 30, 2019, all such 

warrants have expired.

See Note 6 in the financial statements for 

further discussion.
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

8 MANAGEMENT’S DISCUSSION AND ANALYSIS

(Table continued on the following page.)

Table 1: TARP Summary1

From TARP Inception through September 30, 2019

(Dollars in millions)

Purchase 

Price or 

Guarantee 

Amounts

Total $ 

Disbursed

Investment 

Repayments

Write-offs 

and 

Losses6

Outstanding 

Balance7

Received 

from 

Investments

Programs Active in 2019 

Bank Support 

Programs 

Capital Purchase 

Program2

$204,895 $204,895 $(199,671)5 $(5,206) $17 $27,106

Community 

Development 

Capital Initiative

570 570 (520) (27) 23 66

Subtotal for 

Investment 

Programs 

205,465 205,465 (200,191) (5,233) 40 27,172

Treasury Housing 

Programs under 

TARP

33,1174 30,087 N/A N/A N/A -

Subtotal for Active 

Programs 

$238,582 $235,552 $(200,191) $(5,233) $40 $27,172 
AGENCY FINANCIAL REPORT | FISCAL YEAR 2019

MANAGEMENT’S DISCUSSION AND ANALYSIS 9

Purchase 

Price or 

Guarantee 

Amounts

Total $ 

Disbursed

Investment 

Repayments

Write-offs 

and 

Losses6

Outstanding 

Balance7

Received 

from 

Investments

Programs Closed in Fiscal Years 2019 or Prior 

Bank Support 

Programs 

Targeted Investment 

Program

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

Asset Guarantee 

Program

5,000 - - - - 4,126

Credit Market 

Programs 

Public Private 

Investment Program

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

Term Asset-Backed 

Securities Loan 

Facility

100 100 (100) - - 685

SBA 7(a) Securities 

Purchase Program

367 367 (363) (4) - 13

Other Programs 

Automotive Industry 

Financing Program

79,692 79,692 (63,037) (16,656) - 7,586

American 

International Group 

Investment 

Program3

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

Subtotal for Closed 

Programs 

$211,620 $206,620 $(176,475) $(30,145) $- $21,651

Total for TARP 

Programs 

$450,201 $442,172 $(376,667) $(35,378) $40 $48,823

Note: Figures may not foot due to rounding.

1 This table shows TARP activity for the period from inception through September 30, 2019, 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 $23.5 billion for the Making Home Affordable Program, $9.6 billion for the 

Hardest Hit Fund, and $45 million committed for the FHA Refinance Program.

5 Includes $2.2 billion of Small Business Lending Fund (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 under “net proceeds from sales 

and repurchases of assets in excess of (less than) cost” in Note 6 of the financial statements.

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.
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

10 MANAGEMENT’S DISCUSSION AND ANALYSIS

Comparison of Estimated Lifetime 

TARP Costs over Time

The ultimate cost of TARP is not expected to 

change significantly as only a few investment 

programs remain open with most of the original 

disbursed investments repaid. 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 

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.

Key Factors Affecting TARP Future 

Activities and Ultimate Cost

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, 2019, provide a 

good illustration of this impact. Table 2 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. The cost amounts in Table 2 are 

based on assumptions regarding future events, 

which are inherently uncertain. This table will 

not match the financial statements since the 

table includes repayments and disbursements 

expected to be made in the future. Data within 

this table is consistent with the estimated TARP 

lifetime cost disclosures on the OFS website at:

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

TARP investment programs are nearly wound 

down with only $40 million of the total $412.1

billion disbursed still outstanding, representing 

7 small banks in the CPP and CDCI portfolios. 

The estimated lifetime income associated with 

investment programs is currently $346 million 

and may fluctuate slightly in the future.

Similarly, with the MHA program in wind-down, 

estimated lifetime costs should not significantly 

fluctuate, but will depend on macroeconomic 

factors, including real estate values, financing 

availability, re-default rates, and market 

demand for housing.
AGENCY FINANCIAL REPORT | FISCAL YEAR 2019

MANAGEMENT’S DISCUSSION AND ANALYSIS 11

Table 2: Estimated Lifetime TARP Costs (Income)1 

(Dollars in billions) 

Program 

Estimated Lifetime Cost (Income) as of September 30 

20095 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 

Bank Support Programs 

Capital Purchase 

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

Targeted Investment 

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

Community Development 

Capital Initiative 0.4 0.3 0.2 0.2 0.1 0.1 0.1 0.1 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) (2.7) (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) (0.6) (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) (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 12.2 12.2 12.2 12.1

American International 

Group Investment 

Program3

56.8 36.9 24.3 15.3 15.2 15.2 15.2 15.2 15.2 15.2 15.2

Subtotal 74.1 32.1 24.6 14.1 2.6 0.1 (0.2) (0.2) (0.3) (0.3) (0.3)

Treasury Housing 

Programs under TARP4

50.0 45.6 45.6 45.6 37.7 37.4 37.4 34.7 32.6 32.5 32.8

Total $124.1 $77.7 $70.2 $59.7 $40.3 $37.5 $37.2 $34.5 $32.3 $32.3 $32.4 

Note: Figures may not foot due to rounding.

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 consist of the MHA, HHF, and FHA Refinance 

programs. The estimated lifetime cost of the FHA Refinance Program (which is accounted for under credit reform) 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.
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

12 MANAGEMENT’S DISCUSSION AND ANALYSIS

Analysis of Systems, Controls, and Legal Compliance

 

MANAGEMENT ASSURANCES 

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 and based on

criteria 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, 2019. 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’s internal controls are designed to meet the management objectives established by Treasury 

and listed below:

(a) Alignment of strategic goals with the agency’s mission;

(b) Effective and efficient operations;

(c) Reliable reporting;

(d) Compliance with applicable laws and regulations; and

(e) Financial management systems comply with Federal financial management systems 

requirements.

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 and based on criteria with OMB Circular A-123, Management’s Responsibility 

for Enterprise Risk Management and Internal Control. Based on the results of this evaluation, OFS 

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

and operating effectively as of September 30, 2019, with no related material weaknesses noted.

Sincerely,

Gavin Beske

Deputy Assistant Secretary for Community and Economic Development
AGENCY FINANCIAL REPORT | FISCAL YEAR 2019

MANAGEMENT’S DISCUSSION AND ANALYSIS 13

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, compliance 

with applicable laws and regulations (FMFIA 

Section 2), and conformance with financial 

management systems requirements (FMFIA 

Section 4) and Federal Financial Management 

Improvement Act (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 Enterprise 

Risk Management and Internal Control, 

require agencies to evaluate and report on 

enterprise risk management (ERM) and 

internal controls in place to help ensure 

effectiveness and efficiency of operations, 

compliance with applicable laws and 

regulations, and reliability of reporting.

OFS has completed these rigorous internal 

control 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 ERM and a sound system of 

internal control. OFS’s ERM and 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 risks and control objectives 

across OFS and its third-party service 

providers. Furthermore, OFS managers are 

responsible for identifying relevant risks, and 

ensuring that effective internal controls are 

implemented in their areas of responsibility. 

OFS senior management provides subcertification statements annually concerning 

whether there is reasonable assurance that 

the objectives of ERM and 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 ERM and internal 

controls assessment process to ensure that 

management can identify risks and 

deficiencies and take timely corrective actions. 

The OFS fiscal year 2019 self-assessment of 

its ERM activities and system of internal 

controls did not identify any significant 

deficiencies or material weaknesses.
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

14 MANAGEMENT’S DISCUSSION AND ANALYSIS

Federal Financial Management 

Improvement Act and Financial 

Management Systems

Federal Financial Management 

Improvement Act (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 2019, 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 2019, OFS continued to utilize 

the Core Investment Transaction Flow (CITF), 

TARP’s system of record and accounting 

translation engine. 

In addition, OFS continued to utilize financial 

systems maintained by Treasury 

Departmental Offices and various Treasury 

bureaus. These systems are in compliance 

with federal financial management systems 

requirements and undergo regular 

independent audits.

In fiscal year 2019, OFS continued to devote 

substantial attention to simplifying its 

technology footprint 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 on an on-going 

basis.

Legal Compliance

OFS is subject to numerous legislative and 

regulatory requirements that promote and 

support an effective ERM and 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 
AGENCY FINANCIAL REPORT | FISCAL YEAR 2019

MANAGEMENT’S DISCUSSION AND ANALYSIS 15

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 

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.

