FY 2016 AGENCY FINANCIAL REPORT

ABOUT THIS REPORT

Our Agency Financial Report

(AFR) for Fiscal Year (FY) 

2016 presents the 

Department of the Treasury’s 

(Treasury, Department, or 

our) financial information 

relative to our vital mission 

and stewardship of the 

resources entrusted to us. 

The AFR also highlights our priorities, 

accomplishments, and challenges implementing 

programs that promote conditions for sustaining 

economic growth and stability at home and abroad, 

protecting the integrity of our nation’s financial 

system, and effectively managing the U.S. 

government’s finances and resources. In accordance

with Office of Management and Budget’s (OMB) 

Circular A-136, Financial Reporting Requirements,

we produce the following three reports: (i) an AFR 

issued on November 15, 2016 and (ii) an Annual 

Performance Report (APR) submitted with Treasury’s 

congressional budget justification to be issued by 

February 1, 2017. The AFR will be available online at

http://www.treasury.gov/about/

budget-performance/annual-performance-plan/Pages/

default.aspx. The APR will be available online at 

http://www.treasury.gov/

about/budget-performance/Pages/cj-index.aspx.

HOW THIS REPORT IS ORGANIZED

Our AFR provides financial and performance 

information for the FY beginning October 1, 2015, and 

ending on September 30, 2016, with comparative prior 

year data, where appropriate. The AFR demonstrates 

our commitment to our mission and accountability to 

Congress and the American people. This report 

presents Treasury’s operations, accomplishments and 

challenges. The AFR begins with a message from the 

Secretary of the Treasury, Jacob J. Lew. This 

introduction is followed by three main sections. 

Part 1: Management’s 

Discussion and Analysis

Provides a high-level overview of 

our organizational structure, 

strategic framework, 

programmatic and financial 

performance, and management 

assurances related to Treasury’s 

internal controls. 

Part 2: Financial Section

Begins with a message from the 

Assistant Secretary for 

Management and Deputy Chief 

Financial Officer, followed by 

the Independent Auditors’ 

Report, audited financial 

statements and notes, and 

supplementary information.

Part 3: Other Information

Contains various information 

including Management and 

Performance Challenges 

identified by the Inspector 

General and the Secretary’s 

response, along with 

information related to tax gap 

and tax burden, improper 

payments, and other relevant 

information. 
FY 2016 AGENCY FINANCIAL REPORT

TABLE OF CONTENTS

MESSAGE FROM THE SECRETARY OF THE TREASURY .......................................................................... 4

PART 1: MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)

TREASURY AT A GLANCE ............................................................................................. 9

ORGANIZATION ................................................................................................... 11

TREASURY STRATEGIC FRAMEWORK................................................................................ 14

PERFORMANCE OVERVIEW ........................................................................................ 16

SUMMARY OF MANAGEMENT AND PERFORMANCE CHALLENGES .................................................... 37

SUMMARY OF MATERIAL WEAKNESSES ............................................................................ 38

FY 2017 OUTLOOK ............................................................................................... 39

FINANCIAL HIGHLIGHTS............................................................................................ 40

MANAGEMENT ASSURANCES ...................................................................................... 45

SYSTEMS, CONTROLS AND LEGAL COMPLIANCE ..................................................................... 46

PART 2: FINANCIAL SECTION

MESSAGE FROM THE ASSISTANT SECRETARY FOR MANAGEMENT AND DEPUTY CHIEF FINANCIAL OFFICER ............. 53

INSPECTOR GENERAL’S TRANSMITTAL LETTER....................................................................... 55

INDEPENDENT AUDITORS’ REPORT ON THE DEPARTMENT’S FINANCIAL STATEMENTS ................................. 57

MANAGEMENT’S RESPONSE TO INDEPENDENT AUDITORS’ REPORT .................................................. 63

FINANCIAL STATEMENTS........................................................................................... 64

NOTES TO THE FINANCIAL STATEMENTS ............................................................................ 71

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) .........................................................14 5

PART 3: OTHER INFORMATION (UNAUDITED)

SECTION A: COMBINED SCHEDULE OF SPENDING.................................................................155

SECTION B: TAX GAP AND TAX BURDEN .........................................................................156

SECTION C: FREEZE THE FOOTPRINT .............................................................................164

SECTION D: MANAGEMENT AND PERFORMANCE CHALLENGES

AND THE SECRETARY’S RESPONSES ..................................................................165

SECTION E: SUMMARY OF FINANCIAL STATEMENT AUDIT AND MANAGEMENT ASSURANCES .......................216

SECTION F: IPIA (AS AMENDED BY IPERA AND IPERIA) REPORTING DETAILS ....................................220

SECTION G: CIVIL MONETARY PENALTIES INFLATION ADJUSTMENT ................................................239

APPENDIX: GLOSSARY OF ACRONYMS ...........................................................................245
4 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | MESSAGE FROM THE SECRETARY OF THE TREASURY

MESSAGE FROM THE SECRETARY OF THE TREASURY

M ISSION S TATEMENT

Maintain a strong economy and create economic and job opportunities by promoting 

conditions that enable economic growth and stability at home and abroad; strengthen 

national security by combating threats and protecting the integrity of the financial system; 

and manage the U.S. government’s finances and resources effectively.

In this year’s Agency Financial Report, the 

Department of the Treasury looks back at a year of 

continued economic growth and financial stability. 

Fiscal Year 2016 was a very successful year for 

Treasury. We helped secure the passage of legislation 

to provide Puerto Rico with critical tools to address its 

fiscal crisis, including access to an orderly

restructuring process to adjust its debts to a 

sustainable level. We took additional administrative 

action against inversions and other tax avoidance 

techniques, while continuing to press the case for the 

need for business tax reform. Following fulfillment of 

Iran’s commitments under the Joint Comprehensive 

Plan of Action (JCPOA), we lifted certain sanctions 

and engaged stakeholders around the world about its

implications. And we announced that, for the first 

time in over 100 years, a woman, Harriet Tubman, 

will grace the front of U.S. currency.

Domestically, we maintained our focus on 

safeguarding the financial system, continuing to 

implement and protect the Dodd-Frank Wall Street 

Reform and Consumer Protection Act. The work of 

the Financial Stability Oversight Council,

comprehensive assessments of the Treasury securities 

market, and a review of the online marketplace 

lending industry have helped to strengthen the 

financial system. The Department also sought to 

promote a financial inclusion agenda through a host 

of initiatives aimed at fostering opportunity for all 

Americans to share in our economic growth. 
DEPARTMENT OF THE TREASURY 5

MESSAGE FROM THE SECRETARY OF THE TREASURY | FY 2016 AGENCY FINANCIAL REPORT

The Treasury Department also conducted significant 

work with diplomatic partners to advance American 

interests abroad. Congressional authorization of the 

2010 International Monetary Fund (IMF) Quota and 

Governance Reforms demonstrated U.S. economic 

leadership in the world at the beginning of the fiscal 

year. We also successfully advanced U.S. growth 

priorities with the Group of 20 (G-20), including 

reaching agreements on exchange rate policy, 

refraining from competitive devaluation, and 

employing all policy levers — monetary, fiscal, and 

structural reforms — in an effort to achieve more 

sustainable, inclusive growth. This important work

resulted in outlining a new framework for financing 

development throughout the world. 

As part of this report, Treasury received an 

unmodified audit opinion on its consolidated financial 

statements and validated its financial data as 

accurate, complete, and reliable. Treasury 

strengthened its management controls, made progress 

towards correcting the material weaknesses discussed 

in Part III of this report, and made progress toward 

achieving all U.S. financial systems and control 

objectives. We provide this report as a comprehensive 

review of the Department’s important work and 

finances. 

The Treasury Department’s accomplishments are a 

credit to the many dedicated and committed 

employees in the Departmental Offices and Bureaus. 

Our persistent focus on core management priorities 

allows the Department to succeed in meeting its 

strategic goals, and I am confident that the steps we 

have taken will allow Treasury to continue to build on 

this work for many years to come. 

Jacob J. Lew

Secretary of the Treasury

November 15, 2016

Secretary of the Treasury Jacob J. Lew and Deputy 

Secretary Sarah Bloom Raskin attended a Treasury 

Town Hall meeting, June 12, 2015.

DEPARTMENT OF THE TREASURY
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TREASURY AT A GLANCE ...........................................9

ORGANIZATION .....................................................11

TREASURY STRATEGIC FRAMEWORK .........................14

PERFORMANCE OVERVIEW ......................................16

SUMMARY OF MANAGEMENT AND

PERFORMANCE CHALLENGES ...............................37

SUMMARY OF MATERIAL WEAKNESSES .....................38

FY 2017 OUTLOOK ...............................................39

FINANCIAL HIGHLIGHTS ..........................................40

MANAGEMENT ASSURANCES ...................................45

SYSTEMS, CONTROLS AND LEGAL COMPLIANCE ..........46

DEPARTMENT OF THE TREASURY 9 

MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2016 AGENCY FINANCIAL REPORT

TREASURY AT A GLANCE

FOUNDATION

After the American Revolution, Congress realized that 

funding a war without proper infrastructure and 

financial discipline presented an enormous challenge 

to our country’s economic stability. Out of the sheer 

necessity and lack of authority to levy and collect

taxes, Congress established the Department of the 

Treasury on September 2, 1789, for the primary 

purpose of managing the U.S. government’s finances. 

President George Washington appointed Alexander 

Hamilton as Treasury’s first Secretary. Just nine 

days after the Department originated, Secretary 

Hamilton took office. Since that time, we have served 

under 76 Treasury Secretaries. 

Throughout history, Treasury was the foundation for

other federal agencies. The U.S. Postal Service, U.S. 

Customs Service, Secret Service, Federal Law 

Enforcement Training Center, and U.S. Coast Guard 

– to name a few – were all, at one point, under 

Treasury’s jurisdiction. 

TODAY’S TREASURY AND HOW WE SERVE THE 

NATION

Treasury remains the premier financial institution of the 

United States, responsible for managing our nation’s debt, 

cash, loans made to other federal agencies, tax collection, 

money production, and economic policy formulation. We 

are a trusted policy advisor to the President, formulating 

and recommending domestic and international financial, 

economic, and tax policy. We contribute to the development 

of key policies that shape our economic health and financial 

security, while simultaneously and seamlessly managing 

the public debt and monitoring the Nation’s surplus and

deficit. 

The Department also performs a critical and far-reaching 

role in enhancing national security and reducing our 

exposure to international terrorism by implementing 

U.S. Department of the Treasury building, 

Washington, D.C.(current) 

DEPARTMENT OF THE TREASURY

East front of the Main Treasury circa 1865. The 336-foot 

long colonnade was rebuilt with granite in 1908. On the 

right stands the old State Department building, which 

was razed in 1866 to make room for the north wing of 

Main Treasury. 

DEPARTMENT OF THE TREASURY
10 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS

economic sanctions against foreign threats to the 

United States.

Additionally, we identify and target the financial 

support networks of national security threats to sever 

their funding streams. At the same time, we improve

safeguards on U.S. financial systems to help combat 

cyber threats. We also leverage our relationships 

with our federal partners and the private sector to 

identify cutting-edge technologies to identify, detect,

and prevent threats to our economic stability before 

occurring.

In recent years, we assisted the Administration in 

taking extraordinary steps to alleviate the effects of 

natural and man-made disasters in the Gulf of Mexico 

and other regions; worked to increase opportunities 

for small businesses, which are the backbone of our 

economy; helped to create jobs to improve the wellbeing of U.S. citizens; and led the safeguarding and 

growth of our national economy. Since 2008, we have 

held investments in two Government Sponsored

Enterprises (GSEs) – Fannie Mae and Freddie Mac –

and are committed to help maintain their solvency so 

they can continue fulfilling their vital roles in the 

home mortgage market. We have been a continuously 

influential part of the government’s service to the 

American people, growing and developing to meet the 

Nation’s needs.

Globally, Treasury represents the U.S. in key

economic forums and international financial 

institutions, including the Group of Seven (G-7) and 

the G-20, which hold annual summits with heads of 

state to discuss global foreign policy issues. Treasury 

plays a vital role in promoting stability and growth in 

the global economy via our leadership roles in the 

International Monetary Fund, the World Bank, the 

regional development banks, and other multilateral 

organizations like the Financial Stability Board and 

the Financial Actions Task Force. 

Although Treasury has evolved to meet the Nation’s

needs, our core mission has remained the same since 

1789. Today, with approximately 100,000 employees, 

we remain steadfast in our commitment to promote 

conditions that enable economic growth and stability 

at home and abroad, protect the integrity of the 

financial system, and effectively manage the U.S. 

government’s finances and resources. We remain the 

principal steward of the U.S. economy — collecting 

revenue, meeting financial obligations, and, when 

appropriate, borrowing and investing public funds.
DEPARTMENT OF THE TREASURY 11

MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2016 AGENCY FINANCIAL REPORT

ORGANIZATION

Treasury is organized into the Departmental Offices, seven bureaus, and three offices of inspector general. The 

Departmental Offices are primarily responsible for policy formulation, while the bureaus are the operating units of 

the organization.
12 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS

DEPARTMENTAL OFFICES

Domestic Finance works to preserve confidence in the 

U.S. Treasury securities market, effectively manage 

federal fiscal operations, strengthen financial 

institutions and markets, promote access to credit, and 

improve financial access and education in service of 

America’s long-term economic strength and stability. 

Terrorism and Financial Intelligence (TFI) uses 

Treasury’s unique financial intelligence, expertise,

and authorities to disrupt and disable terrorists, 

criminals, and other national security and foreign 

policy threats to the United States and to protect the 

U.S. and international financial systems from abuse. 

International Affairs protects and supports U.S. 

economic prosperity and national security by working 

to foster the most favorable external environment for 

sustained employment and economic growth.

Tax Policy develops and implements tax policies and 

programs, reviews regulations and rulings to 

administer the Internal Revenue Code, negotiates tax 

treaties, and provides economic and legal policy 

analysis for domestic and international tax policy 

decisions. Tax Policy also provides revenue estimates 

for the President’s Budget. 

 

Other offices within Departmental Offices include 

General Counsel, Legislative Affairs, and Public 

Affairs.

Economic Policy reports on current and prospective 

economic developments and assists in the 

determination of appropriate economic policies. The 

office is responsible for the review and analysis of 

domestic economic issues and developments in the 

financial markets. 

The Treasurer of the United States oversees the U.S. 

Mint and Bureau of Engraving and Printing, chairs 

the Advanced Counterfeit Deterrence Steering 

Committee, and is a key liaison with the Federal 

Reserve. In addition, the Treasurer serves as a senior 

advisor to the Secretary in the areas of community 

development and public engagement. 

The Office of Management, including the Chief 

Financial Officer (CFO), manages the Department’s 

financial resources and oversees Treasury-wide 

programs, including human capital, information 

technology, acquisition, and diversity and inclusion. 

INSPECTORS GENERAL

 

Three Inspectors General – the Office of Inspector 

General (OIG), the Treasury Inspector General for Tax 

Administration (TIGTA), and the Special Inspector 

General for the Troubled Asset Relief Program 

(SIGTARP) – provide independent audits, 

investigations, and oversight of Treasury and our

programs. 
DEPARTMENT OF THE TREASURY 13

MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2016 AGENCY FINANCIAL REPORT

BUREAUS 

The Alcohol and Tobacco Tax and Trade Bureau 

(TTB) collects federal excise taxes on alcohol, tobacco, 

firearms, and ammunition and is responsible for 

enforcing and administering laws covering the 

production, use, and distribution of alcohol products. 

The Bureau of Engraving and Printing (BEP)

develops and produces U.S. currency notes that are 

trusted worldwide.

The Financial Crimes Enforcement Network 

(FinCEN) safeguards the financial system from illicit 

use, combats money laundering, and promotes 

national security through the collection, analysis, and 

dissemination of financial intelligence and strategic 

use of financial authorities. 

The Bureau of the Fiscal Service (Fiscal Service)

provides central payment services to federal program 

agencies, operates the U.S. government’s collections 

and deposit systems, delivers administrative shared 

services to federal agencies, provides government-wide 

accounting and reporting services, manages the 

collection of delinquent debt owed to the U.S. 

government, borrows the money needed to operate the 

U.S. government through the sale of marketable, 

savings, and special-purpose U.S. Treasury securities 

(including the state and local government series), and 

accounts for and services the public debt. 

The Internal Revenue Service (IRS) is the largest of 

our bureaus and determines, assesses, and collects tax 

revenue in the United States.

The United States Mint (U.S. Mint) designs, mints, 

and issues U.S. circulating and bullion coins; prepares 

and distributes numismatic coins and other items; 

and strikes Congressional Gold Medals and other 

medals of national significance. The U.S. Mint 

maintains physical custody and protection of most of 

the Nation’s gold and all of its silver assets. 

The Office of the Comptroller of the Currency (OCC)

charters, regulates, and supervises national banks 

and federal savings associations (thrifts) to ensure 

that they operate in a safe and sound manner, provide 

fair access to financial services, treat customers fairly, 

and comply with applicable laws and regulations. The 

OCC also supervises federal branches and agencies of 

foreign banks and has rule-making authority for all 

savings associations. 
14 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS

TREASURY STRATEGIC FRAMEWORK

The Government Performance and Results Act

(GPRA) and the GPRA Modernization Act of 2010

establish the need for agencies to identify 

performance goals, report progress against targets, 

and conduct data-driven reviews. When done well, 

these practices serve two key purposes for 

stakeholders within and outside of the organization: 

to assess the organization’s health and impact and to 

inform decision-making and strategy, including 

effective resource allocation. In this spirit, we 

developed a strategic framework supported by using 

best-in-class organizational performance practices to 

ultimately help achieve our strategic goals. 

TREASURY ORGANIZATIONAL PERFORMANCE 

REVIEW CYCLE

Our organizational performance reviews provide a 

regular forum for open dialogue and coordination 

between departmental, bureau, and office leadership. 

We bring together different perspectives to set and 

align priorities, identify and solve problems, review 

agency performance goals, and drive results. The 

cycle integrates statutory requirements to conduct 

quarterly performance reviews of agency goals and a 

Strategic Objective Annual Review (SOAR), which 

analyzes cross-cutting performance and designates a 

set of strategic objectives as making “Noteworthy 

Progress” or as a “Focus Area for Improvement.”

Sessions

Fall 

(October – November)

Winter 

(February - March) 

Spring

(April – May)

Summer 

(June – July)

FocusPerformance Strategic Objective Annual 

Review (SOAR)

Performance Budget

ChairDeputy Secretary

(COO)/Assistant Secretary 

for Management (ASM/PIO)

ASM/PIO and Deputy PIO COO/ASM (PIO) ASM (PIO)

Goals/Outcomes • Gain a shared 

understanding of prior

year’s performance at the 

bureau/office level

• Set priorities for current 

year

• Recognize successes

• Evaluate cross-agency 

progress toward strategic 

objectives

• Identify strategic shifts/

validate Treasury priorities

• Outline potential topics for 

annual FedStat meeting 

with OMB

• Assess progress on 

priorities

• Surface problems or 

assistance needed

• Recognize successes

• Connect priorities to 

future funding

• Explore performance 

impacts

• Strengthen IT 

acquisition 

budgeting 

accountability
DEPARTMENT OF THE TREASURY 15

MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2016 AGENCY FINANCIAL REPORT

FY 2014 - 2017 STRATEGIC FRAMEWORK

The strategic framework comprises the Department’s FY 2014-2017 strategic goals and objectives and FY 2015-

2016 Agency Priority Goals (APGs), which align to specific objectives. All bureaus and offices align their programs 

and performance within this framework.

Strategic Goals Strategic Objectives/APGs

Contributing 

Bureaus/Offices

Economic

Goal 1: Promote 

domestic economic 

growth and stability 

while continuing 

reforms of the 

financial system

1.1: Promote savings and increased access to credit and affordable housing options

1.2: Wind down emergency financial crisis response programs

1.3: Complete implementation of financial regulatory reform initiatives, continue 

monitoring capital markets, and address threats to stability

1.4: Facilitate commerce by providing trusted and secure U. S. currency, products, 

and services for use by the public

Domestic Finance

International Affairs

Economic Policy

BEP

Fiscal Service

OCC

TTB

U.S. Mint

Goal 2: Enhance U.S. 

competitiveness 

and job creation, 

and promote 

international 

financial stability 

and more balanced 

global growth

2.1: Promote free trade, open markets, and foreign investment opportunities

2.2: Protect global economic and financial stability and press for market-determined 

foreign exchange rates

2.3: Advance U.S. economic, financial, and national security goals by leveraging 

multilateral mechanisms

2.4: Provide technical assistance to developing countries working to improve public 

financial management and strengthen their financial systems

International Affairs

TFI

Economic Policy

Tax Policy

Financial

Goal 3: Fairly and 

effectively reform 

and modernize 

federal financial 

management, 

accounting, and tax 

systems

3.1: Improve the efficiency and transparency of federal financial management and 

government-wide accounting

 Aligned APG: Financial Transparency

3.2: Improve the disbursement and collection of federal funds and reduce improper 

payments made by the U.S. government

3.3: Pursue tax reform, implement the Patient Protection and Affordable Care Act (ACA) 

and Foreign Account Tax Compliance Act, and improve the execution of the tax 

code

Domestic Finance

Tax Policy

Fiscal Service

IRS

TTB

Security

Goal 4: Safeguard 

the financial system 

and use financial 

measures to counter 

national security 

threats

4.1: Identify priority threats to the financial system using intelligence analysis and 

outreach to the financial sector

4.2: Develop, implement, and enforce sanctions and other targeted financial measures

4.3: Improve the cybersecurity of our nation’s financial sector

4.4: Protect the integrity of the financial system by implementing, promoting, and 

enforcing anti-money laundering and counterterrorism financing standards

TFI

Domestic Finance

FinCEN

OCC

Management

Goal 5: Create a 

21st-century 

approach to 

government by 

improving efficiency, 

effectiveness and 

customer 

interaction

5.1: Increase workforce engagement, performance, and diversity by instilling excellence, 

innovation, and inclusion in Treasury’s organizational culture and business practices

5.2: Support effective, data-driven decision-making and encourage transparency 

through intelligent gathering, analysis, sharing, use, and dissemination of 

information 

5.3: Promote efficient use of resources through shared services, strategic sourcing, 

streamlined business processes, and accountability

5.4: Create a culture of service through relentless pursuit of customer value 

 Aligned APG: Increasing IRS Self-Service Options for Taxpayers

All Offices and 

Bureaus, led by the 

Office of 

Management
16 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS

PERFORMANCE OVERVIEW 

Goal 1: Promote domestic growth and stability while continuing reforms 

of the financial system

Economic growth stimulates opportunity, mobility, and 

security for Americans – and allows citizens and 

businesses to have more confidence in the safety and 

soundness of the financial system. Strategic objectives 

for achieving our first goal are to: (i) promote savings 

and increased access to credit and affordable housing; 

(ii) wind down emergency financial crisis response 

programs; (iii) implement financial regulatory reform 

initiatives, continue monitoring capital markets, and 

address threats to stability; and (iv) facilitate commerce 

by providing trusted and secure U.S. currency, products, 

and services for use by the public.

We continue to work closely with other agencies and 

monitor the evolving market structure and liquidity. 

For example, we issued a request for information (RFI), 

“Public Input on Expanding Access to Credit through 

Online Marketplace Lending”, in January 2016. 

Through this effort, we took steps to understand the 

potential opportunities and risks presented by this 

evolving industry, and to foster discourse about how this 

industry could best serve the financial needs of the 

American people.

We received hundreds of responses to the RFI from 

online marketplace lenders, trade associations, 

consumer and small business advocates, academics, 

investors, and financial institutions. Comments covered 

a wide range of issues, but common themes emerged. 

They include the risks and benefits of using various 

underwriting techniques, opportunities to expand access 

to credit, new credit models and operations that remain 

untested, enhanced safeguards that small business 

borrowers will require, and greater transparency that 

can benefit borrowers and investors. In May 2016, we 

released a white paper, “Opportunities and Challenges 

in Online Marketplace Lending.” The paper discusses 

these important themes, highlights certain best 

THINKSTOCK .com

Strengthening Consumers’

Financial Safeguards

The Dodd-Frank Wall Street Reform and Consumer 

Protection Act, signed into law on July 21, 2010,

made important and fundamental changes to the 

structure of the U.S. financial system to strengthen 

safeguards for consumers and investors and to 

provide better tools for limiting risk in the major 

financial institutions and financial markets.
DEPARTMENT OF THE TREASURY 17

MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2016 AGENCY FINANCIAL REPORT

practices, and provides policy recommendations. To 

follow up, we are facilitating interagency coordination 

through the creation of a standing working group on 

online marketplace lending with other federal agencies. 

Our partners include the Consumer Financial Protection 

Bureau, the Federal Deposit Insurance Corporation, the 

Federal Reserve Board, the Federal Trade Commission, 

the Securities and Exchange Commission, the Small 

Business Administration, a representative of a state 

bank supervisor, and the OCC. During 2016, the group 

met four times to discuss and share information on 

marketplace lending issues.

In addition, Treasury’s Office of Financial Stability 

(OFS) has undertaken efforts to effectuate a smooth 

wind-down of the Making Home Affordable program 

(MHA), which will close to new applications in 

December 2016. To this end, OFS initiated and 

continues to work with stakeholders to influence a 

framework for loss mitigation following the end of 

MHA. This included joint publication with the 

Department of Housing and Urban Development (HUD)

and the Federal Housing Finance Agency in July of a 

white paper designed to serve as a guide for future loss 

mitigation programs that drew from the lessons learned 

from the government’s crisis-era housing programs. At 

the same time, OFS continues to implement the Hardest 

Hit Fund (HHF) to help stabilize housing markets in 18

states and the District of Columbia. In April 2016, OFS 

concluded a process to allocate an additional $2 billion 

to HHF, enabling participating states to continue 

helping struggling homeowners avoid foreclosure and to 

stabilize their state housing markets.

In September 2016, our Community Development 

Financial Institutions Fund (CDFI Fund) awarded 32

organizations nearly $91.5 million in grants for the 

development of affordable housing and community 

facilities in low-income communities. These awards 

were made through the FY 2016 round of the Capital 

Magnet Fund (CMF). They will support financing for 

the preservation, rehabilitation, development or

purchase of affordable housing for low-income 

communities. These grants will also support related 

economic development and community service facilities 

such as day care centers, workforce development 

centers, and health care clinics. Recipients are able to 

use CMF awards to create financing tools such as loan 

reserves, loan funds, risk sharing loans, and loan 

guarantees. CMF awards must be used to leverage 

 The front of the new $20 note will feature the portrait of 

Harriet Tubman, whose life was dedicated to fighting for 

liberty. The reverse of the new $20 note will depict the 

White House and an image of President Andrew Jackson. 

DEPARTMENT OF THE TREASURY

Introducing the New $20, $10, 

and $5 Notes

America’s currency is a statement about who we 

are as a nation. Our modern money honors our 

history and celebrates our values. Building on 

tremendous feedback from Americans across our 

country about the theme of democracy, Treasury 

will create new design concepts for the $20, $10, 

and $5 dollar notes. For the first time in over a 

century, the front of our currency will feature the 

portrait of a woman — Harriet Tubman on the 

$20 note. Learn more about our currency 

redesign at https://modernmoney.treasury.gov/.
18 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS

housing and economic development investments to 

achieve a leverage ratio of at least 10:1.

Also, the Small Business Jobs Act of 2010 created the 

CDFI Bond Guarantee Program, which is administered 

by the CDFI Fund. Bonds issued under the program 

support CDFI lending activity in underserved 

communities by providing a source of long-term, lowcost capital. Since 2013, we have provided bond 

guarantees totaling $1.11 billion for financial 

institutions to finance small businesses, affordable 

rental housing, day care centers, senior living facilities, 

charter schools, and health care facilities. On 

September 28, 2016, we announced that an additional 

two bond issuances, totaling $265 million, were 

guaranteed in FY 2016.

KEY PERFORMANCE DATA HIGHLIGHTS

Measure 

(Responsible Bureau/Office)

FY 13 FY 14 FY 15 FY 16 FY 16

Target Result vs Target

Percentage of CDFI Program loans & 

investments originated to eligible distressed 

communities or underserved populations by 

dollar amount (%) (Domestic Finance - CDFI 

Fund)1

77.1 70.8 80.1 80.9 60.0 Exceeded

Manufacturing costs for currency – dollar 

costs per thousand notes produced (BEP)2 50.5 42.0 42.4 44.3 50.0 Exceeded

Seigniorage per dollar issued (Mint)3 .24 .37 .49 .52 .47 Exceeded

Percent of permit applications processed 

within service standards (TTB)4 50 58 47 32 85 Unmet

Percent of label and formula applications 

processed within service standards (TTB)5 49 67 75 75 85 Unmet

Explanation of Results

1This measure demonstrates the impact of CDFI awardees in serving eligible distressed communities and underserved 

populations by lending reported during the program year. By regulation, all certified CDFIs must originate 60 percent or more of 

their loans and investments in eligible distressed census tracts or to underserved populations. The target is a threshold that must 

be met or exceeded, recognizing the need for CDFIs to balance their mission to service distressed communities and underserved 

populations against financial safety and soundness considerations. The FY 2016 results exceeded the threshold target reflecting 

the mission-oriented lending by the reporting awardee cohort, and improvements in reporting systems and guidance on how to 

track the deployment of loans.

2This measure calculates the actual manufacturing cost for currency notes, which include direct labor costs, the cost of raw 

materials used, and related manufacturing overhead charges. The FY 2016 cost was lower than anticipated due to savings 

resulting from decreased spoilage as well as the recovery of Series 2009 $100 notes thru the Single Note Inspection process.

3This measure calculates the difference between the face value and the cost of minting and issuing circulating coins. Seigniorage 

per dollar issued is the seigniorage generated from each dollar of circulating coinage face-value shipped to Federal Reserve 

Banks. FY 2016 results exceeded the target and prior year performance as a result of a 1 percent increase in circulating shipment 

volumes combined with a 10 percent decrease in cost of goods sold.

4This measure indicates how often TTB processes permit applications within the established customer service standards, which 

are reviewed annually for new businesses seeking to engage in alcohol or tobacco manufacturing or distribution to ensure timely 

market entry for qualified individuals. TTB continues to face challenges in timely service due to resource constraints combined 

with the recent spike in applications for new breweries, wineries, and distilleries. TTB expects performance improvement in FY 

2017 as a result of workflow enhancements implemented this fiscal year. TTB also continues to develop enhancements to its 

electronic filing system to reduce application errors that delay processing times. 

5This measure indicates how often TTB processes alcohol beverage label and formula applications within the customer service 

standards established for the respective programs to improve consistency and reliability for the business community served. 

Service standards are annually reviewed and updated to account for various factors, including workload and resources. 

Performance in the latter half of the fiscal year improved dramatically following an infusion of dedicated resources provided in 

the FY 2016 enacted budget for this program. TTB expects the additional staffing and ongoing efforts to manage workload 

volume through the elimination of filing requirements and improved application compliance will result in significant and 

sustainable improvements.
DEPARTMENT OF THE TREASURY 19

MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2016 AGENCY FINANCIAL REPORT

Goal 2: Enhance U.S. competitiveness and job creation, and promote 

international financial stability and more balanced global growth

We protect and support American economic prosperity 

by strengthening the external environment for U.S. 

growth, preventing and mitigating global financial 

instability, and managing key global challenges. Our 

strategic objectives for achieving our second goal are

to: (i) promote free trade, open markets, and foreign 

investment opportunities; (ii) protect global economic 

and financial stability and press for marketdetermined foreign exchange rates; (iii) advance U.S. 

economic, financial, and national security goals by 

leveraging multilateral mechanisms; and (iv) provide 

technical assistance to developing countries working 

to improve public financial management and 

strengthen their financial systems. In FY 2016, we 

identified objective 2.3 as achieving noteworthy 

progress due to Congressional passage of the 2010 

IMF Quota and Governance Reforms, which was a 

focus area for improvement in FYs 2014 and 2015.

EFFORTS TO PROMOTE GLOBAL STABILITY

In December 2015, Congress approved the IMF Quota 

and Governance Reforms to strengthen the IMF in its 

role of supporting global growth and financial 

stability. The reforms significantly increased the 

IMF's core resources, enabling swift and effective 

responses to crises, and also improved the IMF's 

governance by better reflecting the increasing role of 

dynamic emerging and developing countries in the 

global economy. Since the global financial crisis, the 

international financial regulatory community has 

taken important steps to foster a more resilient 

financial system through shoring up bank balance 

sheets, developing tools to resolve failing institutions, 

assessing risks from non-bank financial institutions, 

and strengthening derivatives markets and central 

counterparty clearing. We continue working with 

international partners, including the Financial 

Stability Board, Financial Action Task Force, IMF, 

and World Bank to address challenges related to a 

decline in correspondent banking relationships, 

including by prioritizing technical assistance aimed at 

helping countries address deficiencies in their 

financial sector supervisory regime and by clarifying 

regulatory expectations. 

We also leveraged strong multilateral institutions to 

make progress in supporting global growth and 

reinforcing norms against unfair currency practices.

The G-20 members in Shanghai in February 2016 

committed to using all policy tools—monetary, fiscal, 

and structural—to boost economic growth in a time of 

weak demand. The G-20 also committed to refrain 

from competitive devaluation and, for the first time, 

to consult on foreign exchange markets to avoid 

surprises that could threaten global financial 

stability. 

In November 2015, Treasury and macroeconomic 

policy authorities of the 11 other Trans-Pacific 

Partnership (TPP) countries adopted provisions to 

address unfair currency practices in the context of the 

TPP free trade agreement. This first-ever Joint 

Declaration sets a high standard among TPP 

countries to prevent unfair currency practices, and 

calls for unprecedented transparency and 

accountability among countries that are entering into 

a trade agreement. All TPP countries committed to 

avoid unfair currency practices and refrain from 

competitive devaluation; to publicly report their 

foreign exchange intervention and foreign reserves 

data; and to consult regularly to address 

macroeconomic issues, including engaging on efforts 

to avoid unfair currency practices. We developed and 

negotiated the Joint Declaration, which addresses the 

principal negotiating objectives on currency that 

Congress included in the Trade Priorities and 

Accountability Act passed in June 2015. 
20 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS

At the June 2016 U.S.-China Strategic and Economic 

Dialogue we secured new commitments that help 

ensure that China’s economic growth continues to 

deliver concrete benefits for the American people. 

China committed to clearly communicate its economic 

policies and to improve the transparency and scope of 

economic and financial data, which will benefit U.S. 

firms and investors, in addition to the global economy 

and financial system. The United States and China 

committed to a policy framework for the private sector 

to further develop renminbi trading and clearing 

capacity, thus expanding the ability of U.S. firms and 

investors to access and transact in China’s currency, 

enhancing their competitiveness in capturing trade 

and investment opportunities in China. New efforts 

were announced to address regulatory barriers and 

promote more open trade in sectors including 

biotechnology products, financial services, aviation 

services, and information and communications 

technology. As the world’s two largest economies, 

cooperation between the United States and China is 

vital for tackling many of today’s most pressing global 

challenges. These include progress in the 

development of new international export credit 

guidelines and China’s commitment to play a more 

constructive role in the Paris Club, including further 

discussion on potential membership. The two 

countries also pledged to work together to prioritize 

efforts to provide public financing for low-carbon 

technologies, and eliminate inefficient fossil fuel 

subsidies. China also committed to a package of 

structural reform policies that would make its steel 

industry more responsive to market forces and reduce 

net steel capacity. China committed to support 

international efforts to address excess capacity 

through the establishment of a Global Forum on Steel 

and to maintain communication on excess capacity in 

the aluminum sector. 

We, along with the Office of the U.S. Trade 

Representative, announced the intention to negotiate 

a covered agreement with the European Union in 

November 2015 that will, among other things, help 

level the playing field for American insurers and 

reinsurers. U.S. and European Union representatives 

met three times in FY 2016 to discuss prudential 

insurance and reinsurance measures. Both sides 

committed to pursuing an agreement on matters 

relating to group supervision, exchange of information 

between supervisory authorities, and reinsurance

supervision, including collateral. Representatives are 

currently continuing the negotiations.

 Strategic Economic Dialogue in Beijing, China, 

June 6-7, 2016.

DEPARTMENT OF THE TREASURY

Improving U.S. Economic 

Engagement with China

Secretary Lew and Chinese Vice Premier Wang Yang 

were joined by leaders from 16 U.S. government 

agencies and senior officials representing key 

Chinese ministries and agencies. Since its 

establishment in 2009, this economic forum has 

served as a platform for the two sides to make 

progress on core issues in the economic relationship. 

The Administration has secured actions from China 

that:

- level the playing field for U.S. workers and 

firms;

- deepen cooperation on global challenges 

such as climate change; and 

- promote critical market-oriented reforms in 

China.
DEPARTMENT OF THE TREASURY 21

MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2016 AGENCY FINANCIAL REPORT

PROTECTING THE GLOBAL FINANCIAL SYSTEM

In November 2015, we announced further guidance to 

make it more difficult for companies to undertake an 

inversion and to reduce the economic benefits of doing 

so. A corporate inversion is a transaction in which a 

U.S.-parented multinational group changes its tax 

residence to reduce or avoid paying U.S. taxes. In 

April 2016, we released temporary regulations that 

incorporated rules from prior inversion guidance (i.e., 

two notices issued in 2014 and 2015). In addition, the 

temporary regulations served to further limit 

inversions by disregarding foreign parent stock 

attributable to certain prior acquisitions of U.S. 

companies. As part of the same package, we released 

proposed regulations addressing the issue of earnings 

stripping by targeting transactions that increase 

related-party debt that does not finance new 

investment in the United States. 

In May 2016, we finalized a customer due diligence 

rule that will require financial institutions to identify 

beneficial owners of companies that become their 

customers. Some bad actors have used shell 

companies and offshore accounts to evade taxes, 

launder money, or finance terrorist activity. We also 

took several steps to further increase transparency 

and disclosure requirements, including proposing a 

rule requiring certain foreign-owned companies to 

obtain a tax identification number from the IRS, 

thereby requiring these entities to report ownership 

and transaction information to the IRS. These steps 

serve to help combat money laundering and tax 

evasion, but additional tools are needed to promote 

transparency and strengthen law enforcement. 

KEY PERFORMANCE DATA HIGHLIGHTS

Measure 

(Responsible Bureau/Office)

FY 13 FY 14 FY 15 FY 16 FY 16

Target Result vs Target

Timely review of Committee on Foreign 

Investment in the U.S. (CFIUS) cases (%) 

(International Affairs)1

100 100 100 100 100 Met

Program Engagement (Traction) – scope and 

intensity of engagement – 5 point scale 

(Office of Technical Assistance or OTA)2

3.8 3.7 3.8 3.9 3.6 Exceeded

Explanation of Results 

1By statue and regulation, CFIUS must complete its consideration of a covered transaction within 75 days of acceptance of a notice 

regarding the transaction, except for transactions for which CFIUS has granted a party’s request for withdrawal from CFIUS ‘s

consideration or that are the subject of notices that CFIUS has rejected due to, e.g., a material misstatement. The 100 percent 

result for FY 2016 reflects that CFIUS timely reviewed all such notified transactions for national security concerns and concluded 

action after determining there were no unresolved national security concerns.

2This measure indicates the degree to which foreign counterparts are engaging proactively and constructively with OTA advisors at 

both the working and policy levels. Counterpart engagement is crucial to the achievement of a project’s intermediate goals and 

ultimate outcomes such as passage of law or regulation, an increase in government revenues, more transparent budgets, an 

improvement in a government’s credit rating, or a reduction in economic crimes. The measure is scored on a 5-point scale, and 

averaged across all projects to provide one overall measure of OTA’s performance. In FY16, the average score for OTA projects was 

3.9, up from 3.8 in the prior reporting period. It should be noted that assigning an aggregate numerical value to a program that 

consists of more than 90 individual projects does not convey the inevitable deviation from one project to the next. Moreover, OTA 

engages in a broad range of countries where policy, political and security environments are more or less conducive to achieving 

traction with foreign counterparts. In that context, OTA’s aggregate score reflects generally strong traction with foreign 

counterparts. 
22 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS

Goal 3: Fairly and effectively reform and modernize federal financial 

management, accounting, and tax systems

Treasury is entrusted with managing the Nation’s 

finances. This includes collecting money due to the 

U.S. government, making payments owed by the 

United States, and financing the federal government 

by determining and executing a borrowing strategy 

that meets the federal government’s needs at the 

lowest cost. Strategic objectives for achieving this

goal are to: (i) improve the efficiency and 

transparency of federal financial management and 

government-wide accounting; (ii) improve the 

disbursement and collection of federal funds and 

reduce improper payments made by the U.S. 

government; and (iii) pursue tax reform, implement 

the ACA and the Foreign Account Tax Compliance Act 

(FATCA), and improve the execution of the tax code.

DIGITAL ACCOUNTABILITY AND 

TRANSPARENCY ACT OF 2014 (DATA ACT)

Treasury continues our important role leading the 

government in modernizing federal financial 

management. As co-lead with the Office of 

Management and Budget (OMB), we designated 

implementation of the DATA Act as an APG for FYs

2016-2017. Through this initiative, we are engaging

with other organizations and communities that create 

and use federal data to make it more transparent and 

available to the American people. 

Last year, we worked with OMB to finalize data 

definition standards. In April 2016, we released the 

DATA Act Information Model Schema Version 1.0 

(DAIMS v1.0), which defines the relationships 

between data elements and provides technical 

guidance for agencies on what data to report to us and 

what format to use. We reviewed hundreds of 

comments by the public and federal agencies before 

finalizing DAIMS v1.0.

In addition, we made progress in developing the 

DATA Act operating infrastructure, including

developing the DATA Act Broker. It is a web-based 

tool agencies will use to submit and validate their 

data for publication on USAspending.gov. Treasury 

also launched OpenBeta to obtain feedback from the 

public on future design of USAspending.gov. 

OpenBeta is a public interactive website where users 

can participate in the website’s development. Finally, 

Treasury and OMB developed recommendations for a 

future governance structure for expanding and 

maintaining the data exchange standards. 

TAX ADMINISTRATION

Effective tax administration is a critical part of our 

mission. Ensuring the efficiency and transparency of 

financial management processes and the integrity and 

accuracy of government accounting of tax revenues is 

an ongoing area of focus for the Department. As part 

of this effort, we have continued to work to improve 

tax administration through the modernization of 

systems, and the strengthening of fraud and identity 

theft protections. To facilitate these efforts, the IRS 

received a funding increase of $290 million in FY 2016 

specifically for the purpose of achieving "measurable 

improvements in the customer service representative 

level of service rate, to improve the identification and 

prevention of refund fraud and identity theft, and to 

enhance cybersecurity to safeguard taxpayer data." 

With these additional resources the IRS was able to 

increase the level of telephone service rate to 72.1 

percent during the most recent filing season (January 

through April) as well as develop and deploy several 

new cybersecurity initiatives. Despite these 

improvements, the total FY 2016 IRS budget of 

$11.235 billion remains $911 million below the 

FY 2010 enacted level which, combined with 

inflationary growth in labor and non-labor expenses, 

has resulted in a reduction of more than 15,000 fulltime employees.
DEPARTMENT OF THE TREASURY 23

MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2016 AGENCY FINANCIAL REPORT

These funding constraints continued to significantly 

affect the IRS’s ability to modernize and improve 

information technology systems. Without adequate 

funding to address the aging infrastructure, the IRS’s 

tax administration systems and cybersecurity 

infrastructure become increasingly vulnerable. 

Additionally, we will need to reduce hiring and defer 

infrastructure and technology investments. Since 

over 56 percent of the IRS workforce is fifty years of 

age or older, the lack of needed new hires prevents the 

transfer of knowledge from the IRS’s existing 

workforce, which is essential to prevent loss of critical 

knowledge and experience as retirements occur over 

the next several years. In order to manage the 

current funding situation, the IRS prioritized the 

allocation of resources toward areas of critical and 

immediate need, such as the delivery of a successful 

filing season in 2016 and the ongoing implementation 

of multiple legislative mandates.

Several key areas of focus for the IRS in FY 2016 were 

continuing the implementation of the ACA tax 

provisions and the FATCA, and administering the 

existing tax code fairly and effectively. For the ACA, 

the IRS improved education and outreach to 

taxpayers, employers, and tax professionals this year 

by developing and distributing materials such as 

webinars, social media broadcasts, and traditional 

media publications. The IRS also revised several 

forms, instructions, and notices in order to improve 

comprehension and readability and to ensure that 

taxpayers understood their tax filing responsibilities. 

In order to ensure compliance with ACA-related filing 

requirements, the IRS worked closely with the 

Centers for Medicare and Medicaid Services (CMS) to 

conduct outreach to uninsured people who paid the 

penalty or claimed an exemption, letting them know 

that tax credits are available for marketplace 

coverage and providing information about their health 

coverage options. In addition, during the course of the 

filing season, the IRS processed a significant number 

of ACA related documents. 

THINKSTOCK .com

IRS’ Dirty Dozen Scam List: 

Don’t be a Victim

Each year, individuals fall prey to tax scams. 

That’s why the IRS provides a list of its annual 

“Dirty Dozen.” Illegal scams can lead to 

significant penalties and interest and possible 

criminal prosecution. IRS Criminal Investigation 

works closely with the Department of Justice to 

shutdown scams and prosecutes the criminals 

behind them. Additional information about tax 

scams available on IRS social media sites provide 

in depth information on various types of scams 

such as identity theft, telephone scams, phishing, 

return preparer fraud, and fake charities. The 

best defense is to remain informed and alert.
24 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS

The IRS is also continuing to implement FATCA. 