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.
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

16 MANAGEMENT’S DISCUSSION AND ANALYSIS

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.
AGENCY FINANCIAL REPORT | FISCAL YEAR 2019

AUDITOR’S REPORT 17
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

18 AUDITOR’S REPORT
AGENCY FINANCIAL REPORT | FISCAL YEAR 2019

AUDITOR’S REPORT 19

GOVERNMENT ACCOUNTABILITY OFFICE AUDITOR’S REPORT

Independent Auditor’s Report

To the Deputy Assistant Secretary for Community and Economic Development 

In our audits of the fiscal years 2019 and 2018 financial statements of the Troubled Asset Relief 

Program (TARP), which is implemented by the Office of Financial Stability (OFS),1 we found

 the OFS financial statements for TARP as of and for the fiscal years ended September 30, 

2019, and 2018, 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, 2019; and

 no reportable noncompliance for fiscal year 2019 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 the required supplementary information 

(RSI)2 and other information included with the financial statements;

3 (2) our report on 

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

GAO has the responsibility to audit OFS’s annual financial statements for TARP under the 

Emergency Economic Stabilization Act of 2008 (EESA), as amended.4

 

1Section 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.

2The RSI consists of Management’s Discussion and Analysis and the Combined Statement of Budgetary Resources, 

which are included with the financial statements.

3Other information consists of information included with the financial statements, other than the RSI and the auditor’s 

report.

4EESA is classified, in part, as amended, at sections 5201 through 5261 of Title 12 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.

441 G St. N.W.

Washington, DC 20548
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

20 AUDITOR’S REPORT

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, 2019, and 

2018; the related statements of net cost, 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, 2019, 

based on criteria established under 31 U.S.C. § 3512(c), (d), commonly known as the Federal 

Managers’ Financial Integrity Act (FMFIA).

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

standards. 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) its assessment about the effectiveness of internal control over financial reporting as of

September 30, 2019, 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. 
AGENCY FINANCIAL REPORT | FISCAL YEAR 2019

AUDITOR’S REPORT 21

An audit of internal control over financial reporting involves performing procedures to obtain 

evidence about whether a material weakness exists.5 The procedures selected depend on the 

auditor’s judgment, including the assessment of the risk that a material weakness exists. An 

audit of internal control over financial reporting also includes obtaining an understanding of 

internal control over financial reporting and evaluating and testing the design and operating 

effectiveness of internal control over financial reporting based on the assessed risk. Our audit of 

internal control also considered OFS’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.

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, 2019, and 2018, 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.

5A 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.
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

22 AUDITOR’S REPORT

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, 2019, based on criteria established under FMFIA. 

Other Matters

Required Supplementary Information

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

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

statements. Although the 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 the 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 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.
AGENCY FINANCIAL REPORT | FISCAL YEAR 2019

AUDITOR’S REPORT 23

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 TARP’s 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 2019 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 reproduced in appendix II. 

Cheryl E. Clark

Director

Financial Management and Assurance

November 4, 2019
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

24 AUDITOR’S REPORT

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

Reporting

DEPARTMENT OF THE TREASURY

WASHINGTON, D.C. 20220

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, 2019, 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, 2019, OFS’s internal control over 

financial reporting was effective.

Gavin Beske

Deputy Assistant Secretary for Community and Economic Development

November 4, 2019
AGENCY FINANCIAL REPORT | FISCAL YEAR 2019

AUDITOR’S REPORT 25

Appendix II: OFS Response to Auditor’s Report

DEPARTMENT OF THE TREASURY

 WASHINGTON, D.C. 20220

November 4, 2019

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 2019 financial statements. OFS is proud to receive a 11th consecutive 

unmodified opinion on its financial statements and 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,

Gavin Beske

Deputy Assistant Secretary for Community and Economic Development
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

26 FINANCIAL STATEMENTS

FINANCIAL STATEMENTS

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 OFS’s financial management 

goal of providing accurate and reliable 

information that may be used to assess 

performance and allocate resources. 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. 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 

activities of 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 OFS has a 

significant equity interest. 

The Balance Sheet summarizes OFS assets, 

liabilities and net position as of September 30, 

2019 and 2018. 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 operations for the fiscal years ended 

September 30, 2019 and 2018.

The Statement of Changes in Net Position 

presents the change in OFS’s net position for 

two components, Unexpended Appropriations 

and Cumulative Results of Operations, for the 

fiscal years ended September 30, 2019 and 

2018. 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, 2019 and 2018. 
AGENCY FINANCIAL REPORT | FISCAL YEAR 2019

FINANCIAL STATEMENTS 27

BALANCE SHEET 

Dollars in Millions

ASSETS

Intragovernmental Assets:

 Fund Balance with Treasury (Note 3) $ 15,737 $ 17,174

Total Intragovernmental Assets 15,737 17,174

Cash on Deposit for Housing Program (Note 4) 10 10

Equity Investments, Net (Note 6) 23 54

Total Assets $ 15,770 $ 17,238

LIABILITIES

Intragovernmental Liabilities:

 Accounts Payable and Other Liabilities - 1

 Due to the General Fund (Note 7) 75 28

 Principal Payable to the Bureau of the Fiscal Service (Note 8) 35 60

Total Intragovernmental Liabilities 110 89

Accounts Payable and Other Liabilities 13 17

Liabilities for Treasury Housing Programs Under TARP:

 FHA-Refinance Program (Notes 5 and 6) 1 1 

Making Home Affordable Program (Note 5) 74 119

Total Liabilities $ 198 $ 226

Commitments and Contingencies (Note 9)

NET POSITION 

 Unexpended Appropriations $ 15,569 $ 17,004

 Cumulative Results of Operations 3 8 

Total Net Position $ 15,572 $ 17,012

Total Liabilities and Net Position $ 15,770 $ 17,238

The accompanying notes are an integral part of these financial statements.
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

28 FINANCIAL STATEMENTS

Dollars in Millions

Gross Cost of Operations:

 Program Subsidy Cost (Income) (Note 5 and Note 6)

 Equity Investment Programs $ (67) $ (25)

 FHA-Refinance Program - (1) 

 Total Program Subsidy Cost (Income) (67) (26) 

 Interest Expense on Borrowings from the Bureau of the Fiscal Service (Note 10) 2 3 

 Treasury Housing Programs Under TARP (Note 5) 1,407 2,165 

 Administrative Cost 51 67

Total Gross Cost of Operations 1,393 2,209 

Earned Revenue:

 Dividend and Interest Income - Programs (Note 6) (1) (3) 

 Interest Income on Financing Account (Note 10) (1) (1) 

 Subsidy Allowance Amortization (Note 10) - 1 

Total Earned Revenue (2) (3) 

Total Net Cost of Operations $ 1,391 $ 2,206

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

STATEMENT OF NET COST

STRATEGIC GOAL: TRANSFORM GOVERNMENT-WIDE FINANCIAL STEWARDSHIP
AGENCY FINANCIAL REPORT | FISCAL YEAR 2019

FINANCIAL STATEMENTS 29

Dollars in Millions

Beginning Balances $ 17,004 $ 8 $ 19,205 $ 9

Budgetary Financing Sources

 Appropriations Received 63 - 79 -

 Appropriations Used (1,459) 1,459 (2,232) 2,232

 Other Adjustments - Canceled Authority (39) - (48) -

Other Financing Sources - (73) - (27)

Total Financing Sources (1,435) 1,386 (2,201) 2,205

Net Cost of Operations - (1,391) - (2,206)

Net Change (1,435) (5) (2,201) (1)

Ending Balances $ 15,569 $ 3 $ 17,004 $ 8

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

STATEMENT OF CHANGES IN NET POSITION
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

30 FINANCIAL STATEMENTS

Dollars in Millions

BUDGETARY RESOURCES

 Unobligated Balances Brought Forward, October 1 113 34 181 44

 Recoveries of Prior-Year Unpaid Obligations 320 - 4,022 -

 Actual Repayments of Debt, Prior-Year Balances - (15) - (32)

 Cancelled Authority (39) - (48) -

 Other Changes in Unobligated Balances (304) - (4,046) -

Unobligated Balance from Prior-Year Budget Authority, Net 90 19 109 12

Appropriations 63 - 79 -

Borrowing Authority - 3 - -

Spending Authority from Offsetting Collections - 87 - 40

TOTAL BUDGETARY RESOURCES (Note 11) $ 153 $ 109 $ 188 $ 52

STATUS OF BUDGETARY RESOURCES

New Obligations and Upward Adjustments (Total) $ 59 $ 29 $ 75 $ 18

Unobligated Balance, End of Year:

 Apportioned, Unexpired Accounts 4 1 4 2

 Unapportioned, Unexpired Accounts - 79 - 32

 Unexpired Unobligated Balance, End of Year 4 80 4 34

 Expired Unobligated Balance, End of Year 90 - 109 -

Unobligated Balance, End of Year (Total) 94 80 113 34

TOTAL STATUS OF BUDGETARY RESOURCES $ 153 $ 109 $ 188 $ 52

OUTLAYS, NET

Outlays, Net (Total) 1,507 (71) 2,290 (50)

Distributed Offsetting Receipts (27) - (15) -

AGENCY OUTLAYS, NET $ 1,480 $ (71) $ 2,275 $ (50)

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

STATEMENT OF BUDGETARY RESOURCES
AGENCY FINANCIAL REPORT | FISCAL YEAR 2019

NOTES TO FINANCIAL STATEMENTS 31

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). 

EESA 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. 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. The Consolidated 

Appropriations Act, 2016 (the Act), gave the 

Secretary of the Treasury the ability to commit an 

additional $2.0 billion in TARP funds to current 

Hardest Hit Fund (HHF) participants. The 

additional $2.0 billion was obligated by Treasury as 

of June 2016. OFS currently does not have the 

authority to commit new program funds. OFS had 

utilized (including purchases made, legal 

commitments to make purchases and offsets for 

guarantees made) $450.2 billion as of September 

30, 2019 and $450.5 billion as of September 30, 

2018.

During fiscal years 2019 and 2018, OFS

administered the Capital Purchase Program (CPP); 

the Community Development Capital Initiative 

(CDCI); and the Treasury Housing Programs under 

TARP. See Notes 5 and 6 for details regarding these 

programs.

Through the purchase of troubled assets, OFS 

entered into several different types of direct loan, 

equity investment, and other credit programs 

(consisting of the Federal Housing Administration 

(FHA) Refinance Program) (collectively, OFS 

programs) with private entities. 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 nor to be permanent in nature.

These private entities are not included in the 

federal budget, and OFS does not hold a majority 

ownership interest in them (except for two 

investments) nor controls them with risk of loss or 

expectation of benefit. OFS’s intent is to liquidate 

its ownership in these entities as soon as 

practicable. Following the criteria in Statement of 

Federal Financial Accounting Standards (SFFAS) 

47, OFS has not consolidated into its financial 

statements the assets, liabilities, or results of 

operations of these entities in which OFS has a 

significant equity interest. Instead, these 

financial statements reflect the activities of OFS 

in executing its programs, including providing 

resources to various entities to help stabilize the 

financial markets. The value of such investments 

was recorded in OFS financial statements.

Using SFFAS 47 criteria, the two investments in 

which OFS holds a majority ownership interest, 

are considered to be disclosure entities for fiscal 

year 2019, and are further discussed in Note 6.

Implementation of SFFAS 47, as of October 1, 

2017, did not result in any changes to the 

reporting entity as compared to previous year 

under the guidance of Statement of Federal 

Financial Accounting Concepts No. 2, Entity and 

Display, for fiscal year 2017. 
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

32 NOTES TO THE FINANCIAL STATEMENTS

The EESA established 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. OFS prepares stand-alone financial 

statements for TARP to satisfy EESA Section 

116(b) (1) and as an office of the Treasury, its 

financial statements are consolidated into 

Treasury’s Agency Financial Report.

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 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 revised. 

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. 

Accounting standards require all reporting

entities to disclose that accounting standards

allow certain presentations and disclosures to be

modified, if needed, to prevent the disclosure of

classified information.

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, 

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, 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, 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.

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. OFS 

concluded that some of the equity investments, 
AGENCY FINANCIAL REPORT | FISCAL YEAR 2019

NOTES TO THE FINANCIAL STATEMENTS 33

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, 

OFS concluded that SFFAS No. 2 (as more fully 

discussed below) should be followed for reporting 

and disclosure requirements of its equity 

investments. 

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 adjustment to the face value of the equity 

investment. 

OFS recognizes dividend income associated with 

equity investments when declared by the entity in 

which OFS has invested and when received in

relation to any repurchases, exchanges, and 

restructurings. 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, OFS has received common 

stock warrants, additional preferred stock 

(referred to as warrant preferred stock) or 

additional notes as additional consideration. 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

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’s 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 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

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 respectively, 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. OFS maintains budgetary program 

accounts which receive appropriations and 
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

34 NOTES TO THE FINANCIAL STATEMENTS

obligate funds to cover the subsidy cost of equity 

investment and FHA Refinance programs, and 

disburse the subsidy cost to OFS’s financing 

accounts. The financing accounts are nonbudgetary 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. 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 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 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. 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 Cost. A 

detailed discussion of OFS’s subsidy calculation 

and reestimate assumptions, process, and results 

is provided in Note 6.

Fund Balance with Treasury

The Fund Balance with Treasury (FBWT)

includes funds available to pay current liabilities 

and finance authorized purchases. Cash receipts 

and disbursements are processed by the Treasury, 

and 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. Obligated balances not 

yet disbursed include undelivered orders and 

unpaid expended authority. Non-Budgetary 

FBWT represents unavailable funds from 

appropriations fulfilled. 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 
AGENCY FINANCIAL REPORT | FISCAL YEAR 2019

NOTES TO THE FINANCIAL STATEMENTS 35

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, 

OFS reports no capitalized property, equipment or 

software on its Balance Sheet as of September 30, 

2019 and 2018.

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 FHA

Refinance programs as of September 30, 2019 and 

2018. 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 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 Treasury Housing 

Programs under TARP

There are three initiatives in the Treasury 

Housing Programs: the Making Home Affordable 

Program, the Hardest Hit Fund and the FHA

Refinance Program. 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 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, 2019 and 2018, is 

based on information about loan modifications 

reported by participating servicers for the Making 

Home Affordable Program. See Note 5.

At the end of fiscal year 2010, 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.
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

36 NOTES TO THE FINANCIAL STATEMENTS

Unexpended Appropriations

Unexpended Appropriations represents OFS’s

undelivered orders and unobligated balances 

reduced by cancelled authority in budgetary 

appropriated funds as of September 30, 2019 and 

2018.

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 OFS’s operations not funded by 

appropriations or some other source, such as 

borrowing authority, from inception through fiscal 

year-end. Cumulative Results of Operations in 

2019 and 2018 included $10 million, 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 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

OFS employees may choose to participate in the 

contributory Federal Employees Health Benefit 

and the Federal Employees Group Life Insurance 

Programs. 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 work-related 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

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. 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 
AGENCY FINANCIAL REPORT | FISCAL YEAR 2019

NOTES TO THE FINANCIAL STATEMENTS 37

account is automatically established and OFS 

matches employee contributions to the plan, 

subject to limitations. The matching 

contributions are recognized as Administrative 

Costs on the Statement of Net Cost. 

Related Parties

There are no related parties for OFS.

NOTE 3. FUND BALANCE WITH TREASURY

Fund Balance with Treasury (FBWT), by status, as of September 30, 2019 and 2018, is presented in the 

following table.

NOTE 4. CASH ON DEPOSIT FOR HOUSING PROGRAM

As of September 30, 2019 and 2018, OFS had $10

million, 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 OFS upon the termination of the

program.

(Dollars in Millions) 2019 2018

St at us of Fund Balance wit h Treasury

 Unobligated Balance

 Available $ 5 $ 6

 Unavailable 169 141

 Obligated Balance Not Yet Disbursed 3,054 4,822

 Nonentity Funds and Anticipated Spending - -

 Non-Budgetary FBWT1 12,509 12,205

Tot al $ 15,737 $ 17,174

As of September 30,

1

Non-Budgetary FBWT represents Housing Program amounts no longer available for obligation, since the 

purpose for which the appropriation was enacted has been fulfilled.
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

38 NOTES TO THE FINANCIAL STATEMENTS

NOTE 5. TREASURY HOUSING PROGRAMS UNDER TARP

Fiscal years 2019 and 2018 marked a transition 

point for housing programs under TARP as the 

largest program, Making Home Affordable (MHA), 

closed to new applicants on December 30, 2016 and 

final assistance actions were required to be offered 

on or before December 1, 2017. These programs

were designed to prevent avoidable foreclosure and 

provide stability for the housing market, and 

primarily provide assistance to homeowners who are 

experiencing financial hardships. 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:

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 the 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 deed-inlieu 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 the OFS. 

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

guaranteed loans offered by the FHA.

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

conjunction with a HAMP modification.

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

HHF Provides locally tailored assistance to states hardest hit by the housing market 

downturn, to assist struggling homeowners and help stabilize housing markets.

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 2019

NOTES TO THE FINANCIAL STATEMENTS 39

Making Home Affordable 

In early 2009, Treasury launched 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. MHA also includes programs to help 

homeowners with loans insured or guaranteed by 

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

financial agent on behalf of OFS. Freddie Mac 

provides compliance oversight of servicers as 

financial agent on behalf of 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. 