This legislation requires foreign financial institutions 

(FFIs) to report detailed information about foreign 

account holders to the IRS or face a 30 percent 

withholding tax. This program has an unprecedented

impact on stakeholders worldwide, including the 

global financial industry, U.S. taxpayers domestically

and overseas, and foreign tax administrations. The 

IRS has been continuing efforts to reach out to 

impacted entities and paid preparers in order to 

provide education on the FATCA filing and reporting 

requirements. IRS registration efforts support the 

program; in FY 2016 nearly 190,000 financial 

institutions registered with the IRS, while over 5,000

financial institutions have enrolled in the 

International Data Exchange Service to submit 

FATCA returns to the IRS. 

In order to support the FATCA program, the IRS 

continued to develop and deploy the FATCA 

registration system, which provided improved online 

services for FFIs, and enhanced the IRS's ability to

capture, exchange, manage, and analyze data. By the 

end of FY 2016, more than 48,000 of the over 217,000 

Financial Institutions and sponsored entities in the 

FATCA program with active Global Intermediary 

Identification numbers registered with the IRS. 

Finally, in the realm of tax enforcement, the IRS 

updated the FATCA Compliance Roadmap with 

additional approaches to identifying non-compliance 

by FFIs.

IDENTITY THEFT AND IMPROPER PAYMENTS

Identity theft continues to be a serious and evolving 

issue, which has a significant impact on tax 

administration. In FY 2016, the IRS stopped more 

than $4 billion in fraudulent refunds claimed by 

identity thieves on more than 787,000 tax returns. In 

March 2015, the IRS established a Security Summit, 

an unprecedented public-private partnership 

consisting of leaders from the IRS and state tax 

agencies and the private sector tax industry. One of 

the most important aspects of the Security Summit’s 

charge is to ensure that the IRS, tax administrators,

and tax industry leaders share information with one 

another and among their work groups about what 

they are doing to combat identity theft and fraud. 

Since March 2015, Summit partners protected 

taxpayers from tax-related identity theft, stopped 

suspicious tax returns, and prevented fraudulent 

refunds from getting into criminals’ hands. Because 

of the safeguards enacted by this partnership, fewer 

people became victims of tax-related identity theft 

during the 2016 filing season. 

DEPARTMENT OF THE TREASURY

Reducing Improper Payments

Fiscal Service – the primary disburser of payments 

to individuals and vendors on behalf of federal 

agencies – established the “Do Not Pay” portal to 

help federal agencies reduce improper payments. 

The portal helps identify ineligible recipients by 

verifying eligibility of a vendor, grantee, loan 

recipient, or beneficiary prior to award; and reverifying eligibility before, during, and after

payments are made. The Portal’s mission is to 

protect the integrity of the government’s payment 

process by assisting agencies in mitigating and 

eliminating improper payments in a cost-effective 

manner while safeguarding the privacy of 

individuals.
DEPARTMENT OF THE TREASURY 25

MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2016 AGENCY FINANCIAL REPORT

Because of Security Summit efforts, the number of 

anticipated taxpayer victims fell between 2015 and 

2016. The number of refunds that banks and 

financial institutions returned to the IRS because 

they appeared suspicious dropped by 55 percent. 

Working together, Security Summit partners were 

able to warn the public – including the payroll 

industry, human resource personnel and tax 

preparers – of emerging scams in which criminals 

either posed as company executives to steal employee 

Form W-2 information or instances where criminals 

used technology to gain remote control of preparers’ 

office computers. The IRS also provided specialized 

outreach and education campaigns to help taxpayers 

avoid fraud and augmented staffing to assist 

taxpayers who have become victims of identity theft.

The IRS strengthened its ability to identify and 

respond to fraud by bolstering analytics capabilities, 

making full use of existing data sources and exploring 

potential new data sources and techniques that allow 

better identification of anomalies. The IRS deployed 

maintenance and enhancements for the Return 

Review Program system, which is used to evaluate 

and flag potentially fraudulent returns, in 

preparation for the 2016 filing season, which allowed 

for receipt of Forms W-2, Wage and Tax Statement, 

directly from reporting agents and other Form W-2 

issuers earlier in the filing season in order to verify 

income and reduce fraud and anomalies. Receiving 

the Form W-2 information earlier allowed the IRS to 

release good returns sooner in the fraud detection 

process, which reduced burden to taxpayers.

In addition, addressing Improper Payments continues 

to be an area of focus for us. In FY 2016, we had one 

program identified as being high risk and high 

priority - the Earned Income Tax Credit (EITC) 

program. Reducing improper payments in the EITC 

program continues to be a significant challenge due to 

the nature of the credit. EITC allows eligible lowincome filers to reduce tax liability by claiming credits 

for working and earning income. However, the 

complexity of the program, the high rate of annual 

turnover in program participants, and the difficulty of 

verifying self-reported information from taxpayers 

claiming the credit make it difficult to reduce 

improper payment rates for EITC. We continue to 

propose legislative changes to the program and to the 

authority of the IRS to address errors and other 

anomalies on tax returns, and while Congress has 

enacted some of these proposals, the IRS must still 

use traditional approaches in attempting to cut down 

the number of improper payments. Education, 

outreach to the return preparer community, 

preemptive engagement with professional filers who 

have historically had high error rates on returns, prerefund validation checks, and post-refund compliance 

activities are all tools employed to address EITC 

improper payments.

As part of the guidance from OMB, risk assessments 

are also conducted on all other refundable tax credit 

programs. In FY 2016, the IRS identified as medium 

risk the American Opportunity Tax Credit (AOTC) 

and the Child Tax Credit (CTC) programs. The IRS 

acknowledges concerns by auditors over the dollar 

value of improper payments from these programs: the 

challenges inherent in reducing these levels are

similar to those associated with EITC. Internal 

controls over these programs are relatively strong, but 

in the absence of additional statutory authority, the 

IRS remains limited in its ability to mitigate improper 

payments.

Finally, we have continued to coordinate closely with 

the Department of Health and Human Services (HHS) 

and CMS on the refundable tax credit portion of the 

ACA. The advance part of this credit, known as the 

Advance Premium Tax Credit (APTC), is 

administered by CMS working with state 

Marketplaces, and is paid to insurance providers 

designated by eligible taxpayers. If a taxpayer 

receives APTC, they are required to file a tax return 

in order to reconcile the APTC amount against their 

income level in order to determine the proper tax 
26 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS

credit amount for the year. Taxpayers who received 

less in APTC than the Premium Tax Credit (PTC) for 

which they were eligible may claim additional PTC on 

their tax return. Taxpayers who received more APTC 

than the PTC for which they were eligible are

required to repay the difference, up to a certain cap 

amount. HHS and Treasury completed risk 

assessments for their portions of the program; we 

determined that the PTC program carries a medium 

risk of improper payments, and we will continue to 

accumulate data on tax returns and taxpayer 

behavior relative to this program in order to quantify 

the potential improper payments value.

KEY PERFORMANCE DATA HIGHLIGHTS

Measure 

(Responsible Bureau/Office)

FY 13 FY 14 FY 15 FY 16 FY 16

Target Result vs Target

Percentage of Treasury payments and 

associated information made electronically 

(%) (Fiscal Service)1

92.5 94.4 94.8 94.9 94.9 Met

Percentage of total dollar amount of U.S. 

Government receipts settled electronically 

(%) (Fiscal Service)1

97.0 98.0 98.0 98.2 98.0 Exceeded

Percentage of individual returns processed 

electronically (IRS)2 82.5 84.1 85.3 86.4 86.0 Exceeded

Taxpayer Self-Assistance Rate (IRS)3 83.3 84.7 88.7 89.0 90.0 Unmet

Explanation of Results

1Fiscal Service has been promoting the Paperless Treasury initiative for several years in an effort to disburse payments, as well as 

receive and settle collections, through electronic means. Fiscal Service has expanded the number of digital wallet providers and 

the number of agencies using the digital wallet. Fiscal Service is piloting an agency-facing mobile application as a part of strategies 

for transitioning more customers to electronic initiatives.

2The number of electronically filed individual tax returns divided by the total individual returns filed. The IRS exceeded the annual 

target and actual prior year performance for individual returns processed electronically. 

3The percentage of taxpayer assistance requests resolved using self-assisted automated services. In FY 2016, the Taxpayer SelfAssistance Rate was one percentage point below plan. This is due in part to higher than expected Assistor Calls Answered and lack 

of availability of some online applications. The IRS will continue to look for new applications that support the needs of the 

taxpayer as well as continue our efforts to manage resources as efficiently as possible in order to meet all future goals.
DEPARTMENT OF THE TREASURY 27

MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2016 AGENCY FINANCIAL REPORT

Goal 4: Safeguard the financial system and use financial measures to 

counter national security threats

We work to protect the integrity of the financial 

system and advance key national security and foreign 

policy objectives through regulation, enforcement, 

financial intelligence analysis, outreach, and targeted 

financial measures. Strategic objectives for achieving 

our fourth goal are to: (i) identify priority threats to 

the financial system using intelligence analysis and 

outreach to the financial sector; (ii) develop, 

implement, and enforce sanctions and other targeted 

financial measures; (iii) improve the cybersecurity of 

our nation’s financial sector; and (iv) protect the 

integrity of the financial system by implementing, 

promoting, and enforcing anti-money laundering and 

counterterrorism financing standards. In our FY 2016 

SOAR, we identified that objectives 4.1 and 4.3 

achieved noteworthy progress as a result of 

coordinating the creation and sharing of actionable 

and targeted financial intelligence with stakeholders 

(4.1) and coordination with cybersecurity partners and 

the financial sector (4.3). Objective 4.3 was also 

identified as a focus area for improvement, as there 

are many challenges to achieving this objective, 

including the continued growth and increasing 

sophistication of cybersecurity threats.

EFFECTIVENESS OF SANCTIONS PROGRAMS

In January and March 2016, Treasury and the 

Department of Commerce announced amendments to 

regulations governing the Cuba embargo, further 

implementing the set of diplomatic and economic 

changes to Cuba relations laid out by President 

Obama in December 2014. These amendments 

further facilitate the normalization process between 

Cuba and the U.S. by increasing the ability of U.S. 

citizens to travel to Cuba to engage directly with the 

Cuban people, expanding Cuba’s access to U.S. 

financial institutions and the dollar, and enabling 

Cubans legally present in the U.S. to earn a salary or 

compensation. 

The Joint Comprehensive Plan of Action reached in 

July 2015 was a landmark international achievement, 

removing the threat of a nuclear-armed Iran while 

illustrating the power of economic sanctions, coupled 

with tough diplomacy, to bring about a safer world. 

We are meeting commitments under the JCPOA by 

lifting nuclear-related secondary sanctions and by 

providing clear and timely guidance to government 

and private sector partners about engagement with 

Iran that is now permitted. The U.S. remains clear 

that the JCPOA did not resolve, nor was intended to 

resolve, concerns outside of the nuclear arena, 

including Iran’s support for terrorism and its ballistic 

missile program, and will continue to leverage various 

tools (including sanctions) to counter this behavior. 

In April 2015, the President issued an executive order 

that authorizes the Secretary of the Treasury, in 

consultation with the Attorney General and the 

Secretary of State, to impose financial sanctions on 

individuals and entities whose malicious cyberenabled activities have contributed to a significant 

threat to the national security, foreign policy, or 

economic health or financial stability of the United 

States. In establishing this new policy, the 

Administration is creating a means of imposing 

economic costs against not just those that conduct 

cyber-attacks, but those responsible for supporting, 

enabling, or ordering such attacks.

CONTINUED CYBERSECURITY PROGRESS

Cyber threats are vast and evolving. The 

sophistication, frequency, and severity of threats 

across U.S. corporations and government agencies 

continue to increase. The increased prevalence of 

cyber risks creates persistent and complex challenges 

for entities throughout the financial sector. The 

constantly changing risk landscape presents 

challenges to Treasury and financial regulatory 

agencies in their efforts to enhance the cybersecurity 
28 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS

and resiliency of both individual entities and the U.S. 

financial system. 

Cyber-attacks can result in direct financial losses, as 

well as serious non-financial consequences. 

Implications from cyber-attacks can include the 

disruption of critical economic functions, loss of 

customer and market confidence in affected

institutions, and loss of general consumer and market

confidence in the financial sector.

Per Presidential Policy Directive 21 Critical

Infrastructure Security and Resilience, Treasury is

responsible for coordinating the federal government’s 

cybersecurity efforts in the financial sector. Treasury

monitors reporting by intelligence community and law 

enforcement sources for information on threats to the 

financial sector, collaborates with other parts of the 

government in improving security and preparing 

response plans for major cyber incidents, and works

closely with the private sector to enhance baseline 

protections, facilitate information sharing, and 

coordinate on incident response and recovery.

In December 2015, President Obama signed the 

Cybersecurity Act (CSA) into law. CSA establishes a 

system for cybersecurity information sharing within 

the federal government, within the private sector, and 

between the federal government and the private 

sector, ultimately enabling firms to bolster their cyber 

defenses. As part of Treasury’s ongoing efforts to 

improve the quality and flow of cyber information, we 

engaged with members of the financial services sector, 

including trade associations and financial regulators, 

to encourage participation in CSA information sharing 

processes. Further, we worked to identify any legal, 

policy, or technical impediments to information 

sharing and assist in addressing them. Additionally, 

we helped craft the implementation documents called 

for in the CSA and established a direct link with the 

Department of Homeland Security’s Automatic 

Indicator Sharing Program. We also implemented 

new technology to begin participating in automated 

indicator exchange with DHS and the private 

financial sector. 

Over the past year, we have also worked with 

partners in the financial sector to carry out publicprivate sector tabletop exercises designed to simulate 

plausible cyber incidents. These exercises help

identify gaps in the preparedness of individual 

entities and in response and recovery coordination

among the government and private sector.
DEPARTMENT OF THE TREASURY 29

MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2016 AGENCY FINANCIAL REPORT

In FY 2016, Treasury facilitated an exercise that 

brought together, for the first time, representatives of 

the cyber-focused Financial and Banking Information 

Infrastructure Committee and the Financial Stability 

Oversight Council, as well as representatives from key 

financial institutions and financial market utilities, to 

examine how to mitigate the effects of a significant 

cybersecurity incident on financial stability. Another 

first this year was a joint exercise with another 

critical infrastructure sector—the energy sector—

which was coordinated with the Department of 

Energy. 

Overall, this year, in collaboration with private-sector

representatives and regulatory agencies in the 

financial services sector, Treasury has executed over 

15 cybersecurity and resiliency exercises. 

In addition, Treasury has responded to the evolving 

cyber risk landscape with increased resources, 

proposing a Cybersecurity Enhancement Account in 

the FY 2017 President’s Budget that is designed to 

bolster our cybersecurity posture and to better 

mitigate cybersecurity risks to the U.S. financial 

system. This dedicated funding source provides 

leadership with greater visibility into cybersecurity 

efforts and encourages information sharing across the 

Department. 

Treasury has also sought to address cybersecurity 

risks globally, recognizing that cybersecurity incidents 

can generate negative consequences across sovereign 

borders through the interconnectedness of the 

international financial system. Starting in late 2015, 

the Deputy Secretary has co-chaired the G-7 Cyber 

Expert Group with the Bank of England, bringing 

together finance ministries, central banks, and 

financial supervisors from Canada, France, Germany, 

Italy, Japan, United States, United Kingdom, and the 

European Union to evaluate current approaches to 

cybersecurity in each country’s financial sector and to 

identify commonalities, differences, and potential gaps 

in those approaches. Through Treasury and the Bank 

of England’s leadership, the G-7 Cyber Expert Group 

also began development of a concise set of principles 

on best practices in cybersecurity for public and 

private entities in the financial sector in an effort to 

promote convergence in entity-specific and sector-wide 

cyber frameworks and build mutual trust and 

THINKSTOCK .com

Safeguarding the U.S. Financial 

System from Illicit Funds

Money laundering can facilitate crimes such as drug 

trafficking and terrorism, and can adversely impact 

the global economy. FinCEN regulates, collects, 

and analyzes reporting from financial institutions to 

hinder money laundering, terrorist financing and 

other financial crimes. This reporting alone, and 

when combined with information from law 

enforcement and other sources, assists 

investigators in identifying financial networks,

banking and travel patterns, businesses and 

personal associations, and communication 

methods; and provides previously unknown 

physical addresses, IP addresses, and phone 

numbers that help identify and link subjects of 

interest to criminal activity. FinCEN regulation and 

enforcement further harden the U.S. financial 

system against illicit activity. 
30 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS

cooperation among countries with closely linked 

financial systems.

We are equally dedicated to enhancing Treasury’s 

internal cybersecurity and resiliency. At the start of 

FY 2016, our Chief Information Officer (CIO) Council 

formally adopted an agency-wide Cybersecurity 

Strategy and Framework for 2016 implementing a 

unified defense for Treasury bureaus and offices. The 

primary objective of our 2016 Cybersecurity Strategy 

is for all bureaus to achieve all of the specified targets 

called for by the Administration under the President’s 

Management Council and Cybersecurity National 

Action Plan. 

We have been recognized by OMB and DHS for our 

leadership in cyber incident response and analytical 

capabilities against advanced persistent threats. We 

continue to block threats on a weekly basis across the 

enterprise, sharing lessons learned and practices 

across government and the financial sector.

In September 2016, our Chief Information Security 

Officer (CISO) called the first quarterly Financial and 

Banking Information Infrastructure Committee 

CIO/CISO Subcommittee meeting. This meeting was 

established to facilitate information sharing and 

develop common risk-based approaches to managing 

internal cybersecurity risk at financial regulatory 

agencies.

Also in FY 2016, we developed the Cyber Cohort 

program to address concerns raised in OMB’s 

Cybersecurity Strategy and Implementation Plan. A 

critical concern for Treasury included the lack of a 

pipeline of cybersecurity employees. This program 

aims to promote long-term Treasury needs by 

attracting, developing, and retaining cyber talent for 

long-term success. The pilot, launched in September 

2016, provides enhanced developmental opportunities, 

including a cyber training curriculum designed by 

cyber professionals and focused on cyber certification, 

individualized mentoring, concentrated developmental 

plans, and six-month rotational assignments for 

participants at a Treasury bureau.

INCREASING THE USE OF FINANCIAL 

INTELLIGENCE

Strategic Objective 4.1 was identified as achieving 

noteworthy progress, as a result of the creation and 

sharing of actionable and targeted financial 

intelligence among stakeholders. In FY 2016, we 

experienced growing demand for our national security 

response efforts. The Office of Intelligence and 

Analysis and FinCEN continued to support the 

broader Treasury efforts against terrorism by 

identifying illicit sources of revenue and illegal 

attempts to access the international financial system. 

In support of this effort, FinCEN systems operate 

using more than 180 business rules daily to screen 

BSA filings and identify reports that merit further 

review for topics of national security concern, such as 

terrorist financing and cyber threats. These rules 

generated roughly 71,000 findings in FY 2016, 

compared to roughly 56,000 in FY 2015. 
DEPARTMENT OF THE TREASURY 31

MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2016 AGENCY FINANCIAL REPORT

The Department and FinCEN, in particular, have 

worked on a number of fronts to strengthen financial 

transparency. Key among these initiatives has been 

the rollout of the final customer due diligence rule and 

draft beneficial ownership legislation. FinCEN has 

helped lead these efforts with extensive feedback from 

the public, both of which seek to increase the ability of 

law enforcement to identify the assets and accounts of 

money launderers and other illicit actors. Over the 

past few years, FinCEN successfully has used its 

Geographic Targeting Order (GTO) authority to target 

money laundering threats such as tax fraud by 

identity theft, the movement of U.S. dollar cash across 

the southern border, and trade-based money 

laundering for priority drug trafficking organizations. 

FinCEN issued a GTO in Florida that contributed to 

the arrests and pending arrests of twenty-two alleged 

co-conspirators in a money-laundering scheme with 

ties to the Mexican Sinaloa drug cartel. A separate 

GTO aimed at money laundering in real estate focuses 

on the proceeds of cash purchases of luxury real estate 

in Manhattan and Miami in an effort to uncover 

individuals attempting to hide assets for potentially 

illegal purposes by concealing their identities.

In 2014, FinCEN initiated a multi-tiered partnership 

between law enforcement, financial intelligence units 

(FIUs), and financial institutions, the Global Rapid 

Response Program to recover and restrain funds 

obtained through cyber-enabled crimes targeting 

financial institutions and their clients. Since its 

creation, the program has recovered or restrained

more than $267 million before it could be used by 

criminals. FinCEN leverages its relationships with 

counterpart FIUs to encourage foreign authorities to 

intercede and freeze funds or reverse wire transfers. 

The program has completed over 475 requests to 

foreign FIUs on behalf of the Federal Bureau of

Investigation, United States Secret Service, and 

various U.S. financial institutions.

 Homeland Security Investigations Chicago Task 

Force Agents seized funds as part of an ongoing 

narcotics investigation. 

DEPARTMENT OF THE TREASURY

Criminal Asset Forfeiture

Asset forfeiture is an important tool in the U.S. 

fight against money laundering. From drug 

cartels to criminal syndicates, law 

enforcement can inflict damage on these 

insidious structures by the removal of enabling 

assets and profits that support and/or 

encourage their existence. Congress 

established the Treasury Executive Office of 

Asset Forfeiture to hold non-tax forfeitures.

Its mission is to affirmatively influence the 

consistent and strategic use of asset forfeiture 

by participating agencies to disrupt and 

dismantle criminal enterprises. The greatest 

opportunities for the Fund is using asset 

forfeiture sanctions to punish and deter broad 

and growing areas of criminal activity including 

cyber fraud, identity theft, money laundering, 

immigration violations and others.
32 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS

KEY PERFORMANCE DATA HIGHLIGHTS

Measure 

(Responsible Bureau/Office)

FY 13 FY 14 FY 15 FY 16 FY 16

Target Result vs Target

Percentage of users finding that the financial 

intelligence collected by FinCEN pursuant to

its regulations provides valuable information 

to safeguard the financial system, combat 

money laundering, and counter terrorist 

financing1

80 81 83 84 84 Met

Explanation of Results

1Survey data that looks at the value of FinCEN data, such as whether the data provided unknown information, supplemented or 

expanded known information, verified information, helped identify new leads, opened a new investigation or examination, 

supported an existing investigation or examination, or provided information for an investigative or examination report. In FY 2016, 

FinCEN met its target of 84 percent. FinCEN attained this result by continued emphasis on on-line training that will better assist 

users in understanding and utilizing the FinCEN Query tool for their unique cases and situations.
DEPARTMENT OF THE TREASURY 33

MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2016 AGENCY FINANCIAL REPORT

Goal 5: Create a 21st Century approach to government by improving 

efficiency, effectiveness, and customer interaction

We continuously strive to work better and smarter, 

recognizing that how we use our resources directly 

impacts our ability to deliver results to the American 

people. Our strategic objectives for achieving our fifth 

goal are to: (i) increase workforce engagement, 

performance, and diversity by instilling excellence, 

innovation, and inclusion in our organizational 

culture and business practices; (ii) support effective, 

data-driven decision-making and encourage 

transparency through intelligent gathering, analysis, 

sharing, use, and dissemination of information; (iii)

promote efficient use of resources through shared 

services, strategic sourcing, streamlined business 

processes, and accountability; and (iv) create a culture 

of service through relentless pursuit of customer 

value. 

We have an agency priority goal to increase selfservice options for taxpayers, led by the IRS, which is 

aligned to Objective 5.4, which we identified in our 

FY 2016 SOAR as a focus area for improvement. 

Objective 5.4 was categorized as a focus area for 

improvement because the IRS and Fiscal Service, our 

key external-facing providers, began efforts in 

FY 2015 to improve their customers’ experience. 

Additionally, in keeping with Objective 5.3, we are 

working to implement the provisions of the Fixing 

America’s Surface Transportation (FAST) Act, which 

requires the use of private debt collection agencies to 

collect unpaid federal tax.

INFORMATION TECHNOLOGY CAPABILITIES

Our implementation of the Federal Information 

Technology Acquisition Reform Act (FITARA) 

improved a number of our processes, notably 

information technology (IT) procurement and budget 

coordination, and transparency for IT acquisitions 

across Treasury. We are dedicated to implementing 

FITARA in accordance with OMB’s guidelines and our 

needs. Our self-assessment against the common 

baseline established by OMB demonstrates that we 

have achieved the highest rating (3 out of 3) in all but 

two of the 17 measurable categories. OMB requested 

that we present our FITARA implementation strategy

to the Federal CIO Council. Our focus is 

sustainability, which means integrating the goals of 

FITARA into existing processes to reduce 

redundancies and ensure efficiencies over time. 

Since 2010, we have closed 19 out of 59 tiered data 

centers and another 573 non-tiered data centers. 

Along with the closing of data centers, Treasury, over 

the last year, also has focused on changing the 

approach to how we spend our technology budget. We 

have focused more on enterprise-wide services, which 

has led to the Department moving more money into 

efforts to develop new or modernize existing systems, 

and away from legacy technology. We increased our 

spending on modernization and enhancements from 

19 to 24 percent of our total IT budget over the last 

five years. 

HIGH VALUE ASSETS

We have worked closely with bureaus to identify and 

prioritize high value assets (HVAs) of the Department 

based on mission criticality, amount and sensitivity of 

data stored, and external interconnections, among 

other factors. For each HVA, we performed an initial 

security review and are developing security controls

tailored to each HVA; these controls will supplement 

existing baseline security controls that apply across 

the Department. Additionally, we have engaged with 

DHS to perform security assessments of select HVAs, 

and have begun to integrate HVA into the Corporate 

Planning and Investment process.

SERVICE TO TAXPAYERS

The IRS increased the filing season Customer Service 

Representative Level of Service (LOS) to 72.1 percent 

during the 2016 filing season (January through April), 
34 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS

a substantial improvement over the filing season LOS 

delivered in FY 2015. The IRS assistors answered 

more than 13.1 million calls, an increase of over 5 

million from the prior year filing season. The average 

speed of answer was 11 minutes, compared to a wait 

time of 23 minutes in the prior year. 

To improve the experience of taxpayers who visit IRS 

sites in person, the IRS expanded the use of 

appointments to 310 Taxpayer Assistance Center 

(TAC) sites and 24 virtual sites located in external 

partner offices. This rollout included several of the 

busiest TACs in order to alleviate taxpayer and 

Congressional concerns about long lines and extended 

wait times. Following the rollout, the appointment 

service enabled the IRS to realize a significant 

reduction in taxpayer wait time, with more than 91

percent of customers receiving service within 30

minutes. Wait times on the TAC appointment line 

averaged six minutes, and nearly 51 percent of 

taxpayers who called to make an appointment had 

their issues resolved during the call without the need 

to come in, allowing the IRS to reserve face-to-face 

service for more complex issues. For taxpayers with 

those issues, the appointment line also gave the IRS a 

chance to delineate the documents they need to bring 

to the meeting, which helped make appointments 

more efficient. As a result, appointment service has 

significantly reduced taxpayer burden by eliminating 

the need for time and travel to IRS offices.

IRS.gov continued to be the primary method for 

providing tax information and services to taxpayers. 

The IRS enhanced existing online and self-help 

service options by increasing the amount of tax 

information and services available to taxpayers 

through IRS.gov. Self-service applications on IRS.gov 

enabled taxpayers to exchange information online 

with the IRS, decreasing service requests from highercost channels such as telephone assistance. IRS.gov 

ensures that the public has access to current and 

accurate tax information with near real-time updates 

of more than 140,000 forms, publications, news items, 

rules, and articles.

 IRS2GO mobile app

DEPARTMENT OF THE TREASURY

The IRS Goes “Mobile”

The IRS has enhanced its digital self-service options by 

increasing the amount of tax information and services 

available through IRS.gov and the mobile app, IRS2Go. 

The new mobile tool allows taxpayers to electronically 

access refund status, make a payment, receive free tax 

preparation assistance, and view helpful videos.
DEPARTMENT OF THE TREASURY 35

MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2016 AGENCY FINANCIAL REPORT

While staying ahead of continuously evolving 

cybercrime is a constant challenge and requires 

extreme vigilance, the IRS was able to continue to 

build robust programs to improve the identification 

and prevention of refund fraud and identity theft, and 

to enhance cybersecurity to safeguard taxpayer data. 

For example, the IRS completed the first release of its 

Short Messaging Service Platform, which allowed for 

the issuance of a one-time password to a taxpayer via 

text messaging services, paving the way for two-factor 

authentication for taxpayers trying to access their tax 

records. 

In addition, the IRS implemented advanced security 

capabilities for all IRS.gov applications to provide 

protection from various, ever-expanding cyber threats 

and attacks. These capabilities will allow IRS to 

detect and block criminal access, as well as allow the 

bureau to perform analytics to identify and assess 

vulnerabilities leading to the development and 

implementation of risk mitigation strategies. In FY 

2016, taxpayers viewed IRS.gov web pages more than 

1.7 billion times, using the website to retrieve tax 

information and to gain access to applications and 

products. The IRS also developed and launched 

several web and mobile tools allowing taxpayers and 

third parties to communicate and transact with the 

IRS, such as the IRS Direct Pay application, 

PayNearMe, the Online Payment Agreement 

application, a Web Chat Feature for tax return 

preparers, and the Get Transcript re-launch. 

In the summer of 2016, the IRS re-launched a more 

rigorous e-authentication system for taxpayers that is 

expected to significantly increase protection against 

identity thieves impersonating taxpayers to access tax 

return information through the Get Transcript online 

service. This new, more secure framework requires a 

multi-step authentication process, enabling citizens to

access their information while helping defend against 

fraud.

RISK MANAGEMENT GOVERNANCE 

STRUCTURE

In July 2016, OMB released an updated Circular No. 

A-123 Management’s Responsibility for Enterprise 

Risk Management and Internal Control to ensure 

federal managers are effectively managing risks to 

achieve strategic objectives. Management, together 

with the Chief Risk Officer (CRO), is responsible for 

establishing a governance structure to effectively 

implement, direct and oversee implementation of the 

Circular and all the elements of a robust process of 

risk management and internal control. Successful 

implementation of this Circular requires us to 

establish and foster an open, transparent culture that 

encourages people to communicate information about 

potential risks and other concerns with their 

superiors. The Deputy Secretary and the CRO cochair regular risk committee meetings of leaders from 

across the Department and routinely coordinate with 

OMB.
36 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS

KEY PERFORMANCE DATA HIGHLIGHTS

Measure 

(Responsible Bureau/Office)

FY 13 FY 14 FY 15 FY 16 FY 16

Target Result vs Target

Federal Employee Viewpoint Survey (FEVS) 

Engagement Index – 1 to 100 (%) 

(Management)1

68 66 66 67 67 Met

Treasury-wide Footprint in Thousands of Sq. 

Ft. (Management)2 37,320 36,418 35,439 TBD 34,927 TBD

Full-year Customer Service Representative 

Level of Service (%) (IRS)3 60.5 64.4 38.1 53.4 47.0 Exceeded

Explanation of Results

1The FEVS Engagement Index is comprised of three OPM calculated indices Leaders Lead, Supervisors, and Intrinsic Work 

Experiences. The Engagement Index denotes the extent to which employees are engaged in their work and motivated by their 

organization’s leadership. Treasury’s Engagement Index showed a one percent increase from 66 percent to 67 percent between 

2015 and 2016. Eight out of eleven Treasury components continue to show increases in their Engagement Index by 1 to 3 points 

from 2015 to 2016. The increase in Treasury’s Engagement Index can be attributed to gains in all three indices. 

2Measures the total square footage occupied by Treasury’s owned and leased buildings. The Department’s real property footprint 

was reduced by an estimated three percent (almost one million square feet) during FY 2015. The reduction was achieved through 

better use of existing office space, consolidations and co-locations, increased use of telework, and the implementation of new 

space design standards that use a reduced footprint to optimally right-size the portfolio consistent with Department mission and 

essential program needs. The Department projects that the footprint will be reduced by another 500,000 square feet in FY 2016. 

The final FY 2016 footprint data is expected to be available in late December 2016 following the Federal Real Property Profile asset 

reporting period.

3This measure indicates the number of toll free callers that either speak to a Customer Service Representative or receive 

information messages divided by the total number of attempted calls during the full fiscal year. In FY 2015, the Customer Service 

LOS target was lowered due to decreased resources and staffing and a projected increase in the number of ACA inquiries. Due to 

an increase in appropriated resources in FY 2016, the IRS has been able to increase the Customer Service Representative LOS

compared to last year. This is largely due to an increase in the number of assistor calls answered. Through extensive 

communication, the IRS encourages taxpayers to use online or automated tools and alternate service channels to resolve their 

concerns quickly and efficiently.
DEPARTMENT OF THE TREASURY 37 

MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2016 AGENCY FINANCIAL REPORT

SUMMARY OF MANAGEMENT AND PERFORMANCE CHALLENGES

Several cross-cutting challenges were identified in our

FY 2016 organizational performance reviews that affect 

efforts to achieve our strategic priorities:

Rapid Pace of Change: In many strategic objectives, 

programs face risks and challenges posed by 

continuously evolving threats or increasing 

sophistication of criminals, growth and change in key 

customer industries or work portfolios, and the need to 

modernize technology to support these changes.

Human Capital –Workforce Planning/Recruitment: 

Challenges within the human capital lifecycle (e.g., 

recruitment-development-retention) and the lengthy 

security clearance process are routinely referenced as 

challenges to mission success. Additionally, expanding 

the use of workforce planning and metrics to proactively 

forecast and meet workforce needs, particularly in the 

enforcement, analytics, and regulatory fields, proves 

challenging.

Need for Congressional Action: In a third of our

strategic objectives, Congressional action on funding and 

authorizations is needed.

Cybersecurity: Continued growth of increasingly 

sophisticated threats requires constant vigilance 

through sophisticated monitoring, implementation of 

cyber hygiene, an insider threat program, and retention 

and recruitment of top talent (enabled by the use of 

strategic workforce planning) to ensure proper baseline 

protections.

In addition to the performance challenges discussed 

above and in the previous sections of this report, OIG 

and TIGTA have identified the most significant 

management and performance challenges facing the 

Department, in accordance with the Reports 

Consolidation Act of 2000. These challenges do not 

necessarily indicate deficiencies in performance; some 

represent inherent risks that require continuous 

monitoring. Refer to Section D of Part 3, Other 

Information, for detailed discussion of these challenges, 

including our progress toward addressing them. 

OIG IDENTIFIED MANAGEMENT CHALLENGES

• Cyber Threats 

• Efforts to Promote Spending Transparency 

and to Prevent and Detect Improper 

Payments 

• Anti-Money Laundering and Terrorist 

Financing/Bank Secrecy Act Enforcement 

• Management of Treasury’s Authorities 

Intended to Support and Improve the 

Economy 

TIGTA IDENTIFIED MANAGEMENT 

CHALLENGES

• Security Over Taxpayer Data and Protection 

of IRS Resources

• Identity Theft and Impersonation Fraud

• Implementing the Affordable Care Act and 

Other Tax Law Changes

• Improving Tax Compliance

• Reducing Fraudulent Claims and Improper 

Payments

• Improving Tax Systems and Expanding 

Online Services

• Providing Quality Taxpayer Services 

Operations

• Impact of Global Economy on Tax 

Administration

• Protecting Taxpayer Rights

• Achieving Program Efficiencies and Cost 

Savings

Additional details on the OIG and TIGTA identified 

Management and Performance Challenges can be 

found in Part 3, Section D, of this report.
38 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS

SUMMARY OF MATERIAL WEAKNESSES

FISCAL SERVICE CONSOLIDATED FINANCIAL 

STATEMENT PROCESS

The Fiscal Service material weakness for internal 

control over the preparation of the Consolidated 

Financial Statements of the U.S. government continued 

to exist in FY 2016. Effective internal controls are a 

challenge not only at the agency level, but also at the 

government-wide level. While progress is being made at 

many agencies and across the government in identifying 

and resolving internal control deficiencies, continued 

diligence and commitment are needed.

The Fiscal Service made progress on implementing

corrective actions during FY 2016 that resolved certain 

control deficiencies, however, recommendations 

remained open. Fiscal Service has a robust remediation 

plan and we are committed towards improving federal 

financial reporting through continued collaboration with 

the U.S. Government Accountability Office, OMB, and 

the federal agency community to pursue mitigation and 

resolution of the remaining issues.

IRS UNPAID TAX ASSESSMENTS AND 

FINANCIAL REPORTING

The IRS material weakness in internal control over 

unpaid tax assessments and significant deficiency in 

internal control over financial reporting systems 

continued to exist in FY 2016, and are collectively 

considered a material weakness at the Department 

level. The IRS has a robust remediation plan that is 

updated and reviewed by the IRS and Treasury 

Executives on a quarterly basis. Additionally, the 

progress of the remediation plan is reviewed 

annually by TIGTA. The outstanding corrective 

actions are scheduled to be completed by FY 2021. 

Additional information on the material weaknesses 

can be found in Part 3, Section E, of this report.
DEPARTMENT OF THE TREASURY 39

MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2016 AGENCY FINANCIAL REPORT

FY 2017 OUTLOOK 

In considering the challenges and risks to successful 

mission delivery facing the Department, we identified 

several initiatives to pursue in FY 2017: 

• Utilize Cybersecurity Enhancement Account to 

strengthen our cybersecurity posture and mitigate 

cybersecurity risks to improve the resilience of the 

nation’s financial sector.

• Build on the IRS efforts to identify opportunities 

for a more user-friendly and cost-effective customer 

service channel, improve the overall taxpayer 

experience, and gain operational efficiency and 

productivity. (FY 2016-2017 APG led by IRS)

• Secure FY 2017 State Small Business Credit 

Initiative and CDFI Bond Guarantee 

Reauthorization to continue programs that support 

small businesses, create and retain jobs, and assist 

disadvantaged communities.

• Issue notice of proposed rulemaking to clarify and 

consolidate federal labeling regulations.

• Continue to engage with G-20 members to leverage 

the Financial Stability Board (FSB) to collective 

advantage and support FSB objectives, and secure 

renewed G-20 commitments to refrain from 

competitive devaluation and consult on exchange 

rates.

• Maintain commitment to taking aggressive action 

against Islamic State of Islam and Levant and AlQaeda by imposing sanctions on designated 

financiers and facilitators.

• Continue increasing financial transparency through 

managing government-wide implementation of the 

DATA Act and completing major milestones to meet 

the statutory deadline of May 2017. (FY 2016-2017 

APG led by OFAS/Fiscal Service)
40 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS

FINANCIAL HIGHLIGHTS – FINANCIAL OVERVIEW

The financial highlights below are an analysis of the 

information included in our consolidated financial 

statements that appear within Part 2, “Financial Section”

of this report. Our principal financial statements have 

been prepared to report Treasury’s financial position and 

results of operations, pursuant to the requirements of 31 

USC 3515(b). These consolidated financial statements 

have been prepared from our books and records in 

accordance with generally accepted accounting principles

(GAAP) for federal entities and the formats prescribed by 

OMB. The consolidated financial 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 financial statements are for 

a component of the U.S. government, a sovereign entity.

The chart below presents changes in key financial 

statement line items as of and for the FY ended 

September 30, 2016, compared to September 30, 2015. 

Summary Financial Information (dollars in billions) 

2016 2015 $ Change % Change

Total Assets $ 22,170.9 $ 20,768.7 $ 1,402.2 6.8%

Total Liabilities $ 21,667.0 $ 20,354.6 $ 1,312.4 6.4%

Total Net Position $ 503.9 $ 414.1 $ 89.8 21.7%

Total Net Cost of Treasury Operations $ 17.7 $ 23.5 $ (5.8) (24.7)%

Net Federal Debt Interest Costs $ 385.7 $ 367.3 $ 18.4 5.0%

GSEs Non-Entity Revenue, Net $ (13.8) $ (30.8) $ 17.0 (55.2)%

Total Net Cost of Treasury Operations and Non-Entity Costs $ 403.6 $ 374.9 $ 28.7 7.7%

Total Budgetary Resources $ 797.3 $ 800.0 $ (2.7) (0.3)%

Agency Outlays, Net $ 400.3 $ 370.2 $ 30.1 8.1%

Net Revenue Received (Custodial) $ 3,048.7 $ 3,024.0 $ 24.7 0.8%

Financial Overview. Our financial performance as of and 

for the FY ended September 30, 2016, reflects several 

major trends. Most significantly, the outstanding federal 

debt, including interest, rose by $1.4 trillion to $19.7

trillion to finance the U.S. government’s operations. Of 

this increase, $352.6 billion stemmed from the restoration

on November 2, 2015 of Treasury securities, plus $2.7 

billion of foregone interest, to certain trust funds that had 

been either suspended or redeemed early during 2015 as a 

result of extraordinary debt management measures we 

took during the period between March 16, 2015 and 

October 30, 2015 in which Congress delayed raising the 

statutory debt limit (referred hereinafter as “Delay”). We 

accrued a liability of $350.7 billion as of September 30, 

2015, reflecting our obligation by statute as of that date to 

issue Treasury securities, and foregone interest, to the 

trust funds.

Additionally, our “Total Net Cost of Treasury Operations 

and Non-Entity Costs” for FY 2016 increased by $28.7

billion primarily stemming from non-entity activity, 

including $18.4 billion of higher net federal debt interest 

costs and $17.0 billion of lower revenue from our 

investments in two government-Sponsored Enterprises 

(GSEs) – Fannie Mae and Freddie Mac – pursuant to our 

Senior Preferred Stock Purchase Agreements, as 

amended. 
DEPARTMENT OF THE TREASURY 41

MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2016 AGENCY FINANCIAL REPORT

Figure 1: Total Assets, Total Liabilities, and Net Position (in billions)

Total Assets of $22.2 trillion at September 30, 2016

consist of a receivable due from the General Fund of the 

U.S. government of $19.7 trillion, intra-governmental 

loans and interest receivable of $1.4 trillion, and fund 

balance and various other assets totaling $1.1 trillion 

(Figure 2). 

Figure 2: FY 2016 Total Assets (Composition)

The $1.4 trillion (or 6.8 percent) increase in total assets at 

the end of FY 2016 over the prior year is primarily due to 

a $1.1 trillion increase in the “Due from the General Fund 

of the U.S. government” account which corresponds to 

increases in the following liabilities: a $1.4 trillion 

increase in federal debt and related interest payable, 

partially offset by a $350.7 billion decrease in a liability 

established in 2015 for the restoration of federal debt 

principal and interest in connection with the Delay. The 

net addition to Treasury liabilities at September 30, 2016

caused a corresponding rise in the “Due from the General 

Fund of the U.S. government” asset account which 

represents future funds required from the General Fund 

of the U.S. government to pay borrowings from the public 

and other federal agencies. 

Intra-governmental loans and interest receivable 

represent loans issued primarily by the Fiscal Service to 

other federal agencies for their own use or for the 

agencies to loan to private sector borrowers whose loans 

are guaranteed by the federal agencies. This receivable 

grew by $94.1 billion (or 7.2 percent) to $1.4 trillion at the 

end of FY 2016 due to increased borrowings by various

federal agencies – such as the Departments of Education 

and Agriculture – to fund their existing programs. 

Other assets include, among other things, operating cash 

balances (held on behalf of the U.S. government), foreign 

currency investments and Special Drawing Rights, as well 

as investments in, and credit program receivables due 

from, certain financial institutions for which we provide 

financial assistance in an effort to stabilize financial 

markets. Other assets increased by $241.2 billion,

primarily reflecting increases in both the U.S. 

government’s operating cash balances and Treasury’s 

fund balance of $157.0 billion and $82.7 billion, 

respectively. Operating cash balances, held in depository 

institutions and Federal Reserve Bank accounts, 

increased in FY 2016 due to increased borrowings from 

the public. The increase in our fund balance stems from 

new legislation, Consolidated Appropriations Act, 2016 

88.8%

6.3%

4.9%

Due from the General Fund

Intragovernmental Loans and Interest Receivable

Other Assets
42 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS

(P.L. 114-113), which, among other things, ended the 

application of the Federal Credit Reform Act of 1990

guidelines for funding transactions involving the United 

States’ participation in the IMF, and therefore required 

us to obtain an appropriations warrant totaling $94.4 

billion to cover the full amount of the commitment made 

to the IMF.

Figure 3: FY 2016 Total Liabilities (Composition)

Total Liabilities of $21.7 trillion at September 30, 2016

principally consist of the federal debt held by the public 

(Figure 3), including interest, of $14.2 trillion, which were 

mainly issued as Treasury Notes and Bills. Liabilities 

also include intra-governmental liabilities totaling $7.4

trillion (of which $5.5 trillion represent principal and 

interest of federal debt in the form of Treasury securities 

held by federal agencies), and various other liabilities 

totaling $83.6 billion. The $1.3 trillion (or 6.4 percent) 

increase in total liabilities over the prior year is 

attributable to a $1.4 trillion increase in federal debt, 

including interest, held by the public and federal agencies 

that was needed to finance the U.S. government’s budget 

deficits. This was partially offset by the reduction in full 

of a $350.7 billion liability established at the end of FY

2015 for the restoration of federal debt principal and 

interest owed to three trust funds – the Government 

Securities Investment Fund of the Federal Employees’ 

Retirement System Thrift Savings Plan, Civil Service 

Retirement and Disability Trust Fund, and the Postal 

Service Retiree Health Benefits Fund – in connection with 

extraordinary measures we undertook during the Delay. 

The increase in total liabilities is also attributable to a 

$242.7 billion increase in the “Due to the General Fund of 

the U.S. government” account, which corresponds 

primarily to increases in the U.S. government’s operating 

cash balances and intra-governmental loans and interest 

receivable, as discussed above. Through the Fiscal 

Service, we account for and report on the principal 

borrowings from and repayments to the General Fund, as 

well as the related interest due to the General Fund. 

Total Net Position of $503.9 billion at September 30, 2016

represents the combined total of our cumulative results of 

operations and unexpended appropriations at the end of 

the FY. The $89.8 billion (21.7 percent) increase in the 

net position at the end of FY 2016 was principally 

attributable to an increase in unexpended appropriations 

as a result of our obtaining an appropriations warrant in 

FY 2016 to cover the full amount of the U.S. government’s 

commitment to the IMF in connection with the enactment 

of P.L. 114-113 in 2016.
DEPARTMENT OF THE TREASURY 43

MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2016 AGENCY FINANCIAL REPORT

Figure 4: Net Cost of Treasury Operations and Non-Entity Costs (in billions)

Total Net Cost of Treasury Operations and Non-Entity 

Costs, as presented on our Consolidated Statements of 

Net Cost, consists of the Net Cost of Treasury Operations 

and Net Non-Entity Costs (Figure 4). Net Cost of 

Treasury Operations represents the gross costs, net of 

earned revenues, we incurred related to our own entity 

activities comprising both operating bureaus and DO that 

are consolidated with the Department. Net Non-Entity 

Costs represent the gross costs, net of earned revenues, 

we incurred on behalf of the U.S. government (or General 

Fund), and primarily include federal debt interest costs, 

net of GSE non-entity revenues. Total Net Cost of 

Treasury Operations and Non-Entity Costs totaled $403.6

billion and $374.9 billion for FYs 2016 and 2015, 

respectively, an increase of $28.7 billion (or 7.7 percent) 

over the prior year. Net Non-Entity Costs contributed 

$34.5 billion of the year-over-year increase in net costs, 

offset by a year-over-year decrease in Net Cost of 

Treasury Operations of $5.8 billion.

Figure 5 : Net Cost of Treasury Operations by Strategic 

Program (in billions)

Net Cost of Treasury Operations is presented on our 

Consolidated Statements of Net Cost by strategic 

program. There are three main categories of strategic 

programs presented – financial, economic, and security –

as well as a management strategic program which is 

combined with the financial program due to the 

immateriality of the management program (Figure 

5). Our Net Cost of Treasury Operations totaled $17.7

billion for 2016 compared to $23.5 billion for 2015, a 

decrease of $5.8 billion (or 24.7%). This decrease is 

primarily a result of reduced valuation losses associated 

with our foreign denominated investments due to 

improved currency exchange rates of foreign currencies 

against the U.S. dollar.

Net Federal Debt Interest Costs primarily reflect interest 

expense on the federal debt. Federal interest costs 

increased by $20.5 billion (or 5.0 percent) in FY 2016
44 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS

primarily attributable to increased net outstanding debt 

held by the public, and increased inflation adjustments

associated with Treasury Inflation-Protected Securities 

which are driven by increases in the Consumer Price 

Index. 

GSEs Non-Entity Revenue, Net totaled $13.8 billion for 

2016 compared to $30.8 billion for 2015. The $17.0 billion 

decrease in this net revenue in 2016 was driven by an

$8.8 billion year-to-year decrease in senior preferred stock 

dividends received from the two GSEs due to lower 

combined GSE earnings in 2016. Additionally, the fair 

value of our GSE investments increased by $2.3 billion at 

the end of FY 2016 compared to an increase of $10.5 

billion at the end of FY 2015, contributing to an 

additional $8.2 billion decrease in this non-entity revenue. 

This year-to-year variance primarily reflects changes in

forecasted GSE earnings derived from guarantee fees, 

forecasted mortgage loan losses, and lower interest rates.

 

Figure 6 : Total Budgetary Resources and Agency Outlays, Net (in billions)

Total Budgetary Resources of $797.3 billion in FY 2016

(Figure 6) were relatively unchanged year over year, 

reflecting a slight decline of $2.7 billion (or 0.3 percent), 

from the prior year.

Agency Outlays, Net of $400.3 billion were higher in FY

2016 (Figure 6) by $30.1 billion (or 8.1 percent) primarily 

due to a $26.9 billion increase in interest payments on 

debt.

Figure 7 : Net Revenue Received (Custodial) (in billions)

Net Revenue Received (Custodial), representing net 

revenue we collected on behalf of the U.S. government, 

includes various taxes, primarily income taxes, as well as 

user fees, fines and penalties, and other revenue. Over 90 

percent of these revenues are related to income and social 

security taxes. Net revenue received was $3.0 trillion for 

FY 2016, an increase of $24.7 billion (or 0.8 percent) over 

the prior fiscal year. This increase is attributable mainly 

to an overall growth in individual invcome tax collections, 

partially offset by reduced corporate income tax 

collections.
DEPARTMENT OF THE TREASURY 45 

MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2016 AGENCY FINANCIAL REPORT

MANAGEMENT ASSURANCES

THE SECRETARY’S ASSURANCE STATEMENT

The Department of the Treasury’s 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). Treasury has evaluated its 

management controls, internal controls over financial 

reporting, and compliance with federal financial systems 

standards. As part of the evaluation process, Treasury 

considered results of extensive testing and assessment 

across the Department and independent audits.

Treasury provides assurance that the objectives of Section 

2 of the FMFIA (Financial Reporting and Operations) 

have been achieved, except for the material weaknesses 

noted below. Treasury is in substantial conformance with 

Section 4 (Financial Management Systems) of the FMFIA. 

Also, in accordance with OMB Circular A-123, 

Management’s Responsibility for Enterprise Risk 

Management and Internal Control, Appendix A, Internal 

Control over Financial Reporting, Treasury provides 

modified assurance that internal control over financial 

reporting was operating effectively based on the results of 

the assessment as of June 30, 2016. Treasury’s financial 

management systems are not in substantial compliance 

with the Federal Financial Management Improvement 

Act (FFMIA) due to the IRS’s material weakness related 

to unpaid tax assessments.

As of September 30, 2016, Treasury had two FMFIA 

material weaknesses as follows (with origination/planned 

resolution timeframes indicated):

Operations: 

• Bureau of the Fiscal Service – Control 

Deficiencies in the Processes used to Prepare the 

Consolidated Government-wide Financial 

Statements (Fiscal Years 2001/2018)

Financial Reporting: 

• IRS – Unpaid Tax Assessments (Fiscal Year 

1995/2021) 

Treasury management remains dedicated to the 

resolution of these remaining weaknesses. Overall, 

Treasury continues to work to maintain high standards, 

eliminate internal control weaknesses, and meet federal 

financial management systems requirements. Additional 

information on the material weaknesses can be found in 

Part 3, Section E, of this report.

Jacob J. Lew

Secretary of the Treasury

November 15, 2016 
46 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS

SYSTEMS, CONTROL AND LEGAL COMPLIANCE

FMFIA

Background

The FMFIA requires Executive branch agencies to 

establish and maintain internal control to ensure that 

Federal programs operate efficiently, effectively, and in 

compliance with applicable laws. The management 

control objectives under FMFIA are to reasonably ensure 

that:

• Obligations and costs are in compliance with 

applicable laws 

• Funds, property, and other assets are safeguarded 

against waste, loss, unauthorized use, or 

misappropriation

• Revenues and expenditures applicable to agency 

operations are properly recorded and accounted for to 

permit the preparation of accounts and 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 financial and operational 

reporting (FMFIA Section 2), and conformance with 

financial management systems requirements (FMFIA 

Section 4 and FFMIA) that protect the integrity of federal 

programs. Deficiencies that seriously affect an agency’s 

ability to meet these objectives are deemed “material 

weaknesses.” We include resolution of material 

weaknesses as a performance requirement for every 

executive, manager, and supervisor. 

Internal Control over Reporting

We continue to strengthen and improve the execution of 

the Treasury mission through the application of sound 

internal controls over financial reporting. In accordance

with Appendix A to OMB Circular A-123, Internal Control 

over Financial Reporting, we use an extensive annual 

testing and assessment methodology that identifies and 

documents internal controls over financial reporting at 

the transaction level integrated with the Government 

Accountability Office’s Standards for Internal Control in 

the Federal Government. Our bureaus and offices 

completed their testing and assessment of internal 

controls for material transactions as of June 30, 2016. 

Based on the results of this assessment, we can provide a 

modified statement of assurance that internal control over 

financial reporting was effective as of June 30, 2016, due

to the IRS’s material weakness for unpaid tax 

assessments. 

In conjunction with our OMB Circular A-123, Appendix A, 

FY 2016 Guidance and Implementation Plan, our bureaus 

and offices documented their compliance with applicable 

laws and regulations. Based on these results, we are in 

compliance with applicable laws and regulations with the 

exception of the FFMIA as addressed below and in Part 3, 

Section E, of this report. 
DEPARTMENT OF THE TREASURY 47

MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2016 AGENCY FINANCIAL REPORT

FFMIA AND FINANCIAL MANAGEMENT SYSTEMS 

FFMIA

The FFMIA requires federal agencies to implement and 

maintain financial management systems that 

substantially comply with federal financial management 

systems requirements, applicable federal accounting 

standards, and the United States Standard General 

Ledger at the transaction level. A financial management 

system includes an agency’s overall financial operation, 

reflecting the people, processes, and technology to 

capture, classify, summarize, and report data in a 

meaningful manner to support business decisions.

Section 803(c) (1) of the FFMIA requires us to make an 

annual determination of the agency’s substantial 

compliance with Section 803(a) of the Act based on review 

of relevant factors. We assess our financial management 

systems annually for conformance with the requirements 

of Appendix D to OMB Circular A-123, Compliance with 

the FFMIA, and other federal financial system 

requirements. Our assessment process includes the use of 

the FFMIA Compliance Determination Framework, which 

incorporates a risk model of risk levels against common 

goals and compliance indicators. OMB Circular A-123, 

Appendix D, contains an outcome-based approach to 

assess FFMIA compliance through a series of financial 

management goals that are common to all agencies.

In addition, we assess available information from audit 

reports and other relevant and appropriate sources, such 

as FISMA compliance activities, to determine whether our 

financial management systems substantially comply with 

FFMIA. We also assess improvements and ongoing 

efforts to strengthen financial management systems and 

the impact of instances of non-compliance on overall 

financial management system performance. Based on the 

results of our overall assessment, we concluded that our 

financial management systems are substantially 

compliant with the FFMIA requirements, with the 

exception of the IRS.

The IRS did not comply with federal financial 

management systems requirements or applicable federal 

accounting standards. The IRS has established a robust 

remediation plan to achieve compliance with the FFMIA 

requirements. The IRS received agreement from OMB 

that the current remediation plan satisfies the

requirements of Appendix D to OMB Circular A-123, 

replacing the need for a waiver from OMB for remediating 

a material weakness taking longer than three years under 

FMFIA. The remediation plan is updated and reviewed 

by IRS and Treasury Executives on a quarterly basis. 

Additionally, the progress of the remediation plan is 

reviewed annually by TIGTA. Additional information on 

the IRS’s remediation plan can be found in IRS’s FY 2016 

Annual Financial Report.

Financial Management Systems 

Our financial management systems framework consists of 

two fundamental components: (1) financial and mixed 

systems maintained by the Treasury bureaus, and (2) the 

Department-wide Financial Analysis and Reporting 

System (FARS). The bureau systems process and record 

detailed financial transactions and submit summary-level 

data to the FARS, which maintains the key financial data 

necessary for Treasury-wide consolidated financial 

reporting. This framework satisfies the bureaus’ diverse 

financial operational and reporting needs, as well as our 

internal and external reporting requirements. The FARS 

framework provides essential support each year to our 

efforts to obtain an unmodified audit opinion.

The FARS includes the following financial applications:

• Treasury Information Executive Repository (TIER) –

a financial data repository used to consolidate and 

validate bureau financial data

• TIER Financial Statements (TFS) – a reporting 

application used to produce monthly and annual 

financial statements, notes, and other supporting 

reports 

Our bureaus submit summary-level financial data to 

TIER on a monthly basis. The TFS application uses the 
48 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS

bureau data to produce financial statements and reports 

on both a Department-wide and bureau-level basis, 

including Treasury’s annual audited financial statements 

and monthly management reports. Fifteen Treasury 

bureaus and offices use centralized financial operations, 

budget execution services, or IT support provided by the

Fiscal Service’s Administrative Resource Center (ARC). 

This shared service approach enables bureaus and offices 

to have access to core financial systems without having to 

maintain the necessary technical and systems 

architectures. The ARC also provides administrative 

services in the areas of accounting, payroll, human 

resources, procurement, financial management of budget 

execution, fixed assets, inventory and order management, 

and travel to our bureaus and offices and to other federal 

entities to support core business activities. Using these 

services reduces the need for us to maintain duplicative 

financial management systems; enhances the quality, 

timeliness, and accuracy of financial management 

processes; and provides a more efficient and cost-effective 

business model. 

In FY 2016 ARC began providing financial management 

and procurement system services to its first cabinet level 

customer agency (HUD). Additionally, ARC initiated 

three multi-year system enhancement efforts: 1) 

implementation of Service Oriented Architecture to 

standardize integration technology; 2) implementation of 

an automated financial statement tool; and 3) 

enhancement of the ad-hoc reporting tool. 

Goals and Supporting Strategies

Our financial system goals and supporting strategies 

focus on improving and streamlining the current bureau 

financial management systems as well as the current 

FARS applications in order to support new financial 

requirements and continue to provide management with 

accurate and timely financial information. In FY 2016, 

we updated TIER to meet new and evolving reporting 

requirements, including the reporting of financial and 

award data to support compliance with the DATA Act. 

We also enhanced FARS IT infrastructure by beginning 

the migration of FARS applications from their current 

location at the Main Treasury building to IRS data 

centers in Memphis, Tennessee, and Martinsburg, West 

Virginia. The migration will support our Data Center 

Consolidation Initiative and will incorporate new physical 

hardware for hosting the FARS. The migration should be 

completed during the first quarter of FY 2017.

Along with bureau financial systems, the TIER and TFS 

applications form a unified financial governance solution 

that focuses on improving financial processes and 

controls. These systems and applications help us reduce 

operating costs, provide assurance over the quality of our 

financial data, improve the timeliness and quality of 

financial management processes and reporting, enhance 

internal controls, and improve transparency in the entire 

reporting process. 
DEPARTMENT OF THE TREASURY 49

MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2016 AGENCY FINANCIAL REPORT

IMPROPER PAYMENTS

Background

The Improper Payments Elimination and Recovery 

Improvement Act of 2012 (IPERIA) requires agencies to 

annually report on all programs and activities, identify 

those that may be susceptible to significant improper 

payments, estimate annual improper payments in the 

susceptible programs and activities, and report the 

results of their improper payment activities. 

Improper payments occur when funds go to the wrong 

recipient, the recipient receives the incorrect amount of 

funds (including overpayments and underpayments), 

documentation is not available to support a payment, or 

the recipient uses funds in an improper manner. 

Appendix C to OMB Circular A-123, Requirements for 

Effective Estimation and Remediation of Improper 

Payments, defines “significant improper payments” as 

gross annual improper payments in a program exceeding 

both the threshold of 1.5 percent of program outlays and 

$10 million of all program or activity payments or $100 

million regardless of the improper payment percentage. 

Appendix C also requires agencies with programs 

susceptible to significant improper payments to 

implement corrective action plans that include improper 

payment root cause identification, reduction targets, and 

identification of accountable officials.

Risk Assessments and Results 

In FY 2016, we completed a full program inventory and 

performed risk assessments to identify programs that 

have a significant risk of improper payments. We 

performed our assessment of each program using the 

nine qualitative risk factors identified in OMB Circular 

A-123, Appendix C. We also performed quantitative risk 

assessments and assessed risks related to the amounts 

of payments processed relative to the OMB specified 

threshold amounts which define payment programs 

susceptible to improper payments.

As a result of the risk assessments, we determined that 

the agency’s programs and activities presented low and 

medium risk of improper payments, except for the IRS’s 

EITC program. The EITC is a high risk program 

susceptible to significant improper payments.

EITC Program 

The EITC is a refundable tax credit that offsets income 

tax owed by low-income taxpayers and, if the credit 

exceeds the amount of taxes due, provides a lump-sum 

payment in the form of a refund to those who qualify. The 

IRS estimates that for FY 2016, between 22.2 percent 

($15.5 billion) and 25.9 percent ($18.1 billion) of the total 

EITC program payments of $69.8 billion were improper. 

The IRS has a robust enforcement program for the EITC 

which consists of examinations and audits, math error 

notices, and document matching. Additional information

on the IRS’s EITC program can be found in Part 3, 

Section F, of this report.

Affordable Care Act

Treasury and HHS each have responsibilities for ensuring 

payment accuracy in Marketplace programs created 

under the ACA. Performing program-specific 

comprehensive risk assessments provides reasonable 

assurance of whether improper payments could exceed 

statutory thresholds and remains critical to evaluating 

and improving payment accuracy. HHS has conducted 

risk assessments to determine areas that might affect 

APTC, Cost-Sharing Reduction (CSR) and other 

programs’ payment accuracy, and Treasury has conducted 

a risk assessment to determine areas that might affect 

PTC payment accuracy. The Departments leveraged the 

same Federally Funded Research and Development 

Center to facilitate interagency coordination, information 

exchange, and risk analysis during the APTC and PTC 

program risk assessments.
50 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS

Qualitative risk assessments of the Marketplace 

programs administered by the Departments were 

conducted in accordance with the risk factors listed in 

Appendix C to OMB Circular A-123, Part I.A.9.b. The 

risk assessments identified and evaluated potential 

improper payment risks.

Treasury has completed the risk assessment for the PTC 

program and has concluded that the program carries a 

medium risk of improper payments. HHS has completed 

risk assessments on the APTC and CSR programs (refer 

to the FY 2016 HHS AFR for details on the APTC and 

CSR risk assessment determination).

In addition to the work on the improper payment risk 

assessments, both Departments have established internal 

controls to provide for effective program operations, 

reliable financial reporting, and compliance with laws and 

regulations. Treasury and OMB will continue to monitor 

the PTC program and provide updated risk assessment 

results, program metrics, and corrective action plans 

consistent with existing guidance and regulatory and 

legislative requirements. Updated information on risk 

assessments and program measurement methodologies

will be provided in each Department’s FY 2017 AFR.

Payment Recapture Audits

The Improper Payments Elimination and Recovery Act of 

2010 (IPERA) requires agencies to conduct payment 

recapture audits (also known as recovery audits) for each 

program and activity that expends $1 million or more 

annually, if conducting such audits would be costeffective. We performed the payment recapture activities 

in accordance with OMB Circular A-123, Appendix C. 

Details on our improper payments and payment recapture 

program activities and results can be found in Section F of 

Part 3, Other Information.

Do Not Pay Initiative

Our Do Not Pay Working System (Working System) is the 

legislative mandated and OMB designated source of 

centralized data and analytic services to help agencies 

verify eligibility and to identify and prevent potential 

fraud, waste, and abuse associated with improper 

payments. The results of the checks against these data 

sources provide information that an agency should 

consider in pre-award or prepayment assessments to help 

prevent improper payments. Fiscal Service, our shared 

service provider, compares our payee records in the 

financial system with payee records in the Working 

System. We review potential matches on an on-going 

basis to prevent improper payments and incorporates a 

pre-award check on potential contractors against the 

Working System. Additional information on the Do Not 

Pay initiative can be found in Part 3, Section F, of this 

report.
MESSAGE FROM THE ASSISTANT SECRETARY

FOR MANAGEMENT AND DEPUTY CHIEF

FINANCIAL OFFICER ...................................... 53

INSPECTOR GENERAL’S TRANSMITTAL LETTER .......... 55

INDEPENDENT AUDITORS’REPORT ON THE

DEPARTMENT’S FINANCIAL STATEMENTS ........... 57

MANAGEMENT’S RESPONSE TO

INDEPENDENT AUDITORS’ REPORT ................... 63

FINANCIAL STATEMENTS .................................... 64

NOTES TO THE FINANCIAL STATEMENTS ................. 71

REQUIRED SUPPLEMENTARY INFORMATION

(UNAUDITED) ........................................... 145

DEPAR TMEN T OF THE TREASURY 53

FINANCIAL SECTION | FY 2016 AGENCY FINANCIAL REPORT

MESSAGE FROM THE ASSISTANT SECRETARY FOR MANAGEMENT AND 

DEPUTY CHIEF FINANCIAL OFFICER 

In Fiscal Year 2016, Treasury pursued an aggressive set of management 

programs and initiatives designed to manage the U.S. government’s finances 

efficiently and responsibly. By focusing on a comprehensive set of management 

priorities, Treasury led and supported government-wide efforts to increase 

productivity, reduce waste and non-essential expenses, and modernize processes 

and systems. Treasury continued to build maturity into its Strategic Objective 

Annual Review (SOAR) and Quarterly Performance Review (QPR) processes, 

which form the basis for organizational performance management across every 

program in the Department. 

As part of our ongoing effort to increase efficiency in Treasury’s acquisition 

methods and use of technology, the Department worked closely with the Office of Management and Budget (OMB) to 

implement requirements of the Federal Information Technology Acquisition Reform Act (FITARA) across government. In 

Fiscal Year 2016, Treasury also demonstrated leadership in the areas of fiscal prudence and management excellence by:

• Receiving an “A” on our small business report card for the sixth consecutive year;

• Taking a renewed look at deferred investments, particularly in infrastructure and technology;

• Continuing to strengthen our internal cybersecurity through critical review of our High Value Assets, expansion of our 

education and awareness programs, and deploying insider threat detection more broadly; and

• Using Federal Employee Viewpoint Survey results to design activities focused on increasing employee engagement, and 

improving the alignment of individual performance to organizational results within the Department to achieve mission 

goals. 

The Department received an unmodified audit opinion on its consolidated financial statements for the 17th consecutive year. 

Treasury continues to make steady progress toward resolving the two Federal Managers’ Financial Integrity Act material 

weaknesses remaining open as of September 30, 2016 (Internal Revenue Service – Unpaid Tax Assessments, and Bureau of 

the Fiscal Service – Systems, Controls, and Procedures to Prepare the Government-wide Financial Statements). Despite the 

complexity of Treasury’s financial systems contributing to these material weaknesses, we continue to make considerable 

progress towards closing the issues. 

As we lead Treasury’s management programs and initiatives, we will continue to ensure that the Department can deliver its 

mission efficiently and provide the best value to the taxpayers.

Kody H. Kinsley Dorrice C. Roth

Assistant Secretary for Management Deputy Chief Financial Officer

November 15, 2016 November 15, 2016

Kody H. Kinsley

Assistant Secretary 

for Management

Dorrice C. Roth

Deputy Chief Financial 

Officer
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DEPAR TMEN T OF THE TREASURY 55

FINANCIAL SECTION | FY 2016 AGENCY FINANCIAL REPORT

OFFICE OF

INSPECTOR GENERAL

DEPARTMENT OF THE TREASURY

WASHINGTON, D.C. 20220

INSPECTOR GENERAL’S TRANSMITTAL LETTER

November 15, 2016

INFORMATION MEMORANDUM FOR SECRETARY LEW

FROM: Eric M. Thorson /s/

Inspector General

SUBJECT: Audit of the Department of the Treasury’s Consolidated Financial Statements for 

Fiscal Years 2016 and 2015

INTRODUCTION

The Chief Financial Officer’s Act, as amended, requires the Department of the Treasury’s (Treasury) 

Inspector General or an independent auditor, as determined by the Inspector General, to audit Treasury’s 

consolidated financial statements. We contracted with the independent certified public accounting firm of 

KPMG LLP (KPMG) to audit the consolidated financial statements of Treasury as of September 30, 2016 

and 2015, and for the years then ended, to provide a report on internal control over financial reporting, to 

report instances in which Treasury’s financial management systems did not substantially comply with the 

requirements of the Federal Financial Management Improvement Act of 1996 (FFMIA), and to report any 

reportable noncompliance with laws, regulations, contracts, and grant agreements tested. The contract 

required that the audit be performed in accordance with U.S. generally accepted government auditing 

standards and Office of Management and Budget (OMB) Bulletin No. 15-02, Audit Requirements for 

Federal Financial Statements. 

RESULTS OF INDEPENDENT AUDIT 

In its audit of Treasury, KPMG found

• the consolidated financial statements were fairly presented, in all material respects, in accordance 

with U.S. generally accepted accounting principles; 

• a material weakness in internal control over unpaid tax assessments and a significant deficiency in 

internal control over financial reporting systems identified by the auditor of the Internal Revenue 

Service, collectively representing a material weakness for Treasury as a whole; 

• deficiencies in internal control over information systems at the Bureau of the Fiscal Service, 

representing a significant deficiency for Treasury as a whole; 
FY 2016 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

56 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

• noncompliance with certain requirements of FFMIA related to Federal financial management

systems requirements and Federal accounting standards; and

• no instances of reportable noncompliance with laws, regulations, contracts, and grant agreements

tested.

EVALUATION OF AUDITORS’ PERFORMANCE

In connection with the contract, we reviewed KPMG’s report and related documentation and inquired of its 

representatives. Our review, as differentiated from an audit in accordance with U.S. generally accepted 

government auditing standards, was not intended to enable us to express, and we do not express, an opinion 

on Treasury’s consolidated financial statements or conclusions about the effectiveness of internal control; 

whether Treasury’s financial management systems substantially complied with FFMIA; and compliance 

with laws, regulations, contracts, and grant agreements. KPMG is responsible for the attached auditor’s 

report dated November 15, 2016, and the conclusions expressed in the report. However, our review 

disclosed no instances where KPMG did not comply, in all material respects, with U.S. generally accepted 

government auditing standards.

I appreciate the courtesy and cooperation extended to KPMG and my staff during the audit. Should you or 

your staff have questions, you may contact me at (202) 622-1090 or Deborah L. Harker, Assistant Inspector 

General for Audit, at (202) 927-5400. 

Attachment

cc: Kody H. Kinsley 

Assistant Secretary for Management

Dorrice C. Roth 

Deputy Chief Financial Officer 
Independent Auditors’ Report

Inspector General 

Department of the Treasury: 

Report on the Financial Statements 

We have audited the accompanying consolidated financial statements of the Department of the Treasury 

(Department), which comprise the consolidated balance sheets as of September 30, 2016 and 2015, and the 

related consolidated statements of net cost, consolidated statements of changes in net position, combined 

statements of budgetary resources and statements of custodial activity for the years then ended, and the 

related notes to the consolidated financial statements (hereinafter referred to as “consolidated financial 

statements”). 

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements 

in accordance with U.S. generally accepted accounting principles; this includes the design, implementation, and 

maintenance of internal control relevant to the preparation and fair presentation of consolidated financial 

statements that are free from material misstatement, whether due to fraud or error. 

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We 

did not audit the financial statements of the Internal Revenue Service (IRS), a component entity of the 

Department, which statements reflect total assets of $57.2 and $48.7 billion, net cost of operations of $12.0 and 

$11.8 billion before applicable eliminating entries, budgetary resources of $12.8 and $12.5 billion, and custodial 

activity of $3,341 and $3,304 billion, as of and for the years ended September 30, 2016 and September 30, 

2015, respectively. Those statements were audited by other auditors, whose report has been furnished to us, 

and our opinion, insofar as it relates to the amounts included for IRS, is based solely on the report of the other 

auditors. 

We also did not audit the financial statements of the Office of Financial Stability (OFS), a component entity of 

the Department, which statements reflect total assets of $24.2 and $28.6 billion, net cost of operations of $4.1 

and $4.4 billion before applicable eliminating entries, and budgetary resources of $3.9 and $10.2 billion, as of 

and for the years ended September 30, 2016 and September 30, 2015, respectively. Those statements were 

audited by other auditors, whose report has been furnished to us, and our opinion, insofar as it relates to the 

amounts included for OFS, is based solely on the report of the other auditors. 

We conducted our audits in accordance with auditing standards generally accepted in the United States of 

America, in accordance with the standards applicable to financial audits contained in Government Auditing 

Standards issued by the Comptroller General of the United States, and in accordance with Office of 

Management and Budget (OMB) Bulletin No. 15-02, Audit Requirements for Federal Financial Statements. 

Those standards and OMB Bulletin No. 15-02 require that we plan and perform the audit to obtain reasonable 

assurance about whether the consolidated financial statements are free from material misstatement. 

KPMG LLP is a Delaware limited liability partnership and the U.S. member

firm of the KPMG network of independent member firms affiliated with 

KPMG International Cooperative (“KPMG International”), a Swiss entity. 

KPMG LLP

Suite 12000

1801 K Street, NW

Washington, DC 20006

57
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the 

consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the 

assessment of the risks of material misstatement of the consolidated 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 consolidated financial statements in order to design audit procedures 

that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness 

of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the 

appropriateness of accounting policies used and the reasonableness of significant accounting estimates made 

by management, as well as evaluating the overall presentation of the consolidated financial statements. 

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our 

audit opinion. 

Opinion on the Financial Statements 

In our opinion, based on our audits and the reports of the other auditors, the consolidated financial statements 

referred to above present fairly, in all material respects, the financial position of the Department of the Treasury 

as of September 30, 2016 and 2015, and its net costs, changes in net position, budgetary resources, and 

custodial activity for the years then ended in accordance with U.S. generally accepted accounting principles. 

Emphasis of Matter 

As discussed in Notes 1AC and 7, effective October 1, 2015 the Department changed its budgetary accounting 

policy for transactions with the International Monetary Fund. Our opinion is not modified with respect to this 

matter. 

As discussed in Notes 9 and 10, the Department is a participant in significant legislation and transactions 

whose purpose is to assist in stabilizing the financial markets. Also as discussed in note 1A, the consolidated 

financial statements do not include the assets, liabilities, or results of operations of commercial entities in which 

the Department has a significant equity interest as it has determined that none of these entities meet the criteria 

for inclusion as a federal entity and are therefore not included in the consolidated financial statements. 

Furthermore, as discussed in notes 1V, 9, and 10, the value of certain investments, loans, and commitments is 

based on estimates. These estimates are inherently subject to substantial uncertainty arising from the likelihood 

of future changes in general economic, regulatory, and market conditions. In addition, there are significant 

uncertainties related to the amounts that the Department will realize from its investments. As such, there will 

likely be differences between the estimated value of these investments, loans, and commitments as of 

September 30, 2016 and 2015, and the amounts that may ultimately be realized from these assets or may be 

required to settle these commitments. Such differences may be material and will also affect the ultimate cost of 

these programs. Our opinion is not modified with respect to these matters. 

Other Matters 

Interactive Data 

Management has elected to reference to information on websites or other forms of interactive data outside the 

Agency Financial Report to provide additional information for the users of its financial statements. Such 

information is not a required part of the basic consolidated financial statements or supplementary information 

required by the Federal Accounting Standards Advisory Board. The information on these websites or the other 

interactive data has not been subjected to any of our auditing procedures, and accordingly we do not express 

an opinion or provide any assurance on it.

Required Supplementary Information 

U.S. generally accepted accounting principles require that the information in the Management’s Discussion and 

Analysis and Required Supplementary Information sections be presented to supplement the basic consolidated 

financial statements. Such information, although not a part of the basic consolidated financial statements, is 

required by the Federal Accounting Standards Advisory Board who considers it to be an essential part of 

financial reporting for placing the basic consolidated financial statements in an appropriate operational, 

58
economic, or historical context. We, and the other auditors, have applied certain limited procedures to the 

required supplementary information in accordance with auditing standards generally accepted in the United 

States of America, which consisted of inquiries of management about the methods of preparing the information 

and comparing the information for consistency with management’s responses to our inquiries, the basic 

consolidated financial statements, and other knowledge we obtained during our audits of the basic consolidated 

financial statements. We do not express an opinion or provide any assurance on the information because the 

limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. 

Other Information

Our audits were conducted for the purpose of forming an opinion on the basic consolidated financial statements 

as a whole. The Message from the Secretary of the Treasury, the Message from the Assistant Secretary for 

Management and the Deputy Chief Financial Officer, and the Other Information sections are presented for 

purposes of additional analysis and are not a required part of the basic consolidated financial statements. Such 

information has not been subjected to the auditing procedures applied in the audits of the basic consolidated 

financial statements, and accordingly, we do not express an opinion or provide any assurance on it. 

Other Reporting Required by Government Auditing Standards

Internal Control Over Financial Reporting 

In planning and performing our audit of the consolidated financial statements as of and for the year ended 

September 30, 2016, we considered the Department’s internal control over financial reporting (internal control) 

to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our 

opinion on the consolidated financial statements, but not for the purpose of expressing an opinion on the 

effectiveness of the Department’s internal control. Accordingly, we do not express an opinion on the 

effectiveness of the Department’s internal control. This report includes our consideration of the results of the 

other auditors’ testing of internal control over financial reporting that was reported on separately by those 

auditors. However, this reporting, insofar as it relates to the results of the other auditors, is based solely on the 

reports of the other auditors. We, and the other auditors, did not test all internal controls relevant to operating 

objectives as broadly defined by the Federal Managers’ Financial Integrity Act of 1982. 

Our consideration of internal control was for the limited purpose described in the preceding paragraph and was 

not designed to identify all deficiencies in internal control that might be material weaknesses or significant 

deficiencies and therefore, material weaknesses or significant deficiencies may exist that have not been 

identified. However, as described below, we and the other auditors identified certain deficiencies in internal 

control that we consider to be a material weakness and a significant deficiency. 

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. A material weakness is a deficiency, or a combination of deficiencies, in 

internal control 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. We consider the deficiency 

described below to be a material weakness. 

A. Material Weakness in Internal Control Over Financial Reporting at IRS (Repeat Condition) 

IRS needs to improve internal control over financial reporting and systems to ensure reliable and timely financial 

information is obtained, maintained, and reported in accordance with OMB Circular A-123, Management’s 

Responsibility for Enterprise Risk Management and Internal Control. The other auditors reported a material 

weakness in internal control over unpaid tax assessments and a significant deficiency in internal control over 

financial reporting systems that we collectively considered a material weakness at the Department level. The 

other auditors performed an audit of IRS’s internal control over financial reporting for the purpose of providing 

an opinion on the effectiveness of internal control. Because of the material weakness, the other auditors’ 

opinion on IRS’s internal control over financial reporting stated that IRS did not maintain, in all material respects, 

effective internal control over financial reporting as of September 30, 2016, and thus a reasonable possibility 

exists that a material misstatement of IRS’s financial statements could occur and not be prevented or detected 

and corrected on a timely basis. IRS internal control deficiencies are summarized as follows: 

59
1. Unpaid Tax Assessments

IRS continued to have system deficiencies in its unpaid tax assessment subsidiary ledger and supporting

financial systems that led to errors in tax payer accounts. In addition, IRS’s management and reporting of

unpaid tax assessments continued to be hindered by inaccurate tax records because IRS did not

consistently record information in tax payers’ accounts accurately and timely. As a result, IRS subsidiary

ledger and supporting financial systems did not: (1) produce reliable and useful information for IRS to

manage unpaid tax assessments; and (2) provide accurate and complete transaction level financial

information that IRS needed to properly report its federal tax receivables, compliance assessments, and

write-offs in accordance with the federal accounting standards. IRS used a compensating estimation

process to determine unpaid tax assessments and recorded multi-billion dollar adjustments to the year end

balances of unpaid tax assessments generated by its subsidiary ledger in order to produce reliable

amounts for reporting its federal taxes receivables, compliance assessments, and write-offs.

2. Financial Reporting Systems

IRS made improvements in internal control over financial reporting systems; however, IRS continued to

have information security control deficiencies that increase the risk of inappropriate and undetected use,

modification, or disclosure of IRS systems and data. Specifically, IRS did not (1) fully implement controls for

logging and monitoring audit trails of certain systems and update mainframe logging and monitoring

policies; (2) limit access to a taxpayer database; (3) implement a secure method for managing

administrator passwords; (4) use strong encryption and safeguard media storage devices to prevent

unauthorized disclosure of and changes to information; (5) segregate incompatible responsibilities; (6)

install security updates on certain databases and servers that support financial systems; and (7) effectively

manage security risk of certain databases.

Recommendation 

The other auditors separately provided IRS management a report detailing the conditions identified and their 

recommendations to address the above material weakness. We recommend that the Assistant Secretary for 

Management (ASM) and Deputy Chief Financial Officer (DCFO) ensure that IRS implements corrective actions 

to resolve this material weakness. 

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

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

consider the deficiency described below to be a significant deficiency. 

B. Significant Deficiency in Internal Control Over Information Systems at the Bureau of the Fiscal 

Service (Repeat Condition) 

Effective information system controls and security programs over financial systems are essential to protecting 

information resources in accordance with OMB Circular No. A-130, Management of Federal Information 

Resources. The Bureau of the Fiscal Service (Fiscal Service) relies on an extensive array of information 

technology systems to perform their primary missions. During fiscal year 2016, Fiscal Service made progress in 

remediating the prior year significant deficiency; however, Fiscal Service's corrective action plans were not 

effectively designed and implemented. Specifically, Fiscal Service’s general information technology controls 

(GITCs) did not provide reasonable assurance that: (1) access to financial systems is protected against 

unauthorized modification, loss, or disclosure; and (2) responsibilities are properly segregated; and (3) 

contingency planning minimizes the risk of unplanned interruptions and provides for recovery of critical 

operations should an interruption occur. Until these control deficiencies are fully addressed, there will be an 

increased risk of inadequate security controls in financial systems; unauthorized access to, modification of, or 

disclosure of sensitive financial data and programs; and disruption of critical financial operations. 

Recommendation 

Due to the sensitivity of the details of the deficiencies described above, we will issue a separate report detailing 

the conditions identified and our recommendations for corrective action. We recommend that the ASM and 

60
DCFO ensure that the Fiscal Service implement requisite corrective actions to resolve control deficiencies over 

its information systems. 

Compliance and Other Matters 

As part of obtaining reasonable assurance about whether the Department’s consolidated financial statements 

are free from material misstatement, we, and the other auditors, performed tests of the Department’s 

compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with 

which could have a direct and material effect on the determination of financial statement amounts. However, 

providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we 

do not express such an opinion. The results of our, and the other auditors’, tests of compliance disclosed no 

instances of noncompliance or other matters that are required to be reported herein under Government 

Auditing Standards or OMB Bulletin No. 15-02. 

We, and the other auditors, also performed tests of its compliance with certain provisions referred to in Section 

803(a) of the Federal Financial Management Improvement Act of 1996 (FFMIA). Providing an opinion on 

compliance with FFMIA was not an objective of our audit, and accordingly, we do not express such an opinion. 

The results of our tests of FFMIA and those of the other auditors disclosed instances described below, in which 

the Department’s financial management systems did not substantially comply with the Federal financial 

management systems requirements and applicable Federal accounting standards. The results of our tests of 

FFMIA and those of the other auditors disclosed no instances in which the Department’s financial management 

systems did not substantially comply with the United States Government Standard General Ledger at the 

transaction level. 

C. Noncompliance with Federal Financial Management Improvement Act of 1996 (Repeat Condition) 

The Department’s financial management systems did not substantially comply with the following FFMIA 

requirements: 

1. Federal Financial Management Systems Requirements

As discussed in finding A. Material Weakness in Internal Control Over Financial Reporting at IRS (Repeat

Condition), the Department continues to have deficiencies in IRS’s financial management systems.

Specifically, IRS did not consistently design, implement, and operate information system controls and

security programs over its financial systems in accordance with the federal financial management system

requirements.

2. Federal Accounting Standards

As discussed in finding A. Material Weakness in Internal Control Over Financial Reporting at IRS (Repeat

Condition), the Department has a material weakness at IRS that affected the Department’s ability to prepare

its financial statements in accordance with the federal accounting standards. Specifically, IRS subsidiary

records and supporting financial systems were unable to support the federal taxes receivable amount on the

consolidated balance sheet, and the compliance assessments and write-offs in the required supplementary

information disclosures, in accordance with the federal accounting standards.

Recommendation 

The other auditors separately provided IRS management with recommendations to address the above 

noncompliance with FFMIA. We recommend that the ASM and DCFO ensure that IRS implements its 

remediation plan outlining actions to be taken to resolve noncompliance with the FFMIA requirements and the 

resources and responsible organizational units for such planned actions.

Department’s Response to Findings

The Department indicated in a separate letter immediately following this report that it concurs with the findings 

and recommendations presented in our report. Further, the Department responded that it will take necessary 

corrective actions to address each of the matters presented. The Department’s response was not subjected to 

the auditing procedures applied in the audit of the consolidated financial statements and, accordingly, we 

express no opinion on the response. 

61
Purpose of the Other Reporting Required by Government Auditing Standards 

The purpose of the communication described in the Other Reporting Required by Government Auditing 

Standards section is solely to describe the scope of our testing of internal control and compliance and the result 

of that testing, and not to provide an opinion on the effectiveness of the Department’s internal control or 

compliance. Accordingly, this communication is not suitable for any other purpose. 

Washington D.C.

November 15, 2016 

62
DEPAR TMEN T OF THE TREASURY 63 

FINANCIAL SECTION | FY 2016 AGENCY FINANCIAL REPORT

MANAGEMENT’S RESPONSE TO INDEPENDENT AUDITORS’ REPORT

November 15, 2016

KPMG LLP

1801 K Street, NW

Washington, DC 20006

Ladies and Gentlemen:

On behalf of Secretary Lew, we are responding to your audit report on the Department of the Treasury's 

fiscal year 2016 consolidated financial statements. Our bureaus and program offices are proud of the 

Department's success in achieving an unmodified audit opinion on the Department's financial statements 

for the seventeenth consecutive year.

The high level of professionalism, technical expertise, and integrity demonstrated by KPMG in conducting

this year's audit contributed greatly to Treasury's successful fiscal year 2016 results. We also appreciate

the expertise and commitment demonstrated by the other organizations involved in the audit process -the

Office of the Inspector General, Government Accountability Office (GAO), and the firms that audited

several of our bureaus.

We acknowledge the one material weakness and one significant deficiency at the Department level, and 

the one instance of noncompliance with laws and regulations described in your report. We agree with

your recommendations, and will focus on necessary corrective actions to address each of the issues.

Overall, we have made strong progress in enhancing our internal control environment. We are very proud of

our progress, and remain committed to ensuring high standards of integrity and transparency in reporting our

financial performance.