The MHA program terminated on December 31, 

2016, except with respect to certain loan 

modification applications made before such date, 

per December 2015, Section 709(b) of the 

Consolidated Appropriations Act, 2016 (the Act). 

In FY 2019, Treasury de-obligated an additional

$304 million from MHA, lowering Treasury’s 

obligation to $23.5 billion.

Hardest Hit Fund

The HHF was implemented in fiscal year 2010, 

and provides locally tailored assistance to states 

hit hardest by the housing market downturn, to 

assist struggling homeowners and help stabilize 

housing markets 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 OFS. States have until December 

31, 2021 to utilize all HHF funding.

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 OFS’s portion of any 

claims associated with the FHA-guaranteed 

mortgages. 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 were 

able to refinance into FHA guaranteed 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, 2019 and September 30, 2018, 

4,200 loans that required potential Treasury 

contribution, with a total value of $620 million, 

had been refinanced through the program for both 
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

40 NOTES TO THE FINANCIAL STATEMENTS

years, of which 1,474 and 1,609, respectively,

could still require a Treasury contribution.

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, $361,159 in claim payments have 

been made as of September 30, 2019, of which 

$71,658 was disbursed during fiscal year 2019. 

See Notes 4 and 6 for further details about the 

deposit and the program. OFS paid $0.2 million 

in fiscal year 2019 and $0.3 million in fiscal year 

2018 to maintain the letter of credit.

The table below recaps housing program 

commitments as of September 30, 2019, and 

payments and accruals as of September 30, 2019

and 2018.

Treasury Housing Programs Under TARP 

Total Commitments as of Fiscal Year Payments through September 30, Accruals as of September 30, 

(Dollars in Millions) September 30, 20191

2019 2018 2019 2018

MHA $ 23,472 $ 1,118 $ 1,600 $ 7 4 $ 119

HFA Hardest Hit Fund 9,600 $ 334 625 - -

FHA Short Refinance2

 4 5 - - - -

Totals $ 33,117 $ 1,452 $ 2,225 $ 7 4 $ 119

1

Total commitments represent amounts obligated to support all of OFS's Housing programs. As of September 30, 2019, $2,956 million 

remains available to be spent. FHA- Refinance commitments include a maximum of $18 million of administrative fees that can be charged 

over the life of the program for 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 FHA-Refinance 

Letter of Credit administrative expense only.
AGENCY FINANCIAL REPORT | FISCAL YEAR 2019

NOTES TO THE FINANCIAL STATEMENTS 41

NOTE 6. EQUITY INVESTMENTS, NET AND FHA REFINANCE PROGRAM

OFS administers programs designed to help 

stabilize the financial system and restore the flow of 

credit to consumers and businesses. OFS made 

direct loans and equity investments under TARP. 

OFS also entered into other credit programs, which 

currently consist of a loss-sharing program under TARP. 

The table below recaps OFS’s remaining programs by 

title and type:

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

Other Credit Program

 FHA Refinance Program Loss-sharing Program with FHA

Equity Investment Programs

Capital Purchase Program

In October 2008, OFS began implementation of the 

TARP with the 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. 

OFS invested a total of $204.9 billion in 707 

institutions under the CPP program between 

October 2008 and December 2009. 

Under this program, 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 had a stated dividend rate of 5.0 

percent through year five, which increased to 9.0 

percent in subsequent years. In addition to the 

senior preferred stock, 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. 

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 OFS holding 

additional senior preferred stock (subordinated 

debentures) (collectively referred to as “warrant 

preferred stock”) of non-public QFIs.

In addition to the above transactions, OFS entered 

into other transactions with various financial 

institutions including exchanging existing preferred 

shares for a like amount of non-tax-deductible 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. 
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

42 NOTES TO THE FINANCIAL STATEMENTS

During fiscal years 2019 and 2018 there were no 

institutions closed by their regulators or declaring 

bankruptcy. 

There were no CPP institutions written off during 

fiscal year 2019 and one during fiscal year 2018.

The following tables provide key data points related 

to the CPP for the fiscal years ending September 30, 

2019 and 2018.

CPP Part icipat ing Inst it ut ions

Number of Institutions Funded 707 707

Institutions Paid in Full, Merged or Investments Sold (506) (505)

Institutions Transferred to CDCI (28) (28)

Institutions Refinanced to SBLF (137) (137)

Institutions Written Off After Bankruptcy or Receivership (34) (34)

Number of Institutions with Outstanding OFS Investments 2 3

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

Number of CPP Institutions Valued at Year-End 2 3

Of the Institutions Valued, Number that Have Missed One or More Dividend Payments 1 1

CPP Invest ment s

(Dollars in Millions)

Outstanding Beginning Balance, Investment in CPP Institutions, Gross $ 2 3 $ 4 8

Repayments and Sales of Investments (5) (4)

Write-Offs - (17)

Losses from Sales and Repurchases of Assets (1) (4)

Outstanding Balance, Investment in CPP Institutions, Gross $ 1 7 $ 2 3

Interest and Dividend Collections $ - $ 2

Net Proceeds from Sales and Repurchases of Assets in Excess of (Less than) Cost $ (1) $ 9
AGENCY FINANCIAL REPORT | FISCAL YEAR 2019

NOTES TO THE FINANCIAL STATEMENTS 43

Community Development Capital Initiative

In February 2010, OFS announced the CDCI to 

invest lower cost capital in Community Development 

Financial Institutions (CDFIs). Under the terms of 

the program, OFS purchased senior preferred stock 

(or subordinated debt) from eligible CDFIs. The 

senior preferred stock had an initial dividend rate of 

2 percent. CDFI banks and thrifts could apply to 

receive capital up to 5 percent of risk-weighted 

assets while CDFI credit unions could apply for up 

to 3.5 percent of total assets. To encourage 

repayment while recognizing the unique 

circumstances facing CDFIs, the dividend rate 

increases to 9 percent after eight years.

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. As of September 30, 2019 there were 5

institutions with outstanding OFS investments. As 

of September 30, 2018 there were 12 institutions 

with outstanding OFS investments.

During fiscal years 2019 and 2018, there were no 

CDCI institutions written off. 

In fiscal year 2019, OFS received $20 million in 

repayments and $1 million in dividends and interest 

from its CDCI investments with, as of September 30, 

2019, an outstanding balance of $23 million and 

value of $11 million.

In fiscal year 2018, OFS received $32 million in 

repayments and $1 million in dividends and interest 

from its CDCI investments with, as of September 30, 

2018, an outstanding balance of $43 million and 

value of $33 million.

Automotive Industry Financing Program

General Motors Company and General Motors 

Corporation

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. Since 2014, OFS retained no ownership 

of GM. OFS received a cumulative total of $39.7 

billion in stock sale proceeds, loan repayments, 

dividends and interest on the GM program.

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. 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 2018, OFS recovered 

$13 million on this administrative claim.

In August 2016, Treasury along with Export 

Development Canada (EDC), which jointly financed 

the administration of the General Motors 

bankruptcy, entered into a settlement with the 

Unsecured Creditors Committee of General Motors 

Corporation (UCC) to split any proceeds of the 

Avoidance Action Trust (AAT) litigation, with 

Treasury and EDC receiving 30 percent and the 

unsecured creditors receiving 70 percent. As a 

condition of the settlement, OFS provided an 

advance of $13 million to the AAT to fund the 

ongoing operating and legal costs associated with 

the litigation. This settlement yields the most 

favorable attainable economic outcome for OFS to 

recover funds related to this claim. During fiscal 

year 2019 OFS received $73 million in AAT 

distributions from the settlement.

Valuation Methodology 

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 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 
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

44 NOTES TO THE FINANCIAL STATEMENTS

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. OFS uses 

market observable inputs, when available, in 

developing cash flows and incorporating the 

adjustment required for market risk. For purposes 

of this disclosure, 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.

 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.
AGENCY FINANCIAL REPORT | FISCAL YEAR 2019

NOTES TO THE FINANCIAL STATEMENTS 45

The following table displays the assets held by the observability of inputs significant to the measurement of 

each value.