Kody H. Kinsley Dorrice C. Roth

Assistant Secretary for Management Deputy Chief Financial Officer
64 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

Consolidated Balance Sheets

As of September 30, 2016 and 2015

(in millions) 2016 2015

ASSETS 

Intra-governmental Assets

Fund Balance (Note 2) $ 435,246 $ 352,526

Loans and Interest Receivable (Note 3) 1,400,654 1,306,596

Advances to the Unemployment Trust Fund (Note 4) 8,558 12,840

Due From the General Fund (Note 4) 19,699,152 18,632,253

Other Intra-governmental Assets 455 453

Total Intra-governmental Assets 21,544,065 20,304,668

Cash, Foreign Currency, and Other Monetary Assets (Note 5) 410,098 253,136

Gold and Silver Reserves (Note 6) 11,062 11,062

Reserve Position in the International Monetary Fund (Note 7) 9,570 8,168

Taxes, Interest, and Other Receivables, Net (Note 8) 50,306 42,034

Credit Program Receivables, Net (Note 9) 7,058 15,145

Loans and Interest Receivable, Net (Note 7) 8,627 5,537

Investments in Government Sponsored Enterprises (GSE) (Note 10) 108,550 106,270

Investments in Multilateral Development Banks (Note 11) 7,648 7,319

Other Investments and Related Interest (Note 12) 9,860 11,737

Property, Plant, and Equipment, Net (Note 13) 3,005 2,897

Other Assets 1,059 762

Total Assets (Note 14) $ 22,170,908 $ 20,768,735

Heritage Assets (Note 13)

The accompanying notes are an integral part of these financial statements.
DEPAR TMEN T OF THE TREASURY 65

FINANCIAL SECTION | FY 2016 AGENCY FINANCIAL REPORT

Consolidated Balance Sheets

As of September 30, 2016 and 2015

 

(in millions) 2016 2015

LIABILITIES 

Intra-governmental Liabilities

Federal Debt and Interest Payable (Notes 4 and 15) $ 5,466,422 $ 5,096,265

Liability for Restoration of Federal Debt Principal and Interest (Notes 4 and 15) - 146,066

Other Debt and Interest Payable (Note 16) 13,125 12,421

Due To the General Fund (Note 4) 1,906,623 1,663,955

Other Intra-governmental Liabilities (Note 18) 462 484

Total Intra-governmental Liabilities 7,386,632 6,919,191

 

Federal Debt and Interest Payable (Notes 4 and 15) 14,196,734 13,148,200

Liability for Restoration of Federal Debt Principal and Interest (Notes 4 and 15) - 204,591

Certificates Issued to the Federal Reserve (Note 5) 5,200 5,200

Allocation of Special Drawing Rights (Note 5) 49,294 49,574

Gold Certificates Issued to the Federal Reserve (Note 6) 11,037 11,037

Refunds Payable (Notes 4 and 22) 2,993 3,039

D.C. Federal Pension and Judicial Retirement Actuarial Liability (Note 17) 8,836 8,849

Other Liabilities (Note 18) 6,268 4,940

Total Liabilities (Note 18) 21,666,994 20,354,621

Commitments and Contingencies (Note 26)

NET POSITION

Unexpended Appropriations: 

 Funds from Dedicated Collections (Note 23) 200 200

 Other Funds 434,446 343,023

 Subtotal 434,646 343,223

Cumulative Results of Operations:

 Funds from Dedicated Collections (Note 23) 47,110 48,646

 Other Funds 22,158 22,245

 Subtotal 69,268 70,891

 

Total Net Position - Funds from Dedicated Collections (Combined Totals) (Note 23) 47,310 48,846

Total Net Position - Other Funds (Combined Totals) 456,604 365,268

Total Net Position (Note 19) 503,914 414,114

Total Liabilities and Net Position $ 22,170,908 $ 20,768,735

The accompanying notes are an integral part of these financial statements.
66 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

Consolidated Statements of Net Cost

For the Fiscal Years Ended September 30, 2016 and 2015

(in millions) 2016 2015

Cost of Treasury Operations: 

Financial Program 

Gross Cost $ 14,969 $ 14,476

Less Earned Revenue (3,129) (3,362)

Net Program Cost 11,840 11,114

 

Economic Program 

Gross Cost 12,045 19,998

Less Earned Revenue (7,078) (8,287)

Net Program Cost 4,967 11,711

 

Security Program 

Gross Cost 412 406

Less Earned Revenue (3) (6)

Net Program Cost 409 400

 

Total Program Gross Costs 27,426 34,880

Total Program Gross Earned Revenues (10,210) (11,655)

Total Net Program Cost before Changes in Actuarial Assumptions 17,216 23,225

(Gain)/Loss on Pension, ORB, or OPEB Assumption Changes 501 299

Total Net Cost of Treasury Operations (Note 20) 17,717 23,524

 

Non-Entity Costs:

Federal Debt Interest 427,479 406,982

Restoration of Foregone Federal Debt Interest (Note 15) 635 -

Less Interest Revenue from Loans (42,384) (39,702)

Net Federal Debt Interest Costs 385,730 367,280

Accrued Restoration of Foregone Federal Debt Interest (Note 15) - 2,052

Other Federal Costs, Net (Note 20) 14,554 13,601

GSEs Non-Entity Revenue, Net (Note 10) (13,802) (30,830)

Other, Net (575) (715)

Total Net Non-Entity Costs 385,907 351,388

Total Net Cost of Treasury Operations and Non-Entity Costs $ 403,624 $ 374,912

 

 

The accompanying notes are an integral part of these financial statements. 
DEPAR TMEN T OF THE TREASURY 67

FINANCIAL SECTION | FY 2016 AGENCY FINANCIAL REPORT

Consolidated Statements of Changes in Net Position

For the Fiscal Years Ended September 30, 2016 and 2015

(in millions) 2016 2015

CUMULATIVE RESULTS OF OPERATIONS (Note 19)

Beginning Balance $ 70,891 $ 72,775

Budgetary Financing Sources 

Appropriations Used 464,156 430,756

Non-Exchange Revenue 253 193

Donations and Forfeitures of Cash/Equivalent 416 4,315

Transfers In/Out Without Reimbursement (48) (17)

Other (67) (3)

Other Financing Sources (Non-Exchange) 

Donation/Forfeiture of Property 158 78

Accrued Interest and Discount on Debt 3,456 9,579

Accrued Interest on Restoration of Federal Debt Principal (Note 15) (2,052) 2,052

Transfers In/Out Without Reimbursement (3) 11

Imputed Financing Sources (Note 20) 681 669

Transfers to the General Fund and Other (Note 19) (64,949) (74,605)

Total Financing Sources 402,001 373,028

Net Cost of Treasury Operations and Non-Entity Costs (403,624) (374,912)

Net Change (1,623) (1,884)

Cumulative Results of Operations 69,268 70,891

 

UNEXPENDED APPROPRIATIONS (Note 19)

Beginning Balance 343,223 348,612

Budgetary Financing Sources 

Appropriations Received (Note 19) 565,550 437,085

Appropriations Transferred In/Out 35 99

Other Adjustments (Note 19) (10,006) (11,817)

Appropriations Used (464,156) (430,756)

Total Budgetary Financing Sources 91,423 (5,389)

Total Unexpended Appropriations 434,646 343,223

Net Position $ 503,914 $ 414,114

 

The accompanying notes are an integral part of these financial statements. 
68 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

Combined Statement of Budgetary Resources

For the Fiscal Year Ended September 30, 2016

 Non-Budgetary 2016

(in millions) Budgetary Financing Total

BUDGETARY RESOURCES

Unobligated balance brought forward, October 1 $ 331,420 $ 572 $ 331,992

Adjustment - Change in IMF accounting (Note 1AC and Note 7) (8,250) - (8,250)

 Unobligated balance brought forward, October 1, as adjusted 323,170 572 323,742

Recoveries of unpaid prior year obligations 7,034 89,424 96,458

Other changes in unobligated balance (8,355) (89,508) (97,863)

Unobligated balance from prior year budget authority, net 321,849 488 322,337

Appropriations (discretionary and mandatory) (Note 19) 465,346 - 465,346

Borrowing authority (discretionary and mandatory) (Note 21) - 365 365

Spending authority from offsetting collections (discretionary and 

 mandatory) 8,144 1,107 9,251

Total Budgetary Resources $ 795,339 $ 1,960 $ 797,299

 

STATUS OF BUDGETARY RESOURCES

New obligations and upward adjustments (Note 21) $ 478,564 $ 1,526 $ 480,090

Unobligated balance, end of year: 

 Apportioned, unexpired accounts 274,048 42 274,090

 Exempt from apportionment, unexpired accounts 1,505 - 1,505

 Unapportioned, unexpired accounts 40,591 392 40,983

 Unexpired unobligated balance, end of year 316,144 434 316,578

 Expired unobligated balance, end of year 631 - 631

Unobligated balance, end of year 316,775 434 317,209

Total Status of Budgetary Resources $ 795,339 $ 1,960 $ 797,299

CHANGE IN OBLIGATED BALANCE

Unpaid Obligations:

Unpaid obligations, brought forward, October 1 $ 137,771 $ 90,171 $ 227,942

Adjustment - Change in IMF accounting (Note 1AC and Note 7) (54,543) - (54,543)

 Unpaid obligations, brought forward, October 1, as adjusted 83,228 90,171 173,399

New obligations and upward adjustments (Note 21) 478,564 1,526 480,090

Outlays (gross) (479,748) (1,470) (481,218)

Recoveries of prior year unpaid obligations (7,034) (89,424) (96,458)

Unpaid obligations, end of year 75,010 803 75,813

Uncollected Payments:

Uncollected payments, Federal sources, brought forward, October 1 (196) (407) (603)

Change in uncollected payments, Federal sources (1) 408 407

Uncollected payments, Federal sources, end of year (197) 1 (196)

Obligated Balance, End of Year $ 74,813 $ 804 $ 75,617

Obligated Balance, Start of Year $ 83,032 $ 89,764 $ 172,796

 

BUDGET AUTHORITY AND OUTLAYS, NET

Budget authority, gross (discretionary and mandatory) $ 473,490 $ 1,472 $ 474,962

Actual offsetting collections (discretionary and mandatory) (8,563) (9,833) (18,396)

Change in uncollected payments, Federal sources 

 (discretionary and mandatory) (1) 408 407

Recoveries of prior year paid obligations (discretionary and mandatory) 110 - 110

Budget Authority, Net (Discretionary and Mandatory) $ 465,036 $ (7,953) $ 457,083

 

Outlays, gross (discretionary and mandatory) $ 479,748 $ 1,470 $ 481,218

Actual offsetting collections (discretionary and mandatory) (8,563) (9,833) (18,396)

Outlays, net (discretionary and mandatory) 471,185 (8,363) 462,822

Distributed offsetting receipts (62,565) - (62,565)

Agency Outlays, Net (Discretionary and Mandatory) $ 408,620 $ (8,363) $ 400,257

 

The accompanying notes are an integral part of these financial statements.
DEPAR TMEN T OF THE TREASURY 69

FINANCIAL SECTION | FY 2016 AGENCY FINANCIAL REPORT

Combined Statement of Budgetary Resources

For the Fiscal Year Ended September 30, 2015 

 Non-Budgetary 2015

(in millions) Budgetary Financing Total

BUDGETARY RESOURCES

Unobligated balance brought forward, October 1 $ 349,165 $ 977 $ 350,142

Recoveries of unpaid prior year obligations 6,353 6,221 12,574

Other changes in unobligated balance (9,861) (6,779) (16,640)

Unobligated balance from prior year budget authority, net 345,657 419 346,076

Appropriations (discretionary and mandatory) (Note 19) 441,419 - 441,419

Borrowing authority (discretionary and mandatory) (Note 21) - 921 921

Spending authority from offsetting collections (discretionary and 

 mandatory) 9,548 2,072 11,620

Total Budgetary Resources $ 796,624 $ 3,412 $ 800,036

 

STATUS OF BUDGETARY RESOURCES

New obligations and upward adjustments (Note 21) $ 465,204 $ 2,840 $ 468,044

Unobligated balance, end of year: 

 Apportioned, unexpired accounts 281,286 102 281,388

 Exempt from apportionment, unexpired accounts 10,137 - 10,137

 Unapportioned, unexpired accounts 39,311 470 39,781

 Unexpired unobligated balance, end of year 330,734 572 331,306

 Expired unobligated balance, end of year 686 - 686

Unobligated balance, end of year 331,420 572 331,992

Total Status of Budgetary Resources $ 796,624 $ 3,412 $ 800,036

 

CHANGE IN OBLIGATED BALANCE

Unpaid Obligations:

Unpaid obligations, brought forward, October 1 $ 130,754 $ 95,577 $ 226,331

New obligations and upward adjustments (Note 21) 465,204 2,840 468,044

Outlays (gross) (451,834) (2,025) (453,859)

Recoveries of prior year unpaid obligations (6,353) (6,221) (12,574)

Unpaid obligations, end of year 137,771 90,171 227,942

Uncollected Payments:

Uncollected payments, Federal sources, brought forward, October 1 (227) (512) (739)

Change in uncollected payments, Federal sources 31 105 136

Uncollected payments, Federal sources, end of year (196) (407) (603)

Obligated Balance, End of Year $ 137,575 $ 89,764 $ 227,339

Obligated Balance, Start of Year $ 130,527 $ 95,065 $ 225,592

 

BUDGET AUTHORITY AND OUTLAYS, NET

Budget authority, gross (discretionary and mandatory) $ 450,967 $ 2,993 $ 453,960

Actual offsetting collections (discretionary and mandatory) (9,655) (4,969) (14,624)

Change in uncollected payments, Federal sources 

 (discretionary and mandatory) 31 105 136

Recoveries of prior year paid obligations (discretionary and mandatory) 76 - 76

Budget Authority, Net (Discretionary and Mandatory) $ 441,419 $ (1,871) $ 439,548

 

Outlays, gross (discretionary and mandatory) $ 451,834 $ 2,025 $ 453,859

Actual offsetting collections (discretionary and mandatory) (9,655) (4,969) (14,624)

Outlays, net (discretionary and mandatory) 442,179 (2,944) 439,235

Distributed offsetting receipts (69,036) - (69,036)

Agency Outlays, Net (Discretionary and Mandatory) $ 373,143 $ (2,944) $ 370,199

 

The accompanying notes are an integral part of these financial statements.
70 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

Statements of Custodial Activity

For the Fiscal Years Ended September 30, 2016 and 2015

(in millions) 2016 2015

Sources of Custodial Revenue (Note 22)

Individual Income and FICA Taxes $ 2,874,877 $ 2,799,081

Corporate Income Taxes 345,552 389,889

Estate and Gift Taxes 22,337 20,042

Excise Taxes 97,931 99,459

Railroad Retirement Taxes 5,941 6,432

Unemployment Taxes 8,440 9,108

Deposit of Earnings, Federal Reserve System 115,672 96,468

Fines, Penalties, Interest and Other Revenue 4,389 7,085

Total Revenue Received 3,475,139 3,427,564

Less Refunds and Other Payments (426,481) (403,607)

Net Revenue Received 3,048,658 3,023,957

Non-Cash Accrual Adjustment 8,257 1,380

Total Custodial Revenue 3,056,915 3,025,337

 

Disposition of Custodial Revenue (Note 22)

Amounts Provided to Fund Non-Federal Entities 425 350

Amounts Provided to Fund the Federal Government 3,048,233 3,023,607

Non-Cash Accrual Adjustment 8,257 1,380

Total Disposition of Custodial Revenue 3,056,915 3,025,337

Net Custodial Revenue $ - $ -

 

The accompanying notes are an integral part of these financial statements. 
DEPAR TMEN T OF THE TREASURY 71

FINANCIAL SECTION | FY 2016 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

TABLE OF CONTENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.............................................................................................................72

2. FUND BALANCE.....................................................................................................................................................................91

3. LOANS AND INTEREST RECEIVABLE – INTRA-GOVERNMENTAL..........................................................................................93

4. DUE FROM THE GENERAL FUND AND DUE TO THE GENERAL FUND...................................................................................95

5. CASH, FOREIGN CURRENCY, AND OTHER MONETARY ASSETS.............................................................................................97

6. GOLD AND SILVER RESERVES, AND GOLD CERTIFICATES ISSUED TO THE FEDERAL RESERVE BANKS................................99

7. RESERVE POSITION IN THE INTERNATIONAL MONETARY FUND AND RELATED LOANS AND INTEREST RECEIVABLE......100

8. TAXES, INTEREST, AND OTHER RECEIVABLES, NET...........................................................................................................102

9. CREDIT PROGRAM RECEIVABLES, NET...............................................................................................................................103

10. INVESTMENTS IN GOVERNMENT SPONSORED ENTERPRISES .............................................................................................106

11. INVESTMENTS IN MULTILATERAL DEVELOPMENT BANKS.................................................................................................110

12. OTHER INVESTMENTS AND RELATED INTEREST................................................................................................................110

13. PROPERTY, PLANT, AND EQUIPMENT, NET........................................................................................................................111

14. NON-ENTITY VS. ENTITY ASSETS .......................................................................................................................................112

15. FEDERAL DEBT AND INTEREST PAYABLE AND RELATED LIABILITIES...............................................................................113

16. OTHER DEBT AND INTEREST PAYABLE................................................................................................................................117

17. D.C. FEDERAL PENSION AND JUDICIAL RETIREMENT ACTUARIAL LIABILITY.....................................................................118

18. LIABILITIES...........................................................................................................................................................................120

19. NET POSITION......................................................................................................................................................................121

20. CONSOLIDATED STATEMENTS OF NET COST AND NET COSTS OF TREASURY SUB-ORGANIZATIONS.................................122

21. ADDITIONAL INFORMATION RELATED TO THE COMBINED STATEMENTS OF BUDGETARY RESOURCES.............................128

22. COLLECTION AND DISPOSITION OF CUSTODIAL REVENUE...................................................................................................131

23. FUNDS FROM DEDICATED COLLECTIONS.............................................................................................................................133

24. RECONCILIATION OF NET COST OF TREASURY OPERATIONS AND NON-ENTITY COSTS TO BUDGET.................................138

25. SCHEDULE OF FIDUCIARY ACTIVITY.....................................................................................................................................139

26. COMMITMENTS AND CONTINGENCIES..................................................................................................................................140

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED – SEE ACCOMPANYING AUDITORS’ REPORT)................................145
72 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. REPORTING ENTITY

The accompanying financial statements include the operations of the Department of the Treasury, one of 24 Chief Financial 

Officers (CFO) Act agencies of the Executive Branch of the U.S. government, and certain custodial activities the Department 

manages on behalf of the entire U.S. government. Except where the content clearly indicates otherwise, the use of the terms 

“Department,” “Treasury,” “we,” “us,” or “our” refers to the Department of the Treasury, including its Departmental Offices 

(DO) and operating bureaus which are further discussed below. The following paragraphs describe the activities of the 

reporting entity. 

We were established by an Act of Congress approved on September 2, 1789. Many subsequent acts affected our development, 

delegating new duties to our charge and establishing the numerous bureaus and divisions that now comprise the 

Department. As a major policy advisor to the President, the Secretary of the Treasury (Secretary) has primary responsibility

for formulating and managing the domestic and international tax and financial policies of the U.S. government. 

Further, the Secretary is responsible for recommending and implementing U.S. domestic and international economic and 

fiscal policy; governing the fiscal operations of the U.S. government; maintaining foreign assets control; managing the 

federal debt; collecting income and excise taxes; representing the United States on international monetary, trade, and 

investment issues; overseeing our overseas operations; and directing the manufacture of coins, currency, and other products 

for customer agencies and the public. 

Our reporting entities include DO and seven operating bureaus. For financial reporting purposes, DO is composed of: 

Community Development Financial Institutions (CDFI) Fund, Office of D.C. Pensions (ODCP), Exchange Stabilization Fund 

(ESF), Federal Financing Bank (FFB), Government Sponsored Enterprises (GSE) Program, International Assistance 

Programs (IAP), Office of Financial Research (OFR), Office of Financial Stability (OFS), Office of Inspector General (OIG), 

Small Business Lending Fund (SBLF), Special Inspector General for the Troubled Asset Relief Program (SIGTARP), 

Treasury Forfeiture Fund (TFF), Treasury Inspector General for Tax Administration (TIGTA), and the DO policy offices. 

Our seven operating bureaus are: Bureau of Engraving and Printing (BEP); Bureau of the Fiscal Service (Fiscal Service); 

Financial Crimes Enforcement Network (FinCEN); Internal Revenue Service (IRS); United States Mint (Mint); Office of the 

Comptroller of the Currency (OCC); and Alcohol and Tobacco Tax and Trade Bureau (TTB). Our consolidated financial 

statements reflect the reporting of our entity activities, comprising both our operating bureaus and DO. This includes

appropriations received to conduct our operations and revenue generated from those operations. They also reflect the 

reporting of certain non-entity (custodial) functions we perform on behalf of the U.S. government and others. Non-entity 

activities include collecting certain federal revenue, servicing the federal debt, disbursing certain federal funds, and 

maintaining certain assets and liabilities for the U.S. government (refer to Notes 4 and 14), as well as for other federal 

entities. Our reporting entity does not include the General Fund of the U.S. government (General Fund), which maintains 

receipt, disbursement, and appropriation accounts for all federal agencies. 
DEPAR TMEN T OF THE TREASURY 73

FINANCIAL SECTION | FY 2016 AGENCY FINANCIAL REPORT

Following generally accepted accounting principles (GAAP) for federal entities, we do not consolidate into our financial 

statements the assets, liabilities, or results of operations of any financial organization or commercial entity in which we hold 

either a direct or indirect majority equity investment, unless they constitute a part of the reporting entity per GAAP. Even 

though some of the equity investments are significant, these entities meet the criteria of “bailed out” entities under 

paragraph 50 of Statement of Federal Financial Accounting Concepts (SFFAC) No. 2, Entity and Display, which directs that 

such “bailout” investments should not be consolidated into the Financial Report of the U.S. government, either in part or as a 

whole. 

B. BASIS OF ACCOUNTING AND PRESENTATION

The financial statements have been prepared from our accounting records in conformity with GAAP for federal entities, and 

OMB Circular No. A-136, Financial Reporting Requirements,as revised. Accounting principles generally accepted for 

federal entities are the standards prescribed by the Federal Accounting Standards Advisory Board (FASAB). The American 

Institute of Certified Public Accountants recognizes FASAB as the official accounting standards-setting body for the U.S. 

government. 

These financial statements consist of the Consolidated Balance Sheets, the Consolidated Statements of Net Cost, the 

Consolidated Statements of Changes in Net Position, the Combined Statements of Budgetary Resources, and the Statements 

of Custodial Activity. The statements and the related notes are prepared in a comparative form to present both fiscal years

2016 and 2015 information. 

To provide additional clarity to our financial statements, we have presented additional financial statement line items on the 

Consolidated Balance Sheets and Consolidated Statements of Changes in Net Position than are required by the guidance in 

OMB Circular No. A-136. The following summarizes how our additional financial statement line items relate to the financial 

statement guidelines of the OMB Circular No. A-136. For the Consolidated Balance Sheets: (i) Advances to the 

Unemployment Trust Fund and Due From the General Fund represent other intra-governmental assets; (ii) Gold and Silver 

Reserves and the Reserve Position in the International Monetary Fund (IMF) represent other monetary assets; (iii) Loans 

and Interest Receivable (non-intra-governmental) represents other assets; (iv) Liability for Restoration of Federal Debt 

Principal and Interest (intra-governmental) and Due To the General Fund represent other intra-governmental liabilities; (v) 

Liability for Restoration of Federal Debt Principal and Interest (non-intra-governmental), Certificates Issued to the Federal 

Reserve, Allocation of Special Drawing Rights, Gold Certificates Issued to the Federal Reserve, Refunds Payable, and the 

D.C. Federal Pension and Judicial Retirement Actuarial Liability represent other liabilities. For the Consolidated 

Statements of Changes in Net Position, Accrued Interest and Discount on Debt, Accrued Interest on Restoration of Federal 

Debt Principal, and Transfers to the General Fund and Other represent other non-exchange financing sources.

We have eliminated transactions and balances among our entities from the Consolidated Balance Sheets, Consolidated 

Statements of Net Cost, and Consolidated Statements of Changes in Net Position. We present the Statement of Budgetary 

Resources on a combined basis; therefore, intra-departmental transactions and balances have not been eliminated from these 

statements. 

While these financial statements have been prepared from our accounting records in accordance with the formats prescribed 

by OMB, these financial statements are in addition to the financial reports used to monitor and control budgetary resources 

which are prepared from the same accounting records. 
74 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

Intra-governmental assets and liabilities are those due from or to other federal entities. Intra-governmental earned

revenues are collections or accruals of revenue from other federal entities, and intra-governmental costs are payments or 

accruals of expenditures to other federal entities. 

The financial statements should be read with the realization that we are a component of the U.S. government, a sovereign 

entity and, accordingly, our liabilities not covered by budgetary resources cannot be liquidated without the legislative 

enactment of an appropriation, and that the payment of all liabilities other than for contracts can be abrogated by the 

sovereign entity. Liabilities represent the probable and measurable future outflow or other sacrifice of resources as a result 

of past transactions or events. Liabilities covered by budgetary resources are those liabilities for which Congress has 

appropriated funds or funding is otherwise available to pay amounts due. Liabilities not covered by budgetary or other 

resources represent amounts owed in excess of available, congressionally appropriated funds or other amounts, and there is 

no certainty that the appropriations will be enacted. 

We have reclassified certain fiscal year 2015 activity and balances presented on the financial statements to conform to the 

presentation in the current year, the effects of which are immaterial,including format and terminology changes we made to 

our Combined Statements of Budgetary Resources in accordance with OMB Circular A-136. 

There are numerous acronyms used throughout the notes herein as well as other sections of this Agency Financial Report. 

Refer to the “Glossary of Acronyms” located in the Appendix of this report for a complete listing of these acronyms and their 

definitions. 

C. FUND BALANCE

The Fund Balance is the aggregate amount of our accounts with the U.S. government’s central accounts from which we are

authorized to make expenditures and pay liabilities. It is an asset because it represents our claim to the U.S. government’s 

resources. Fund balance is not equivalent to unexpended appropriations because it also includes non-appropriated revolving 

and enterprise funds, suspense accounts, and custodial funds such as deposit funds, special funds, and trust funds. 

D. LOANS AND INTEREST RECEIVABLE

Intra-Governmental

Intra-governmental entity loans and interest receivable from other federal agencies represent the principal and related 

interest receivable on loans we issue, through FFB. We do not record loan loss allowance for credit reform subsidy costs for 

loans purchased from federal agencies or for guaranteed loans made to non-federal borrowers because those agencies 

guarantee the outstanding balances (interest and principal). 

Intra-governmental non-entity loans and interest receivable from other federal agencies represent the principal and related 

interest receivable on loans we issue, through the Fiscal Service. We act as an intermediary issuing these loans because the 

agencies receiving these loans lend these funds to third parties to carry out various programs of the U.S. government. 

Because of our intermediary role in issuing these loans, we do not record a loan loss allowance related to these non-entity 

intra-governmental loans. Instead, the ultimate lender, the federal agency that issued the loans to the public, recognizes 

loan loss allowances and subsidy costs. We accrue interest revenue on intra-governmental loans when earned. 
DEPAR TMEN T OF THE TREASURY 75

FINANCIAL SECTION | FY 2016 AGENCY FINANCIAL REPORT

Public 

Public loans and interest receivable primarily represent supplemental borrowing arrangements between the United States 

and the IMF (refer to Note 7). These loans are denominated in Special Drawing Rights (SDRs) and recorded at the 

equivalent U.S. dollar amount (refer to the accounting policy below entitled “Special Drawing Rights”). We periodically 

adjust the value of these loans, due to fluctuations in the value of the U.S. dollar with respect to the SDR, to maintain the 

amount of these loans in dollar terms. We do not record a loan loss allowance for these loans as we do not anticipate any 

defaults on the repayment of these loans. 

E. ADVANCES TO THE UNEMPLOYMENT TRUST FUND

The General Fund issues advances to the Department of Labor’s (DOL) Unemployment Trust Fund for states to pay 

unemployment benefits. The Fiscal Service accounts for the advances issued on behalf of the General Fund. As outlined in 

the United States Code (USC) 42 USC §1323, these advances bear an interest rate that is computed as the average interest 

rate as of the end of the calendar month preceding the issuance date of the advance for all interest-bearing obligations of the 

United States that form the public debt, to the nearest lower 1/8 of 1.0 percent. Interest on the advances is due on 

September 30th of each year. We repay advances when the Secretary, in consultation with the Secretary of the DOL, 

determines that the balance in the Unemployment Trust Fund is adequate to allow repayment.

F. CASH, FOREIGN CURRENCY, AND OTHER MONETARY ASSETS

Substantially all of our operating cash is non-entity government-wide cash held in depository institutions and Federal 

Reserve Bank (FRB) accounts. Agencies deposit funds that are submitted to them directly into either a Federal Reserve 

Treasury General Account (TGA) or a local TGA depositary. We transfer the balances in these TGA accounts into the 

Federal Reserve Bank of New York’s (FRBNY) TGA throughout the day. 

Operating cash of the U.S. government represents balances from tax collections, customs duties, other revenue, federal debt 

receipts, and other various receipts, net of cash outflows for budget outlays and other payments held in the FRBs and in 

foreign and domestic financial institutions. Outstanding checks net against operating cash until they clear the Federal 

Reserve System. 

The FRBNY maintains the TGA, which functions as the U.S. government’s checking account for deposits and disbursements 

of public funds. Cash in the TGA is restricted for government-wide operations. 

We classify our foreign currency investments having original maturities of three months or less as cash equivalents. SDR

holdings comprise most of the other monetary assets (refer to the accounting policy below entitled “Special Drawing Rights”).

G. TAXES, INTEREST, AND OTHER RECEIVABLES, NET

We do not accrue federal taxes receivable, net, and the corresponding liability due to the General Fund, until related tax 

returns are filed or assessments are made by the IRS and agreed to by either the taxpayer or the court. Additionally, 

prepayments are netted against liabilities. We make accruals to reflect penalties and interest on taxes receivable through 

the balance sheet date. 
76 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

Taxes receivable consist of unpaid assessments (taxes and associated penalties and interest) due from taxpayers. The 

existence of a receivable is supported by a taxpayer agreement, such as filing of a tax return without sufficient payment, or a 

court ruling in favor of the IRS. We record an allowance for doubtful accounts to reflect an estimate of the portion of total 

taxes receivable deemed to be uncollectible. 

Compliance assessments are unpaid assessments which neither the taxpayer nor a court has affirmed the taxpayer owes to 

the U.S. government. Examples include assessments resulting from an IRS audit or examination in which the taxpayer does 

not agree with the results. Compliance assessment write-offs consist of unpaid assessments for which the IRS does not 

expect further collections due to factors such as taxpayers’ bankruptcy, insolvency, or death. We do not report compliance 

assessments and related write-offs on the balance sheet. Statutory provisions require the accounts to be maintained until 

the statute for collection expires. 

H. CREDIT PROGRAM RECEIVABLES,NET

We account for all of our credit program receivables under the provisions of credit reform accounting pursuant to the Federal 

Credit Reform Act (FCRA). Credit programs include loans or equity securities associated with our state and local Housing 

Finance Agency (HFA) initiative programs, SBLF program, CDFI Fund programs, and the Troubled Asset Relief Program 

(TARP) (refer to Note 9). 

To account for our credit program receivables, we apply the accounting provisions of Statement of Federal Financial 

Accounting Standards (SFFAS) No. 2, Accounting for Direct Loans and Loan Guarantees, as amended. SFFAS No. 2, as 

amended, requires measurement of the asset or liability at the net present value of the estimated future cash flows. The 

cash flow estimates for each credit program transaction reflect the actual structure of the instruments. For each of these 

instruments, we estimate cash inflows and outflows related to the program over the estimated term of the instrument. 

Further, each cash-flow estimate reflects the specific terms and conditions of the program, technical assumptions regarding 

the underlying assets, risk of default or other losses, and other factors as appropriate. The measurement of assets within 

these programs is primarily derived from inputs which generally represent market data and, when such data is not 

available, management’s best estimate of how a market participant would assess the risk inherent in the asset.

The primary purpose of the FCRA is to measure the cost of federal credit programs, and to place the cost of such credit 

programs on a basis equivalent with other federal spending. FCRA requires that the ultimate costs of a credit program be 

calculated and the budgetary resources be obtained before incurring the direct loan obligations. To accomplish this, we first 

predict or estimate the future performance of direct and guaranteed loans when preparing our annual budget. We reestimate the data used for these budgetary estimates at the fiscal year-end to reflect changes in actual loan performance and 

actual interest rates in effect when the loans were issued. The re-estimated data reflect adjustments for market risks, asset 

performance, and other key variables and economic factors. We then use the re-estimated data to report the cost of the loans 

disbursed under the direct or guaranteed loan program as a “Program Cost” in our Consolidated Statements of Net Cost. 

Cash flows associated with our credit programs generally include disbursements, repayments, repurchases, fees, recoveries, 

interest, dividends, proceeds from sales of instruments, borrowings from Treasury, negative subsidy, and the subsidy cost 

received from the program accounts. We draw security-level data and assumptions used as the basis for cash flow model 

forecasts and program performance from widely available market sources, as well as information published by investees. 

Key inputs and assumptions to the cash flow forecasts include, but are not limited to:
DEPAR TMEN T OF THE TREASURY 77

FINANCIAL SECTION | FY 2016 AGENCY FINANCIAL REPORT

• Security characteristics such as unpaid principal balance, coupon rate, weighted-average loan age, issued bond balance, 

credit rating, maturity date, sinking fund schedules, principal and interest payment schedules, and performance of 

underlying collateral

• Discount rate and Market Adjusted Discount Rate (MRADR)

• Department actions, as well as changes in legislation

• Forecast dividend payments, late payments, prepayment rates and default rates

• Expected escrow conversion and return rates

• Default and recovery reports published by Moody’s and Standard and Poor’s 

• Other third-party market sources

The recorded subsidy cost associated with each of our credit programs represents the difference between our projected costs 

of the program and the future cash flows we anticipate receiving. The subsidy allowance specifically takes into consideration 

projected repayments and defaults and the projected cost of borrowings. We amortize the allowance to reflect the difference 

between projected and actual financing costs. 

Our actions, as well as changes in legislation, may impact estimated future cash flows and related subsidy costs. We 

recognize the cost or cost savings of a modification in subsidy costs when the terms of a program are modified. Workouts are 

actions taken to maximize repayments of existing credit programs, and the expected effects on cash flows are included in the 

original estimate and re-estimates of the subsidy cost. Subsidy costs are also impacted by re-estimates which may occur as a 

result of updates to the original program subsidy cost estimates to reflect actual cash flows experience, as well as changes in 

forecasts of estimated future cash flows associated with the credit program.

I. INVESTMENTS

Investments in GSEs

We hold senior preferred stock and warrants for the purchase of common stock of two GSEs, the Federal National Mortgage 

Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). We present these non-federal 

investment holdings at their fair value. We record changes in the valuation of these investments as non-entity exchange 

transactions on the Consolidated Statements of Net Cost. We also record dividends related to these investments as nonentity exchange transactions, and accrued when declared. 

The GSE Senior Preferred Stock Purchase Agreements (SPSPAs), which we entered into with each GSE when the GSEs 

were placed under conservatorship, require that we increase our investment in the GSEs’ senior preferred stock if, at the end 

of any quarter, the Federal Housing Finance Agency (FHFA), acting as the conservator, determines that the liabilities of 

either GSE exceed its respective assets. Since funding to the GSEs to pay their excess liabilities is appropriated directly to 

us, we report such payments, as needed, as entity expenses within the Economic Program on the Consolidated Statements of 

Net Cost, and in the line item, “Cumulative Results of Operations,” on the Consolidated Balance Sheets. These payments 

also result in an increase to the non-entity investment in the GSEs’ senior preferred stock, with a corresponding increase to

“Due To the General Fund”, as we hold the investment on behalf of the General Fund. 
78 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

Investments in Multilateral Development Banks

On behalf of the United States, we invest in Multilateral Development Banks (MDBs) to support poverty reduction, private 

sector development, transitions to market economies, and sustainable economic growth and development, thereby advancing 

U.S. economic, political, and commercial interests abroad. As a participating member country, we provide a portion of the 

capital base of the MDBs, through subscriptions to capital, which allows the MDBs to issue loans at market-based rates to 

middle-income developing countries. These paid-in capital investments are non-marketable equity investments valued at 

cost on our Consolidated Balance Sheets.

In addition, on behalf of the United States, we contribute funding to MDBs to finance grants and extend credit to poor 

countries at below market-based interest rates. We report these U.S. contributions, also referred to as “concessional 

window” contributions, as an expense within the Economic Program on our Consolidated Statements of Net Cost. 

Other Investments and Related Interest

The ESF holds most of our foreign currency investments. We classify the ESF’s other foreign currency denominated assets 

and investment securities as either available-for-sale or trading securities recorded at fair value. These holdings are 

normally invested in interest-bearing securities issued or held through foreign governments or monetary authorities. We 

recognize interest on investments, amortization of premiums, and accretion of discounts on an accrual basis, and amortize or 

accrete premiums and discounts over the life of the related investment security as an adjustment to yield using a method 

which approximates the effective interest method. 

J. PROPERTY, PLANT, AND EQUIPMENT, NET

General

Property, plant, and equipment (PP&E) is composed of capital assets used in providing goods or services. It also includes 

assets acquired through capital leases, which are initially recorded at the amount recognized as a liability for the capital 

lease at its inception. PP&E is stated at full cost, including costs related to acquisition, delivery, and installation, less 

accumulated depreciation. Major alterations and renovations, including leasehold and land improvements, are capitalized, 

while maintenance and repair costs are charged to expense as incurred. Costs for construction projects are recorded as 

construction-in-progress until completed, and are valued at actual (direct) cost plus applied overhead and other indirect 

costs.

Internal-use software encompasses software design, development, and testing of projects adding significant new 

functionality and long-term benefits. We accumulate costs for developing internal-use software in work-in-development until 

we place a project into service and testing and final acceptances are successfully completed. Once completed, we transfer the 

costs to depreciable property. 

We lease land and buildings from the General Services Administration (GSA) to conduct most of our operations. We have no 

material leases that meet capital lease requirements for financial reporting purposes. GSA charges a standard level user fee 

which approximates commercial rental rates for similar properties. 
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Our bureaus are diverse both in size and in operating environment. Accordingly, our capitalization policy provides minimum 

capitalization thresholds,which generally range from $25,000 to $50,000 for all property categories except for internal-use 

software. Minimum capitalizationthresholds for internal-use software generally range from $50,000 to $250,000 (except for 

the IRS, for which minimum capitalization thresholds generally ranges from $10 million to $50 million). We also use a 

capitalization threshold for bulk purchases, which generally ranges from $50,000 to $500,000 for non-manufacturing 

bureaus, and $25,000 to $50,000 for manufacturing bureaus. Bureaus determine the individual items that comprise bulk 

purchases based on our guidance. 

Depreciation is expensed on a straight-line basis over the estimated useful life of the asset with the exception of leasehold 

improvements and capital leases. We depreciate leasehold improvements over the term of the lease or the useful life of the 

improvement, whichever is shorter. We depreciate capital leases over the estimated life of the asset or term of the lease, 

whichever is shorter. Service life ranges (2 to 50 years) are wide due to our diversity of PP&E. We do not depreciate land 

and land improvements, construction-in-progress, and internal-use software in development. We record impairment costs 

related to a significant and permanent decline in the service utility of general PP&E and construction-in-progress in the 

period incurred. 

Heritage Assets

Heritage assets are assets of historical significance. Multi-use heritage assets are those heritage assets for which the 

predominant use is general government operations. We capitalize all acquisition, reconstruction, and betterment costs for 

our multi-use heritage asset buildings as general PP&E, and depreciate these costs over their service life. 

K. FEDERAL DEBT AND INTEREST PAYABLE

We issue federal debt in the form of Treasury securities. This debt relates to monies borrowed from the public and certain 

other federal agencies to fund the operations of the U.S. government. We issue certain federal debt at a discount or 

premium. We amortize these discounts and premiums over the term of the security using an interest method for all longterm securities and the straight-line method for short-term securities. Interest costs accrue as an expense as incurred and 

are reported on the Consolidated Statements of Net Cost as non-entity costs. 

L. COMMITMENTS AND CONTINGENCIES

Through FFB, we make loan commitments with federal agencies, or private sector borrowers with loans guaranteed by 

federal agencies, to extend credit for their own use (refer to the accounting policy above entitled “Loans and Interest 

Receivable, Intra-Governmental”). We establish loan commitments when FFB and other parties fully execute promissory 

notes in which we become obligated to issue such loans immediately or at some future date. We reduce loan commitments 

when we issue the loans or when the commitments expire. Most of our obligations give a borrower the contractual right to a 

loan or loans immediately or at some point in the future within an agreed upon timeframe. 

On behalf of the United States, we subscribe to capital for certain MDBs, portions of which are capital commitments which 

are callable under certain limited circumstances to meet the obligations of the respective MDB. The capital commitments 

become binding on the United States when we issue instruments of subscription stating our intention to subscribe to the 

U.S. portion of callable capital, subject to the amounts provided for in appropriations acts. 
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FY 2016 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

Additionally, on behalf of the United States, we have established financial commitments through our participation in the 

IMF through a quota subscription and certain borrowing arrangements that supplement IMF resources. U.S. financial 

commitments to the IMF become binding when the United States consents to an increase in its participationas an IMF 

member country, and all other conditions to the increase have been met. The outstanding financial commitment in the U.S. 

quota decreases or increases when the IMF draws upon or repays funding obtained pursuant to a letter of credit established 

by the United States to make domestic currency available to the IMF as needed. The outstanding financial commitment in 

the supplemental borrowing arrangements decrease or increase when the IMF borrows and repays loans under this 

supplemental funding arrangement (refer to Note 7). 

In accordance with SFFAS No. 5, Accounting for Liabilities of the Federal Government, we recognize material contingent 

liabilities meetingthe following criteria:

• A past event or exchange transaction has occurred

• A future cash outflow is probable

• A future cash outflow is measurable

The estimated liability we record is either a specific amount or within a range of amounts. If some amount within the range 

is a better estimate than any other amount within the range, that amount is recognized. If no amount within the range is a 

better estimate than any other amount, we recognize the minimum amount in the range, and we disclose the range and a 

description of the nature of the contingency. We follow this policy in recording a contingent liability, if any, related to the 

GSE SPSPA program (refer to Note 10), and loss contingencies that may arise from claims, assessments, litigations, fines, 

penalties, and other sources (refer to Note 26).

If one or more, but not all, of the above criteria for recognition are met, and there is a reasonable possibility of loss, we will 

disclose, if material, the nature of the contingent liability, along with a range of possible loss, if estimable, and a description 

of the nature of the contingency. 

M. SPECIAL DRAWING RIGHTS

The SDR is an international reserve asset created by the IMF to supplement its member countries’ official reserves. Under 

its Articles of Agreement, the IMF may allocate SDRs to member countries in proportion to their IMF quotas. Pursuant to 

the Special Drawing Rights Act of 1968, as amended, the ESF holds all SDRs allocated to or otherwise acquired by the 

United States. 

Allocations and Holdings

We record the SDR holdings as part of “Cash, Foreign Currency, and Other Monetary Assets,” and we record the SDR 

allocations as a liability entitled “Allocation of Special Drawing Rights” when the IMF allocates SDRs to the Department. 

We carry this liability since the SDRs may be withdrawn as needed by the IMF unless the following occurs: a withdrawal by 

the United States from the IMF membership, cancellation of the SDRs, or liquidation of the IMF or SDR Department of the 

IMF.
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SDR holdings increase primarily as a result of IMF SDR allocations. We record SDR transactions as incurred, and include 

acquisitions and sales of SDRs, interest received on SDR holdings, interest charges on SDRs allocations, and valuation 

adjustments. The U.S. government also receives remuneration in SDRs from the IMF based on claims on the IMF as 

represented by the U.S. Reserve Positionin the IMF and loans receivable from supplemental borrowing arrangements. We 

credit remuneration to the ESF, which transfers to the TGA account an equivalent amount of dollars plus nominal interest. 

The allocations and holdings are revalued monthly based on the SDR valuation rate as calculated by the IMF, resulting in 

the recognition of unrealized gains or losses on revaluation that are reported on the Consolidated Statements of Net Cost.

Certificates Issued to the Federal Reserve

The Special Drawing Rights Act of 1968 authorizes the Secretary to issue certificates, not to exceed the value of SDR 

holdings, to the FRB in return for dollar amounts equal to the face value of certificates issued. We issue certificates to 

finance the acquisition of SDRs from other countries or to provide U.S. dollar resources to finance other ESF operations. 

Certificates issued are redeemed by us at such times and in such amounts as the Secretary may determine, and do not bear 

interest. We report certificates issued to the FRB at their face value which approximates their carrying value since, under 

the terms of the agreement, there is no set repayment date and no interest accrued while certificates remain outstanding.

N. REFUNDS PAYABLE

Refunds payable arise in the normal course of tax administration when it is determined that taxpayers have paid more than 

the actual taxes they owe. We record amounts concluded to be valid refunds owed to taxpayers as a liability entitled 

“Refunds Payable” on the Consolidated Balance Sheets, with a corresponding receivable from the General Fund included in 

the line entitled “Due From the General Fund.”

O. FEDERAL EMPLOYEE BENEFITS PAYABLE – FECAACTUARIAL LIABILITY

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. The FECA 

program is administered by the DOL which pays valid claims and subsequently seeks reimbursements from us for these paid 

claims. Generally, we reimburse the DOL within two to three years once funds are appropriated. The FECA liability 

consists of two components. The first component is based on actual claims paid by the DOL but not yet reimbursed by us. 

The second component is the estimated liability for future workers compensation as a result of past events. We report both 

components in “Other Liabilities” on the Consolidated Balance Sheets. These future workers’ compensation estimates are 

generated by applying 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. 

P. ANNUAL, SICK, AND OTHER LEAVE

We report annual and compensatory leave earned by our employees, but not yet used, as an accrued liability. We adjust the 

accrued balance annually to reflect current pay rates. Any portion of the accrued leave for which funding is not available is 

recorded as an unfunded liability as reported in “Other Liabilities” on the Consolidated Balance Sheets. We expense sick 

and other leave as taken and do not record a liability for such amounts because employees do not vest in sick and other leave 

benefits. 
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FY 2016 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

Q. PENSION COSTS, OTHER RETIREMENT BENEFITS, AND OTHER POST-EMPLOYMENT BENEFITS

Federal Pension Costs, Other Retirement Benefits, and Other Post-Employment Benefits

We recognize the full costs of our employees’ pension benefits, including recognizing imputed costs for the difference between 

the estimated service cost and our contributions. However, the Office of Personnel Management (OPM) rather than the 

Department recognizes the assets and liabilities associated with these benefits.

Most of our employees hired prior to January 1, 1984, participate in the Civil Service Retirement System (CSRS), and 

employees hired between January 1, 1984 and December 31, 1986 are covered under the CSRS Offset System, to which we

contribute 7.0 percent and 7.5 percent of pay for regular and law enforcement employees, respectively. On January 1, 1987, 

the Federal Employees’ Retirement System (FERS) went into effect pursuant to Public Law (P.L.) 99-335. FERS is a three 

tiered retirement system consisting of a Basic Benefit Plan, Thrift Savings Plan (TSP), and Social Security Benefits. FERS 

and Social Security automatically cover employees hired after December 31, 1986. For the FERS Basic Benefit Plan, we

contribute between 11.9 percent and 13.7 percent for regular employees, and between 28.4 percent and 30.1 percent for law 

enforcement officers. The TSP under FERS is a 401(k)-type savings plan in which we automatically contribute one percent 

of base pay and match any employee contributions up to an additional four percent of base pay. For most employees hired 

after December 31, 1983, we also contribute the employer’s matching share for Social Security. 

Similar to federal retirement plans, OPM, rather than the Department, reports the assets and liability for future payments 

to retired employees who participate in the Federal Employees Health Benefits Program (FEHBP) and Federal Employees 

Group Life Insurance (FEGLI) Program. We report the full cost of providing other retirement benefits (ORB). We also 

recognize an expense and a liability for other post-employment benefits (OPEB), which includes all types of benefits, 

provided to former or inactive (but not retired) employees, their beneficiaries, and covered dependents. Additionally, one of 

our bureaus, OCC, separately sponsors a defined life insurance benefit plan for current and retired employees, and is the 

administrator for a private defined benefit retirement plan, the Pentegra Defined Benefit Plan (PDBP), that provides 

retirement, disability, and death benefits for certain retired employees who meet eligibility requirements. In addition to the 

TSP, the OCC separately sponsors a 401(k) plan.

District of Columbia Federal Pension and Judicial Retirement Plans

Pursuant to Title XI of the Balanced Budget Act of 1997, as amended, we became responsible for benefit payments to certain 

District of Columbia (D.C.) police officers, firefighters, teachers and judges under D.C. retirement plans (refer to Note 17). 

The actuarial cost method used to determine costs and actuarial liability for the retirement plans is the Individual Entry Age 

Normal Funding Method, which approximates the methodology specified by the Aggregate Entry Age Normal Actuarial Cost 

Method. The methodology bases actuarial liability on long-term economic assumptions. The pension benefit costs incurred 

by the plans are included on the Consolidated Statements of Net Cost.

The economic assumptions used for the valuation of the D.C. Federal Pension and Judicial retirement plans differ from those 

used by the OPM for the following reasons: (i) the annual rate of salary increase assumptions are based on different plan 

member experience; (ii) the annual rate of inflation and cost-of-living adjustment assumptions are based on different 

statutory requirements (applicable Consumer Price Index and period of calculation); and (iii) for the annual rate of 

investment return assumption, OPM and the D.C. Federal Pension and Judicial retirement plans use the same underlying 

yield curve but, unlike the D.C. Federal Pension plan, OPM converts to a single equivalent rate.
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FINANCIAL SECTION | FY 2016 AGENCY FINANCIAL REPORT

R. REVENUE AND FINANCING SOURCES

Our activities are financed either through exchange revenue we receive from others or through non-exchange revenue and 

financing sources (such as appropriations provided by the Congress and penalties, fines, and certain user fees collected). 

User fees primarily include collections from the public for the IRS costs to process installment agreements, letter ruling and 

determinations, and income verification. We recognize exchange revenue when earned; i.e., goods are delivered or services 

are rendered. We recognize revenue from reimbursable agreements when providing services. We record non-exchange 

revenues when received or accrued when we have a legal claim through the respective collecting bureau. We recognize 

appropriations used as financing sources when related expenses are incurred or assets are purchased. 

We also incur certain costs paid in total or in part by other federal entities, such as pension costs, the FEHBP, and any unreimbursed payments made from the Treasury Judgment Fund on our behalf. We recognize these subsidized costs on the 

Consolidated Statements of Net Cost, and we recognize the imputed financing for these costs on the Consolidated 

Statements of Changes in Net Position. As a result, there is no effect on net position. We also recognize other non-exchange 

financing sources, such as donations and transfers of assets without reimbursements, for the period in which they occurred 

on the Consolidated Statements of Changes in Net Position. 

We recognize revenue we receive from disposition of forfeited property as non-exchange revenue on the Consolidated 

Statements of Changes in Net Position. We report costs related to the Forfeiture Fund program on the Consolidated 

Statements of Net Cost. The TFF is the special fund account for depositing non-tax forfeiture proceeds received pursuant to 

laws enforced or administered by law enforcement bureaus that participate in the TFF. We report forfeited property 

balances in “Other Assets” on the Consolidated Balance Sheets. 

S. CUSTODIAL REVENUES

Non-entity revenue reported on our Statements of Custodial Activity includes cash we collected, primarily from taxes. It 

does not include revenue collected by other federal agencies, such as user fees and other receipts, which are remitted for 

general operating purposes of the U.S. government or are dedicated for certain trust funds. We present the Statements of 

Custodial Activity on the “modified accrual basis.” We recognize revenues as cash is collected, and record a “non-cash 

accrual adjustment” representing the net increase or decrease during the reporting period in net revenue-related assets and 

liabilities, mainly taxes receivable. 

T. APPROPRIATIONS AND OTHER BUDGETARY ACTIVITY

Combined Statement of Budgetary Resources Activity

We record appropriations when authorized by legislation. Incurred obligations of appropriations are recorded when we place 

an order or sign a contract for goods and services, award a grant, or take other actions that require us to make payments to 

the public or another federal entity. Outlays are recorded when disbursements are made. 
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FY 2016 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

Permanent and Indefinite Appropriations

We use permanent and indefinite appropriations to disburse tax refunds, income tax credits, and child tax credits. We 

recognize refund payment funding as appropriations are used. Permanent indefinite authority for refund activity is 

available for an unlimited period of time in the amount necessary to cover the refund and/or credit. We report tax refunds 

and credits as a custodial activity of the Department, since they are, in substance, a custodial revenue-related activity 

resulting from taxpayer overpayments of their tax liabilities. 

We also have two permanent and indefinite appropriations related to debt activity. One permanent and indefinite 

appropriation is used to pay interest on the public debt securities, and the other is used to redeem securities that are 

matured, called, or eligible for early redemption. These accounts are not annual appropriations and do not have refunds. 

We report debt redemption appropriations related to our liability on our Consolidated Balance Sheets. We record interest 

appropriations at the beginning of the fiscal year and again at mid-year, if necessary, and we return any unused authority to 

the General Fund at the end of the fiscal year. Permanent indefinite authority for debt redemptions and related interest is 

available for an unlimited period of time. 

We also have permanent and indefinite appropriations to fund increases in the projected subsidy costs of credit programs as 

determined by the re-estimation process required by the FCRA, and to also cover our renewable energy project.

Additionally, we have other permanent and indefinite appropriations to make certain payments on behalf of the U.S. 

government. We receive these appropriations to make payments to the FRB for fiscal services provided, and to the financial 

institutions for services provided as financial agents of the U.S. government. They also include appropriations provided to 

make other disbursements on behalf of the U.S. government, including payments made to various parties as a result of 

certain claims and judgments rendered against the United States. 

U. INCOME TAXES

As an agency of the U.S. government, we are exempt from all income taxes imposed by any governing body, whether it is a 

federal, state, commonwealth, local, or foreign government. 

V. USE OF ESTIMATES

We have made certain estimates and assumptions relating to the reporting of assets, liabilities, revenues, expenses, and the 

disclosure of contingent liabilities to prepare our financial statements. Actual results may differ from these estimates. 

Adverse changes in the outlook for the key assumptions underlying management’s estimates may materially affect the 

results of our operations, cash flows and/or our financial position in future periods. Transactions subject to estimates 

principally include loan and credit program receivables, credit reform subsidy costs, investments in GSEs and other nonfederal securities and related impairment, tax receivables, loan guarantees, depreciation, imputed costs, actuarial liabilities, 

cost and earned revenue allocations, as well as contingencies and any related recognized liabilities. The following is a 

discussion of certain significant transactions subject to estimation.

We account for all of our credit program receivables in accordance with credit reform accounting (refer to the accounting 

policy above entitled “Credit Program Receivables, Net” and Note 9). These receivables are derived using credit reform 

modeling which is subject to the use of estimates and forecasts that have inherent uncertainty. We recognize the sensitivity 

of credit reform modeling to slight changes in certain model assumptions such as general economic conditions, specific stock 

price volatility of the entities in which we have an equity interest, estimates of expected default, and prepayment rates. 
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FINANCIAL SECTION | FY 2016 AGENCY FINANCIAL REPORT

We use regular review of model factors, statistical modeling, and annual re-estimates to reflect the most accurate cost of the 

credit programs to the U.S. government. The purpose of re-estimates is to update original program subsidy cost estimates to 

reflect actual cash flow experience as well as changes in forecasts of future cash flows. We update forecasts of future cash 

flows 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. 

We perform annual calculations, as of September 30, to assess our need for recording an estimated liability in accordance 

with SFFAS No. 5 related to our funding commitment to the GSEs under the SPSPAs. Liability recognition is predicated on 

the probable future occurrence of an excess of liabilities and minimum capital reserve amounts, as defined, over the assets of 

either GSE at the end of any reporting quarter. The occurrence of future GSE deficits, which ultimately determines our

liability to the GSEs, is most sensitive to future changes in the housing price index and, to a lesser extent, future changes in 

guarantee fees received by the GSEs on single family mortgages. 

The annual valuation performed as of September 30 on the preferred stock and warrants comprising the “Investments in 

Government Sponsored Enterprises” line item on the Consolidated Balance Sheets incorporates various forecasts, projections 

and cash flow analyses to develop an estimate of the asset’s fair value. The value of the senior preferred stock is estimated 

by first estimating the fair value of the total equity of each GSE (which, in addition to the senior preferred stock, is 

comprised of other equity instruments including common stock, common stock warrants, and junior preferred stock). The 

fair value of the total equity is based on a discounted cash flow valuation methodology, whereby the primary input is the 

present value of the projected quarterly dividend payments. The fair value of the GSE’s other equity instruments is then 

deducted from its total equity, with the remainder representing the fair value of the senior preferred stock. The primary

input into the warrants valuation is the market value of the shares of common stock of the GSEs which, along with the 

junior preferred stock, are traded on the over-the-counter (OTC) Bulletin Board. We evaluate the need for adjusting our 

OTC market-based valuation of the warrants for the effects, if any, of significant events occurring after the close of the 

market but before the end of the measurement date. We record any changes in valuation, including impairment, and 

disclose changes in accordance with SFFAS No. 7, Accounting for Revenue and Other Financing Sources. Since the 

valuation is an annual process, we deem changes in valuation of the preferred stock and warrants as usual and recurring. 

Note 10 includes a detailed discussion of the results of the asset valuation and estimated liability assessment. 

Estimation of such complex and long-duration receivables, investments, and contingencies is subject to uncertainty. It is 

possible that new developments will adversely impact the value of receivables, investments, and contingencies, as well as 

ultimate amounts we are required to fund. Except as expressly noted herein, we have not revalued or included in our 

estimates as of September 30, 2016 the effects of any new developments that may have occurred subsequent to September 

30, 2016. Refer to the accounting policy entitled “Pension Costs, Other Retirement Benefits, and Other Post-Employment 

Benefits” above and Note 8 for additional discussion related to the estimation of actuarial liabilities and tax receivables, 

respectively.

W. OTHER-THAN-TEMPORARY IMPAIRMENTS

A decline in the market value (either due to credit, price or currency) of any investment below cost that is deemed to be 

other-than-temporary is accounted for as an impairment, and the carrying value is reduced to fair value for financial 

reporting purposes. To determine whether an impairment is other-than-temporary, we consider whether we have the ability 

and intent to hold the investment until a market price recovery, and consider whether evidence indicating the cost of the 

investment is recoverable outweighs evidence to the contrary. 
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FY 2016 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

X. CREDIT, MARKET AND FOREIGN CURRENCY RISK

Credit risk is the potential, no matter how remote, for financial loss from a failure of a borrower or counterparty to perform 

in accordance with underlying contractual obligations. We take on possible credit risk when we make direct loans or 

guarantees to non-federal entities, provide credits to foreign entities, or become exposed to institutions which engage in 

financial transactions with foreign countries (refer to Note 12). Our following programs entail credit risk: monetary assets 

held; committed but undisbursed direct loans; funding commitment to the GSEs; GSE obligations obtained under the HFA 

initiative (the New Issue Bond Program); investments, loans, and other credit programs including the CDFI Fund programs, 

SBLF, and TARP. 

Our activities generally focus on the underlying problems in the credit markets. We developed these programs to provide 

credit where borrowers are not able to get access to credit with reasonable terms and conditions. Because these programs 

attempt to correct for a market imperfection, it can expose us to potential costs and losses. Additional risk of costs and losses 

could result from terrorist attacks under the Terrorism Risk Insurance Program. The extent of the risk we assumed is 

described in more detail in the notes to the financial statements and, where applicable, is factored into credit reform models 

and reflected in fair value measurements (refer to Notes 9, 10, and 26). 

For Emergency Economic Stabilization Act (EESA) programs, the statute requires calculation of budgetary costs of the 

troubled assets and guarantees of troubled assets by adjusting the discount rate for market risks. We adjust our cost 

estimates for the TARP programs based on a MRADR to reflect the additional return required by the market to compensate 

for variability around the expected losses reflected in the cash flows. Under SFFAS No. 2, including market risk in the cash

flow estimates is consistent with the type of assets being valued. The inclusion of the MRADR is the mechanism for deriving 

a fair value of the assets. 

We face certain risks and uncertainties as a result of holding securities denominated in foreign currency. The price of 

holdings of such securities may widely fluctuate as a result of volatility in foreign currency markets and changes in real and 

perceived credit risk of our counterparties. 

Y. FUNDS FROM DEDICATED COLLECTIONS

We account for revenues and other financing sources for funds from dedicated collections (FDC) separately from other funds. 

Such funds are financed by specifically identified revenues provided to the U.S. government by non-federal sources, often 

supplemented by federal and other financing sources, which remain available over time. Statute requires use of these 

specifically identified revenues and other financing sources for designated activities, benefits, or purposes. We apply the 

following criteria for purposes of designating funds as dedicated collections: (i) a statute committing the U.S. government to 

use specifically identified revenues and/or other financing sources that are originally provided to the U.S. government by a 

non-federal source only for designated activities, benefits, or purposes; (ii) explicit authority for the fund to retain revenues 

and/or other financing sources not used in the current period for future use to finance the designated activities, benefits, or 

purposes; (iii) a requirement to account for and report on the receipt, use, and retention of the revenues and/or other 

financing sources that distinguishes the fund from the U.S. government’s general revenues; and (iv) for funds comprised of 

both federal and non-federal sources, such funding is predominantly non-federal, or the non-federal funding is material to 

our financial statements. 
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Z. ALLOCATION TRANSFERS

We are a party to allocation transfers with other federal agencies as both a transferring (parent) entity and/or a receiving 

(child) entity. Allocation transfers are legal delegations by one department of its authority to obligate budget authority and 

outlay funds to another department. A separate fund account (allocation account) is created in Treasury as a subset of the 

parent fund account for tracking and reporting purposes. All allocation transfers of balances are credited to this account, 

and subsequent obligations and outlays incurred by the child entity are charged to this allocation account as they execute the 

delegated activity on behalf of the parent. Parent federal agencies report both the proprietary and budgetary activity and 

the child agency does not report any financial activity related to budget authority allocated from the parent federal agency to 

the child federal agency. However, OMB guidance requires the child to report the activity when we receive allocation 

transfers, as the child, from the Executive Office of the President (See Circular No. A-136, II.4.2, question 5 for three 

exceptions). 

We allocate funds, as the parent, to the Department of Energy and Department of Health and Human Services (HHS). Also, 

we receive allocation transfers, as the child, from the Agency for International Development, HHS, Department of 

Transportation, Executive Office of the President, and General Services Administration.

AA. FIDUCIARY ACTIVITIES

Fiduciary activities are the collection or receipt, and the management, protection, accounting, investment, and disposition by 

the U.S. government of cash or other assets in which non-Federal individuals or entities have an ownership interest that the 

U.S. government must uphold. Fiduciary cash and other assets are not assets of the U.S. government. We do not report 

these activities in our consolidated financial statements, but instead are reported in Note 25. 

AB. RELATED PARTIES AND OTHER ENTITIES

The primary “related parties” with whom we conduct business are other federal agencies, mainly through the normal lending 

activities of the Fiscal Service and the FFB. We disclose these activities in the consolidated financial statements. 

Additionally, the Secretary serves on the Federal Housing Finance Oversight Board, and consults with the Director of FHFA 

on matters involving Fannie Mae and Freddie Mac. This provides us with an advisory role in the FHFA’s actions as the 

conservator for Fannie Mae and Freddie Mac. We have no transactions with FHFA, but rather transact directly with the 

GSEs. We also utilize the services of the FRBs to execute a variety of transactions on behalf of the Fiscal Service and the 

ESF. Due to the magnitude and variety of services provided, the following provides an overview of the FRBs’ purpose, 

governance, and the various services provided on our behalf. 
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FY 2016 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

Federal Reserve System

Congress, under the Federal Reserve Act of 1913, created the Federal Reserve System (FR System). The FR System consists 

of the Federal Reserve Board of Governors (Board), the Federal Open Market Committee (FOMC), and the FRBs. 

Collectively, the FR System serves as the nation’s central bank and is responsible for formulating and conducting monetary 

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

providing nationwide payments systems (including large-dollar transfers of funds, automated clearinghouse (ACH) 

operations, and check collection), providing certain financial services to federal agencies and fiscal principals, and serving as 

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

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

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

by the FOMC to carry out its central bank responsibilities. The FR System is not included in the federal budget. The FR 

System is considered an independent central bank, and the executive branch of the U.S. government does not ratify its 

decisions. 

We interact with the FRBs in a variety of ways, including the following:

• The FRBs serve as our fiscal agent and depositary, executing banking and other financial transactions on our behalf

(refer to Note 5). We reimburse the FRBs for these services, the cost of which is included on the Consolidated 

Statements of Net Costs.

• The FRBs hold Treasury and other federal securities in the FRBs’ System Open Market Account (SOMA) for the purpose 

of conducting monetary policy (refer to Note 15).

• The FRBs hold gold certificates issued by the Department in which the certificates are collateralized by gold (refer to 

Note 6).

• The FRBs hold SDR certificates issued by the Department which are collateralized by SDRs (refer to Notes 5 and 7).

• The FRBs are required by Board policy to transfer their excess earnings to us on behalf of the U.S. government (refer to 

Notes 8 and 22).

We also consult with the FR System on matters affecting the economy and certain financial stability activities. We account 

for and disclose the above financial activities involving us in our consolidated financial statements. In accordance with 

SFFAC No. 2, Entity and Display, we do not consolidate the FR Systems’ assets, liabilities, and operations into our financial 

statements.

Federal Reserve System Structure 

The Board is an independent organization governed by seven members appointed by the President and confirmed by the 

Senate. The full term of a Board member is 14 years, and the appointments are staggered so that one term expires on 

January 31 of each even-numbered year. The Board has a number of supervisory and regulatory responsibilities for 

institutions including, among others, state-chartered banks that are members of the FR System, bank holding companies, 

and savings and loan holding companies. In addition, the Board has general supervisory responsibilities for the 12 FRBs, 

and issues currency (Federal Reserve Notes) to the FRBs for distribution. 
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The FOMC is comprised of the seven Board members and five of the 12 FRB presidents. FOMC formulates and conducts

monetary policy primarily through open market operations (the purchase and sale of certain securities in the open market), 

the principal tool of national monetary policy. These operations affect the amount of reserve balances available to depository 

institutions, thereby influencing overall monetary and credit conditions. The 12 FRBs are chartered under the Federal 

Reserve Act, which requires each member bank to own the capital stock of its FRB. Each FRB has a board of directors that 

exercises supervision and control of each FRB, with three members appointed by the Board of Governors of the FR System, 

and six board members elected by their member banks. 

The FRBs participate in formulating and conducting monetary policy, distribute currency and coin, and serve as our fiscal 

agent, as well as the fiscal agent for other federal agencies and fiscal principals. Additionally, the FRBs provide short-term 

loans to depository institutions and loans to participants in programs or facilities with broad-based eligibility in unusual and 

crucial circumstances when approved by the Board. 

Federal Reserve System Assets and Liabilities

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

securities held by the FRBs totaled $1.8 trillion as of September 30, 2016 and 2015 (refer to Note 15). These assets are 

generally subject to the same market (principally interest-rate) and credit risks as other financial instruments. In the open 

market, the FR System purchases and sells Treasury securities as a mechanism for controlling the money supply. 

The FRBs have deposit liabilities with Treasury and depository institutions. The FRBs issue Federal Reserve Notes, the 

circulating currency of the United States, which are collateralized by the Treasury securities and other assets held by the 

FRBs. 

Financial and other information concerning the FR System, including financial statements for the Board and the FRBs, may 

be obtained from the FR System website.

FRB Residual Earnings Transferred to the Department

FRBs generate income from interest earned on securities, reimbursable services provided to federal agencies, and the 

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

generate earnings from carrying out open market operations, via the earnings on securities held in the SOMA account, their 

execution of these operations is for the purpose of accomplishing monetary policy rather than generating earnings. Each 

FRB is required by Board policy to transfer to us its residual (or excess) earnings after providing for the cost of operations, 

payment of dividends, and surplus funds not to exceed an FRB’s allocated portion of an aggregate of $10 billion for all FRBs 

in accordance with the provisions of a new statute, Fixing America’s Surface Transportation Act of 2015 (P.L. 114-94), which 

became effective December 4, 2015. Prior to this statute, each FRB was required to maintain surplus funds equal to the 

amount of capital paid-in. The new statue limits the aggregate amount of surplus funds to $10 billion that all FRBs can 

maintain. 
90 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

FRBs’ residual earnings may vary due to, among other things, changes in the SOMA balance levels that may occur in 

conducting monetary policy. Under P.L. 114-94, if an FRB’s earnings for the year are not sufficient to provide for the cost of 

operations, payment of dividends, or allocated portion of the $10 billion aggregate surplus funds limitation, an FRB will 

suspend its payments to us until such earnings become sufficient. The FRB residual earnings of $115.7 billion and $96.5 

billion for fiscal years ended September 30, 2016 and 2015, respectively, are reported as custodial revenues on our

Statements of Custodial Activity. They constituted 3.3 percent and 2.8 percent of our total custodial revenues collected in 

fiscal years 2016 and 2015, respectively. “Taxes, Interest and Other Receivables, Net” includes a receivable for FRB’s 

residual earnings which represents the earnings due to us as of September 30, but not collected by us until after the end of 

the month (refer to Note 8). 

AC. CHANGE IN BUDGETARY ACCOUNTING AND REPORTING

Effective October 1, 2015, in accordance with OMB guidance, we changed our budgetary accounting and reporting policy for 

transactions related to the United States’ participationin the IMF. Under this change in policy, IMF transactions – other 

than related interest earnings and cost estimates for U.S. quota and New Arrangements to Borrow adjustments – are no 

longer reported as budgetary resources and uses on our Combined Statement of Budgetary Resources. As a result of this 

change in budgetary accounting, we adjusted the beginning balances of “Unobligated” and “Unpaid Obligations” on our 

Combined Statement of Budgetary Resources for fiscal year 2016 to remove those balances associated with the IMF 

programs. This change in accounting policy and resulting budgetary beginning balance adjustments did not impact our 

proprietary accounts. Refer to Note 7 for a further discussion of this change in accounting and its related impact on our

Combined Statement of Budgetary Resources for the fiscal year ended September 30, 2016. 
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FINANCIAL SECTION | FY 2016 AGENCY FINANCIAL REPORT

2. FUND BALANCE 

As of September 30, 2016 and 2015, Fund Balance consisted of the following:

(in millions) 2016 2015

Appropriated Funds $ 431,008 $ 344,691

Revolving Funds 2,277 6,269

Special Funds 783 686

Clearing Funds 689 511

Deposit Funds 78 80

Other Funds (principally Receipt, Suspense, and Trust Funds) 411 289

Total Fund Balance $ 435,246 $ 352,526

Appropriated funds consist of amounts appropriated annually by Congress to fund our operations. 

We use revolving funds for continuing cycles of business-like activity in which the fund charges for the sale of products or 

services and uses the proceeds to finance its spending, usually without requirement for annual appropriations. A public 

enterprise revolving fund is an account that is authorized by law to be credited with offsetting collections from the public, 

and those monies are used to finance operations. Also included in revolving funds are the working capital fund and 

financing funds. The working capital fund is a fee-for-service fund established to support operations of our components. The 

financing funds relate to credit reform activities.

Special funds include funds designated for specific purposes. Clearing funds represent reconciling differences with our

balances as reported in the U.S. government’s central accounts. These fund accounts temporarily hold unidentifiable 

general, special, or trust fund collections that belong to the U.S. government until they are classified to the proper receipt or 

expenditure account by the federal entity. Deposit funds are accounts that record amounts held temporarily by the U.S. 

government until ownership is determined, and include seized cash and other amounts received as an advance that are not 

accompanied by an order. 

STATUS OF FUND BALANCE 

As of September 30, 2016 and 2015, the status of the fund balance consisted of the following: 

(in millions) 2016 2015

Unobligated Balance - Available $ 275,595 $ 291,525

Unobligated Balance - Not Available 41,614 40,467

Unpaid Obligations 75,617 227,339

Subtotal 392,826 559,331

Adjustment for ESF (94,273) (91,066)

Adjustment for Intra-Treasury Investments (9,347) (13,075)

Adjustment for Borrowing Authority (6,520) (93,963)

Adjustment for IMF 138,373 (14,809)

Adjustment for Authority Unavailable for Obligations 12,091 3,872

Other Adjustments 2,096 2,236

Total Status of Fund Balance $ 435,246 $ 352,526
92 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

Portions of the Unobligated Balance Not Available, as shown on the Combined Statement of Budgetary Resources, include 

amounts appropriated in prior fiscal years that are not available to fund new obligations. However, we may use such 

amounts for upward and downward adjustments for existing obligations in future years. The Unpaid Obligations represent 

amounts designated for payment of goods and services ordered but not received, or goods and services received but for which 

payment has not yet been made. 

Since the following line items are either a component of Fund Balance or post to budgetary status accounts, the following 

adjustments are required to reconcile the budgetary status to the non-budgetary Fund Balance as reported on the 

Consolidated Balance Sheets:

• Adjustments for ESF – ESF investments in Treasury securities (which are eliminated on the Consolidated Balance 

Sheets), foreign investments, SDR holdings, and related balances that meet the criteria for reporting as part of 

budgetary resources are reported on the Combined Statements of Budgetary Resources; however, they are not a 

component of the Fund Balance as they represent invested funds.

• Adjustments for Intra-Treasury Investments – Budgetary resources include Treasury security investments;however, we 

have moved the money from the Fund Balance to Investments, which we eliminate on the Consolidated Balance Sheets.

• Adjustments for Borrowing Authority – Borrowing authority is in budgetary status reported on the Combined 

Statements of Budgetary Resources but not in the Fund Balance because we have not received the amounts. The 

significant decline in borrowing authority is related to new legislation effective in fiscal year 2016 which ended the 

application of FCRA guidelines to the IMF program involving the use of borrowing authority, and commenced the 

application of non-FCRA guidelines to the IMF program which involves obtaining an appropriation warrant to cover the 

full amount of the commitment made to the IMF (refer to Note 7). 

• Adjustments for IMF – In accordance with OMB guidance, effective October 1, 2015, the IMF program transactions are 

no longer reported as budgetary resources and uses on our Combined Statement of Budgetary Resources; however, the 

funding received through appropriation warrants is reported as a component of Fund Balance (Refer to Note 1AC and 7). 

Prior to fiscal year 2016, the IMF program transactions that met the criteria for reporting as part of budgetary resources 

were reported on the Combined Statements of Budgetary Resources; however, they were not a component of the Fund 

Balance as they represented other monetary assets.

• Adjustment for Authority Unavailable for Obligations – Resources unavailable for obligations reduced the budgetary 

resources reported on the Combined Statements of Budgetary Resources; however, they do not impact the Fund Balance.

As of September 30, 2016 and 2015, we had no budgetary authority in the Fund Balance that was specifically withheld from 

apportionment by the OMB. We hold balances in non-entity funds, such as certain deposit funds (e.g., seized cash), for the 

public or for another federal entity, such as the General Fund. Such funds have an offsetting liability equal to the Fund 

Balance. Refer to Note 7 regarding restrictions related to the line of credit held on the U.S. quota in the IMF. 
DEPAR TMEN T OF THE TREASURY 93 

FINANCIAL SECTION | FY 2016 AGENCY FINANCIAL REPORT

3. LOANS AND INTEREST RECEIVABLE – INTRA-GOVERNMENTAL 

ENTITY INTRA-GOVERNMENTAL

Through FFB, we issue loans to federal agencies for the agencies’ own use or for the agencies to loan to private sector 

borrowers whose loans are guaranteed by the federal agencies. FFB is a wholly-owned Government corporation that 

operates under the general supervision of the Secretary, and has its own broad statutory authority to finance any obligations 

that are issued, sold, or guaranteed by federal agencies. For agencies that have the statutory authority to borrow in the 

market, but not from Treasury through the Fiscal Service (refer to the Non-Entity Intra-Governmental section below), FFB 

uses its statutory authority to make these loans directly to federal agencies. 

FFB also uses its statutory authority to finance direct or indirect federally-guaranteed obligations which, as a matter of longstanding federal credit policy, is the least expensive and most efficient method of financing these credit-risk obligations when 

compared to private sector lender financing. When a federal agency has to honor its guarantee because a private-sector 

borrower defaults, the federal agency that guaranteed the loan must obtain an appropriation or use other resources to repay 

FFB. 

All principal and interest on FFB loans to federal agencies and private-sector borrowers are, or have a commitment to be, 

backed by the full faith and credit of the U.S. government. Accordingly, we have not recognized any credit-related losses on 

its loans, nor have we recorded an allowance for uncollectible intra-governmental loans. 

As of September 30, 2016 and 2015, entity intra-governmental loans (issued by FFB) and interest receivable consisted of the 

following: 

Loans Interest 2016 Loans Interest 2015

(in millions) Receivable Receivable Total Receivable Receivable Total

Department of Agriculture $ 43,339 $ 25 $ 43,364 $ 41,675 $ 26 $ 41,701

Department of Energy 15,616 70 15,686 15,746 70 15,816

United States Postal Service(1) 15,000 61 15,061 15,000 52 15,052

Department of Education 1,442 12 1,454 1,393 11 1,404

Other Agencies 557 1 558 107 - 107

Total Entity Intra-governmental $ 75,954 $ 169 $ 76,123 $ 73,921 $ 159 $ 74,080

(1) The United States Postal Service (USPS) experienced an operating deficit in both fiscal years 2016 and 2015.

We, along with Congress and other stakeholders are aware of the current and long-term financial issues

of the USPS. Congress is considering legislative solutions for returning the USPS to financial stability. 
94 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

NON-ENTITY INTRA-GOVERNMENTAL 

Through the Fiscal Service, we account for and report on the principal borrowings from and repayments to the General Fund 

for various funds managed by other federal agencies, as well as the related interest due to the General Fund. These federal 

agencies are statutorily authorized to borrow from the General Fund, through the Fiscal Service, to make loans for a broad 

range of purposes, such as education, housing, farming, and small business support. 

As of September 30, 2016 and 2015, non-entity intra-governmental loans (issued by the Fiscal Service) and interest 

receivable that were due to the General Fund consisted of the following:

Loans Interest 2016 Loans Interest 2015

(in millions) Receivable Receivable Total Receivable Receivable Total

Department of Education $ 1,126,370 $ - $ 1,126,370 $ 1,050,373 $ - $ 1,050,373

Department of Agriculture 75,627 - 75,627 69,894 3 69,897

Department of Housing and Urban

 Development 30,447 - 30,447 27,048 - 27,048

Export Import Bank of the U.S. 25,022 - 25,022 22,725 - 22,725

Department of Homeland Security 23,017 - 23,017 23,020 - 23,020

Department of Transportation 10,868 - 10,868 8,972 - 8,972

Small Business Administration 8,020 - 8,020 7,175 - 7,175

Department of Labor 5,706 - 5,706 5,687 - 5,687

Department of Energy 5,209 28 5,237 4,961 26 4,987

Railroad Retirement Board 3,577 39 3,616 3,498 39 3,537

Executive Office of the President/

 Defense Security Cooperation 

 Agency 2,499 - 2,499 39 - 39

Overseas Private Investment

 Corporation 2,491 - 2,491 2,157 - 2,157

Department of Defense 1,631 - 1,631 1,509 - 1,509

Department of Health and Human 

 Services 1,410 - 1,410 1,305 - 1,305

National Credit Union Administration 1,000 1 1,001 2,300 2 2,302

Other Agencies 1,568 1 1,569 1,783 - 1,783

Total Non-Entity Intra-

 governmental $ 1,324,462 $ 69 $ 1,324,531 $ 1,232,446 $ 70 $ 1,232,516

Total Intra-governmental Loans

 and Interest Receivable (Entity 

 and Non-Entity) $ 1,400,416 $ 238 $ 1,400,654 $ 1,306,367 $ 229 $ 1,306,596
DEPAR TMEN T OF THE TREASURY 95

FINANCIAL SECTION | FY 2016 AGENCY FINANCIAL REPORT

4. DUE FROM THE GENERAL FUND AND DUE TO THE GENERAL FUND

The General Fund consists of assets and liabilities used to finance the daily and long-term operations of the U.S government, 

as a whole. It also includes accounts used in the management of the Budget of the U.S. government. 

We hold and manage General Fund assets, such as loans and interest receivable, cash, and investments in the GSEs on 

behalf of the U.S. government. General Fund assets constitute resources available to meet the operating needs of the U.S. 

government. We report these managed assets separately on the Consolidated Balance Sheets, with a corresponding amount 

reported as Due To the General Fund that represents a liability to reflect assets we owed to the General Fund. 

General Fund liabilities, primarily federal debt and interest payable and liability for restoration of federal debt principal and 

interest, are obligations of the U.S. government. We report these Department-managed liabilities separately on the 

Consolidated Balance Sheets, with a corresponding amount reported as Due From the General Fund that represents a 

receivable, or future funds required of the General Fund to repay borrowings from the public and other federal agencies. 

As of September 30, 2016 and 2015, the General Fund liabilities we owed exceeded the assets held on behalf of the General 

Fund by $17.8 trillion and $17.0 trillion, respectively. This represents the amount needed by the U.S. government, through 

a combination of future tax collections and/or continued borrowing from the public and federal agencies to meet its 

obligations.

As of September 30, 2016 and 2015, Due From the General Fund included the following non-entity liabilities:

Liabilities Requiring Funding from the General Fund (in millions) 2016 2015

Federal Debt and Interest Payable - Held by the Public (Note 15) $ 14,196,734 $ 13,148,200

Federal Debt and Interest Payable - Intra-governmental (Note 15) 5,466,422 5,096,265

Liability for Restoration of Federal Debt Principal and Interest - Due to the 

 Public (Note 15) - 204,591

Liability for Restoration of Federal Debt Principal and Interest - Intra-

 governmental (Note 15) - 146,066

Refunds Payable (Note 22) 2,993 3,039

Adjustment for Eliminated Liabilities 33,003 34,092

Total Due From the General Fund $ 19,699,152 $ 18,632,253

The Adjustment for Eliminated Liabilities principally represents investments in U.S. government securities held by our

reporting entities that were eliminated against Federal Debt and Interest Payable Intra-governmental.
96 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

As of September 30, 2016 and 2015, Due To the General Fund included the following non-entity assets:

Assets to be Distributed to the General Fund (in millions) 2016 2015

Fund Balance $ 694 $ 589

Loans and Interest Receivable - Intra-governmental (Note 3) 1,324,531 1,232,516

Advances to the Unemployment Trust Fund 8,558 12,840

Cash Due to the General Fund (Held by the Department) (Note 5) 347,077 193,449

Accounts Receivable - Intra-governmental 377 390

Foreign Currency 118 85

Custodial Gold without Certificates and Silver Held by the Mint 25 25

Taxes and Other Non-Entity Receivables Due to the General Fund 50,201 41,992

Credit Reform Downward Subsidy Re-estimates 152 288

Loans and Interest Receivable 8 21

Investments in Government Sponsored Enterprises (Note 10) 108,550 106,270

Adjustment for Eliminated Assets 66,332 75,490

Total Due To the General Fund $ 1,906,623 $ 1,663,955

The assets to be distributed to the General Fund do not represent all of the non-entity assets we manage. Refer to Note 14 for all 

of our non-entity assets held.

The Fund Balance reported above represents the non-entity funds we hold on behalf of the General Fund. It is used to 

administer programs such as the Presidential Election Campaign and payments for Legal Services Corporation and thus not 

available for our general use. 

The General Fund issues advances to the DOL’s Unemployment Trust Fund to disburse to states for unemployment benefits. 

We transfer repayment of these advances to the General Fund.

Taxes and Other Non-Entity Receivables Due to General Fund primarily represents IRS-related federal taxes receivable 

(refer to Note 8).

The Adjustment for Eliminated Assets principally represents loans and interest payable owed by our Treasury reporting 

entities, which were eliminated against Loans and Interest Receivable Intra-governmental held by the Fiscal Service.
DEPAR TMEN T OF THE TREASURY 97 

FINANCIAL SECTION | FY 2016 AGENCY FINANCIAL REPORT

5. CASH, FOREIGN CURRENCY, AND OTHER MONETARY ASSETS

Cash, Foreign Currency, and Other Monetary Assets held as of September 30, 2016 and 2015 were as follows: 

(in millions) 2016 2015

Entity:

Cash $ 32 $ 40

Foreign Currency and Foreign Currency Denominated Assets 11,756 8,310

Other Monetary Assets:

 Special Drawing Right Holdings 50,057 50,336

 U.S. Dollars Held in Cash by the IMF 309 149

Total Entity 62,154 58,835

Non-Entity:

Operating Cash of the U.S. government 346,956 193,325

Foreign Currency 118 85

Miscellaneous Cash Held by All Treasury Reporting Entities 870 891

Total Non-Entity 347,944 194,301

Total Cash, Foreign Currency, and Other Monetary Assets $ 410,098 $ 253,136

We hold non-entity operating and other miscellaneous cash due to the General Fund which consisted of the following as of 

September 30, 2016 and 2015: 

(in millions) 2016 2015

Operating Cash - FRB Account $ 353,312 $ 198,716

Outstanding Checks (6,356) (5,391)

Total Operating Cash of the U.S. government 346,956 193,325

Miscellaneous Cash 127 133

Subtotal 347,083 193,458

Amounts Due to the Public (6) (9)

Total Cash Due to the General Fund (Note 4) $ 347,077 $ 193,449

ENTITY

Entity cash, foreign currency, and other monetary assets principally include foreign currency, foreign currency denominated 

assets (FCDAs), and SDRs. These assets are valued as of September 30, 2016 and 2015 using current exchange rates plus 

accrued interest. 

Foreign Currency Denominated Assets 

We normally invest FCDA holdings in interest-bearing securities issued by or held through foreign governments or monetary 

authorities. FCDAs with original maturities of three months or less were valued at $11.8 billion and $8.3 billion as of 

September 30, 2016 and 2015, respectively. 

Special Drawing Rights

The SDR is an international reserve asset created by the IMF to supplement existing reserve assets. The IMF has allocated 

new SDRs on several occasions to members participating in the IMF’s SDR department. The SDR derives its value as a 

reserve asset essentially from the commitments of participants to hold and accept SDRs and to honor various obligations 

connected with their proper functioning as a reserve asset. Pursuant to the Special Drawing Rights Act of 1968, as 
98 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

amended, we issued certificates to the Federal Reserve, valued at $5.2 billion which were reported as a liability on the 

Consolidated Balance Sheets as of September 30, 2016 and 2015. The certificates were issued to finance the ESF’s 

acquisition of SDRs from other countries or to provide U.S. dollar resources for financing other ESF operations. 

On a daily basis, the IMF calculates the value of the SDR using the currency exchange rate in terms of the U.S. dollar from 

weighted amounts of each of four freely usable currencies, as defined by the IMF. These currencies are the U.S. dollar, the 

European euro, the Japanese yen, the British pound sterling, and, effective October 1, 2016, the Chinese renminbi. We 

revalue the U.S. SDR holdings and allocations from the IMF monthly based on the SDR valuation rate calculated by the 

IMF.

Pursuant to the IMF Articles of Agreement, SDR holdings and allocations acquired by the United States are permanent 

resources or liabilities unless:

• cancelled by the Board of Governors pursuant to an 85.0 percent majority decision of the total voting power of IMF 

members;

• the SDR department of the IMF is liquidated;

• the IMF is liquidated; or

• the United States chooses to withdraw from the IMF or terminate its participation in the SDR department

Except for the payment of interest and charges on SDR allocations to the United States, the payment of the U.S. 

commitment related to SDR allocations is conditional on events listed above, in which the United States has a substantial or 

controlling voice. The United States has received no SDR allocations since 2009.

As of September 30, 2016 and 2015, the total amount of SDR holdings of the United States was the equivalent of $50.1 

billion and $50.3 billion, respectively. As of September 30, 2016 and 2015, the total value of SDR allocations to the United 

States was the equivalent of $49.3 billion and $49.6 billion, respectively.

NON-ENTITY

We manage the non-entity cash, foreign currency, and other monetary assets principally included in the Operating Cash of 

the U.S. government. Also included is foreign currency maintained by various U.S. disbursing offices, miscellaneous cash 

such as seized monetary instruments, undistributed cash, and offers in compromises which are maintained as a result of our

tax collecting responsibilities. The Operating Cash of the U.S. government represents balances from tax collections, other 

revenues, federal debt receipts, and other receipts, net of checks outstanding, which are held in the FRBNY. 
DEPAR TMEN T OF THE TREASURY 99

FINANCIAL SECTION | FY 2016 AGENCY FINANCIAL REPORT

6. GOLD AND SILVER RESERVES, AND GOLD CERTIFICATES ISSUED TO 

THE FEDERAL RESERVE BANKS

Through the Mint, we are responsible for safeguarding most of the U.S. government’s gold and all of the silver reserves in 

accordance with 31 USC §5117; a smaller portion of the gold is in the custody of the FRBs. 

The gold reserves we hold are partially offset by a liability for gold certificates issued by the Secretary to the FRBs at the 

statutory rate, as provided in 31 USC §5117. Since 1934, Gold Certificates have been issued in non-definitive or book-entry 

form to the FRBs. Our liability incurred by issuing the Gold Certificates, as reported on the Consolidated Balance Sheets, is 

limited to the gold we hold at the statutory value. Upon issuance of Gold Certificates to the FRBs, we deposit the proceeds 

from the certificates into the operating cash of the U.S. government. All of our certificates issued are payable to the FRBs. 

The Mint also holds 100,000 fine troy ounces (FTO) ($4 million at the statutory carrying value) of gold reserves without 

certificates. 

The gold and silver bullion reserve (deep storage and working stock) are reported on the consolidated financial statements at

the values stated in 31 USC § 5116 – 5117 (statutory rates) which are $42.2222 per FTO of gold and no less than 

$1.292929292 per FTO of silver. Accordingly, the silver is valued at $1.292929292 per FTO. The market values of the gold 

and silver reserves disclosed below are based on the London Gold Fixing. As of September 30, 2016 and 2015, the values of 

gold and silver reserves consisted of the following:

2016

Statutory 2016

Carrying Market Market

Statutory Value Rate Per Value

 FTOs Rate (in millions) FTO (in millions)

Gold 248,046,116 $ 42.2222 $ 10,473 $ 1,322.50 $ 328,041

Gold Held by Federal Reserve Banks 13,452,811 $ 42.2222 568 $ 1,322.50 17,791

Total Gold 261,498,927 11,041 345,832

Silver 16,000,000 $ 1.2929 21 $ 19.35 310

Total Gold and Silver Reserves $ 11,062 $ 346,142

2015

Statutory 2015

Carrying Market Market

Statutory Value Rate Per Value

 FTOs Rate (in millions) FTO (in millions)

Gold 248,046,116 $ 42.2222 $ 10,473 $ 1,114.00 $ 276,323

Gold Held by Federal Reserve Banks 13,452,811 $ 42.2222 568 $ 1,114.00 14,987

Total Gold 261,498,927 11,041 291,310

Silver 16,000,000 $ 1.2929 21 $ 14.65 234

Total Gold and Silver Reserves $ 11,062 $ 291,544
100 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

7. RESERVE POSITION IN THE INTERNATIONAL MONETARY FUND AND 

RELATED LOANS AND INTEREST RECEIVABLE

The United States participates in the IMF through a quota subscription and certain borrowing arrangements that 

supplement IMF resources. 

LEGISLATIVE CHANGES

The Supplemental Appropriations Act of 2009 (P.L. 111-32) authorized and funded an increase of approximately SDR 5.0 

billion (approximately $8.0 billion) in the U.S. quota in the IMF, as well as an increase in the United States’ participation in 

the New Arrangements to Borrow (NAB) up to the dollar equivalent of SDR 75 billion. This increase in the U.S. quota and 

NAB became effective in fiscal year 2011. P.L. 111-32 subjected the increases in both the U.S. quota and the NAB to the 

requirements of FCRA, and as such, all funding provided pursuant to P.L. 111-32, referred to as “FCRA funds,” was 

accounted for in accordance with credit reform accounting guidelines per SFFAS No. 2. A credit program receivable was 

established for FCRA fund amounts disbursed (refer to Note 9). 

In fiscal year 2016, Congress passed the Consolidated Appropriations Act of 2016 (P.L. 114-113) which authorized and 

funded an SDR 40.9 billion (approximately $57 billion) increase in the U.S. quota in the IMF, and reduced the United States’ 

participation in the NAB by a corresponding amount. This resulted in no net change in the United States’ overall financial 

commitment to the IMF. The provisions of P.L. 114-113 also eliminated our use of FCRA, commencing in fiscal year 2016,

for any U.S. funding to the IMF, including any funding disbursements made pursuant to P.L. 111-32. 

The fiscal year 2016 legislationhad the following significant impacts to the Department’s consolidated financial statements 

as of and for the fiscal year ended September 30, 2016. On the Consolidated Balance Sheet, the “Reserve Position in the 

IMF” and “Loans and Interest Receivable” increased by $1.3 billion and $4.4 billion, respectively, with a corresponding 

decrease of $5.7 billion in “Credit Program Receivables, Net” to reclassify those program funds previously presented in 

accordance with FCRA guidelines pursuant to P.L. 111-32. Furthermore, the “Unexpended Appropriations – Appropriations 

Received” line reported on our Consolidated Statement of Changes in Net Position for the fiscal year ended September 30, 

2016 increased by $94.4 billion as a result of no longer applying FCRA guidelines to these programs. In connection with the 

IMF programs, P.L. 114-113 ended the application of FCRA guidelines which involved having borrowing authority, and 

commenced the application of non-FCRA guidelines which involves obtaining an appropriation warrant to cover the full 

amount of the commitment made to the IMF, with current indefinite authority to maintain the U.S. dollar equivalent of the 

SDR funding commitment levels. On our Combined Statement of Budgetary Resources for the 2016 fiscal year, we recorded 

recoveries of prior year unpaid obligations of $89.4 billion and other changes in unobligated balances for the withdrawal of 

borrowing authority of $87.5 billion related to the legislative termination of the FCRA program. 