(Dollars in Millions)

Quoted 

Prices for 

Identical 

Assets 

(Level 1)

Significant 

Observable 

Inputs 

(Level 2)

Significant 

Unobservable 

Inputs 

(Level 3) Total

Program

 CPP $ 2 $ - $ 1 0 $ 1 2

 CDCI 7 - 4 1 1

Tot al TARP Programs $ 9 $ - $ 1 4 $ 2 3

(Dollars in Millions)

Quoted 

Prices for 

Identical 

Assets 

(Level 1)1

Significant 

Observable 

Inputs 

(Level 2)

Significant 

Unobservable 

Inputs 

(Level 3) Total

Program

 CPP $ 1 1 $ - $ 1 0 $ 2 1

 CDCI 1 0 - 2 3 3 3

Tot al TARP Programs $ 2 1 $ - $ 3 3 $ 5 4

As of September 30, 2019

As of September 30, 2018

1

For CPP, Level 1 includes Harbor Bankshares Corporation, valued at $6.6M (Original disbursement of $6.8M, restructured into 

5,491,843 common shares (or 84.3% of Shares Outstanding)). For CDCI, Level 1 includes Carver Bancorp, Inc, valued at $10M (Original 

disbursement of $19M, restructured into 2,321,286 common shares (or 62.8% of Shares Outstanding)). While Treasury holds majority 

ownership in both entities, the holdings do not meet the criteria for consolidation into these financial statements. 

1

For CPP, Level 1 includes Harbor Bankshares Corporation, valued at $6.6M (Original disbursement of $6.8M, restructured into 

4,287,024 common shares (or 65.8% of Shares Outstanding)). For CDCI, Level 1 includes Carver Bancorp, Inc, valued at $10M (Original 

disbursement of $19M, restructured into 2,321,286 common shares (or 62.8% of Shares Outstanding)). While Treasury holds majority 

ownership in both entities, the holdings do not meet the criteria for consolidation into these financial statements. 
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

46 NOTES TO THE FINANCIAL STATEMENTS

The following provides a description of the 

methodology used to develop the cash flows and 

incorporate the market risk into the measurement of 

OFS assets.

Financial Institution Equity 

Investments6

The estimated values of preferred equity 

investments are the net present values of the 

expected dividend payments and proceeds from 

repurchases and sales.

In fiscal year 2018, OFS implemented a new 

estimation methodology in its model for its 

remaining equity investments to better capture the 

expected performance of remaining securities. The 

model estimates the probability of default, preferred 

share calls and preferred dividends based on the 

institution’s historical dividend payment 

performance and on the historical behavior of the 

equity investments for similar TARP and non-TARP 

Treasury programs. Inputs to the model include 

institution-specific dividend payments, preferred 

share calls, failures for TARP and non-TARP 

Treasury programs, as well as a financial market 

stress index published by the Federal Reserve Bank 

of St. Louis. The market risk adjustment is 

estimated by applying credit spreads from similar 

securities.

For both of its fiscal year 2019 and 2018 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.

 

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

Subsidy Cost and Reestimates

The recorded subsidy cost of equity investments or 

the FHA Refinance program is based upon the 

calculated net present value of expected future cash 

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

legislation may change estimated future cash flows 

resulting in changes to subsidy cost. These changes 

in subsidy cost are recorded as modifications. The 

cost or reduction in cost of a modification is 

recognized when it occurs.

During fiscal year 2019 and 2018, 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 2019 and 2018, financial statement 

reestimates for all programs, except the FHA

Refinance program, were performed using actual 

financial transaction data through September 30. 

For fiscal years 2019 and 2018 market and security 

specific data publicly available as of September 30 

were used. FHA Refinance reestimates used actual 

financial transaction data through August 31.

Net downward reestimates for the fiscal years ended 

September 30, 2019 and 2018, totaled $67 million 

and $26 million, respectively. Descriptions of the 

reestimates, by OFS’s Program, are as follows:
AGENCY FINANCIAL REPORT | FISCAL YEAR 2019

NOTES TO THE FINANCIAL STATEMENTS 47

Capital Purchase Program

The $4 million upward reestimate for CPP for fiscal 

year ended September 30, 2019 was the result of 

sales and reduced market values.

The $4 million downward reestimate for CPP for the 

fiscal year ended September 30, 2018 was the result 

of repayments and improved market values.

Community Development Capital Initiative

The $2 million upward reestimate for CDCI for fiscal 

year ended September 30, 2019 was the result of 

sales and reduced market values. 

The $7 million downward reestimate for CDCI for 

fiscal year ended September 30, 2018 was the result 

of repayments and improved market values.

Automotive Industry Financing Program

For fiscal year ended September 30, 2019 a $73

million downward reestimate was due to collections 

related to the AAT distributions.

For fiscal year ended September 30, 2018 a $13

million downward reestimate was due to collections 

related to the Old GM.

Public-Private Investment Program (PPIP)

For fiscal year ended September 30, 2018 there was 

a $0.5 million downward reestimate due to a 

recovery collection. The PPIP program was closed in 

2016. 

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, 2019 and 2018. OFS’s 

authority expired October 3, 2010 and no 

commitments were made thereafter, so there were 

no investment program budget execution subsidy 

rates for fiscal years 2019 and 2018.
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

48 NOTES TO THE FINANCIAL STATEMENTS

Troubled Asset Relief Program Equity Investments

(Dollars in Millions) TOTAL CPP PPIP AIFP CDCI

As of Sept ember 30, 2019

Equit y Invest ment Programs:

Equity Investments Outstanding, Gross $ 4 0 $ 1 7 $ - $ - $ 2 3

Subsidy Cost Allowance (17) (5) - - (12)

Equity Investments Outstanding, Net $ 2 3 $ 1 2 $ - $ - $ 1 1

Obligations for Investments not yet Disbursed $ - $ - $ - $ - $ -

Reconciliat ion of Subsidy Cost Allowance:

Balance, Beginning of Period $ 1 2 $ 2 $ - $ - $ 1 0

 Interest and Dividend Revenue 1 - - - 1

 Net Proceeds from Sales and Repurchases of Assets

 in Excess of (Less than) Cost 7 2 (1) - 7 3 -

 Net Interest Expense on Borrowings from Fiscal Service

 and Financing Account Balance (1) - - - (1)

Balance, End of Period, Before Reestimates 8 4 1 - 7 3 1 0

 Subsidy Reestimates Upward (Downward), Net (67) 4 - (73) 2

Balance, End of Period $ 1 7 $ 5 $ - $ - $ 1 2

Reconciliat ion of Subsidy Cost (Income):

 Subsidy Cost (Income) for Disbursements $ - - - - -

 Subsidy Reestimates Upward (Downward), Net (67) 4 - (73) 2

Total Equity Investment Programs

 Subsidy Cost (Income) $ (67) $ 4 $ - $ (73) $ 2

(Dollars in Millions) TOTAL CPP PPIP AIFP CDCI

As of Sept ember 30, 2018

Equit y Invest ment Programs:

Equity Investments Outstanding, Gross $ 6 6 $ 2 3 $ - $ - $ 4 3

Subsidy Cost Allowance (12) (2) - - (10)

Equity Investments Outstanding, Net $ 5 4 $ 2 1 $ - $ - $ 3 3

Obligations for Investments not yet Disbursed $ - $ - $ - $ - $ -

Reconciliat ion of Subsidy Cost Allowance:

Balance, Beginning of Period $ 3 0 $ 1 3 $ - $ - $ 1 7

 Interest and Dividend Revenue 3 2 - - 1

 Net Proceeds from Sales and Repurchases of Assets

 in Excess of (Less than) Cost 2 3 9 1 1 3 -

 Write-Offs (17) (17) - - -

 Net Interest Expense on Borrowings from Fiscal Service

 and Financing Account Balance (2) (1) - - (1)

Balance, End of Period, Before Reestimates 3 7 6 1 1 3 1 7

 Subsidy Reestimates Upward (Downward), Net (25) (4) (1) (13) (7)

Balance, End of Period $ 1 2 $ 2 $ - $ - $ 1 0

Reconciliat ion of Subsidy Cost (Income):

 Subsidy Cost (Income) for Disbursements $ - - - - -

 Subsidy Reestimates Upward (Downward), Net (25) (4) (1) (13) (7)

Total Equity Investment Programs

 Subsidy Cost (Income) $ (25) $ (4) $ (1) $ (13) $ (7)
AGENCY FINANCIAL REPORT | FISCAL YEAR 2019

NOTES TO THE FINANCIAL STATEMENTS 49

FHA Refinance Program

As discussed in Note 5, 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. Homeowners were able to refinance into FHA

guaranteed mortgages through December 31, 2016, 

therefore, no new loans were guaranteed during 

fiscal years 2019 and 2018.

Cumulatively, as of September 30, 2019 and 2018, 

4,200 loans that required potential Treasury 

contribution, with a total value of $620 million, had 

been refinanced through the program for both years, 

of which 1,474 and 1,609 loans, respectively, could 

still require a Treasury contribution. 

OFS’s maximum exposure for all active loans for 

FHA’s guarantee totaled $17.9 million and $20

million at September 30, 2019 and 2018, 

respectively. OFS’s guarantee resulted in a liability 

of $1 million at September 30, 2019 and September 

30, 2018. The liability was calculated, using credit 

reform accounting, as the present value of the 

estimated future cash outflows for OFS’s share of 

losses incurred on any defaults of the FHA 

guaranteed loans. Cumulatively, as of September 

30, 2019 and 2018, $361,159 and $289,501 of claims 

had been paid by OFS under the program, 

respectively. 

At September 30, 2019 and 2018, OFS’s remaining 

obligation under the FHA program was $24 million. 

Budget subsidy rates for the program, entirely for 

defaults, were set at 0.8 percent for loans 

guaranteed in fiscal year 2017 (loans endorsed by 

FHA from October 1, 2016 to December 31, 2016).

The program recorded $1million downward 

reestimate for fiscal year 2018.

The following table details the changes in the FHA

Refinance Program liability and the subsidy cost for 

the program during fiscal years 2019 and 2018. 

FHA-Refinance Program Liabilit y

(Dollars in Millions) 2019 2018

Balance, Beginning of Period $ 1 $ 2

Balance, End of Period, Before Reestimates 1 2

 Subsidy Reestimates - Upward (Downward), Net - (1)

Balance, End of Period $ 1 $ 1

Reconciliat ion of Subsidy Cost (Income)

 Subsidy Reestimates - Upward (Downward), Net $ - $ (1)

Tot al Subsidy Cost (Income) $ - $ (1)

Fiscal Year
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

50 NOTES TO THE FINANCIAL STATEMENTS

NOTE 7. DUE TO THE GENERAL FUND

As of September 30, 2019, OFS accrued $75 million 

of downward reestimates payable to the General 

Fund. As of September 30, 2018, OFS accrued $28

million of downward reestimates payable to the 

General Fund. Due to the General Fund is a nonentity 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. 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. 

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, 2019 and 2018 were as follows: 

Borrowings from the Fiscal Service by the OFS, outstanding as of September 30, 2019 and 2018 were as 

follows:

As of September 30, 2019, borrowings carried 

remaining terms ranging from 19 to 22 years, with 

interest rates from 2.96 percent to 3.80 percent. As 

of September 30, 2018, borrowings carried 

remaining terms ranging from 20 to 23 years, with

interest rates from 2.96 percent to 3.80 percent. 

(Dollars in Millions) 2019 2018

Beginning Balance, Principal Payable t o t he Fiscal Service $ 6 0 $ 119

 New Borrowings 3 -

 Repayments (28) (59)

Ending Balance, Principal Payable t o t he Fiscal Service $ 3 5 $ 6 0

As of September 30,

(Dollars in Millions) 2019 2018

CPP $ 1 9 $ 1 8

CDCI $ 1 6 4 2

Tot al Borrowings Out st anding $ 3 5 $ 6 0

As of September 30,
AGENCY FINANCIAL REPORT | FISCAL YEAR 2019

NOTES TO THE FINANCIAL STATEMENTS 51

NOTE 9. COMMITMENTS AND CONTINGENCIES

OFS is party to various legal actions and claims 

brought by or against it. In the opinion of 

management and the Office of General Counsel, the 

ultimate resolution of these legal actions and claims 

will not have a materially adverse effect on OFS’s

financial statements. Contingent liabilities related 

to litigation are recorded in the financial statements 

if and when losses are determined to be probable 

and measurable. 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. 

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.
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

52 NOTES TO THE FINANCIAL STATEMENTS

NOTE 10. STATEMENT OF NET COST

The Statement of Net Cost (SNC) presents the net 

cost of operations for OFS under the strategic goal to 

transform government-wide financial stewardship. 

OFS has determined that all initiatives and 

programs under the TARP fall within this strategic 

goal.

OFS’s 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.

OFS’s SNC for fiscal year 2019 includes $2 million of 

intragovernmental costs relating to interest expense 

on borrowings from the Fiscal Service and $1 million 

intragovernmental revenues relating to interest 

income on financing account balances. OFS’s SNC

for fiscal year 2018 includes $3 million of 

intragovernmental costs relating to interest expense 

on borrowings from the Fiscal Service and $1 million 

in 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. OFS’s SNC includes $1

million of subsidy allowance amortization for fiscal 

year 2018.

NOTE 11. STATEMENT OF BUDGETARY RESOURCES

The Statement of Budgetary Resources (SBR) 

presents information about total budgetary 

resources available to OFS and the status of those 

resources. For the fiscal year ended September 30, 

2019, OFS’s total resources in budgetary accounts 

were $153 million and resources in non-budgetary 

financing accounts, including spending authority 

from collections of equity investment liquidations, 

dividends, interest and fees, were $109 million. For 

the fiscal year ended September 30, 2018, OFS’s 

total resources in budgetary accounts were $188

million and resources in non-budgetary financing 

accounts were $52 million. 

Permanent Indefinite Appropriations

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 EESA and that 

any such funds expended or obligated by the 

Secretary for actions authorized by EESA, including 

the payment of administrative expenses, shall be 

deemed appropriated at the time of such 

expenditure or obligation.

Borrowing Authority 

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. As of September 30, 2019 OFS had 

no borrowing authority available of the $3 million 
AGENCY FINANCIAL REPORT | FISCAL YEAR 2019

NOTES TO THE FINANCIAL STATEMENTS 53

authorized. As of September 30, 2018 OFS had no 

borrowing authority available or authorized. 

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 and equity investment program financing 

accounts. These receipts are not available for any 

other use per credit reform accounting guidance.

Apportionment Categories of Obligations 

Incurred: Direct versus Reimbursable 

Obligations

All of OFS’s 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. OFS 

obligations incurred are direct obligations 

(obligations not financed from intragovernmental 

reimbursable agreements).

Undelivered Orders

Undelivered orders as of September 30, 2019 were 

$3 billion in budgetary accounts, all Non-Federal 

and no funds remained in non-budgetary financing 

accounts. Undelivered orders as of September 30, 

2018 were $4.7 billion in budgetary accounts and no 

funds remained 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 2021, with the “Actual” 

column completed for fiscal year 2019, 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 March 2020. It will be available at 

https://www.whitehouse.gov/omb/budget/

The 2020 President’s Budget, with the “Actual” 

column completed for the fiscal year ended 

September 30, 2018, was published in March 2019,

and reconciled to the SBR. The only differences 

between the two documents were due to:

 Rounding; and

 Expired funds that are not shown in the 

“Actual” column of the President’s Budget.
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

54 NOTES TO THE FINANCIAL STATEMENTS

NOTE 12. RECONCILIATION OF NET COST OF OPERATIONS TO OUTLAYS, NET

The Reconciliation of Net Cost of Operations to 

Outlays, Net explains the difference between 

proprietary financial accounting information and 

budgetary accounting information. Financial 

accounting is intended to provide a picture of the 

government’s financial operations and financial 

position and is presented on an accrual basis. The 

accrual basis includes information about costs 

arising from the consumption of assets and the 

incurrence of liabilities. Budgetary accounting is 

used for planning and control purposes and relates 

to both the receipt and use of cash, as well as 

reporting the federal deficit. The reconciliation of 

net cost, presented on an accrual basis, and the net 

outlays, presented on a budgetary basis, provides an 

explanation of the relationship between financial 

accounting and budgetary information. The 

reconciliation serves not only to identify costs paid 

for in the past and those that will be paid in the 

future, but also to assure integrity between financial 

and budgetary financial accounting. For the fiscal 

year ended September 30, 2019 the Reconciliation of 

Net Cost of Operations to Outlays, Net consisted of 

the following: 

Dollars in Millions

IntragovernmentalWith the 

Public

Total Fiscal 

Year 2019

Net Cost of Operations $ 13 $ 1,378 $ 1,391

Components of Net Cost That Are Not Part of Net Outlays:

Year-end credit reform subsidy re-estimates 68 - 68

Other1

 7 - 7

Increase / (Decrease) in Assets:

Equity Investments - (31) (31)

(Increase) / Decrease in Liabilities:

Accounts Payable and Other Liabilities - 4 4

Due to the General Fund (47) - (47)

Making Home Affordable Program - 45 45

Total Components of Net Cost That Are Not Part of Net Outlays: 28 18 46

Components of Net Outlays That Are Not Part of Net Cost:

Effect of prior year agencies credit reform subsidy re-estimates (1) - (1)

Distributed Offsetting Receipts (27) - (27)

Total Components of Net Outlays That Are Not Part of Net Cost (28) - (28)

Outlays, Net $ 13 $ 1,396 $ 1,409

1Other includes the cost of the CPP and CDCI programs.
AGENCY FINANCIAL REPORT | FISCAL YEAR 2019