CHANGE IN BUDGETARY ACCOUNTING AND REPORTING

The fiscal year 2016 legislation caused OMB to reconsider its budgetary accounting policy for transactions related to the 

United States’ participation in the IMF. OMB mandated a change in policy, effective October 1, 2015, under which IMF 

transactions – other than related interest earnings and cost estimates for U.S. quota and NAB adjustments – are no longer 

reported as budgetary resources and uses on our Combined Statement of Budgetary Resources. For the fiscal year ended 

September 30, 2016, we adjusted our beginning balances of “Unobligated” and “Unpaid Obligations” on the Combined 

Statement of Budgetary Resources by $8.3 billion and $54.5 billion, respectively, to remove those balances associated with 

the IMF Quota and NAB programs combined. We made no adjustment to the prior year financial statement presentation. 
DEPAR TMEN T OF THE TREASURY 101

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RESERVE POSITION IN THE INTERNATIONAL MONETARY FUND

We pay quota subscriptions partly through the transfer of reserve assets, such as foreign currencies or SDRs, which are 

international reserve assets created by the IMF, and partly by making domestic currency available as needed through a noninterest-bearing letter of credit. This letter of credit, issued by us and maintained by the FRBNY, represents our available 

commitment to the IMF which may be drawn upon by the IMF. 

Transfers to the IMF under the U.S. quota do not result in net budgetary outlays as they constitute an exchange of monetary 

assets in which the United States receives an equal offsetting claim on the IMF in the form of an increase in the U.S. reserve 

position in the IMF. Similarly, when the IMF repays dollars to the United States, no net budgetary receipt results because 

the U.S. reserve position declines concurrently in an equal amount. The U.S. reserve position is an interest-bearing asset 

like other international reserve assets held by the United States, and is available at any time to meet U.S. funding needs.

The U.S. quota is denominated in SDRs. As of September 30, 2016 and 2015, the U.S. quota in the IMF was SDR 83.0 and 

SDR 42.1 billion, respectively. The increase in fiscal year 2016 was attributable to P.L. 114-113, which increased the U.S. 

quota by SDR 40.9 billion. The equivalent U.S. dollar value of the U.S. quota consisted of the following:

 

(in millions) 2016 2015

Letter of Credit (1) $ 106,116 $ 49,766

Reserve Position (2) 9,570 9,363

Total U.S. Quota in the IMF $ 115,686 $ 59,129

(1) Letter of Credit amounts are included as part of the “Fund Balance” as reported on the Consolidated Balance Sheets and “Appropriated 

Funds” as disclosed in Note 2. Amounts also include approximately 0.25 percent of the U.S. quota held in cash in an IMF account at 

the FRBNY. Of the Letter of Credit amount reported as of September 30, 2015, $5.786 billion was subject to FCRA accounting guidelines

pursuant to P.L. 111-32 (refer to Note 9).

(2) The Reserve Position amount of $9.570 billion as of September 30, 2016 was not subject to FCRA and was reported as “Reserve Position in 

the IMF” on the Consolidated Balance Sheets. Of the Reserve Position amount of $9.363 billion as of September 30, 2015, $8.168 

billion was not subject to FCRA and was reported as “Reserve Position in the IMF” on the Consolidated Balance Sheets. The remaining 

$1.195 billion was subject to FCRA pursuant to P.L. 111-32 and thereby reported within “Credit Program Receivables, Net” on the

Consolidated Balance Sheets. This FCRA amount represents the outstanding disbursement under P.L. 111-32 at the then current

exchange rate (refer to Note 9).

Fluctuations in the value of the U.S. dollar with respect to the SDR result in valuation changes in dollar terms for the U.S. 

quota. We periodically adjust this balance to maintain the SDR value of the U.S. quota as required by our agreement with 

the IMF. As of September 30, 2016 and 2015, the U.S. quota reflects a net downward adjustment in value of $648 million 

and $3.3 billion, respectively, due to the appreciationof the U.S. dollar against the SDR. 

LOANS AND INTEREST RECEIVABLE

In addition to quota subscriptions, the IMF maintains borrowing arrangements to supplement its resources in order to 

forestall or cope with an impairment of the international monetary system when IMF liquidity is low. The United States has 

the authority to participate in two such arrangements – the NAB and the General Arrangements to Borrow (GAB). When 

the United States transfers funds to the IMF under these supplemental borrowing arrangements, the United States receives 

in exchange a liquid and interest-bearing claim on the IMF. As of September 30, 2016 and 2015, the IMF had not utilized 

the GAB.

In accordance with P.L. 114-113, the United States decreased its NAB participation to SDR 28.2 billion from SDR 69.1 

billion during fiscal year 2016, which was equivalent to $39.4 billion as of September 30, 2016 compared to $97.0 billion as of 

September 30, 2015. As of September 30, 2016, under the U.S. NAB arrangement with the IMF, there was $8.6 billion of 

U.S. loans outstanding which were reported as “Loans and Interest Receivable” on the Consolidated Balance Sheets. As of 
102 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

September 30, 2015, there was $9.5 billion of U.S. loans outstanding, of which $5.5 billion was reported as “Loans and 

Interest Receivable” on the Consolidated Balance Sheets, and the remaining $4.0 billion was subject to FCRA accounting 

guidelines pursuant to P.L. 111-32 and thereby reported within “Credit Program Receivables, Net” on the Consolidated 

Balance Sheets (refer to Note 9).

8. TAXES, INTEREST, AND OTHER RECEIVABLES, NET

As of September 30, 2016 and 2015, Taxes, Interest, and Other Receivables, Net consisted of the following:

(in millions) 2016 2015

Non-Entity 

Federal Taxes Receivable, Gross $ 178,181 $ 171,159

Less: Allowance on Taxes Receivable (129,165) (130,141)

Interest Receivable on FRB Deposits of Earnings 376 264

Other Receivables 936 821

Less: Allowance on Other Receivables (118) (103)

Total Non-Entity (Note 14) 50,210 42,000

 

Entity 

Miscellaneous Entity Receivables and Related Interest 96 34

Total Taxes, Interest, and Other Receivables, Net $ 50,306 $ 42,034

Federal taxes receivable constitutes the largest portion of these receivables, with IRS-related taxes receivable representing 

the majority of the balance. IRS federal taxes receivable consists of tax assessments, penalties, and interest which were not 

paid or abated, and which were agreed to by either the taxpayer and IRS, or the courts. Federal taxes receivable is reduced 

by an allowance for doubtful accounts which we established to represent an estimate for uncollectible amounts. The portion 

of taxes receivable estimated to be collectible and the allowance for doubtful accounts are based on projections of 

collectability from a statistical sample of taxes receivable (refer to the section entitled Required Supplementary Information 

(unaudited) for additional discussion on IRS Federal Taxes Receivable, Net).

In addition to amounts attributed to taxes, these receivables also include accrued interest income due on funds deposited in 

FRBs. We do not establish an allowance for the receivable on deposits of FRB earnings.
DEPAR TMEN T OF THE TREASURY 103 

FINANCIAL SECTION | FY 2016 AGENCY FINANCIAL REPORT

9. CREDIT PROGRAM RECEIVABLES, NET

We administer a number of programs designed to stabilize the nation’s financial system and restore the flow of credit to 

consumers, businesses, and homeowners. As of September 30, 2016 and 2015, Credit Program Receivables, Net consisted of 

the following:

(in millions) 2016 2015

State and Local Housing Finance Agency Program (GSE sponsored) $ 5,718 $ 6,919

Small Business Lending Fund Program 449 2,395

International Monetary Fund Programs: 

 U.S. Quota in the IMF Program (FCRA portion) - 1,163

 New Arrangements to Borrow Program (FCRA portion) - 4,005

Other (1) 891 663

Total $ 7,058 $ 15,145

(1) Includes TARP and CDFI credit program receivables valued at $490 million and $401 million, respectively, as of September 30, 2016,

and $482 million and $181 million, respectively, as of September 30, 2015. 

STATE AND LOCAL HOUSING FINANCE AGENCY (HFA) PROGRAM (GSE SPONSORED) 

Under the Housing and Economic Recovery Act (HERA), we, together with the FHFA, Fannie Mae, and Freddie Mac, created 

a program in October 2009 to provide support to HFAs. The HFA Program is comprised of the New Issue Bond Program 

(NIBP) that is designed to support low mortgage rates and expand resources for low- and middle- income borrowers to 

purchase or rent homes, making them more affordable over the long term. Under the terms of the NIBP, we purchased 

securities of Fannie Mae and Freddie Mac backed by new mortgage revenue bonds issued by HFAs. As of September 30, 

2016 and 2015, the HFA net credit program receivable of $5.7 billion and $6.9 billion, respectively, included a positive 

subsidy allowance of $791 million and $865 million, respectively, which reflects our projection that the HFA program will 

result in a net cost to us after accounting for repayments, interest, and fees. 

We performed a financial statement re-estimate of the NIBP program’s cost as of September 30, 2016 and 2015. These reestimates resulted in a downward re-estimate, or a decrease in the cost of the program, of $38 million and $17 million as of 

September 30, 2016 and 2015, respectively. The downward re-estimate in fiscal year 2016 and 2015 was primarily driven by 

higher than estimated principal collections, and a slightly higher prepayment curve used in the projection of future years’ 

cash flows as a result of improved economic conditions. 

SMALL BUSINESS LENDING FUND PROGRAM 

The Small Business Jobs Act of 2010 (P.L. 111-240) created the SBLF program. Pursuant to the Act, we provided capital to 

qualified community banks, for purposes of encouraging bank lending to small businesses, by purchasing qualifying noncumulative preferred stock or equivalents in each bank. As an incentive to participating banks to increase lending to small 

businesses, the dividend rate a bank paid to us for SBLF funding was reduced as the bank’s small business lending 

increased. For most banks, the initial dividend rate of 5.0 percent could be reduced to as low as 1.0 percent. The rates 

locked in for all participants based on third quarter 2013 lending. The program provides an incentive for banks to repay 

loans within 4 1⁄2 years. For institutions that did not increase lending by the end of the first two years of the program, the 

rate increased to 7.0 percent in March 2014. In addition, after 4 1⁄2 years, the rate increased to 9.0 percent and 13.8 percent 

for C Corporation and S Corporation banks, respectively, remaining in the program effective March 2016. We treat these 

purchases of capital as direct loans in accordance with the requirements of FCRA. Our authority to provide new capital to 

SBLF participants expired in September 2011 and, accordingly, there were no new capital disbursements since that date.
104 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

As of September 30, 2016 and 2015, SBLF’s net credit program receivable was $449 million and $2.4 billion, respectively. 

The decrease in this net receivable at September 30, 2016 was due to a sharp increase in redemptions prior to a rate step-up 

that occurred in the first calendar quarter of 2016. These amounts included a negative subsidy allowance of $40 millionand 

$32 million at September 30, 2016 and 2015, respectively, which reflects our projection that the SBLF program will result in 

net income to us. 

We performed financial statement re-estimates of the program’s cost as of September 30, 2016 and 2015 which resulted in a 

downward re-estimate, or a decrease in the cost of the program of $21 millionand $42 million, respectively. Both the 2016 

and 2015 downward re-estimates were driven by changes in performance assumptions, actual performance to-date, and 

actual program funding costs. The performance assumptions anticipate overall income to the program due to the repurchase 

of SBLF securities by participating institutions earlier than anticipated,and lower projected defaults relative to previous 

estimates. 

INTERNATIONAL MONETARY FUND PROGRAMS 

Effective in fiscal year 2016, Congress passed P.L. 114-113 which, among other things, requires that transactions involving 

the United States’ participation in the IMF not be subject to FCRA guidelines. P.L. 114-113 superseded those provisions 

within P.L. 111-32 that subjected these transactions to FCRA guidelines (refer to Note 7 for further discussion of the 

financial statement impact of this legislative change). Accordingly, as of September 30, 2016, there was no credit program 

receivable related to the IMF programs. The remainder of this discussion focuses on the net credit program receivable 

related to the IMF programs that existed as of September 30, 2015 under the accounting provisions of P.L. 111-32. 

As of September 30, 2015, for U.S. budgetary and accounting purposes, there were effectively two portions of the IMF quota 

and NAB programs. The U.S. quota in the IMF totaled $59.1 billion at September 30, 2015, and comprised a FCRA and nonFCRA portion of $7.0 billion and $52.1 billion, respectively. At September 30, 2015, we reported a net credit program 

receivable of $1.2 billion, representing amounts disbursed in connection with the FCRA portion of the U.S. quota’s reserve 

position, net of a positive subsidy allowance of $181 million, reflecting our projection that the program would result in a net 

cost to us after accounting for repayments and net interest. During fiscal year 2015, we had repayments of $651 million, 

resulting in net proceeds less than cost of $74 million. We reported the remaining undisbursed FCRA portion of the U.S. 

quota totaling $5.8 billion at September 30, 2015 as a letter of credit (refer to Note 7).

The U.S. NAB arrangement with the IMF totaled $97.0 billion at September 30, 2015, and comprised a FCRA and non-FCRA 

portion of $87.6 billion and $9.4 billion, respectively. At September 30, 2015, we reported a net credit program receivable of 

$4.0 billion, representing FCRA disbursements outstanding under the NAB, net of a positive subsidy allowance of $366 

million. 

SUMMARY TABLES

The following tables provide the net composition, subsidy cost, re-estimates, a reconciliation of subsidy cost allowances, and 

the components of the subsidy for each of our credit programs for the fiscal years ended September 30, 2016 and 2015. The 

tables also include budget subsidy rates pertaining only to the cohorts for the fiscal year presented. These rates cannot be 

applied to the direct loans disbursed during the current reporting year to yield the subsidy expense. The subsidy expense for 

new loans reported in 2016 and 2015 could result from disbursements of loans from both current year cohorts and prior 

year(s) cohorts, and also includes modifications and re-estimates. Amounts reported in the line item “Net Credit Program 

Receivables” are not necessarily the same as the proceeds that we would expect to receive from selling these assets. 
DEPAR TMEN T OF THE TREASURY 105

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IMF- IMF- 2016

(in millions) HFA SBLF Quota NAB Other (2) TOTAL

Credit Program Receivables, Net: 

 Credit Program Receivables, Gross $ 6,509 $ 409 $ - $ - $ 1,034 $ 7,952

 Subsidy Cost Allowance (791) 40 - - (143) (894)

Net Credit Program Receivables $ 5,718 $ 449 $ - $ - $ 891 $ 7,058

New Credit Program Loans Disbursed $ - $ - $ - $ - $ 213 $ 213

Obligations for Loans Not Yet Disbursed $ - $ - $ - $ - $ 789 $ 789

 

Reconciliation of Subsidy Cost Allowance: 

 Balance, Beginning $ 865 $ (32) $ 181 $ 366 $ 252 $ 1,632

 Subsidy Cost for Disbursements - - - - (4) (4)

 Subsidy Cost for Modifications 25 25

 Fees, Interest and Dividend Revenue Received 212 30 - - 15 257

 Net Proceeds from Sales and Repurchases of Assets 

 Less than Cost - - - - (37) (37)

 Subsidy Allowance Amortized (1) (248) (17) - - (30) (295)

 Other - - (181) (366) - (547)

Balance, Ending, Before Re-estimates 829 (19) - - 221 1,031

 Subsidy Re-estimates (38) (21) - - (78) (137)

Balance, Ending $ 791 $ (40) $ - $ - $ 143 $ 894

 

Re-estimates 

 Interest on Re-estimate $ (9) $ (3) $ - $ - $ 2 $ (10)

 Technical/Default Re-estimate (29) (18) - - (80) (127)

Total Re-estimates – Increase (Decrease) in 

 Subsidy Cost $ (38) $ (21) $ - $ - $ (78) $ (137)

 

Reconciliation of Subsidy Costs: 

 Subsidy Cost for Disbursements $ - $ - $ - $ - $ (4) $ (4)

 Subsidy Cost for Modifications 25 25

 Subsidy Re-estimates (38) (21) - - (78) (137)

Total Credit Program Receivables Subsidy Costs $ (38) $ (21) $ - $ - $ (57) $ (116)

Administrative Expense $ 2 $ 7 $ - $ - $ 2 $ 11

 

 IMF- IMF- 2015

(in millions) HFA SBLF Quota NAB Other (3) TOTAL

Credit Program Receivables, Net: 

 Credit Program Receivables, Gross $ 7,784 $ 2,363 $ 1,344 $ 4,371 $ 915 $ 16,777

 Subsidy Cost Allowance (865) 32 (181) (366) (252) (1,632)

Net Credit Program Receivables $ 6,919 $ 2,395 $ 1,163 $ 4,005 $ 663 $ 15,145

New Credit Program Loans Disbursed $ - $ - $ - $ - $ 104 $ 104

Obligations for Loans Not Yet Disbursed $ - $ - $ - $ - $ 735 $ 735

 

Reconciliation of Subsidy Cost Allowance: 

 Balance, Beginning $ 1,050 $ 36 $ 159 $ 134 $ 695 $ 2,074

 Subsidy Cost for Disbursements - - - - (1) (1)

 Fees, Interest, and Dividend Revenue Received 241 38 1 2 31 313

 Net Proceeds from Sales, Repurchases, and Repayments 

 of Assets Less than Cost - - (74) - (195) (269)

 Loans Written Off - - - - (13) (13)

 Subsidy Allowance Amortized (1) (409) (64) 3 (2) (33) (505)

Balance, Ending, Before Re-estimates 882 10 89 134 484 1,599

 Subsidy Re-estimates (17) (42) 92 232 (232) 33

Balance, Ending $ 865 $ (32)$ 181 $ 366 $ 252 $ 1,632

 

Re-estimates 

 Interest on Re-estimate (3) (4) - - 1 (6)

 Technical/Default Re-estimate (14) (38) 92 232 (233) 39

Total Re-estimates – Increase (Decrease) in 

 Subsidy Cost $ (17) $ (42)$ 92 $ 232 $ (232) $ 33

 

Reconciliation of Subsidy Costs: 

 Subsidy Cost for Disbursements $ - $ - $ - $ - $ (1) $ (1)

 Subsidy Re-estimates (17) (42) 92 232 (232) 33

Total Credit Program Receivables Subsidy Costs $ (17) $ (42)$ 92 $ 232 $ (233) $ 32

Administrative Expense $ 2 $ 11 $ - $ - $ 2 $ 15

(1) Amount includes net interest income (expense) on borrowings from the Fiscal Service and financing account balance.

(2) CDFI Financial Assistance Direct Loan Program budget subsidy rates for Interest Differential and for Defaults were 1.66% and 10.72%, respectively.

(3) CDFI Financial Assistance Direct Loan Program budget subsidy rates for Interest Differential and for Defaults were 3.00%, and 9.41%, respectively. 
106 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

10. INVESTMENTS IN GOVERNMENT SPONSORED ENTERPRISES

Congress established Fannie Mae and Freddie Mac as GSEs to support mortgage lending. A key function of the GSEs is to 

purchase mortgages, package those mortgages into securities, which are subsequently sold to investors, and guarantee the 

timely payment of principal and interest on these securities. 

Leading up to the financial crisis, increasingly difficult conditions in the housing market challenged the soundness and 

profitability of the GSEs, thereby threatening to undermine the entire housing market. In response, Congress passed HERA 

(P.L. 110-289) in July 2008. This act created FHFA, with enhanced regulatory authority over the GSEs, and provided the 

Secretary with certain authorities intended to ensure the financial stability of the GSEs, if necessary. In September 2008, 

FHFA placed the GSEs under conservatorship, and we invested in the GSEs by entering into a Senior Preferred Stock 

Purchase Agreement (SPSPA) with each GSE. We took these actions to preserve the GSEs’ assets, ensure a sound and 

solvent financial condition, and mitigate systemic risks that contributed to market instability. The purpose of such actions is 

to maintain the solvency of the GSEs so they can continue to fulfill their vital roles in the home mortgage market while the 

Administration and Congress determine what structural changes should be made to the housing finance system. Draws 

under the SPSPAs result in an increased investment in the GSEs as further discussed below.

Under the SPSPAs, we initially received from each GSE: (i) 1,000,000 shares of non-voting variable liquidation preference 

senior preferred stock with a liquidation preference value of $1,000 per share, and (ii) a non-transferable warrant for the 

purchase, at a nominal cost, of 79.9 percent of common stock on a fully-diluted basis. The warrants expire on September 7,

2028. Under the amended SPSPAs, the quarterly dividend payment changed from a 10.0 percent per annum fixed rate 

dividend on the total liquidation preference (as discussed below) to an amount equivalent to the GSE’s positive net worth 

above a capital reserve amount. The capital reserve amount, which was initially set at $3.0 billion for calendar year 2013, 

declines by $600 million at the beginning of each calendar year thereafter until it reaches zero by calendar year 2018. On 

January 1, 2016 and 2015, the capital reserve amount had declined to $1.2 billion and $1.8 billion for calendar years 2016 

and 2015, respectively. The GSEs will not pay a quarterly dividend if their positive net worth is below their required capital 

reserve threshold. We received cash dividends of $11.5 billion and $20.4 billion during fiscal years ended September 30, 

2016 and 2015, respectively. 

The SPSPAs, which have no expiration date, provide for us to disburse funds to the GSEs if, at the end of any quarter, the 

FHFA determines that the liabilities of either GSE exceed its assets. Draws from the Department under the SPSPAs are 

designed to ensure that the GSEs maintain positive net worth, with a fixed maximum amount available to each GSE under 

this agreement, established as of December 31, 2012 (refer to the “Contingent Liability to GSEs” section below). Draws 

against the funding commitment of the SPSPAs do not result in the issuance of additional shares of senior preferred stock; 

instead, it increases the liquidation preference of the initial 1,000,000 shares by the amount of the draw. The combined 

cumulative liquidation preference totaled $189 billion as of September 30, 2016 and 2015. There were no payments to the 

GSEs for the fiscal years ended September 30, 2016 and 2015. 

ACCOUNTING TREATMENT

Entity Transactions― If we estimate a probable contingent liability to the GSEs, we will accrue and report this liability on 

our Consolidated Balance Sheets, and fund the liabilitythrough our direct appropriations. We will report the liability 

accrual, if any, at its gross amount as an “entity” cost on our Consolidated Statements of Net Cost, and within the line item, 

“Cumulative Results of Operations” on our Consolidated Balance Sheets, without considering the increase in senior preferred 

stock liquidation preference/fair value adjustments, and future dividend receipts from the GSEs.
DEPAR TMEN T OF THE TREASURY 107

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Non-Entity Transactions― If we make actual payments to the GSEs, they will result in increases to the U.S. government’s 

liquidation preference in the GSEs’ senior preferred stock, and thus represent General Fund exchange revenue reported on 

our Consolidated Statements of Net Cost as “GSEs Non-Entity Cost (Revenue).” Changes in the fair valuation of the GSE 

preferred stock and common stock warrants, and related dividends received, are General Fund-related costs and revenues 

which we report as “GSEs Non-Entity Cost (Revenue).”

INVESTMENTS IN GSES 

As of September 30, 2016 and 2015, our investments in the GSEs consisted of the following: 

Gross Cumulative

Investments Valuation 9/30/2016

GSEs Investments (in millions) As of 9/30/16 Gain/(Loss) Fair Value

Fannie Mae Senior Preferred Stock $ 116,989 $ (58,889) $ 58,100

Freddie Mac Senior Preferred Stock 72,160 (32,560) 39,600

Fannie Mae Warrants Common Stock 3,104 4,016 7,120

Freddie Mac Warrants Common Stock 2,264 1,466 3,730

Total GSEs Investments $ 194,517 $ (85,967) $ 108,550

Gross Cumulative

Investments Valuation 9/30/2015

GSEs Investments (in millions) As of 9/30/15 Gain/(Loss) Fair Value

Fannie Mae Senior Preferred Stock $ 116,989 $ (61,689) $ 55,300

Freddie Mac Senior Preferred Stock 72,160 (35,560) 36,600

Fannie Mae Warrants Common Stock 3,104 6,176 9,280

Freddie Mac Warrants Common Stock 2,264 2,826 5,090

Total GSEs Investments $ 194,517 $ (88,247) $ 106,270

SENIOR PREFERRED STOCK AND WARRANTS FOR COMMON STOCK

In determining the fair value of the senior preferred stock and warrants for common stock, we relied on the GSEs’ public 

filings and press releases concerning their financial statements, as well as non-public, long-term financial forecasts, monthly 

summaries, quarterly credit supplements, independent research regarding preferred stock trading, independent research 

regarding the GSEs’ common stock trading on the OTC Bulletin Board, discussions with each of the GSEs and FHFA, and 

other information pertinent to the valuations. Because the instruments are not publicly traded, there is no comparable 

trading information available. The fair valuations rely on significant unobservable inputs that reflect assumptions about the 

expectations that market participants would use in pricing. 

The fair value of the senior preferred stock considers the amount of forecasted dividend payments. The fair valuations 

assume that a hypothetical buyer would acquire the discounted dividend stream as of the transaction date. The fair value of 

the senior preferred stock increased as of September 30, 2016 when compared to September 30, 2015,primarily reflecting a 

lower discount rate which was driven by a lower long-term Treasury rate (or risk-free rate), as well as a reduction in the 

market value of the GSEs’ other equity securities that comprise their total equity (refer to Note 1V). 
108 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

Factors impacting the fair value of the warrants include the nominal exercise price and the large number of potential 

exercise shares, the market trading of the common stock that underlies the warrants as of September 30, the principal 

market, and the market participants. Other factors impacting the fair value include, among other things, the holding period 

risk related directly to the assumption of the amount of time that it will take to sell the exercised shares without depressing 

the market. The fair value of the warrants decreased at the end of fiscal year 2016, when compared to 2015, primarily due to 

decreases in the market price of the underlying common stock of each GSE.

CONTINGENT LIABILITY TO GSES

As part of the annual process undertaken by the Department, we prepare a series of long-term financial forecasts to assess,

as of September 30, the likelihood and magnitude of future draws to be required by the GSEs under the SPSPAs within the 

forecast time horizon. We used 25-year financial forecasts prepared through years 2041 and 2040 in assessing if a 

contingent liability was required as of September 30, 2016 and 2015, respectively. If future payments under the SPSPAs are 

deemed to be probable within the forecast horizon, we will estimate and accrue a contingent liability to the GSEs to reflect 

the forecasted equity deficits of the GSEs. We will not discount this accrued contingent liability, nor will we take into 

account any of the offsetting dividends that we could receive, as the dividends, if any, would be owed directly to the General 

Fund. We will adjust such recorded accruals in subsequent years as new information develops or circumstances change. 

Based on our annual assessment, we estimated there was no probable future funding draws as of September 30, 2016 and 

2015, and thereby accrued no contingent liability. However, as of September 30, 2016, it is reasonably possible that 

volatility in interest rates and fair value losses could potentially cause the GSEs to generate quarterly losses and, therefore, 

result in future funding draws against our funding commitment. Due to challenges quantifying future volatility in interest 

rates and fair value losses, we could not estimate the total amount of this reasonably possible future funding liability as of 

September 30, 2016. At September 30, 2016 and 2015, the maximum remaining contractual commitment to the GSEs for the 

remaining life of the SPSPAs was $258.1 billion. 

In assessing the need for an estimated contingent liability, we rely on the GSEs’ public filings and press releases concerning 

their financial statements, monthly summaries, and quarterly credit supplements, as well as non-public, long-term financial 

forecasts, the FHFA House Price Index, discussions with each of the GSEs and FHFA, and other information pertinent to the 

liability estimates. The forecasts prepared in assessing the need for an estimated contingent liability as of September 30, 

2016 include three potential wind-down scenarios, with varying assumptions regarding the timing as to when the GSEs 

would cease issuing new guaranteed mortgage-backed securities. The forecasts also assume a continued gradual wind-down 

of the retained portfolios (and corresponding net interest income) through 2018, as directed under the amended SPSPAs for 

each GSE to reduce the maximum balance of its retained mortgage portfolio by 15.0 percent per annum beginning December 

31, 2013. The maximum balance of the GSEs’ retained mortgage portfolio was initially set at $650 billion as of December 31, 

2012, and the amended SPSPAs requires that we reduce this maximum balance to $250 billion by December 31, 2018.

ESTIMATION FACTORS

Our forecasts concerning the GSEs may differ from actual experience. Estimated senior preferred values and future draw 

amounts will depend on numerous factors that are difficult to predict including, but not limited to, changes in government 

policy with respect to the GSEs, the business cycle, inflation, home prices, unemployment rates, interest rates, changes in 

housing preferences, home financing alternatives, availability of debt financing, market rates of guarantee fees, outcomes of

loan refinancings and modifications, new housing programs, and other applicable factors. 
DEPAR TMEN T OF THE TREASURY 109

FINANCIAL SECTION | FY 2016 AGENCY FINANCIAL REPORT

FINANCIAL PERFORMANCE OF THE GSES

The summarized unaudited aggregated financial condition of the GSEs as of September 30, 2016 and 2015, along with their 

summarized unaudited aggregated financial operating results for the nine months ended September 30, 2016 and 2015 were 

as follows: 

(in millions) 2016 2015

Combined Assets

 Investment Securities $ 165,805 $ 177,395

 Mortgage Loans 4,831,397 4,770,323

 Other 274,002 245,211

Total Combined Assets 5,271,204 5,192,929

Combined Liabilities

 Long-Term Debt 5,103,417 4,944,536

 Other 160,101 243,091

Total Combined Liabilities 5,263,518 5,187,627

Combined Net Equity $ 7,686 $ 5,302

For the Nine Months Ended September 30 

Combined Net Interest Income $ 25,984 $ 27,691

Combined Benefit for Loan Losses 4,587 2,934

Combined Net Interest Income After Benefit for Loan Losses $ 30,571 $ 30,625

Combined Net Income $ 10,246 $ 12,706

Combined Regulatory Capital - Minimum Capital Deficit as of September 30 $ (228,416) $ (232,671)

We obtained this financial information from the GSEs’ quarterly financial reports filed with the SEC. The financial information

above excludes certain financial guarantees not directly reflected on the GSEs’ balance sheets.

GSES NON-ENTITY REVENUE

For the fiscal years ended September 30, 2016 and 2015, GSEs Non-Entity Revenue consisted of the following: 

Summary of GSEs Non-Entity Revenue (in millions) 2016 2015

Fair Value Gain on GSEs Warrants/Preferred Stock $ (2,280) $ (10,460)

GSEs Preferred Stock Dividends (11,522) (20,370)

Total GSEs Non-Entity Revenue, Net $ (13,802) $ (30,830)

REGULATORY ENVIRONMENT

To date, Congress has not approved a plan to address the future of the GSEs, thus the GSEs continue to operate under the 

direction of their conservator, the FHFA, whose stated strategic goals for the GSEs are to: (i) maintain foreclosure 

prevention activities and credit availability to foster liquid, efficient, competitive, and resilient national housing finance 

markets; (ii) reduce taxpayer risk through increasing the role of private capital in the mortgage market; and (iii) build a new 

single-family securitization infrastructure.

The Temporary Payroll Tax Cut Continuation Act of 2011 was funded by an increase of ten basis points in the GSEs’ 

guarantee fees (referred to as “the incremental fees”) which began in April 2012, and is effective through October 1, 2021. 

The incremental fees are remitted to us and not retained by the GSEs and, thus, do not affect the profitability of the GSEs. 

For fiscal years 2016 and 2015, the GSEs remitted to us the incremental fees totaling $2.8 billion and $2.4 billion, 

respectively, which are reported within the line item entitled “Fines, Penalties, Interest and Other Revenue” on our 

Statements of Custodial Activity. 
110 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

11. INVESTMENTS IN MULTILATERAL DEVELOPMENT BANKS

As of September 30, 2016 and 2015, Investments in Multilateral Development Banks consisted of the following:

(in millions) 2016 2015

International Bank for Reconstruction and Development $ 2,844 $ 2,658

Inter-American Development Bank (1) 2,001 1,898

Asian Development Bank 991 986

European Bank for Reconstruction and Development 636 636

International Finance Corporation 569 569

African Development Bank 337 302

North American Development Bank 225 225

Multilateral Investment Guarantee Agency 45 45

Total $ 7,648 $ 7,319

Refer to Note 26 for a description of the additional commitments related to these institutions. 

(1) Includes Inter-American Investment Corporation 

12. OTHER INVESTMENTS AND RELATED INTEREST

Other investments and related interest include foreign currency holdings that we typically invest in interest-bearing 

securities issued or held through foreign governments or monetary authorities (refer to Note 5). ESF holds most of our

foreign currency investments. Of the total $9.8 billion fair value of foreign investments (excluding interest receivable) held 

at September 30, 2016, $4.1 billion will mature within one year, $4.8 billion will mature after one year but before five years, 

and $0.9 billion will mature after five years but before ten years. 

As of September 30, 2016 and 2015, Other Investments and Related Interest consisted of the following:

Cost/ Unamortized 9/30/16

Acquisition (Premium)/ Interest Net Unrealized 9/30/16

Type of Investment (in millions) Value Discount Receivable Investment Gain/(Loss) Fair Value

Foreign Investments:

 Euro Bonds & Notes $ 5,223 $ 217 $ 60 $ 5,500 $ (207)$ 5,293

 Japanese Government Bonds 3,959 6 2 3,967 582 4,549

Other Investments 30 (2) - 28 (10) 18

Total Non-Federal $ 9,212 $ 221 $ 62 $ 9,495 $ 365 $ 9,860

Cost/ Unamortized 9/30/15

Acquisition (Premium)/ Interest Net Unrealized 9/30/15

Type of Investment (in millions) Value Discount Receivable Investment Gain/(Loss) Fair Value

Foreign Investments:

 Euro Bonds & Notes $ 6,106 $ 190 $ 67 $ 6,363 $ (508)$ 5,855

 Japanese Government Bonds 5,488 9 3 5,500 (278) 5,222

 Other FCDAs 642 - - 642 - 642

Other Investments 29 (2) - 27 (9) 18

Total Non-Federal $ 12,265 $ 197 $ 70 $ 12,532 $ (795)$ 11,737
DEPAR TMEN T OF THE TREASURY 111 

FINANCIAL SECTION | FY 2016 AGENCY FINANCIAL REPORT

13. PROPERTY, PLANT, AND EQUIPMENT, NET

As of September 30, 2016 and 2015, Property, Plant, and Equipment, Net consisted of the following:

2016

Net

Depreciation Service Accumulated Book

(in millions) Method Life Cost Depreciation Value

Buildings, structures and facilities S/L 3 - 50 years $ 766 $ (446)$ 320

Furniture, fixtures and equipment S/L 2 - 20 years 2,787 (2,023) 764

Construction in progress N/A N/A 61 - 61

Land and land improvements N/A N/A 18 (2) 16

Internal-use software in use S/L 2 - 15 years 3,108 (1,789) 1,319

Internal-use software in development N/A N/A 336 - 336

Assets under capital lease S/L 2 - 25 years 14 (10) 4

Leasehold improvements S/L 2 - 25 years 413 (228) 185

Total $ 7,503 $ (4,498)$ 3,005

2015

Net

Depreciation Service Accumulated Book

(in millions) Method Life Cost Depreciation Value

Buildings, structures and facilities S/L 3 - 50 years $ 752 $ (421) $ 331

Furniture, fixtures and equipment S/L 2 - 20 years 2,804 (1,978) 826

Construction in progress N/A N/A 44 - 44

Land and land improvements N/A N/A 18 (2) 16

Internal-use software in use S/L 2 - 15 years 2,780 (1,528) 1,252

Internal-use software in development N/A N/A 205 - 205

Assets under capital lease S/L 2 - 25 years 16 (8) 8

Leasehold improvements S/L 2 - 25 years 426 (211) 215

Total $ 7,045 $ (4,148) $ 2,897

The service life ranges vary significantly due to the diverse nature of PP&E we hold.

HERITAGE ASSETS

We have fifteen heritage assets, of which five are considered multi-use, for fiscal years 2016 and 2015. The Treasury

Complex (Main Treasury Building and Annex), declared a national historical landmark in 1972, is treated as a multi-use 

heritage asset and is expected to be preserved indefinitely. The buildings that house the Mint in Denver, San Francisco, 

Fort Knox, and West Point are also multi-use heritage assets and included on the National Register of Historic Places. 

Additionally, the Mint maintains heritage assets consisting of four coin collections and six historical artifacts. 
112 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

14. NON-ENTITY VS. ENTITY ASSETS 

Non-entity assets are those that we hold and manage on behalf of the U.S. government (General Fund) but are not available 

for our use. The table below shows our total assets, segregated between non-entity and entity, as of September 30, 2016 and 

2015: 

 2016

(in millions) Non-Entity Entity Total

Intra-governmental Assets: 

Fund Balance (a) $ 2,228 $ 433,018 $ 435,246

Loans and Interest Receivable (Note 3) 1,324,531 76,123 1,400,654

Advances to the Unemployment Trust Fund (Note 4) 8,558 - 8,558

Due From the General Fund (Note 4) 19,699,152 - 19,699,152

Other Intra-governmental Assets 377 78 455

Total Intra-governmental Assets 21,034,846 509,219 21,544,065

Cash, Foreign Currency, and Other Monetary Assets (Note 5) (b) 347,944 62,154 410,098

Gold and Silver Reserves (Note 6) (c) 11,062 - 11,062

Taxes, Interest, and Other Receivables, Net (Note 8) 50,210 96 50,306

Investments in GSEs (Note 10) 108,550 - 108,550

Other Assets (d) 8 46,819 46,827

Total Assets $ 21,552,620 $ 618,288 $ 22,170,908

(a) $694 million of the non-entity balance represents assets held on behalf of the General Fund (refer to Note 4).

(b) $347.2 billion of the non-entity balance represents assets held on behalf of the General Fund (refer to Note 4).

(c) $25 million of the non-entity balance represents assets held on behalf of the General Fund (refer to Note 4).

(d) Other Assets (Entity) include loans and interest receivable, other investments and related interest, reserve position in the IMF, and other 

various assets on the Consolidated Balance Sheets not separately presented in this table.

 2015

(in millions) Non-Entity Entity Total

Intra-governmental Assets:

Fund Balance (e) $ 1,510 $ 351,016 $ 352,526

Loans and Interest Receivable (Note 3) 1,232,516 74,080 1,306,596

Advances to the Unemployment Trust Fund (Note 4) 12,840 - 12,840

Due From the General Fund (Note 4) 18,632,253 - 18,632,253

Other Intra-governmental Assets 390 63 453

Total Intra-governmental Assets 19,879,509 425,159 20,304,668

Cash, Foreign Currency, and Other Monetary Assets (Note 5) (f) 194,301 58,835 253,136

Gold and Silver Reserves (Note 6) (g) 11,062 - 11,062

Taxes, Interest, and Other Receivables, Net (Note 8) 42,000 34 42,034

Investments in GSEs (Note 10) 106,270 - 106,270

Other Assets (h) $ 21 51,544 51,565

Total Assets 20,233,163 $ 535,572 $ 20,768,735

(e) $589 million of the non-entity balance represents assets held on behalf of the General Fund (refer to Note 4).

(f) $193.4 billion of the non-entity balance represents assets held on behalf of the General Fund (refer to Note 4).

(g) $25 million of the non-entity balance represents assets held on behalf of the General Fund (refer to Note 4).

(h) Other Assets (Entity) include credit program receivables, net, totaling $15.1 billion, a reserve position in the IMF of $8.2 billion, and other 

various assets on the Consolidated Balance Sheets not separately presented in this table.
DEPAR TMEN T OF THE TREASURY 113 

FINANCIAL SECTION | FY 2016 AGENCY FINANCIAL REPORT

15. FEDERAL DEBT AND INTEREST PAYABLE AND RELATED LIABILITIES

Treasury is responsible for administering the federal debt on behalf of the U.S. government. The federal debt includes 

borrowings from the public as well as borrowings from federal agencies. The federal debt does not include debt issued by 

other governmental agencies, such as the Tennessee Valley Authority or Department of Housing and Urban Development. 

Debt held by the public primarily represents the amount the U.S. government has borrowed to finance cumulative cash 

deficits. In contrast, debt held by other federal agencies, primarily trust funds, represents balances of Treasury securities 

held by individual federal agencies with either the authority or the requirement to invest excess receipts in Treasury 

securities, with the principal and interest guaranteed by the full faith and credit of the U.S. government. 

Federal Debt and Interest Payable as of September 30, 2016 and 2015 was as follows: 

Held by Other Federal Agencies (Intra-governmental) (in millions) 2016 2015

Beginning Balance $ 4,980,598 $ 4,994,682

New Borrowings/(Repayments) - Net 373,569 (14,084)

Subtotal at Par Value 5,354,167 4,980,598

Premium/(Discount) 72,598 75,144

Debt Principal Not Covered by Budgetary Resources (Note 18) 5,426,765 5,055,742

Interest Payable Covered by Budgetary Resources 39,657 40,523

Total $ 5,466,422 $ 5,096,265

 

Held by the Public (in millions) 2016 2015

Beginning Balance $ 13,123,847 $ 12,784,971

New Borrowings - Net of Repayments 1,049,577 338,876

Subtotal at Par Value 14,173,424 13,123,847

Premium/(Discount) (33,800) (31,378)

Debt Principal Not Covered by Budgetary Resources (Note 18) 14,139,624 13,092,469

Interest Payable Covered by Budgetary Resources 57,110 55,731

Total $ 14,196,734 $ 13,148,200

FEDERAL DEBT HELD BY OTHER FEDERAL AGENCIES

Certain federal agencies are allowed to invest excess funds in debt securities we issue on behalf of the U.S. government. The 

terms and the conditions of debt securities issued allow the U.S. government to meet its cash needs. The vast majority of 

debt securities are non-marketable securities issued at par value, but others are issued at market prices and interest rates 

that reflect market terms. The average intra-governmental interest rate for debt held by the federal entities, excluding 

Treasury Inflation-Protected Securities (TIPS) and Floating Rate Notes (FRNs), for fiscal years 2016 and 2015 was 2.8

percent and 3.1 percent, respectively. The average intra-governmental interest rate on TIPS for both fiscal years 2016 and 

2015 was 1.3 percent. The average interest rate represents the original issue weighted effective yield on securities 

outstanding at the end of the fiscal year.

The federal debt also includes intra-governmental marketable debt securities that certain agencies are permitted to buy and 

sell on the open market. The debt held by federal agencies at par value (not including premium/discount or interest payable)

as of September 30, 2016 and 2015 was as follows: 
114 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

(in millions) 2016 2015

Social Security Administration $ 2,842,592 $ 2,808,287

Office of Personnel Management 994,528 831,167

Department of Defense Agencies 815,608 747,402

Department of Health and Human Services 259,742 267,121

All Other Federal Entities - Consolidated 441,697 326,621

Total Federal Debt Held by Other Federal Agencies $ 5,354,167 $ 4,980,598

FEDERAL DEBT HELD BY THE PUBLIC

Federal debt held by the public at par value (not including premium/discount or interest payable) as of September 30, 2016 

and 2015 consisted of the following:

Average

Interest

(at par value in millions) Term Rates 2016

Marketable:

Treasury Bills 1 Year or Less 0.4% $ 1,644,759

Treasury Notes Over 1 Year - 10 Years 1.8% 8,624,253

Treasury Bonds Over 10 Years 4.4% 1,825,339

Treasury Inflation-Protected Securities (TIPS) 5 Years or More 0.8% 1,209,814

Treasury Floating Rate Notes (FRN) 2 Years 0.4% 334,139

Total Marketable 13,638,304

Non-Marketable On Demand to Over 40 Years 2.0% 535,120

Total Federal Debt Held by the Public $ 14,173,424

Average

Interest

(at par value in millions) Term Rates 2015

Marketable:

Treasury Bills 1 Year or Less 0.1% $ 1,355,231

Treasury Notes Over 1 Year - 10 Years 1.8% 8,366,026

Treasury Bonds Over 10 Years 4.7% 1,688,208

Treasury Inflation-Protected Securities (TIPS) 5 Years or More 0.8% 1,135,363

Treasury Floating Rate Notes (FRN) 2 Years 0.1% 287,039

Total Marketable 12,831,867

Non-Marketable On Demand to Over 40 Years 2.5% 291,980

Total Federal Debt Held by the Public $ 13,123,847

We generally issue Treasury bills, notes, bonds, and TIPS to meet the borrowing needs of the U.S. government. We issue 

marketable bills at a discount or at par, and pay the par amount of the security upon maturity. The average interest rate on

Treasury bills represents the original issue effective yield on securities outstanding at year end. 
DEPAR TMEN T OF THE TREASURY 115

FINANCIAL SECTION | FY 2016 AGENCY FINANCIAL REPORT

We issue marketable notes and bonds as long-term securities that pay semi-annual interest based on the securities’ stated 

interest rates. We issue these securities at either par value or at an amount that reflects a discount or premium. The 

average interest rate on marketable notes and bonds represents the stated interest rate adjusted by any discount or 

premium on securities outstanding at year-end. We also issue TIPS that have interest and redemption payments tied to the 

Consumer Price Index (CPI) for all Urban Consumers, a widely used measurement of inflation. We adjust the principal for 

TIPS daily over the life of the security based on the CPI for all Urban Consumers. At maturity, TIPS are redeemed at the 

inflation-adjusted principal amount, or the original par value, whichever is greater. TIPS pay a semi-annual fixed rate of 

interest applied to the inflation-adjusted principal. The average interest rate on TIPS represents the stated interest rate on 

principal plus inflation, adjusted by any discount or premium on securities outstanding as of the end of the fiscal year. The 

inflation-adjusted TIPS principal balance of federal debt held by the public included inflation of $90.8 billion and $90.0

billion as of September 30, 2016 and 2015, respectively.

We also issue marketable FRNs which pay interest quarterly based on the interest rate at the time of payment. The interest 

rate of FRNs can change over time and indexed to the highest acceptable discount rate of the most recent 13-week 

marketable bill auction. Similar to marketable notes and bonds, we issue these securities at either par value or at an 

amount that reflects a discount or premium. The average interest rate on marketable FRNs represents the highest accepted 

discount rate of the most recent 13-week marketable auction as of September 30, adjusted by any discount or premium on 

securities outstanding as of that date. 

Federal Debt Held by the Public includes federal debt held outside of the U.S. government by individuals, corporations, 

FRBs, state and local governments, foreign governments, and central banks. As of September 30, 2016, the FRBs had total 

holdings of $1.8 trillion which: (i) excluded $714 billion in Treasury securities used in overnight reverse repurchase 

transactions, and (ii) included a net of $0.7 billion in Treasury securities held by the FRB as collateral for securities lending 

activities. As of September 30, 2015, the FRBs had total holdings of $1.8 trillion which: (i) excluded $618 billion in Treasury 

securities used in overnight reverse repurchase transactions, and (ii) included a net of $1.8 billion in Treasury securities held 

by the FRB as collateral for securities lending activities. The FRB holds Treasury securities in the FRB System Open 

Market Account for the purpose of conducting monetary policy. 

STATUTORY DEBT LIMIT 

Congress provided us with statutory authority to take certain extraordinary measures in the event that Treasury debt nears 

the statutory debt limit and a delay in raising the statutory debt limit occurs. These measures authorize us to deviate from

our normal debt management operations and exercise legal authorities to avoid exceeding the statutory debt limit.

During the period of the delay in raising the statutory debt limit, we may undertake the following extraordinary measures: 

(i) suspend new issuances of Treasury securities to the Government Securities Investment Fund of the Federal Employees’ 

Retirement System Thrift Savings Plan (TSP), the Civil Service Retirement and Disability Trust Fund (Civil Service Fund), 

the Postal Service Retiree Health Benefits Fund (Postal Benefits Fund), and the ESF as investments; (ii) redeem early a 

certain amount of Treasury securities held by the Civil Service Fund; (iii) suspend new issuances of State and Local 

Government Series (SLGS) securities; (iv) utilize FFB to exchange outstanding Treasury securities held by the Civil Service 

Fund for non-Treasury securities (refer to Note 16); and (v) issue cash management bills to manage short-term financing 

needs. 
116 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

When the period of delay in raising the statutory debt limit ends, we discontinue our use of extraordinary measures and 

resume our normal debt management operations. Furthermore, we are required by the relevant statutes, to restore the TSP, 

along with the OPM-administered Civil Service Fund and Postal Benefits Fund (the OPM funds), with the accumulated 

principal balance of Treasury securities that bears such interest rates and maturity dates necessary to replicate the 

investments the funds would have held had the delay not occurred (the uninvested principal). In addition, relevant statutes 

require us to pay these funds the related lost interest (foregone interest) on the uninvested principal. Relevant statutes do 

not require that we restore the ESF and state and local governments with uninvested principal or lost interest incurred 

during a period of delay. 

A delay in raising the statutory debt limit occurred from March 16, 2015 until Friday, October 30, 2015. On Monday, 

November 2, 2015, Congress enacted the Bipartisan Budget Act of 2015 (P.L. 114-74) which temporarily suspended the debt 

limit through March 15, 2017. During the period March 16, 2015 through October 30, 2015, we undertook the extraordinary 

measures as described above (also refer to Note 16). On November 2, 2015, when Congress temporarily suspended the debt 

limit, we resumed normal debt management operations. On this date, we restored uninvested principal totaling $352.6 

billion, of which $204.8 billion was restored to the TSP and $147.8 billion was restored to the two OPM funds. We also 

restored foregone interest totaling $2.7 billion, of which $1.7 billion was restored to the TSP on the next interest payment 

date of November 3, 2015 and $971 million was restored to the two OPM funds on the next semi-annual interest payment 

date of December 31, 2015. In addition, we authorized ESF and state and local governments to resume investments in 

Treasury securities.

Of the $2.7 billion of foregone interest paid in fiscal year 2016, $635 million is reported in fiscal year 2016 as a current year, 

non-entity expense within the line item, “Restoration of Foregone Federal Debt Interest,” and $2.1 billion was accrued in 

fiscal year 2015 as a non-entity expense within the line item, “Accrued Restoration of Foregone Federal Debt Interest” on our 

Consolidated Statements of Net Cost. In fiscal year 2015, we also reported the $2.1 billion of accrued foregone interest as 

part of other financing sources on the Consolidated Statement of Changes in Net Position, and subsequently reversed this 

amount in fiscal year 2016 in connection with the actual payment of interest.

Since the delay in raising the statutory debt limit did not end until November 2, 2015, none of the uninvested principal and 

foregone interest payable had been restored to the TSP and the two OPM funds as of September 30, 2015. Accordingly, we 

recorded a liability as of September 30, 2015 totaling $350.7 billion, comprised of uninvested principal owed to these three 

funds as of that date totaling $348.6 billion, and foregone interest payable to the funds for the period March 16, 2015 

through September 30, 2015 totaling $2.1 billion. This liability for the uninvested principal and foregone interest payable as 

of September 30, 2015 was reported on our Consolidated Balance Sheets in the line item, “Liability for Restoration of Federal

Debt Principal and Interest” of which $146.1 billion represented an intra-governmental liability of the combined principal 

and interest payable to the two OPM funds, and the remaining $204.6 billion represented the principal and interest payable 

to the TSP, a public liability. Corresponding amounts were reported in the “Due From the General Fund” line item on the 

Consolidated Balance Sheets for the total $350.7 billion of uninvested principal and foregone interest owed to the funds as of 

September 30, 2015 (refer to Note 4). 
DEPAR TMEN T OF THE TREASURY 117

FINANCIAL SECTION | FY 2016 AGENCY FINANCIAL REPORT

16. OTHER DEBT AND INTEREST PAYABLE

Through FFB, we have outstanding borrowings and related accrued interest owed to the Civil Service Fund. At September 

30, 2016 and 2015, FFB had outstanding borrowings of $13.1 billion and $12.4 billion, inclusive of $101 million and $106

million of accrued interest payable, respectively. During fiscal years 2016 and 2015, FFB paid $2.0 billion and $1.3 billion in 

principal, respectively. The outstanding borrowings at September 30, 2016 had stated interest rates that ranged from 2.25

percent to 4.63 percent per annum, and an effective interest rate of 3.08 percent. The outstanding borrowings at September 

30, 2015 had stated interest rates that ranged from 2.88 percent to 4.63 percent per annum, and an effective interest rate of 

3.43 percent. Maturity dates ranged from June 30, 2017 to June 30, 2029 for outstanding borrowings at September 30, 2016, 

and from June 30, 2016 to June 30, 2024 for outstanding borrowings at September 30, 2015.

On October 15, 2015, FFB exchanged $2.7 billion of non-Treasury securities that did not count against the debt limit, for an 

equivalent amount of Treasury securities held by the Civil Service Fund that did count against the debt limit. FFB used the 

Treasury securities it had received from the Civil Service Fund to repay $2.1 billion of outstanding principal borrowings, 

including interest, owed to the Fiscal Service. The Fiscal Service then extinguished the Treasury securities it had received

from FFB, which thereby helped us to remain below the statutory debt limit. These transactions resulted in a cumulative

$13.1 billion outstanding debt obligation owed to the Civil Service Fund as of September 30, 2016, which was reported as an 

intra-governmental liability on our Consolidated Balance Sheets entitled “Other Debt and Interest Payable.” 
118 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

17. D.C. FEDERAL PENSION AND JUDICIAL RETIREMENT ACTUARIAL 

LIABILITY

Title XI of the Balanced Budget Act of 1997, as amended intended to relieve the D.C. government of the burden of unfunded 

pension liabilities transferred to the District by the U.S. government in 1979. To fulfill our responsibility, we manage two 

funds ― the D.C. Teachers’, Police Officers’, and Firefighters’ Federal Pension Fund (the D.C. Federal Pension Fund) and the 

District of Columbia Judicial Retirement and Survivors’ Annuity Fund (the Judicial Retirement Fund). We are required to 

make annual amortized payments from the General Fund to the D.C. Federal Pension Fund and the Judicial Retirement 

Fund. The D.C. Federal Pension Fund benefit payments relate to creditable service performed on or before June 30, 1997, 

while the Judicial Retirement Fund benefit payments relate to all creditable service. 

A reconciliation of the combined actuarial pension liability for the D.C. Federal Pension Fund and the Judicial Retirement 

Fund as of September 30, 2016 and 2015 is as follows: 

(in millions) 2016 2015

Beginning Liability Balance $ 8,849 $ 9,159

Pension Expense:

Normal Cost 6 6

Interest on Pension Liability During the Year 136 161

Actuarial (Gains) Losses During the Year:

From Experience (94) (230)

From Discount Rate Assumption Change 385 541

From Other Assumption Changes 107 (246)

Total Pension Expense 540 232

Less Amounts Paid (553) (542)

Ending Liability Balance $ 8,836 $ 8,849
DEPAR TMEN T OF THE TREASURY 119

FINANCIAL SECTION | FY 2016 AGENCY FINANCIAL REPORT

D.C. Federal Judicial 2016

Additional Information ($ in millions): Pension Fund Retirement Fund Total

Amount Received from the General Fund $ 461 $ 14 $ 475

Annual Rate of Investment Return Assumption 1.12% - 4.17% 1.12% - 4.17%

Future Annual Rate of Inflation and Cost-Of-

 Living Adjustment:

 Police Officers 1.87% N/A

 Firefighters 1.87% N/A

 Teachers 1.90% N/A

 Judicial N/A 1.99%

Future Annual Rate of Salary Increases:

 Police Officers 2.00% N/A

 Firefighters 2.20% N/A

 Teachers 3.00% N/A

 Judicial N/A 1.15%

D.C. Federal Judicial 2015

Additional Information ($ in millions): Pension Fund Retirement Fund Total

Amount Received from the General Fund $ 488 $ 14 $ 502

Annual Rate of Investment Return Assumption 1.52% - 4.30% 1.52% - 4.30%

Future Annual Rate of Inflation and Cost-Of-

 Living Adjustment:

 Police Officers 2.14% N/A

 Firefighters 2.14% N/A

 Teachers 2.20% N/A

 Judicial N/A 2.40%

Future Annual Rate of Salary Increases:

 Police Officers 2.17% N/A

 Firefighters 2.20% N/A

 Teachers 3.00% N/A

 Judicial N/A 1.70%
120 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

18. LIABILITIES

LIABILITIES NOT COVERED BY BUDGETARY AND OTHER RESOURCES 

As of September 30, 2016 and 2015, liabilities not covered by budgetary and other resources consisted of the following: 

(in millions) 2016 2015

Intra-governmental Liabilities Not Covered by Budgetary 

 and Other Resources 

Federal Debt Principal, Premium/Discount (Note 15) $ 5,426,765 $ 5,055,742

Liability for Restoration of Federal Debt Principal and Interest (Note 15) - 146,066

Other Intra-governmental Liabilities 114 114

Total Intra-governmental Liabilities Not Covered by Budgetary 5,426,879 5,201,922

 and Other Resources

Federal Debt Principal, Premium/Discount (Note 15) 14,139,624 13,092,469

Liability for Restoration of Federal Debt Principal and Interest (Note 15) - 204,591

Gold and Silver Reserves (Note 6) 11,062 11,062

D.C. Federal Pension and Judicial Retirement - Actuarial 

 Liability (Unfunded) 5,002 5,038

Other Liabilities 1,052 1,080

Total Liabilities Not Covered by Budgetary and Other Resources 19,583,619 18,516,162

Total Liabilities Covered by Budgetary and Other Resources 2,083,375 1,838,459

Total Liabilities $ 21,666,994 $ 20,354,621

OTHER LIABILITIES

Total “Other Liabilities” displayed on the Consolidated Balance Sheets consists of both liabilities that are covered and not 

covered by budgetary resources. Other liabilities at September 30, 2016 and 2015, consisted of the following: 

Non- 2016 Non- 2015

(in millions) Current Current Total Current Current Total

Intra-governmental

Accounts Payable $ 130 $ - $ 130 $ 182 $ - $ 182

Unfunded Federal Workers Compensation 

 Program Liability (FECA) 44 54 98 45 53 98

Other Accrued Liabilities 233 1 234 201 3 204

Total Intra-governmental $ 407 $ 55 $ 462 $ 428 $ 56 $ 484

With the Public

Liability for Deposit Funds (Held by the

 U.S. government for Others)

 and Suspense Accounts $ 1,236 $ - $ 1,236 $ 251 $ - $ 251

Actuarial Federal Workers Compensation 

 Program Liability (FECA) - 597 597 - 588 588

Accrued Funded Payroll and Benefits 413 - 413 342 - 342

Accounts Payable and Other Accrued

 Liabilities 3,943 79 4,022 3,692 67 3,759

Total With the Public $ 5,592 $ 676 $ 6,268 $ 4,285 $ 655 $ 4,940
DEPAR TMEN T OF THE TREASURY 121 

FINANCIAL SECTION | FY 2016 AGENCY FINANCIAL REPORT

19. NET POSITION

Cumulative Results of Operations represents the net results of operations since inception, and includes cumulative amounts 

related to investments in capitalized assets and donations and transfers of assets in and out without reimbursement. Also 

included as a reduction in Cumulative Results of Operations are accruals for which the related expenses require funding 

from future appropriations and assessments. These future funding requirements include, among others: (a) accumulated 

annual leave earned but not taken, (b) accrued FECA, (c) credit reform cost re-estimates, (d) unfunded D.C. Federal pension, 

and (d) expenses for contingent liabilities. 

Unexpended Appropriations represents the amount of spending authorized as of year-end that is unliquidated or unobligated 

and has not lapsed, been rescinded, or withdrawn. No-year appropriations remain available for obligation until expended. 

Annual appropriations remain available for upward or downward adjustment of obligations until canceled. We report 

adjustments related to unexpended appropriations, such as cancellations of expired funds or rescissions, as “Other 

Adjustments” on the Consolidated Statements of Changes in Net Position. 

APPROPRIATIONS RECEIVED

Congress appropriates the amount reported as “Appropriations Received” from the General Fund receipts, such as income 

taxes, that are not dedicated by law for a specific purpose. This amount will not necessarily agree with the “appropriations

(discretionary and mandatory)” amount reported on the Combined Statements of Budgetary Resources because of differences 

between proprietary and budgetary accounting concepts and reporting requirements. For example, certain dedicated 

receipts are recorded as “appropriations (discretionary and mandatory)” on the Combined Statements of Budgetary 

Resources, but are recognized as exchange or non-exchange revenue (i.e., typically in revolving, special, and non-revolving 

trust funds) and reported on the Consolidated Statements of Changes in Net Position in accordance with SFFAS No. 7, 

Accounting for Revenue and Other Financing Sources. 

TRANSFERS TO THE GENERAL FUND AND OTHER

The amount reported as “Transfers to the General Fund and Other” on the Consolidated Statements of Changes in Net 

Position under “Other Financing Sources” includes the following for the years ended September 30, 2016 and 2015: 

(in millions) 2016 2015

Categories of Transfers to the General Fund and Other 

Interest Revenue $ 44,636 $ 42,015

Increase in Liquidation Preference of GSEs Preferred Stock, 

 GSEs Preferred Stock Dividends and Valuation Changes (Note 10) 13,802 30,830

Other 6,511 1,760

Total $ 64,949 $ 74,605

Included in “Transfers to the General Fund and Other” is the annual valuation adjustment on the GSE Senior Preferred

Stock investments and related dividends. These transfers also include distribution of interest revenue to the General Fund. 

We accrue interest revenue on inter-agency loans held on behalf of the U.S. government. We report a corresponding amount 

on the Consolidated Statements of Net Cost under “Non-Entity Costs: Less Interest Revenue from Loans.” Eliminations 

between our bureaus reduce the amount reported on the Consolidated Statements of Net Cost. 
122 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

The “Other” line generally includes collections from other federal agencies for reimbursement of costs we incurred for our

administration of trust funds established within the Social Security Act. We execute these administrative services as 

directed by statute. The fiscal year 2016 activity also includes a $3.8 billion transfer of forfeited assets to a Fiscal Servicemanaged miscellaneous receipt account. This line also includes Seigniorage and numismatic profits also are included in the 

“Other” line. Seigniorage is the face value of newly minted circulating coins less the cost of production. Numismatic profit is 

any profit on the sale of proof coins, uncirculated coins, commemorative coins, and related products and accessories. The 

Mint is required to distribute seigniorage and numismatic profits in excess of operating expenses to the General Fund (refer 

to Note 21). In any given year, the amount recognized as seigniorage may differ from the amount distributed to the General 

Fund by an insignificant amount due to timing differences. The “Other” line also includes the credit reform downward reestimate subsidies transferred to the General Fund resulting from a change in forecasts of future cash flows. 

20. CONSOLIDATED STATEMENTS OF NET COST AND NET COSTS OF 

TREASURY SUB-ORGANIZATIONS

Our Consolidated Statements of Net Cost display information on a consolidated basis. We consist of DO and seven operating 

bureaus that we provide supporting schedules for Net Cost in the notes to the financial statements (refer to Note 1). These 

supporting schedules provide consolidating information, which fully displays the costs, revenues, and net cost of DO and 

each operating bureau.

The classification of sub-organizations has been determined in accordance with SFFAS No. 4, Managerial Cost Accounting 

Standards and Concepts for the Federal Government which states that the predominant factor is the reporting entity’s 

organization structure and existing responsibility components, such as bureaus, administrations, offices, and divisions 

within a department.

Each sub-organization is responsible for accumulating costs. The assignment of the costs to Department-wide programs is 

the result of using the following cost assignment methods: (1) direct costs, (2) cause and effect, and (3) cost allocation.

INTRA-DEPARTMENTAL COSTS/REVENUES

We report intra-departmental costs/revenues resulting from the provision of goods and/or services on a reimbursable basis 

among our sub-organizations as costs by providing sub-organizations and as revenues by receiving sub-organizations. We

recognized intra-departmental imputed costs on the Consolidated Statements of Net Cost of $646 million and $596 million 

during fiscal years 2016 and 2015, respectively. Accordingly, we eliminated such costs or revenues in the consolidation 

process.

INTRA-GOVERNMENTAL COSTS

Intra-governmental costs relate to the source of goods and services we purchased and not to the classification of the related 

intra-governmental revenue.

In certain cases, other federal agencies incur costs that are directly identifiable to our operations. In accordance with SFFAS 

No. 30, Inter-Entity Cost Implementation Amending SFFAS No. 4, Managerial Cost Accounting Standards and Concepts, we

recognize identified costs paid on our behalf by other agencies. The imputed inter-departmental financing sources we 

currently recognize include the actual cost of future benefits for the federal pension plans that other federal entities pay, the 

FEHB, and any un-reimbursed contract dispute payments made from the Treasury Judgment Fund on our behalf. We 
DEPAR TMEN T OF THE TREASURY 123

FINANCIAL SECTION | FY 2016 AGENCY FINANCIAL REPORT

reflect the funding for these costs as costs on the Consolidated Statements of Net Cost, and as imputed financing sources on

the Consolidated Statements of Changes in Net Position. Costs paid by other agencies on our behalf were $681 million and 

$669 million for the fiscal years ended September 30, 2016 and 2015, respectively.

CONSOLIDATED STATEMENTS OF NET COST PRESENTATION

OMB Circular No. A-136, Financial Reporting Requirements, as revised, requires that the presentation of the Consolidated 

Statements of Net Cost align directly with the goals and outcomes identified in the Strategic Plan. Accordingly, we have

presented the gross costs and earned revenues by our major program categories as defined by the strategic goals reported in 

our fiscal years 2014 – 2017 Strategic Plan. The majority of our bureaus’ and reporting entities’ net cost information falls 

within a single program category in the Consolidated Statements of Net Cost. DO and TTB allocate costs and related 

revenues to multiple programs using a net cost percentage calculation. All of our management offices coordinate, on a 

Treasury-wide basis, their efforts to achieve the Management program-related strategic goals (refer to the Strategic 

Framework section of Management’s Discussion and Analysis). For financial statement presentation purposes, we combine

the net costs associated with our Management program-related goals with the net costs associated with our Financial

program-related strategic goals. 

Our Consolidated Statements of Net Cost also present interest expense on the Federal Debt and other federal costs incurred 

on behalf of the U.S. government. We do not reflect these costs as program costs related to our strategic plan missions. We 

eliminate these costs in the consolidation process to the extent that they involve transactions with our sub-organizations. 

Non-entity other federal costs shown on the Consolidated Statements of Net Cost for the fiscal years ended September 30, 

2016 and 2015 consisted of the following: 

(in millions) 2016 2015

Credit Reform Interest on Uninvested Funds(Intra-governmental) $ 7,349 $ 8,088

Judgment Claims and Contract Disputes 3,563 1,885

Resolution Funding Corporation 2,628 2,628

Corporation for Public Broadcasting 485 445

All Other Payments 529 555

Total $ 14,554 $ 13,601
124 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

20. CONSOLIDATED STATEMENT OF NET COST AND NET COSTS OF 

TREASURY SUB-ORGANIZATIONS (IN MILLIONS)

For Fiscal Year Ended September 30, 2016 

 

 

Program Costs

Bureau of

Engraving &

Printing

Bureau of the

Fiscal

Service

Departmental

Office(a)

Financial 

Crimes 

Enforcement 

Network

Internal 

Revenue 

Service U.S. Mint

FINANCIAL PROGRAM

Intra-governmental Gross Costs $ - $ 452 $ 2,704 $ - $ 4,342 $ -

Less: Earned Revenue - (211) (2,899) - (99) -

Intra-governmental Net Costs - 241 (195) - 4,243 -

Gross Costs with the Public - 1,635 819 - 8,139 -

Less: Earned Revenue - (139) (145) - (405) -

Net Costs with the Public - 1,496 674 - 7,734 -

 Net Cost: Financial Program - 1,737 479 - 11,977 -

ECONOMIC PROGRAM

Intra-governmental Gross Costs 104 - 463 - - 79

Less: Earned Revenue (6) - (128) - - (3)

Intra-governmental Net Costs 98 - 335 - - 76

Gross Costs with the Public 613 - 7,139 - - 2,900

Less: Earned Revenue (675) - (2,235) - - (2,995)

Net Costs with the Public (62) - 4,904 - - (95)

 Net Cost (Revenue): Economic Program 36 - 5,239 - - (19)

SECURITY PROGRAM

Intra-governmental Gross Costs - - 211 25 - -

Less: Earned Revenue - - (41) - - -

Intra-governmental Net Costs - - 170 25 - -

Gross Costs with the Public - - 171 95 - -

Less: Earned Revenue - - - - - -

Net Costs with the Public - - 171 95 - -

 Net Cost: Security Program - - 341 120 - -

Total Net Program Cost (Revenue)

 Before Changes in Actuarial

 Assumptions 36 1,737 6,059 120 11,977 (19)

(Gain)/Loss on Pension, ORB, or OPEB

 Assumption Changes - - 492 - - -

Total Net Cost of (Revenue From)

 Treasury Operations $ 36 $ 1,737 $ 6,551 $ 120 $ 11,977 $ (19)

(a) Of the total $5.2 billion of net cost reported by Departmental Offices for the Economic Program, Treasury International Assistance Programs and OFS 

contributed $2.0 billion and $4.1 billion respectively, partially offset by ESF which contributed net income of $1.6 billion. Other net costs were spread 

throughout other DO programs or offices. 
DEPAR TMEN T OF THE TREASURY 125

FINANCIAL SECTION | FY 2016 AGENCY FINANCIAL REPORT

20. CONSOLIDATED STATEMENT OF NET COST AND NET COSTS OF 

TREASURY SUB-ORGANIZATIONS (IN MILLIONS) (CON’T):

For Fiscal Year Ended September 30, 2016 

 

Program Costs

Office of the 

Comptroller of the 

Currency

Alcohol

and

Tobacco

Tax and

Trade

Bureau

Combined 

Total Eliminations

2016 

Consolidated

FINANCIAL PROGRAM

Intra-governmental Gross Costs $ - $ 15 $ 7,513 $ 3,181 $ 4,332

Less: Earned Revenue - (3) (3,212) (774) (2,438)

Intra-governmental Net Costs - 12 4,301 2,407 1,894

Gross Costs with the Public - 44 10,637 - 10,637

Less: Earned Revenue - (2) (691) - (691)

Net Costs with the Public - 42 9,946 - 9,946

 Net Cost: Financial Program - 54 14,247 2,407 11,840

ECONOMIC PROGRAM

Intra-governmental Gross Costs 161 15 822 421 401

Less: Earned Revenue (35) (1) (173) (130) (43)

Intra-governmental Net Costs 126 14 649 291 358

Gross Costs with the Public 948 44 11,644 - 11,644

Less: Earned Revenue (1,129) (1) (7,035) - (7,035)

Net Costs with the Public (181) 43 4,609 - 4,609

 Net Cost (Revenue): Economic Program (55) 57 5,258 291 4,967

SECURITY PROGRAM

Intra-governmental Gross Costs - - 236 90 146

Less: Earned Revenue - - (41) (38) (3)

Intra-governmental Net Costs - - 195 52 143

Gross Costs with the Public - - 266 - 266

Less: Earned Revenue - - - - -

Net Costs with the Public - - 266 - 266

 Net Cost: Security Program - - 461 52 409

Total Net Program Cost (Revenue)

 Before Changes in Actuarial

 Assumptions (55) 111 19,966 2,750 17,216

(Gain)/Loss on Pension, ORB, or OPEB

 Assumption Changes 9 - 501 - 501

Total Net Cost of (Revenue From)

 Treasury Operations $ (46)$ 111 $ 20,467 $ 2,750 $ 17,717
126 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

20. CONSOLIDATED STATEMENT OF NET COST AND NET COSTS OF 

TREASURY SUB-ORGANIZATIONS (IN MILLIONS) (CON’T):

For Fiscal Year Ended September 30, 2015 

 

 

Program Costs

Bureau of

Engraving &

Printing

Bureau of the

Fiscal

Service

Departmental

Office(a)

Financial 

Crimes 

Enforcement 

Network

Internal 

Revenue 

Service U.S. Mint

FINANCIAL PROGRAM

Intra-governmental Gross Costs $ - $ 423 $ 2,741 $ - $ 4,311 $ -

Less: Earned Revenue - (201) (3,250) - (100) -

Intra-governmental Net Costs - 222 (509) - 4,211 -

Gross Costs with the Public - 1,474 517 - 8,062 -

Less: Earned Revenue - (133) (1) - (422) -

Net Costs with the Public - 1,341 516 - 7,640 -

 Net Cost: Financial Program - 1,563 7 - 11,851 -

ECONOMIC PROGRAM

Intra-governmental Gross Costs 102 - 513 - - 76

Less: Earned Revenue (7) - (79) - - (3)

Intra-governmental Net Costs 95 - 434 - - 73

Gross Costs with the Public 581 - 15,125 - - 2,990

Less: Earned Revenue (660) - (3,351) - - (3,123)

Net Costs with the Public (79) - 11,774 - - (133)

 Net Cost (Revenue): Economic Program 16 - 12,208 - - (60)

SECURITY PROGRAM

Intra-governmental Gross Costs - - 196 28 - -

Less: Earned Revenue - - (42) (1) - -

Intra-governmental Net Costs - - 154 27 - -

Gross Costs with the Public - - 175 90 - -

Less: Earned Revenue - - - - - -

Net Costs with the Public - - 175 90 - -

 Net Cost: Security Program - - 329 117 - -

Total Net Program Cost (Revenue)

 Before Changes in Actuarial

 Assumptions 16 1,563 12,544 117 11,851 (60)

(Gain)/Loss on Pension, ORB, or OPEB

 Assumption Changes - - 295 - - -

Total Net Cost of (Revenue From)

 Treasury Operations $ 16 $ 1,563 $ 12,839 $ 117 $ 11,851 $ (60)

(a) Of the total $12.2 billion of net cost reported by Departmental Offices for the Economic Program, Treasury International Assistance Programs, OFS, DO 

Policy Offices, and ESF contributed $2.2 billion, $4.4 billion, $2.3 billion, and $2.4 billion respectively. Other net costs were spread throughout other DO 

programs or offices. 
DEPAR TMEN T OF THE TREASURY 127

FINANCIAL SECTION | FY 2016 AGENCY FINANCIAL REPORT

20. CONSOLIDATED STATEMENT OF NET COST AND NET COSTS OF 

TREASURY SUB-ORGANIZATIONS (IN MILLIONS) (CON’T):

For Fiscal Year Ended September 30, 2015 

 

Program Costs

Office of the 

Comptroller of the 

Currency

Alcohol

and

Tobacco

Tax and

Trade

Bureau

Combined 

Total Eliminations

2015 

Consolidated

FINANCIAL PROGRAM

Intra-governmental Gross Costs $ - $ 14 $ 7,489 $ 3,108 $ 4,381

Less: Earned Revenue - (2) (3,553) (749) (2,804)

Intra-governmental Net Costs - 12 3,936 2,359 1,577

Gross Costs with the Public - 42 10,095 - 10,095

Less: Earned Revenue - (2) (558) - (558)

Net Costs with the Public - 40 9,537 - 9,537

 Net Cost: Financial Program - 52 13,473 2,359 11,114

ECONOMIC PROGRAM

Intra-governmental Gross Costs 146 14 851 483 368

Less: Earned Revenue (29) (1) (119) (84) (35)

Intra-governmental Net Costs 117 13 732 399 333

Gross Costs with the Public 892 42 19,630 - 19,630

Less: Earned Revenue (1,117) (1) (8,252) - (8,252)

Net Costs with the Public (225) 41 11,378 - 11,378

 Net Cost (Revenue): Economic Program (108) 54 12,110 399 11,711

SECURITY PROGRAM

Intra-governmental Gross Costs - - 224 83 141

Less: Earned Revenue - - (43) (37) (6)

Intra-governmental Net Costs - - 181 46 135

Gross Costs with the Public - - 265 - 265

Less: Earned Revenue - - - - -

Net Costs with the Public - - 265 - 265

 Net Cost: Security Program - - 446 46 400

Total Net Program Cost (Revenue)

 Before Changes in Actuarial

 Assumptions (108) 106 26,029 2,804 23,225

(Gain)/Loss on Pension, ORB, or OPEB

 Assumption Changes 4 - 299 - 299

Total Net Cost of (Revenue From)

 Treasury Operations $ (104) $ 106 $ 26,328 $ 2,804 $ 23,524
128 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

21. ADDITIONAL INFORMATION RELATED TO THE COMBINED 

STATEMENTS OF BUDGETARY RESOURCES

UNDELIVERED ORDERS

Undelivered orders represent goods and services ordered and obligated, which have not been received. This includes any 

orders for which we have paid in advance, but for which delivery or performance has not yet occurred. Undelivered orders as 

of September 30, 2016 and 2015 consisted of the following: 

(in millions) 2016 2015

Paid $ 10 $ 7

Unpaid 18,443 170,646

Undelivered orders at the end of the year $ 18,453 $ 170,653

CONTRIBUTED CAPITAL

Contributed capital represents the current year authority and prior year balances of amounts actually transferred through 

non-expenditure transfers to miscellaneous receipt accounts of the General Fund of the Treasury to repay a portion of a 

capital investment or transfer seigniorage and numismatic profits (refer to Note 19). Contributed capital for the fiscal years 

ended September 30, 2016 and 2015 was $195 million and $171 million, respectively. 

APPORTIONMENT CATEGORIES OF NEW OBLIGATIONS AND UPWARD ADJUSTMENTS

Apportionment categories are determined in accordance with the guidance provided in OMB Circular No. A-11, Preparation, 

Submission and Execution of the Budget. Apportionment Category A represents resources apportioned for calendar 

quarters. Apportionment Category B represents resources apportioned for other time periods for activities, projects or 

objectives, or for any combination thereof. New obligations and upward adjustments for direct and reimbursable obligations 

by apportionment category for the fiscal years ended September 30, 2016 and 2015 consisted of the following: 

(in millions) 2016 2015

Direct - Category A $ 106 $ 105

Direct - Category B 31,768 37,291

Direct - Exempt from Apportionment 441,961 425,027

Total Direct 473,835 462,423

Reimbursable - Category B 4,954 4,549

Reimbursable - Exempt from Apportionment 1,301 1,072

Total Reimbursable 6,255 5,621

Total Direct and Reimbursable $ 480,090 $ 468,044

TERMS OF BORROWING AUTHORITY USED

Several of our programs have authority to borrow under the FCRA, as amended. The FCRA provides indefinite borrowing 

authority to financing accounts to fund the unsubsidized portion of direct loans and to satisfy obligations in the event the 

financing account’s resources are insufficient. OMB Circular No. A-11 defines repayment requirements. Interest expense 

due is calculated based on the beginning balance of borrowings outstanding and the borrowings/repayments activity that 

occurred during the fiscal year. Undisbursed Departmental borrowings earn interest at the same rate as the financing 

account pays on its debt owed to the Fiscal Service. In the event that principal and interest collections exceed the interest 

expense due, we receive the excess payment. If principal and interest do not exceed interest expense due, we will borrow the 
DEPAR TMEN T OF THE TREASURY 129

FINANCIAL SECTION | FY 2016 AGENCY FINANCIAL REPORT

difference. We make periodic principal repayments based on the analysis of cash balances and future disbursement needs. 

All interest on borrowings is due on September 30. Interest rates on FCRA borrowings range from 0.26 percent to 7.59 

percent.

AVAILABLE BORROWING

The available borrowing authority and related changes in available borrowing authority as of and for the fiscal years ended 

September 30, 2016 and 2015 are shown below: 

(in millions) 2016 2015

Beginning Balance $ 93,963 $ 99,248

Current Authority 365 921

Borrowing Authority Withdrawn (1) (87,501) (6,098)

Borrowing Authority Converted to Cash (307) (108)

Ending Balance $ 6,520 $ 93,963

(1) The increase in this activity is due to a withdrawal of borrowing authority related to the IMF program. Refer to Note 7. 

RECONCILIATION OF THE PRESIDENT’S BUDGET

The Budget of the United States (also known as the President’s Budget), with actual numbers for fiscal year 2016, was not 

published at the time that these financial statements were issued. The fiscal year 2018 President’s Budget is expected to be 

published in February 2017, can be located on the OMB website, and will be available from the U.S. Government Printing 

Office. The following chart displays the differences between the Combined Statement of Budgetary Resources (SBR) in the 

fiscal year 2015 Agency Financial Report and the actual fiscal year 2015 balances included in the fiscal year 2017 President’s 

Budget.
130 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

Reconciliation of Fiscal Year 2015 Combined Statement of Budgetary Resources

to the Fiscal Year 2017 President’s Budget

New

Outlays (net Distributed Obligations

Budgetary of offsetting Offsetting Net and Upward

(in millions) Resources collections) Receipts Outlays Adjustments

Statement of Budgetary Resources (SBR) Amounts $ 800,036 $ 439,235 $ (69,036) $ 370,199 $ 468,044

Included in the Treasury Department Chapter of the 

 President's Budget (PB) but not in the SBR:

IRS non-entity tax credit payments and other outlays(1) 120,489 117,644 - 117,644 120,489

Tax and Trade Bureau (TTB) non-entity collections for Puerto Rico 343 343 - 343 343

Continued dumping subsidy - U.S. Customs and Border Patrol 296 91 - 91 91

Non-Treasury offsetting receipts - - (273) (273) -

Subtotal 121,128 118,078 (273) 117,805 120,923

Included in the SBR but not in the Treasury Department

 chapter of the PB

Treasury resources shown in non-Treasury chapters of the PB (2) (42,119) (5,125) - (5,125) (21,357)

Expired funds in SBR (734) - - - -

Other (6) (6) - (6) (4)

Subtotal (42,859) (5,131) - (5,131) (21,361)

President's Budget Amounts $ 878,305 $ 552,182 $ (69,309) $ 482,873 $ 567,606

(1) These are primarily refundable Earned Income Tax Credit, Child Tax Credit, Build America Bond payments, Cost Sharing Reductions and the 

Refundable Premium Tax Credit reported with refunds as custodial activities in our financial statements and thus are not reported as budgetary 

resources. (2) The largest of these resources relates to our International Assistance Programs.

LEGAL ARRANGEMENTS AFFECTING USE OF UNOBLIGATED BALANCES

The use of unobligated balances is restricted based on annual legislation requirements or enabling authorities. Funds 

presumably become available for only one fiscal year unless otherwise noted in the annual appropriation language. 

Unobligated balances in unexpired Treasury account fund symbols are available in the next fiscal year for new obligations 

unless some restrictions have been placed on those funds by law. In those situations, the restricted funding will be 

temporarily unavailable until such time as the reasons for the restriction have been satisfied or legislation has been enacted 

to remove the restriction.

Amounts in expired Treasury account fund symbols are not available for new obligations, but may be used to adjust 

obligations and make disbursements that were recorded before the budgetary authority expired or to meet a bona fide need 

that arose in the fiscal year for which the appropriation was made.
DEPAR TMEN T OF THE TREASURY 131

FINANCIAL SECTION | FY 2016 AGENCY FINANCIAL REPORT

22. COLLECTION AND DISPOSITION OF CUSTODIAL REVENUE 

We collect the majority of federal revenue from income and excise taxes. The table below shows collection activity, by 

revenue type and tax year, for the fiscal years ended September 30, 2016 and 2015: 

Tax Year

Pre- 2016

(in millions) 2016 2015 2014 2014 Collections

Individual Income and FICA Taxes $ 1,833,546 $ 982,879 $ 32,757 $ 25,695 $ 2,874,877

Corporate Income Taxes 228,219 107,207 2,426 7,700 345,552

Estate and Gift Taxes 18 8,006 906 13,407 22,337

Excise Taxes 74,711 23,011 67 142 97,931

Railroad Retirement Taxes 4,527 1,411 1 2 5,941

Unemployment Taxes 4,311 3,974 50 105 8,440

Fines, Penalties, Interest & Other Revenue -

 Tax Related 470 - 1 1 472

Tax Related Revenue Received 2,145,802 1,126,488 36,208 47,052 3,355,550

Deposit of Earnings, Federal Reserve System 72,244 43,428 - - 115,672

Fines, Penalties, Interest & Other Revenue -

 Non-Tax Related 3,069 848 - - 3,917

Non-Tax Related Revenue Received 75,313 44,276 - - 119,589

Total Revenue Received $ 2,221,115 $ 1,170,764 $ 36,208 $ 47,052 $ 3,475,139

Less Amounts Collected for Non-Federal Entities 425

Total $ 3,474,714

Tax Year

 Pre- 2015 

(in millions) 2015 2014 2013 2013 Collections

Individual Income and FICA Taxes $ 1,790,800 $ 954,560 $ 28,275 $ 25,446 $ 2,799,081

Corporate Income Taxes 260,237 114,879 3,881 10,892 389,889

Estate and Gift Taxes 39 6,838 643 12,522 20,042

Excise Taxes 76,490 22,781 65 123 99,459

Railroad Retirement Taxes 5,005 1,425 2 - 6,432

Unemployment Taxes 4,285 4,664 47 112 9,108

Fines, Penalties, Interest & Other Revenue -

 Tax Related 893 - - 1 894

Tax Related Revenue Received 2,137,749 1,105,147 32,913 49,096 3,324,905

Deposit of Earnings, Federal Reserve System 71,051 25,417 - - 96,468

Fines, Penalties, Interest & Other Revenue -

 Non-Tax Related 5,612 579 - - 6,191

Non-Tax Related Revenue Received 76,663 25,996 - - 102,659

Total Revenue Received $ 2,214,412 $ 1,131,143 $ 32,913 $ 49,096 $ 3,427,564

Less Amounts Collected for Non-Federal Entities 350

Total $ 3,427,214
132 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

AMOUNTS PROVIDED TO FUND THE U.S. GOVERNMENT 

For the years ended September 30, 2016 and 2015, collections of custodial revenue transferred to other federal entities were 

as follows: 

(in millions) 2016 2015

Department of the Interior $ 749 $ 638

General Fund 3,047,484 3,022,969

Total $ 3,048,233 $ 3,023,607

FEDERAL TAX REFUNDS AND OTHER PAYMENTS 

Federal tax refunds and other payments include amounts paid to taxpayers who have paid more than the actual taxes they 

owe, as well as payments for various refundable tax credits. Refunds and other payments, by revenue type and tax year, 

were as follows for the years ended September 30, 2016 and 2015: 

Tax Year

2016

(in millions) 2016 2015 2014

Pre2014Refunds / 

Payments

Individual Income and FICA Taxes $ 37,029 $ 300,721 $ 26,529 $ 8,030 $ 372,309

Corporate Income Taxes 6,511 19,143 7,345 18,283 51,282

Estate and Gift Taxes 357 529 130 285 1,301

Excise Taxes 157 611 379 243 1,390

Railroad Retirement Taxes - 3 - - 3

Unemployment Taxes 1 155 18 22 196

Total $ 44,055 $ 321,162 $ 34,401 $ 26,863 $ 426,481

Tax Year

2015

(in millions) 2015 2014 2013

Pre2013Refunds / 

Payments

Individual Income and FICA Taxes $ 30,720 $ 289,986 $ 23,622 $ 7,070 $ 351,398

Corporate Income Taxes 6,242 20,825 5,502 17,484 50,053

Estate and Gift Taxes - 211 306 406 923

Excise Taxes 377 578 79 45 1,079

Railroad Retirement Taxes - 1 - 1 2

Unemployment Taxes 1 115 15 21 152

Total $ 37,340 $ 311,716 $ 29,524 $ 25,027 $ 403,607

FEDERAL TAX REFUNDS AND OTHER AMOUNTS PAYABLE

As of September 30, 2016 and 2015, refunds and other amounts payable consisted of the following:

(in millions) 2016 2015

Internal Revenue Service $ 2,974 $ 3,025

Alcohol and Tobacco Tax and Trade Bureau 19 14

Total $ 2,993 $ 3,039
DEPAR TMEN T OF THE TREASURY 133

FINANCIAL SECTION | FY 2016 AGENCY FINANCIAL REPORT

23. FUNDS FROM DEDICATED COLLECTIONS

ESF represents the majority of our FDC activities. In addition, such funds managed by BEP, Mint, and OCC (our nonappropriated bureaus) and certain funds managed by the IRS are public enterprise (or revolving) funds and receive no 

appropriations from the Congress. Fiscal Service, DO, IRS, OFR, TFF, and the CDFI Fund manage other miscellaneous 

FDCs.

The following is a list of FDCs and a brief description of the purpose, accounting, and uses of these funds.

Bureau Fund Code Fund Title/Description

Exchange Stabilization Fund (ESF)

ESF 020X4444 Exchange Stabilization Fund

Public Enterprise/Revolving Funds

BEP 020X4502 Bureau of Engraving and Printing Fund

MNT 020X4159 Public Enterprise Fund

OCC 020X8413 Assessment Funds

IRS 020X4413 Federal Tax Lien Revolving Fund

Other FDC Funds

Fiscal Service 020X5080 Gifts to Reduce Public Debt

Fiscal Service 020X5081 Presidential Election Campaign

Fiscal Service 020X8625 Gulf Coast Restoration Trust Fund

Fiscal Service 020X8902 Esther Cattell Schmitt Gift Fund

Fiscal Service 5805585 Travel Promotion Fund, Corp for Travel Promotion

Fiscal Service 580X5585 Travel Promotion Fund, Corp for Travel Promotion

Fiscal Service 020X5581 HOPE Reserve Fund

Fiscal Service 0205445002 Debt Collection Special Fund

Fiscal Service 0205445003 Debt Collection Special Fund

Fiscal Service 0200/15445 Debt Collection Special Fund

Fiscal Service 0201/25445 Debt Collection Special Fund

Fiscal Service 0202/35445 Debt Collection Special Fund

Fiscal Service 0203/45445 Debt Collection Special Fund 

Fiscal Service 0204/55445 Debt Collection Special Fund

Fiscal Service 0205/65445 Debt Collection Special Fund

Fiscal Service 0206/75445 Debt Collection Special Fund

DO 020X5816 Confiscated and Vested Iraqi Property and Assets

DO 020X8790 Gifts and Bequests Trust Fund

IRS 020X5510 Private Collection Agency Program

IRS 020X5433 Informant Reimbursement

OFR 020X5590 Financial Research Fund

TFF 020X5697 Treasury Forfeiture Fund

CDFI 020X8524 Capital Magnet Fund
134 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

Pursuant to the legal authority found in Section 10 of the Gold Reserve Act of 1934, as amended, the ESF may purchase or 

sell foreign currencies, hold U.S. foreign exchange and SDR assets, and may provide financing to foreign governments and 

foreign entities. The ESF accounts for and reports its holdings to the Fiscal Service on the Standard Form 224, “Statement 

of Transactions,” and provides other reports to Congress. Interest on SDRs in the IMF, investments in Treasury securities, 

and investments in foreign currency assets are ESF’s primary sources of revenue. The ESF’s earnings and realized gains on 

foreign currency assets represent inflows of resources to the government, and the interest revenues earned from U.S. 

Securities are the result of intra-Departmental flows.

The BEP, Mint, OCC, and IRS operate “public enterprise/revolving funds” to account for their respective revenues and 

expenses. 31 USC § 5142 established the revolving fund for BEP to account for revenue and expenses related to the currency 

printing activities. P.L. 104-52 (31 USC § 5136) established the Public Enterprise Fund for the Mint to account for all 

revenue and expenses related to the production and sale of numismatic products and circulating coinage. Revenues and 

other financing sources at the Mint are mainly from the sale of numismatic and bullion products and the sale of circulating 

coins to the FRB system. These revenues represent inflows of resources to the government. 12 USC § 481 established the 

Assessment Funds for OCC. Revenue and financing sources are from the bank examinations and assessments for the 

oversight of the national banks, savings associations, and savings and loan holding companies. These non-appropriated 

funds contribute to the inflows of resources to the government to specifically fund these entities’ operations. 26 USC § 7810 

established the Federal Tax Lien Revolving Fund to account for revenue and expenses from the sale of property foreclosed 

upon by a holder of a lien. Such revenue represents inflows of resources to the federal government. There are minimal 

transactions with other government agencies.