REQUIRED SUPPLEMENTARY INFORMATION 55

REQUIRED SUPPLEMENTARY INFORMATION

Dollars in Millions

BUDGETARY RESOURCES

 Unobligated Balance Brought Forward, October 1 $ 113 $ 34 $ - $ 34 $ 113

 Recoveries of Prior-Year Unpaid Obligations 320 - 304 - 16

 Actual Repayments of Debt, Prior-Year Balances - (15) - (15) -

 Cancelled Authority (39) - - - (39)

 Other Changes in Unobligated Balances (304) - (304) - -

Unobligated Balance from Prior-Year Budget Authority, Net 90 19 - 19 90

Appropriations 63 - 1 - 62

Borrowing Authority - 3 - 3 -

Spending Authority from Offsetting Collections - 87 - 87 -

TOTAL BUDGETARY RESOURCES (Note 11) $ 153 $ 109 $ 1 $ 109 $ 152

STATUS OF BUDGETARY RESOURCES

New Obligations and Upward Adjustments (Total) $ 59 $ 29 $ 1 $ 29 $ 58

Unobligated Balance, End of Year:

 Apportioned, Unexpired Accounts 4 1 - 1 4

 Unapportioned, Unexpired Accounts - 79 - 79 -

 Unexpired Unobligated Balance, End of Year 4 80 - 80 4

 Expired Unobligated Balance, End of Year 90 - - - 90

Unobligated Balance, End of Year (Total) 94 80 - 80 94

TOTAL STATUS OF BUDGETARY RESOURCES $ 153 $ 109 $ 1 $ 109 $ 152

OUTLAYS, NET

Outlays, Net (Total) 1,507 (71) 1,453 (71) 54

Distributed Offsetting Receipts (27) - (27) - -

AGENCY OUTLAYS, NET $ 1,480 $ (71) $ 1,426 $ (71) $ 54

REQUIRED SUPPLEMENTARY INFORMATION

COMBINED STATEMENT OF BUDGETARY RESOURCES
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

56 REQUIRED SUPPLEMENTARY INFORMATION

Dollars in Millions

BUDGETARY RESOURCES

 Unobligated Balance Brought Forward, October 1 $ 181 $ 44 $ 42 $ 44 $ 139

 Recoveries of Prior-Year Unpaid Obligations 4,022 - 4,004 - 18

 Actual Repayments of Debt, Prior-Year Balances - (32) - (32) -

 Cancelled Authority (48) - - - (48)

 Other Changes in Unobligated Balances (4,046) - (4,046) - -

Unobligated Balance from Prior-Year Budget Authority, Net 109 12 - 12 109

Appropriations 79 - - - 79

Borrowing Authority - - - - -

Spending Authority from Offsetting Collections - 40 - 40 -

TOTAL BUDGETARY RESOURCES (Note 11) $ 188 $ 52 $ - $ 52 $ 188

STATUS OF BUDGETARY RESOURCES

New Obligations and Upward Adjustments (Total) $ 75 $ 18 $ - $ 18 $ 75

Unobligated Balance, End of Year:

 Apportioned, Unexpired Accounts 4 2 - 2 4

 Unapportioned, Unexpired Accounts - 32 - 32 -

 Unexpired Unobligated Balance, End of Year 4 34 - 34 4

 Expired Unobligated Balance, End of Year 109 - - - 109

Unobligated Balance, End of Year (Total) 113 34 - 34 113

TOTAL STATUS OF BUDGETARY RESOURCES $ 188 $ 52 $ - $ 52 $ 188

OUTLAYS, NET

Outlays, Net (Total) 2,290 (50) 2,226 (50) 64

Distributed Offsetting Receipts (15) - (15) - -

AGENCY OUTLAYS, NET $ 2,275 $ (50) $ 2,211 $ (50) $ 64

REQUIRED SUPPLEMENTARY INFORMATION

COMBINED STATEMENT OF BUDGETARY RESOURCES
AGENCY FINANCIAL REPORT | FISCAL YEAR 2019

OTHER INFORMATION 57
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

58 REQUIRED SUPPLEMENTARY INFORMATION
AGENCY FINANCIAL REPORT | FISCAL YEAR 2019

OTHER INFORMATION 59

Section A – Payment Integrity

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, the Improper Payments 

Elimination and Recovery Act of 2010 (IPERA, 

Pub. L. 111-204) was signed into law. IPERA 

amends IPIA, generally repealed the Recovery 

Auditing Act (31 USC §§3561-3567), and 

significantly increased agency payment 

recapture efforts by expanding the types of 

payments to be reviewed and lowering the 

dollar threshold of annual payments that 

require 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 Enterprise Risk 

Management and 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 costeffective.

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 2019 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 2019, OFS 

reviewed administrative and program 

payments totaling approximately $1.5 billion.

OFS does not have an improper payment

recapture audit contingency contract or formal 

management improvement program in place. 

Instead, OFS performs both targeted postaward 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 Treasury Fiscal Service –

Administrative Resource Center and Internal 

Revenue Service – Office of Treasury 

Procurement Services (OTPS) to support 

payment recapture reporting. Fiscal Service

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 
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

60 OTHER INFORMATION

recapture audit and improper payments 

reporting capabilities.

OFS 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 

sample-based post-award loan level reviews of 

MHA incentive payments to ensure validity in 

accordance with the MHA Program Handbook 

for Servicers of Non-GSE Mortgages and 

Supplemental Directives issued by Treasury.

In conjunction with participating states’ 

HFAs, OFS also performs targeted payment 

recapture audit activities to detect and 

prevent erroneous payments under the HHF 

program.

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 AFR. In 

summary, OFS has a strong enterprise risk 

management and 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 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.

Fiscal Service 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. OFS implemented the “Do Not Pay” 

solution in fiscal year 2013 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 Fiscal Service “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 AFR.
AGENCY FINANCIAL REPORT | FISCAL YEAR 2019

OTHER INFORMATION 61

Section B – Fraud Reduction and Data Analytics Act

Overview of the Act

Under the Fraud Reduction and Data 

Analytics Act of 2015 (FRDAA, P.L. 114-186, 

31 USC 3321), each entity must disclose in its 

AFR information pertaining to its fraud 

reduction efforts undertaken during the fiscal 

year.

These disclosures should include information 

on the entity’s progress in implementing:

 financial and administrative controls 

pursuant to FRDAA;

 the fraud risk principle in the 

Standards for Internal Control in the 

Federal Government; and

 OMB Circular A-123 with respect to 

leading practices for managing fraud 

risk.

These disclosures should also include 

information on the entity’s progress in:

 identifying risks and vulnerabilities to 

fraud (e.g., payroll, beneficiary 

payments, grants, large contracts, 

purchase and travel cards); and

 establishing strategies, procedures, 

and other steps to curb fraud.

Reporting

OFS has no confirmed fraud within its 

programs and activities.

OFS is subject to rigorous oversight. OFS’s 

Senior Assessment Team (SAT) routinely 

discusses risks, including those related to 

fraud, during its meetings. OFS’s operational 

and accounting process are well-documented 

and relatively mature, most having been 

established over nine years ago. These 

processes consider fraud risk principles 

outlined within the Standards for Internal 

Control in the Federal Government. The 

remaining TARP investments are steadily 

being liquidated through planned, wellcoordinated transactional events. There are 

established practices for initiating, approving, 

processing and recording payments to third 

parties, including those related to the TARP 

programs and for the TARP administration. 

During wind-down, OFS remains vigilant in 

ensuring its controls are adequate to prevent 

or detect fraud.

OFS disclosures required under FRDAA are 

included within the U.S. Department of the 

Treasury Agency Financial Report.
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

62 OTHER INFORMATION

Section C – Reduce the Footprint

Overview of the Memorandum

Consistent with Section 3 of the OMB 

Memorandum M-12-12, Promoting Efficient 

Spending to Support Agency Operations, and 

OMB Management Procedures Memorandum 

2015-01, the “Reduce the Footprint” 

implementation policy, all CFO Act entities 

must set annual targets to reduce the total 

square footage of their domestic inventory of

office and warehouse space compared to the 

Fiscal Year 2015 baseline.

Reporting

OFS disclosures required under the 

Memorandum are included within the U.S. 

Department of the Treasury AFR.
AGENCY FINANCIAL REPORT | FISCAL YEAR 2019

OTHER INFORMATION 63

Additional TARP Historical Information

Bank Support Programs

CPP

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. OFS continues to winddown the remaining CPP investments through 

repayments by those institutions that are able to 

repay, restructurings and sales of common stock, 

where OFS’s investment shares were converted 

to common stock holdings.

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 were to repay 

the funds they received, with the approval of 

their regulators.

Targeted Investment Program

OFS established the Targeted Investment 

Program (TIP) in December 2008. OFS invested 

a total of $40.0 billion in two institutions – Bank 

of America (BofA) and Citigroup – under the 

TIP. 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. 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 $301.0 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 by $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.

Supervisory Capital Assessment Program

In 2009, Treasury worked with federal banking 

regulators to develop a comprehensive “stress 

test” known as the Supervisory Capital 

Assessment Program (SCAP). The SCAP closed 

on November 9, 2009, without making any 

investments.

CDCI

On February 3, 2010, OFS created the 

Community Development Capital Initiative 

(CDCI) to help viable certified Community 

Development Financial Institutions (CDFIs) and 

the communities they serve cope with effects of 

the financial crisis. 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 increased to nine 

percent after eight years.

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
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

64 OTHER INFORMATION

Credit Market Programs

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). OFS completed the wind-down of the 

PPIP during fiscal year 2015, with no debt or 

equity investments outstanding after the final 

equity repayment was made in June 2013.

Term Asset-Backed Securities Loan Facility

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 

CMBS, which had ground to a virtual standstill 

during the early months of the financial crisis. 

As of September 30, 2015, all TALF loans 

provided by Federal Reserve Bank of New York 

(FRBNY) had been repaid in full and the

program closed. Since inception, accumulated 

income earned from investments in TALF, LLC 

totaled $685 million.

Small Business Administration 7(a) 

Securities Purchase Program

OFS launched the Small Business 

Administration (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. 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 was launched in December 2008 to help 

prevent the disorderly liquidations of General 

Motors (GM) and Chrysler, which would have 

resulted in a significant disruption of the U.S. 

auto industry. Recognizing that both GM and 

Chrysler were on the verge of collapse, OFS 

disbursed $79.7 billion in loans and equity 

investments to GM, Chrysler, and General 

Motors Acceptance Corporation (now known as 

Ally Financial).

To further maximize the recovery of TARP funds 

for taxpayers, OFS, along with Export 

Development Canada (EDC), which jointly 

financed administration of the General Motors 

bankruptcy (Old GM), entered into a settlement 

with the Unsecured Creditors Committee of 

General Motors Corporation to split any 

proceeds of the AAT litigation, with OFS and 

EDC receiving 30 percent and the unsecured 

creditors receiving 70 percent. As a condition of 

the settlement, OFS and EDC provided an 

advance of $15 million ($13 million provided by 

OFS) in September 2016 to the AAT to fund the 

ongoing litigation against certain lenders to Old 

GM. This settlement yields the most favorable 

attainable economic outcome to ensure OFS is 

repaid some portion of any assets recovered 

through the pending lawsuit.
AGENCY FINANCIAL REPORT | FISCAL YEAR 2019

OTHER INFORMATION 65

Recoveries from the bankruptcy liquidation of 

Old GM remains 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. Investment Program

In 2008, AIG facing potentially fatal liquidity 

problems and with the crisis threatening to 

intensify and spread more broadly throughout 

the economy, Treasury and FRBNY provided 

assistance to AIG. In December 2012, Treasury 

exited all remaining holdings in AIG through 

the sale of common stock and AIG’s repurchase 

of warrants. During the financial crisis, the 

Treasury’s and the FRBNY’s peak support for 

AIG totaled $182.3 billion. That included $69.8 

billion in TARP funds that OFS committed and 

$112.5 billion committed by the FRBNY, 

including $22.1 billion in commitments which 

were later cancelled. As a result of the combined 

efforts of AIG, Treasury, 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 in 

excess of disbursements of $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

MHA

In early 2009, OFS launched MHA to help 

struggling homeowners avoid foreclosure and 

stabilize the housing market.

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 HAMP which 

provides eligible homeowners the opportunity to 

reduce their monthly mortgage payments to 

more affordable and sustainable levels to 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.

The Act provided that MHA would terminate on 

December 31, 2016, except with respect to 

certain loan modification applications made 

before such date. As set forth in program

guidelines, MHA servicers were required to 
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

66 OTHER INFORMATION

evaluate applications submitted before the 

deadline and offer trial modifications to eligible 

applicants. All MHA transactions, including 

first and second lien permanent modifications, 

short sales or deeds-in-lieu of foreclosure, and 

unemployment forbearance plans, were required 

to be completed per program guidelines by 

December 1, 2017. At this point, MHA is in a 

steady state until final incentives on existing 

modifications are paid per program 

requirements. 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 FHA and the 

United States Department of Agriculture 

(USDA).

HHF

HHF was established in February 2010 to 

provide targeted aid to homeowners in states hit 

hardest by the economic and housing market 

downturn. In an effort to restore stability to 

housing markets, HHF provides funding for 

state Housing Finance Agencies (together with 

the eligible entities, collectively “HFAs”) to 

develop locally-tailored foreclosure prevention 

solutions in areas that have been hardest hit by 

home price declines and high unemployment. In 

total, $9.6 billion in HHF funds has been 

allocated among 18 states and the District of 

Columbia.

HHF programs vary state to state, but may 

include such programs as mortgage payment 

assistance for unemployed or underemployed 

homeowners, reinstatement to bring 

homeowners current on their mortgage or 

property taxes, principal reduction to help 

homeowners modify or refinance 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.

Support for FHA Refinance Program

In March 2010, enhancements were made to an 

existing FHA program that permitted 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, was intended to 

provide more opportunities for qualifying 

mortgage loans to be restructured and 

refinanced into FHA-insured loans. On 

December 31, 2016, the application period for 

the FHA Refinance Program ended.

For additional information on the housing 

programs, please visit the OFS website at:

http://www.treasury.gov/initiatives/financialstability/TARPPrograms/housing/Pages/default.aspx
AGENCY FINANCIAL REPORT | FISCAL YEAR 2019

OTHER INFORMATION 67

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.

 

Agency Financial Report (AFR): This report 

provides an overview of the programs, 

accomplishments, challenges, and 

management’s accountability for the resources 

entrusted to the agency. The report is 

prepared in accordance with the requirements 

of the OMB Circular A-136, Financial 

Reporting Requirements.

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 lowcost 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.

 

Consolidated Appropriations Act, 2016: The 

law which included provisions that i.) the 

MHA program will terminate on December 31, 

2016, except with respect to certain loan 

modification applications made before such 

date and ii.) provided Treasury authority to 

commit an additional $2.0 billion in TARP 

funds to the HHF program.

 

Debtor-In-Possession (DIP): A debtor-inpossession 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. 

 

Dodd-Frank Wall Street Reform and 

Consumer Protection Act (Dodd-Frank Act): 

The law that limited Treasury’s authority to 

purchase or guarantee troubled assets to a 

maximum of $475.0 billion.

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.

Hardest Hit Fund (HHF): A TARP program

to help 18 hardest hit states, plus the District 

of Columbia, to develop locally-tailored 

programs to assist struggling homeowners in 

their communities.

 
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

68 OTHER INFORMATION

Home Affordable Modification Program 

(HAMP): A TARP program OFS established 

to help struggling, homeowners reduce their 

mortgage payments to affordable and 

sustainable levels and avoid foreclosure. 

 

Housing Finance Agencies (HFAs): Statecharted authorities established to help meet 

the affordable housing needs of the residents 

of their states. 

 

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 struggling 

homeowners reduce their monthly mortgage 

payments to more affordable levels and avoid 

foreclosure. HAMP is part of MHA. 

 

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.

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 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.

 

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 nonrecourse loans to buyers of AAA-rated AssetBacked 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 2019

OTHER INFORMATION 69

Contact Information

Department of the Treasury – Office of Financial Stability

1500 Pennsylvania Avenue NW

Washington, DC 20220

Telephone 202-622-2000 | Treasury Press Office 202-622-2960

Website Information

Treasury ...........................................................................................................................www.treasury.gov

Office of Financial Stability ............................................................................. www.financialstability.gov

Making Home Affordable Program........................................................ www.makinghomeaffordable.gov

Additional References

TARP Programs .................... www.treasury.gov/initiatives/financial-stability/TARP-Programs/Pages/default.aspx

TARP Reports .......................................www.treasury.gov/initiatives/financial-stability/reports/Pages/default.aspx

TARP Tracker .......................... www.treasury.gov/initiatives/financial-stability/reports/Pages/TARP-Tracker.aspx

Financial Reports .......www.treasury.gov/initiatives/financial-stability/reports/Pages/Annual-Agency-Financial-Reports.aspx
THE DEPARTMENT OF THE TREASURY | OFFICE OF FINANCIAL STABILITY

70 OTHER INFORMATION

WWW.FINANCIALSTABILITY.GOV