There are other FDCs at several of our bureaus, such as donations to the Presidential Election Campaign Fund, gifts to 

reduce the public debt, and other enforcement related activities. Public laws and the U.S. Code established and authorized 

the use of these funds. Sources of revenues and other financing sources include contributions, cash and property forfeited in 

enforcement activities, public donations, and other allocations, all which represent inflows to the government.

INTRA-GOVERNMENTAL INVESTMENTS IN TREASURY SECURITIES

The U.S. government does not set aside assets to pay future benefits or other expenditures associated with FDCs. Our

bureaus and other federal agencies invest some of the funds that they collect from the public, if they have the statutory 

authority to do so, in securities issued by the Fiscal Service. The Fiscal Service collects cash and makes deposits in the 

General Fund, which then uses the cash for general government purposes.

The investments provide our bureaus and other federal agencies with authority to draw upon the General Fund to make 

future benefit payments or other expenditures. When our bureaus or other federal agencies require redemption of these 

securities to make expenditures, the government finances those redemptions out of accumulated cash balances, by raising 

taxes or other receipts, by borrowing from the public or repaying less debt, or by curtailing other expenditures. This is the 

same way that the government finances all other expenditures.

The securities are an asset to our bureaus and other federal agencies and a liability of the Fiscal Service. The General Fund 

is liable to the Fiscal Service. Because our bureaus and other federal agencies are parts of the U.S. government, these assets 

and liabilities offset each other from the standpoint of the government as a whole. For this reason, they do not represent an 

asset or a liability in the U.S. government-wide financial statements.
DEPAR TMEN T OF THE TREASURY 135

FINANCIAL SECTION | FY 2016 AGENCY FINANCIAL REPORT

Our financial statements do not display the balances related to the investments made by our bureaus because the bureaus 

are subcomponents of the Department. However, the General Fund remains liable to the Fiscal Service for the invested 

balances and the Fiscal Service remains liable to the investing bureaus (refer to Note 4).
136 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

Summary Information for Funds from Dedicated Collections

as of and for the Fiscal Year Ended September 30, 2016

Public

Exchange Enterprise/

Stabilization Revolving Other FDC Combined

(in millions) Fund Funds Funds FDC Funds

ASSETS

Fund Balance $ - $ 944 $ 935 $ 1,879

Investments and Related Interest - Intra-governmental 22,680 1,662 3,733 28,075

Cash, Foreign Currency and Other Monetary Assets 61,813 - 17 61,830

Investments and Related Interest 9,842 - - 9,842

Other Assets - 1,686 241 1,927

Total Assets $ 94,335 $ 4,292 $ 4,926 $ 103,553

LIABILITIES

Intra-governmental Liabilities $ - $ 32 $ 763 $ 795

Certificates Issued to Federal Reserve Banks 5,200 - - 5,200

Allocation of Special Drawing Rights 49,294 - - 49,294

Other Liabilities 4 768 182 954

Total Liabilities 54,498 800 945 56,243

Net Position

Unexpended Appropriations 200 - - 200

Cumulative Results of Operations 39,637 3,492 3,981 47,110

Total Liabilities and Net Position $ 94,335 $ 4,292 $ 4,926 $ 103,553

Statement of Net Cost

Gross Cost $ 317 $ 4,804 $ 576 $ 5,697

Less: Earned Revenue (1,925) (4,841) (309) (7,075)

Gains/Losses on Pension, ORB, or OPEB Assumption Changes - 9 - 9

Total Net Cost of (Revenue From) Operations $ (1,608)$ (28)$ 267 $ (1,369)

Statement of Changes in Net Position

Cumulative Results of Operations:

Beginning Balance $ 38,029 $ 3,415 $ 7,202 $ 48,646

Budgetary Financing Sources - (61) (3,339) (3,400)

Other Financing Sources - 110 385 495

Total Financing Sources - 49 (2,954) (2,905)

Revenue From (Net Cost of) Operations 1,608 28 (267) 1,369

Change in Net Position 1,608 77 (3,221) (1,536)

Ending Balance $ 39,637 $ 3,492 $ 3,981 $ 47,110
DEPAR TMEN T OF THE TREASURY 137

FINANCIAL SECTION | FY 2016 AGENCY FINANCIAL REPORT

Summary Information for Funds from Dedicated Collections

as of and for the Fiscal Year Ended September 30, 2015

Public

Exchange Enterprise/

Stabilization Revolving Other FDC Combined

(in millions) Fund Funds Funds FDC Funds

ASSETS

Fund Balance $ 1,871 $ 1,190 $ 732 $ 3,793

Investments and Related Interest - Intra-governmental 20,773 1,541 7,121 29,435

Cash, Foreign Currency and Other Monetary Assets 58,646 - 25 58,671

Investments and Related Interest 11,719 - - 11,719

Other Assets - 1,432 177 1,609

Total Assets $ 93,009 $ 4,163 $ 8,055 $ 105,227

LIABILITIES

Intra-governmental Liabilities $ - $ 28 $ 647 $ 675

Certificates Issued to Federal Reserve Banks 5,200 - - 5,200

Allocation of Special Drawing Rights 49,574 - - 49,574

Other Liabilities 6 720 206 932

Total Liabilities 54,780 748 853 56,381

Net Position

Unexpended Appropriations 200 - - 200

Cumulative Results of Operations 38,029 3,415 7,202 48,646

Total Liabilities and Net Position $ 93,009 $ 4,163 $ 8,055 $ 105,227

Statement of Net Cost

Gross Cost $ 5,212 $ 4,786 $ 531 $ 10,529

Less: Earned Revenue (2,860) (4,939) (295) (8,094)

Gains/Losses on Pension, ORB, or OPEB Assumption Changes - 4 - 4

Total Net Cost of (Revenue From) Operations $ 2,352 $ (149)$ 236 $ 2,439

Statement of Changes in Net Position

Cumulative Results of Operations:

Beginning Balance $ 40,381 $ 3,207 $ 2,876 $ 46,464

Budgetary Financing Sources - (11) 4,425 4,414

Other Financing Sources - 70 137 207

Total Financing Sources - 59 4,562 4,621

Revenue From (Net Cost of) Operations (2,352) 149 (236) (2,439)

Change in Net Position (2,352) 208 4,326 2,182

Ending Balance $ 38,029 $ 3,415 $ 7,202 $ 48,646
138 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

24. RECONCILIATION OF NET COST OF TREASURY OPERATIONS AND 

NON-ENTITY COSTS TO BUDGET

The Reconciliation of Net Cost of Operations to Budget explains the difference between the budgetary net obligations and the 

proprietary net cost of Treasury operations and non-entity costs. For the fiscal years ended September 30, 2016 and 2015, 

the Reconciliation of Net Cost of Operations to Budget consisted of the following:

(in millions) 2016 2015

RESOURCES USED TO FINANCE ACTIVITIES

Budgetary Resources Obligated: 

New Obligations and Upward Adjustments (Note 21) $ 480,090 $ 468,044

Less: Actual Offsetting Collections and Recoveries of Prior Year Unpaid 

 Obligations, Net of Change in Uncollected Payments (114,447) (27,062)

New Obligations and Upward Adjustments Net of Offsetting Collections and Recoveries 365,643 440,982

Less: Distributed Offsetting Receipts (62,565) (69,036)

Net Obligations 303,078 371,946

 

Other Resources:

Donations and Forfeiture of Property 158 78

Financing Sources for Accrued Interest and Discount on Debt 3,456 9,579

Financing Sources for Accrued Interest on Restoration of Federal Debt Principal (Note 15) (2,052) 2,052

Transfers In/Out Without Reimbursement (3) 11

Imputed Financing Sources from Cost Absorbed by Others 681 669

Transfers to the General Fund and Other (Note 19) (64,949) (74,605)

Net Other Resources Used to Finance Activities (62,709) (62,216)

Total Resources Used to Finance Activities 240,369 309,730

 

RESOURCES USED TO FINANCE ITEMS NOT PART OF THE NET COST OF

 TREASURY OPERATIONS AND NON-ENTITY COSTS 

Change in Budgetary Resources Obligated for Goods, Services, and Benefits Ordered but not

 yet Provided (97,256) 5,195

Resources that Fund Expenses Recognized in Prior Periods 115 (1,284)

Budgetary Offsetting Collections & Receipts that do not affect Net Cost of Treasury 

 Operations and Non-Entity Costs (60,595) (66,860)

Adjustment to Accrued Interest and Discount on Debt 5,810 4,949

Resources that Finance the Acquisition of Assets or Liquidation of Liabilities (7,444) (896)

Other Resources or Adjustments to Net Obligated Resources that do not Affect Net Cost of 

 Treasury Operations and Non-Entity Costs (4,209) (2,226)

Total Resources Used to Finance Items Not Part of the Net Cost of Treasury Operations and 

 Non-Entity Costs (163,579) (61,122)

Total Resources Used to Finance the Net Cost of Treasury Operations and Non-

 Entity Costs 403,948 370,852

 

Total Components of Net Cost of Treasury Operations and Non-Entity Costs That Will 

 Require or Generate Resources in Future Periods (290) 393

Total Components of Net Cost of Treasury Operations and Non-Entity Costs That Will Not 

 Require or Generate Resources (a) (34) 3,667

Total Components of Net Cost of Treasury Operations and Non-Entity Costs

 That Will Not Require or Generate Resources in the Current Period (324) 4,060

Net Cost of Treasury Operations and Non-Entity Costs $ 403,624 $ 374,912

(a) The Components not requiring or generating resources primarily include depreciation and amortization and revaluation of assets or

liabilities. 
DEPAR TMEN T OF THE TREASURY 139

FINANCIAL SECTION | FY 2016 AGENCY FINANCIAL REPORT

25. SCHEDULE OF FIDUCIARY ACTIVITY

We have identified the following funds as meeting the criteria for fiduciary activity. Details of the funds are provided below.

Bureau Fund Code Authority Fund Title/Description

Fiscal Service 020X6133 31 USC 1322 Payment of Unclaimed Monies

BEP 020X6513.013 31 USC 5119 Mutilated Currency Claims Funds

Fiscal Service 020X6045 31 USC 3328 Proceeds, Payments of Unpaid Checks

Fiscal Service 020X6048 31 USC 3329, 3330 Proceeds of Withheld Foreign Checks

Fiscal Service 020015X6078 50 APP. USC 2012 War Claims Fund, Foreign Claims Settlement Commission

Fiscal Service 020X6092 31 USC 1321 Debt Management Operations

Fiscal Service 020X6104 22 USC 1627 Albanian Claims Fund, Treasury

Fiscal Service 020X6210 22 USC 1623 Iraq Claims Settlement Fund

Fiscal Service 020X6309 22 USC 1627(a) Libyan Claims Settlement Fund

Fiscal Service 020X6310 22 USC 1627(a) Libyan Claims Settlement Fund

Fiscal Service 020X6311 98 Stat. 1876 Kennedy Center Revenue Bond

Fiscal Service 020X6312 22 USC 1627 Iranian Claims Settlement Fund

Fiscal Service 020X6314 22 USC 1644g German Democrat Settlement Fund

Fiscal Service 020X6315 22 USC 1645h Vietnam Claims Settlement Fund

Fiscal Service 020X6501.018 31 USC 3513 Small Escrow Amounts

Fiscal Service 020X6720 31 USC 3513 SM DIF Account for Dep. & Check Adj.

Fiscal Service 020X6830 104 Stat. 1061 Net Interest Payments to/from State

Fiscal Service 020X6999 31 USC 3513 Accounts Payable, Check Issue UNDDR

IRS 020X6737 90 Stat. 269-270 Internal Revenue Collections for Northern Mariana Island

IRS 020X6738 31 USC 3513 Coverover Withholdings-U.S. Virgin Islands

IRS 020X6740 31 USC 3515 Coverover Withholdings-Guam

IRS 020X6741 31 USC 3513 Coverover Withholdings-American Samoa

OAS 020X6317.001 22 USC 2431 Belize Escrow, Debt Reduction

“Payment of Unclaimed Monies” is a fund authorized by 31 USC 1322, permitting the Fiscal Service to collect unclaimed 

monies on behalf of the public. Our other fiduciary activities as listed above are included in All Other Fiduciary Funds.

Schedule of Fiduciary Activity 

2016 2015

Payment of All Payment of All

Unclaimed Other Total Unclaimed Other Total

Monies Fiduciary Fiduciary Monies Fiduciary Fiduciary

(in millions) Fund Funds Funds Fund Funds Funds

Fiduciary Net Assets, Beginning of

 the Year $ 608 $ 133 $ 741 $ 580 $ 140 $ 720

Increases:

 Contributions to Fiduciary Net Assets 39 342 381 31 273 304

 Investment earnings - 1 1 - 1 1

Total Increases 39 343 382 31 274 305

Decreases:

 Disbursements to and on behalf

 of beneficiaries - (344) (344) (3) (281) (284)

Total Decreases - (344) (344) (3) (281) (284)

Net Increase (Decrease) in

 Fiduciary Assets 39 (1) 38 28 (7) 21

Fiduciary Net Assets, End of Year $ 647 $ 132 $ 779 $ 608 $ 133 $ 741
140 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

Schedule of Fiduciary Net Assets

2016 2015

Payment of All Payment of All

Unclaimed Other Total Unclaimed Other Total

Monies Fiduciary Fiduciary Monies Fiduciary Fiduciary

(in millions) Fund Funds Funds Fund Funds Funds

Fiduciary Net Assets

Cash and Cash Equivalents $ 647 $ 69 $ 716 $ 608 $ 118 $ 726

Investments - 67 67 - 20 20

Other Assets - 1 1 - - -

Total Fiduciary Assets 647 137 784 608 138 746

Less: Fiduciary Liabilities - (5) (5) - (5) (5)

Total Fiduciary Net Assets $ 647 $ 132 $ 779 $ 608 $ 133 $ 741

26. COMMITMENTS AND CONTINGENCIES

LEGAL CONTINGENCIES

We are a party in various administrative proceedings, legal actions, and claims, which may ultimately result in settlements 

or decisions adverse to the U.S. government. These contingent liabilities arise in the normal course of operations and their 

ultimate disposition is unknown. We disclose contingent liabilities where the conditions for liability recognition have not 

been met and the likelihood of unfavorable outcome is more than remote. We do not accrue for possible losses related to 

cases where we cannot estimate the potential loss or the likelihood of an unfavorable outcome is less than probable.

In some cases, a portion of any loss that may occur may be paid by our Judgment Fund, which is separate from our operating 

resources. For cases related to the Contract Disputes Act of 1978 and awards under federal anti-discrimination and whistleblower protection acts, we must reimburse the Judgment Fund from future appropriations.

In the opinion of our management and legal counsel, based on information available as of the date of this report, the 

expected outcome of other legal actions, individually or in the aggregate, will not have a materially adverse effect on our

consolidated financial statements, except for the pending legal actions described below which may have a materially adverse 

impact on our consolidated financial statements depending on the outcomes of the cases.

Pending Legal Actions

• Tribal Trust Fund Cases: Native American tribes have filed numerous cases in the U.S. District Courts seeking a 

declaration that the United States has not provided the tribes with a full and complete accounting of their trust funds, 

and also seeking an order requiring the U.S. government to provide such an accounting. In addition, there are a number 

of other related cases seeking damages in the U.S. Court of Federal Claims, which do not name us as a defendant. The 

U.S. government is currently in discussion with counsel representing most of the remaining plaintiff tribes with tribal 

trust fund cases pending against the United States about the feasibility of an out-of-court settlement. Plaintiff tribes in 

several of the pending cases have chosen to pursue active litigation, rather than settlement discussion, and the U.S. 

government is litigating those cases vigorously. We are unable to determine the likelihood of an unfavorable outcome or 

an estimate of potential loss at this time.
DEPAR TMEN T OF THE TREASURY 141

FINANCIAL SECTION | FY 2016 AGENCY FINANCIAL REPORT

• GSE Related Cases: A number of cases were filed in the U.S. Court of Federal Claims, the U.S. District Court for the 

District of Columbia,the U.S. District Court for the District of Delaware, the U.S. District Court for the Northern 

District of Illinois, the U.S. District Court for the Northern District of Iowa, the U.S. District Court for the Eastern 

District of Kentucky, and the U.S. District Court for the Southern District of Texas, in which the plaintiffs allege, among 

other things, that the U.S. government took their property and contractual rights as preferred and common stockholders 

when the third amendments to the SPSPAs between us and each GSE were executed in August 2012 (refer to Note 10). 

One case also alleges that the U.S. government took plaintiffs’ property and contractual rights when the GSEs were 

placed into conservatorship and entered into the SPSPAs with us in September 2008. In the Court of Federal Claims, 

the plaintiffs seek just compensation (damages) from the U.S. government. In the District Courts, the plaintiffs seek to 

set aside the third amendments to the SPSPAs as well as damages. On September 30, 2014, the D.C. District Court 

granted the defendants’ motions to dismiss four cases pending in that court, and the plaintiffs filed appeals in October 

2014 which are still pending. An additional case is pending in the D.C. District Court. On September 9, 2016, the U.S. 

District Court for the Eastern District of Kentucky granted the defendants’ motion to dismiss, and the plaintiffs filed a 

notice of appeal on November 14, 2016. We are unable to determine the likelihood of an unfavorable outcome or an 

estimate of potential loss in the remaining cases at this time.

• Starr International Co., Inc. v. United States: The plaintiff, an American International Group, Inc. (AIG) shareholder, 

brought suit on behalf of two classes of shareholders. The suit alleges that the U.S. government violated the Fifth 

Amendment to the United States Constitutionby illegally exacting or taking property without just compensation. One 

class, the Credit Agreement Class, claimed the U.S. government violated the Fifth Amendment when it conveyed a 

majority share of AIG’s equity and voting rights in connection with an $85 billion loan to AIG during the 2008 financial 

crisis. Starr also asserted a Fifth Amendment violation on behalf of the second class, the Reverse Stock Split 

Shareholder Class, alleging that a June 2009 reverse stock split constituted a taking of the common stockholders’ 

asserted right to a shareholder vote on whether to approve a reverse split of AIG’s common stock. The U.S. Court of 

Federal Claims held that the Credit Agreement Shareholder Class prevails on liability, but recovers no damages, and 

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

United States have appealed. We are unable to determine the likelihood of an unfavorable outcome or make an estimate 

of potential loss at this time.

• Unredeemed Savings Bonds Related Cases: A number of plaintiffs filed claims in the U.S. Court of Federal Claims 

requesting that we redeem matured savings bonds not possessed by the applicable states, but which have registered 

owners with last known addresses in those states. We informed the applicable states we would not redeem these 

savings bonds since those states were not the registered owners of the bonds. On August 20, 2015, the court partially 

dismissed one claim and denied the U.S. government’s motion to dismiss with respect to other claims. We are unable to 

determine the likelihood of an unfavorable outcome or an estimate of potential loss at this time.

• Adam Steele, Brittany Montrois v. United States: The plaintiffs filed a class claim in the U.S. District Court for the 

District of Columbia seeking refunds of all user fees paid, plus interest, to obtain a preparer tax identification number 

(PTIN). Additionally, the plaintiffs seek to force us to cease charging a user fee to obtain a PTIN and asking for more 

information than is necessary to issue a PTIN. We are unable to determine the likelihood of an unfavorable outcome or 

an estimate of potential loss at this time.

• Anonymous Whistleblower Cases: A number of whistleblower cases were filed in the U.S. Tax Court under seal, 

appealing the denial of an award by the IRS Whistleblower Office. The anonymous claimants allegedly provided 
142 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

confidential information about tax fraud committed by multiple other taxpayers to the IRS. The court is currently 

holding these cases in abeyance until it determines the scope and standard of review it will follow. We are unable to 

determine the likelihood of an unfavorable outcome or an estimate of potential loss at this time. 

• American Recovery and Reinvestment Tax Act of 2009 (ARRA) Related Cases: A number of cases were filed in the U.S. 

Court of Federal Claims alleging that the U.S. government violated statutory and regulatory mandates to make proper 

payments to plaintiffs under ARRA,Section 1603, for having placed certain energy properties into service. We have 

determined there is a reasonably possible likelihood of an unfavorable outcome in some of the cases. On October 28, 

2016, the Court of Federal Claims entered judgment against the United States in the amount of $207 million in one of 

the cases. The U.S. government has 60 days to appeal the judgment. Another case with alleged damages of 

approximately $47 millionremains in litigation.

• Other Legal Actions: We are also involved in employment related legal actions (e.g., matters alleging discrimination and 

other claims before federal courts, the Equal Employment Opportunity Commission, and the Merit Systems Protection 

Board) for which an unfavorable outcome is reasonably possible, but for which an estimate of potential loss cannot be 

determined at this time. We do not expect that these cases will have a material adverse effect on our consolidated 

financial position or results. 

OTHER COMMITMENTS AND CONTINGENCIES

Loan Commitments

Through the FFB, we make loan commitments with federal agencies, or private sector borrowers with loans guaranteed by 

federal agencies, to extend them credit for their own use (refer to Notes 1L and 3). As of September 30, 2016 and 2015, we

had loan commitments totaling $12.5 billion and $14.6 billion, respectively.

Multilateral Development Banks

On behalf of the United States, we have subscribed to capital for certain MDBs, portions of which are callable under certain 

limited circumstances to meet the obligations of the respective MDB. There has never been, nor is there anticipated, a call 

on the U.S. commitment for these subscriptions. As of September 30, 2016 and 2015, U.S. callable capital in MDBs was as 

follows:

(in millions) 2016 2015

Inter-American Development Bank $ 49,181 $ 45,082

International Bank for Reconstruction and Development 43,427 40,498

Asian Development Bank 18,701 18,572

European Bank for Reconstruction and Development 3,055 3,055

African Development Bank 4,085 3,550

North American Development Bank 1,275 1,275

Multilateral Investment Guarantee Agency(1) 315 315

Total $ 120,039 $ 112,347

(1) Both fiscal years 2016 and 2015 include commitments of $22 million for the undisbursed portion of the subscription to paid-in capital

investments. 

Terrorism Risk Insurance Program 

Congress originally enacted the Terrorism Risk Insurance Act (TRIA) in November 2002 to address market disruptions 

resulting from terrorist attacks on September 11, 2001. Most recently, the Terrorism Risk Insurance Program 
DEPAR TMEN T OF THE TREASURY 143

FINANCIAL SECTION | FY 2016 AGENCY FINANCIAL REPORT

Reauthorization Act of 2015 extended the Terrorism Risk Insurance Program (TRIP) until December 31, 2020. The TRIP

helps to ensure available and affordable commercial property and casualty insurance for terrorism risk, and simultaneously 

allows private markets to stabilize. The authority to pay claims under the TRIP is activated when the Secretary (in 

consultation with the Secretary of the Department of Homeland Security and the Attorney General of the United States) 

certifies an “act of terrorism.” In the event of certification of an “act of terrorism,” insurers may be eligible to receive 

reimbursement from the U.S. government for associated insured losses – assuming an aggregate insured loss threshold 

(“program trigger”) has been reached – once a particular insurer has satisfied its designated deductible amount. For 

calendar years 2016 and 2015, the program trigger amount was $120 million and $100 million, respectively. This amount 

will increase by $20 million annually through calendar year 2020. Insured losses above insurer deductibles will be shared 

between insurance companies and the U.S. government. The TRIP includes both mandatory and discretionary authority for 

us to recoup federal payments made under the TRIP through policyholder surcharges under certain circumstances, and 

contains provisions designed to manage litigation arising from or relating to a certified act of terrorism. There were no 

claims under the TRIP as of September 30, 2016 or 2015.

Exchange Stabilization Agreement

The North American Framework Agreement (NAFA), which we signed in 1994, includes the Exchange Stabilization 

Agreement (ESA) with Mexico. Through the ESF, we have a standing swap line for $3.0 billion with Mexico under the NAFA 

and its implementing ESA. The amounts and terms (including the assured source of repayment) of any borrowing under 

NAFA and ESA will have to be negotiated and agreed to before any actual drawing can occur. The ESA does provide sample 

clauses that state that transactions shall be exchange rate neutral for the ESF, and bear an interest rate based on that 

comparable to Treasury bills. There were no drawings outstanding on the ESF swap line as of September 30, 2016 and 2015. 

IMF Commitments

The United States participates in the IMF through a quota subscription and the NAB which is a borrowing arrangement 

that supplements IMF resources. As of September 30, 2016 and 2015, the United States’ financial commitment under the 

U.S. quota was SDR 83.0 billion and SDR 42.1 billion, respectively, which was equivalent to $115.7 billion and $59.1 billion, 

respectively. Its financial commitment under the NAB arrangement was SDR 28.2 billion and SDR 69.1 billion as of 

September 30, 2016 and 2015, respectively, which was equivalent to $39.4 billion and $97.0 billion, respectively. The 

increase in the U.S. quota and decrease in the NAB commitment is attributable to the December 18, 2015 enactment of the 

Consolidated Appropriations Act 2016 (P.L. 114-113). This Act authorized an increase in the United States’ participation in 

the U.S. quota and a corresponding reduction in the NAB of SDR 40.9 billion (approximately $57 billion) (refer to Note 7).

Housing Programs Under TARP 

We design housing programs under TARP to provide stability for both the housing market and homeowners. These 

programs assist homeowners who are experiencing financial hardships to remain in their homes until their financial position 

improves or they relocate to a more sustainable living situation, and to obtain other assistance designed to prevent 

foreclosures. As of September 30, 2016 and 2015, we had committed up to $37.5 billion for these programs. Outstanding 

commitments totaled $15.0 billion and $19.0 billion as of September 30, 2016 and 2015, respectively. For fiscal years 2016 

and 2015, payments made on behalf of the housing programs under TARP totaled $4.3 billion and $4.2 billion, respectively, 

reported within the Economic Program on our Consolidated Statements of Net Cost. 
144 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

Commitment to GSEs

The SPSPA agreements between us and each GSE, which have no expiration date, provide for us to disburse funds to the 

GSEs if, at the end of any quarter, the FHFA determines that the liabilities exceed the GSE’s assets. At September 30, 2016 

and 2015, our maximum remaining potential commitment to the GSEs was $258.1 billion. Refer to Note 10 for further 

information.
DEPAR TMEN T OF THE TREASURY 145 

FINANCIAL SECTION | FY 2016 AGENCY FINANCIAL REPORT

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED – SEE ACCOMPANYING 

AUDITORS’ REPORT) 

INTRODUCTION

This section provides the Required Supplementary Information as prescribed by accounting standards.

OTHER CLAIMS FOR REFUNDS

We estimated that $7.1 billion and $4.8 billion as of September 30, 2016 and 2015, respectively, may be payable as other 

claims for tax refunds. This estimate represents amounts (principal and interest) that we may pay for claims pending 

judicial review by the federal courts or internally, by Appeals. In fiscal year 2016, the total estimated payout (including 

principal and interest) for claims pending judicial review by the federal courts and appeals courts is $4.8 billion and $2.3

billion, respectively. In fiscal year 2015, the total estimated payout (including principal and interest) for claims pending 

judicial review by the federal courts and appeals courts was $2.1 billion and $2.7 billion, respectively. To the extent 

judgments against the government in these cases prompt other similarly situated taxpayers to file similar refund claims, 

these amounts could become significantly greater. 

IRS FEDERAL TAXES RECEIVABLE, NET

In accordance with SFFAS No. 7, Accounting for Revenue and Other Financing Sources and Concepts for Reconciling 

Budgetary and Financial Accounting, some unpaid tax assessments do not meet the criteria for financial statement 

recognition. Internal Revenue Code Section 6201 authorizes and requires us to make inquiries, determinations, and 

assessments of all taxes which taxpayers have not duly paid (including interest, additions to the tax, and assessable 

penalties) under the law. Unpaid assessments result from taxpayers filing returns without sufficient payment, as well as 

from tax compliance programs such as examination, under-reporter, substitute for return, and combined annual wage 

reporting. We also have authority to abate the paid or unpaid portion of an assessed tax, interest, and penalty. Abatements 

occur for a number of reasons and are a normal part of the tax administration process. Abatements may result in claims for 

refunds or a reduction of the unpaid assessed amount.

Under federal accounting standards, we consider unpaid assessments which require taxpayer or court agreement federal 

taxes receivable. We consider assessments not agreed to by taxpayers or the courts compliance assessments and not federal 

taxes receivable. Due to the lack of agreement, these compliance assessments are less likely to have future collection 

potential than those unpaid assessments that we consider federal taxes receivable.

We call assessments with little or no future collection potential write-offs. Write-offs principally consist of amounts owed by 

deceased, bankrupt, or defunct taxpayers, including many failed financial institutions liquidated by the FDIC and the former 

Resolution Trust Corporation (RTC). Write-offs have little or no future collection potential, but statutory provisions require 

that we maintain these assessments until the statute for collection expires.

Although we do not consider compliance assessments and write-offs receivables under federal accounting standards, they 

represent legally enforceable claims of the U.S. government. 

The components of the total unpaid assessments at September 30, 2016 and 2015,were as follows: 
146 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

(in millions) 2016 2015

Total Unpaid Assessments $ 391,000 $ 389,000

Less: Compliance Assessments (74,000) (80,000)

Write Offs (139,000) (138,000)

Gross Federal Taxes Receivable 178,000 171,000

Less: Allowance for Doubtful Accounts (129,000) (130,000)

Federal Taxes Receivables, Net $ 49,000 $ 41,000

To eliminate double counting, the compliance assessments reported above exclude trust fund recovery penalties assessed 

against officers and directors of businesses involved in the non-remittance of federal taxes withheld from their employees. 

The penalties totaled $1 billion and $2 billion as of September 30, 2016 and 2015, respectively. We report the related unpaid 

assessments of those businesses as taxes receivable or write-offs, but we may also recover portions of those businesses’ 

unpaid assessments from any and all individual officers and directors against whom we assess a trust fund recovery penalty.

ALCOHOL AND TOBACCO TAX AND TRADE BUREAU

As an agent of the U.S. government and as authorized by 26 USC, the TTB collects excise taxes from alcohol, tobacco, 

firearms, and ammunition industries. In addition, the TTB collects special occupational taxes from certain tobacco 

businesses. During fiscal years 2016 and 2015, TTB collected approximately $22.1 billion and $22.3 billion in taxes, interest, 

and other revenues, respectively. TTB also collects Federal excise taxes on certain articles produced in Puerto Rico and the 

Virgin Islands, and imported into the United States. In accordance with 26 USC 7652, such taxes collected on rum imported 

into the United States are “covered over” or paid into the treasuries of Puerto Rico and the Virgin Islands.

TTB remits substantially all of the taxes collected, net of related refund disbursements, to the General Fund. We further 

distribute this revenue to Federal agencies in accordance with various laws and regulations. The firearms and ammunition 

excise taxes are an exception. TTB remits those revenues to the Fish and Wildlife Restoration Fund under provisions of the 

Pittman-Robertson Act of 1937.

DEFERRED MAINTENANCE

In fiscal years 2016 and 2015, we had no material amounts of deferred maintenance costs to report on vehicles, buildings, 

and structures we owned.

Deferred maintenance applies to owned PP&E. Deferred maintenance is maintenance that we had not performed when it 

should have been, or scheduled to be, and put off or delayed for a future period. We define maintenance as the act of keeping 

capitalized assets in an “acceptable condition” to serve their required mission. It includes preventive maintenance, normal 

repairs, replacement of parts and structural components, and other activities needed to preserve the asset so that it 

continues to provide acceptable services and achieves its expected useful life. Maintenance excludes activities aimed at 

expanding the capacity or significantly upgrading the assets to a different form than it was originally intended (i.e., activities 

related to capitalized improvements, modernization, and/or restoration).

Logistic personnel use condition assessment surveys and/or the total life-cycle cost methods to determine deferred 

maintenance and acceptable operating condition of an asset. We use periodic condition assessments, physical inspections, 

and review of manufacturing and engineering specifications, work orders, and building and other structure logistics reports 

under these methodologies. 
DEPAR TMEN T OF THE TREASURY 147

FINANCIAL SECTION | FY 2016 AGENCY FINANCIAL REPORT

STATEMENT OF BUDGETARY RESOURCES DISAGGREGATED BY TREASURY REPORTING ENTITY

The following tables provide the Statement of Budgetary Resources for the fiscal years ended September 30, 2016 and 2015 

disaggregated by Treasury reporting entity rather than by Treasury major budget account, since we manage our budget at 

the reporting entity level. 
148 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

Fiscal Year 2016 Combining Statement of Budgetary Resources Disaggregated

by Sub-organization Accounts

Bureau of Bureau of Fin. Crimes Internal

Engraving & the Fiscal Departmental Enforcement Revenue

(in millions): Printing Service Offices (a) Network Service

BUDGETARY RESOURCES

Unobligated balance brought forward, October 1 $ 101 $ 1,227 $ 327,593 $ 47 $ 1,015

Adjustment - Change in IMF accounting - - (8,250) - -

 Unobligated balance brought forward, October 1, as adjusted 101 1,227 319,343 47 1,015

Recoveries of unpaid prior year obligations - 56 96,249 3 114

Other changes in unobligated balance - (5) (97,739) (1) (58)

Unobligated balance from prior year budget authority, net 101 1,278 317,853 49 1,071

Appropriations (discretionary and mandatory) - 450,673 2,839 113 11,615

Borrowing authority (discretionary and mandatory) - - 365 - -

Spending authority from offsetting collections (discretionary and 

 mandatory) 681 257 3,970 2 122

Total Budgetary Resources $ 782 $ 452,208 $ 325,027 $ 164 $ 12,808

STATUS OF BUDGETARY RESOURCES

New obligations and upward adjustments $ 648 $ 450,829 $ 12,163 $ 114 $ 11,860

Unobligated balance, end of year:

 Apportioned, unexpired accounts 134 1,310 271,813 45 470

 Exempt from apportionment, unexpired accounts - 3 95 - 7

 Unapportioned, unexpired accounts - 31 40,689 - 146

 Unexpired unobligated balance, end of year 134 1,344 312,597 45 623

 Expired unobligated balance, end of year - 35 267 5 325

Unobligated balance, end of year 134 1,379 312,864 50 948

Total Status of Budgetary Resources $ 782 $ 452,208 $ 325,027 $ 164 $ 12,808

CHANGE IN OBLIGATED BALANCE

Unpaid Obligations:

Unpaid obligations, brought forward, October 1 $ 110 $ 651 $ 225,191 $ 45 $ 1,380

Adjustment - Change in IMF accounting - - (54,543) - -

 Unpaid obligations, brought forward, October 1, as adjusted 110 651 170,648 45 1,380

New obligations and upward adjustments 648 450,829 12,163 114 11,860

Outlays (gross) (643) (450,247) (14,338) (110) (11,461)

Recoveries of prior year unpaid obligations - (56) (96,249) (3) (114)

Unpaid obligations, end of year 115 1,177 72,224 46 1,665

Uncollected Payments:

Uncollected payments, Federal sources, brought forward, October 1 (43) (25) (505) - (23)

Change in uncollected payments, Federal sources (9) (13) 437 (1) (5)

Uncollected payments, Federal sources, end of year (52) (38) (68) (1) (28)

Obligated Balance, End of Year $ 63 $ 1,139 $ 72,156 $ 45 $ 1,637

Obligated Balance, Start of Year $ 67 $ 626 $ 170,143 $ 45 $ 1,357

BUDGET AUTHORITY AND OUTLAYS, NET

Budget authority, gross (discretionary and mandatory) $ 681 $ 450,930 $ 7,174 $ 115 $ 11,737

Actual offsetting collections (discretionary and mandatory) (672) (246) (13,102) - (155)

Change in uncollected payments, Federal sources

 (discretionary and mandatory) (9) (13) 437 (1) (5)

Recoveries of prior year paid obligations (discretionary and mandatory) - 2 67 - 38

Budget Authority, Net (Discretionary and Mandatory) $ - $ 450,673 $ (5,424)$ 114 $ 11,615

Outlays, gross (discretionary and mandatory) $ 643 $ 450,247 $ 14,338 $ 110 $ 11,461

Actual offsetting collections (discretionary and mandatory) (672) (246) (13,102) - (155)

Outlays, net (discretionary and mandatory) (29) 450,001 1,236 110 11,306

Distributed offsetting receipts - (45,505) (15,990) - (1,070)

Agency Outlays, Net (Discretionary and Mandatory) $ (29)$ 404,496 $ (14,754)$ 110 $ 10,236

(a) Of the $325 billion of Total Budgetary Resources for Departmental Offices, GSE, ESF, and OAS had $259 billion, $40 billion, and

$15 billion, respectively. The remainder is spread throughout other offices.
DEPAR TMEN T OF THE TREASURY 149

FINANCIAL SECTION | FY 2016 AGENCY FINANCIAL REPORT

Fiscal Year 2016 Combining Statement of Budgetary Resources Disaggregated

by Sub-organization Accounts

Alcohol

and

Office of the Tobacco

Comptroller Tax and

of the Trade Non-

(in millions): U. S. Mint Currency Bureau Budgetary Budgetary

BUDGETARY RESOURCES

Unobligated balance brought forward, October 1 $ 703 $ 1,301 $ 5 $ 331,420 $ 572

Adjustment - Change in IMF accounting - - - (8,250) -

 Unobligated balance brought forward, October 1, as adjusted 703 1,301 5 323,170 572

Recoveries of unpaid prior year obligations 17 18 1 7,034 89,424

Other changes in unobligated balance (58) - (2) (8,355) (89,508)

Unobligated balance from prior year budget authority, net 662 1,319 4 321,849 488

Appropriations (discretionary and mandatory) - - 106 465,346 -

Borrowing authority (discretionary and mandatory) - - - - 365

Spending authority from offsetting collections (discretionary and 

 mandatory) 3,043 1,170 6 8,144 1,107

Total Budgetary Resources $ 3,705 $ 2,489 $ 116 $ 795,339 $ 1,960

STATUS OF BUDGETARY RESOURCES

New obligations and upward adjustments $ 3,272 $ 1,090 $ 114 $ 478,564 $ 1,526

Unobligated balance, end of year:

 Apportioned, unexpired accounts 318 - - 274,048 42

 Exempt from apportionment, unexpired accounts - 1,400 - 1,505 -

 Unapportioned, unexpired accounts 117 - - 40,591 392

 Unexpired unobligated balance, end of year 435 1,400 - 316,144 434

 Expired unobligated balance, end of year (2) (1) 2 631 -

Unobligated balance, end of year 433 1,399 2 316,775 434

Total Status of Budgetary Resources $ 3,705 $ 2,489 $ 116 $ 795,339 $ 1,960

CHANGE IN OBLIGATED BALANCE

Unpaid Obligations:

Unpaid obligations, brought forward, October 1 $ 304 $ 238 $ 23 $ 137,771 $ 90,171

Adjustment - Change in IMF accounting - - - (54,543) -

 Unpaid obligations, brought forward, October 1, as adjusted 304 238 23 83,228 90,171

New obligations and upward adjustments 3,272 1,090 114 478,564 1,526

Outlays (gross) (3,266) (1,042) (111) (479,748) (1,470)

Recoveries of prior year unpaid obligations (17) (18) (1) (7,034) (89,424)

Unpaid obligations, end of year 293 268 25 75,010 803

Uncollected Payments:

Uncollected payments, Federal sources, brought forward, October 1 - (4) (3) (196) (407)

Change in uncollected payments, Federal sources - (3) 1 (1) 408

Uncollected payments, Federal sources, end of year - (7) (2) (197) 1

Obligated Balance, End of Year $ 293 $ 261 $ 23 $ 74,813 $ 804

Obligated Balance, Start of Year $ 304 $ 234 $ 20 $ 83,032 $ 89,764

BUDGET AUTHORITY AND OUTLAYS, NET

Budget authority, gross (discretionary and mandatory) $ 3,043 $ 1,170 $ 112 $ 473,490 $ 1,472

Actual offsetting collections (discretionary and mandatory) (3,047) (1,168) (6) (8,563) (9,833)

Change in uncollected payments, Federal sources

 (discretionary and mandatory) - (3) 1 (1) 408

Recoveries of prior year paid obligations (discretionary and mandatory) 3 - - 110 -

Budget Authority, Net (Discretionary and Mandatory) $ (1)$ (1)$ 107 $ 465,036 $ (7,953)

Outlays, gross (discretionary and mandatory) $ 3,266 $ 1,042 $ 111 $ 479,748 $ 1,470

Actual offsetting collections (discretionary and mandatory) (3,047) (1,168) (6) (8,563) (9,833)

Outlays, net (discretionary and mandatory) 219 (126) 105 471,185 (8,363)

Distributed offsetting receipts - - - (62,565) -

Agency Outlays, Net (Discretionary and Mandatory) $ 219 $ (126)$ 105 $ 408,620 $ (8,363)
150 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

Fiscal Year 2015 Combining Statement of Budgetary Resources Disaggregated

by Sub-organization Accounts

Bureau of Bureau of Fin. Crimes Internal

Engraving & the Fiscal Departmental Enforcement Revenue

(in millions): Printing Service Offices (a) Network Service

BUDGETARY RESOURCES

Unobligated balance brought forward, October 1 $ 71 $ 1,039 $ 346,682 $ 55 $ 1,081

Recoveries of unpaid prior year obligations - 52 12,408 2 95

Other changes in unobligated balance - (21) (16,522) (1) (84)

Unobligated balance from prior year budget authority, net 71 1,070 342,568 56 1,092

Appropriations (discretionary and mandatory) - 418,637 11,226 112 11,344

Borrowing authority (discretionary and mandatory) - - 921 - -

Spending authority from offsetting collections (discretionary and 

 mandatory) 666 254 5,857 - 113

Total Budgetary Resources $ 737 $ 419,961 $ 360,572 $ 168 $ 12,549

STATUS OF BUDGETARY RESOURCES

New obligations and upward adjustments $ 636 $ 418,734 $ 32,979 $ 121 $ 11,534

Unobligated balance, end of year:

 Apportioned, unexpired accounts 101 1,142 278,786 44 612

 Exempt from apportionment, unexpired accounts - 4 8,824 - 7

 Unapportioned, unexpired accounts - 49 39,679 - 53

 Unexpired unobligated balance, end of year 101 1,195 327,289 44 672

 Expired unobligated balance, end of year - 32 304 3 343

Unobligated balance, end of year 101 1,227 327,593 47 1,015

Total Status of Budgetary Resources $ 737 $ 419,961 $ 360,572 $ 168 $ 12,549

CHANGE IN OBLIGATED BALANCE

Unpaid Obligations:

Unpaid obligations, brought forward, October 1 $ 107 $ 1,296 $ 223,035 $ 28 $ 1,329

New obligations and upward adjustments 636 418,734 32,979 121 11,534

Outlays (gross) (633) (419,327) (18,415) (102) (11,388)

Recoveries of prior year unpaid obligations - (52) (12,408) (2) (95)

Unpaid obligations, end of year 110 651 225,191 45 1,380

Uncollected Payments:

Uncollected payments, Federal sources, brought forward, October 1 (47) (25) (615) (1) (37)

Change in uncollected payments, Federal sources 4 - 110 1 14

Uncollected payments, Federal sources, end of year (43) (25) (505) - (23)

Obligated Balance, End of Year $ 67 $ 626 $ 224,686 $ 45 $ 1,357

Obligated Balance, Start of Year $ 60 $ 1,271 $ 222,420 $ 27 $ 1,292

BUDGET AUTHORITY AND OUTLAYS, NET

Budget authority, gross (discretionary and mandatory) $ 666 $ 418,891 $ 18,004 $ 112 $ 11,457

Actual offsetting collections (discretionary and mandatory) (671) (260) (8,805) (1) (150)

Change in uncollected payments, Federal sources

 (discretionary and mandatory) 4 - 110 1 14

Recoveries of prior year paid obligations (discretionary and 

 mandatory) - 7 45 - 24

Budget Authority, Net (Discretionary and Mandatory) $ (1)$ 418,638 $ 9,354 $ 112 $ 11,345

Outlays, gross (discretionary and mandatory) $ 633 $ 419,327 $ 18,415 $ 102 $ 11,388

Actual offsetting collections (discretionary and mandatory) (671) (260) (8,805) (1) (150)

Outlays, net (discretionary and mandatory) (38) 419,067 9,610 101 11,238

Distributed offsetting receipts - (42,819) (24,920) - (1,297)

Agency Outlays, Net (Discretionary and Mandatory) $ (38)$ 376,248 $ (15,310)$ 101 $ 9,941

(a) Of the $361 billion of Total Budgetary Resources for Departmental Offices, GSE, ESF, IMF and OAS had $259 billion and $38 billion, $25 billion,

and $15 billion, respectively. The remainder is spread throughout other offices.
DEPAR TMEN T OF THE TREASURY 151

FINANCIAL SECTION | FY 2016 AGENCY FINANCIAL REPORT

Fiscal Year 2015 Combining Statement of Budgetary Resources Disaggregated

by Sub-organization Accounts

Alcohol

and

Office of the Tobacco

Comptroller Tax and

of the Trade Non-

(in millions): U. S. Mint Currency Bureau Budgetary Budgetary

BUDGETARY RESOURCES

Unobligated balance brought forward, October 1 $ 506 $ 703 $ 5 $ 349,165 $ 977

Recoveries of unpaid prior year obligations 15 1 1 6,353 6,221

Other changes in unobligated balance (11) - (1) (9,861) (6,779)

Unobligated balance from prior year budget authority, net 510 704 5 345,657 419

Appropriations (discretionary and mandatory) - - 100 441,419 -

Borrowing authority (discretionary and mandatory) - - - - 921

Spending authority from offsetting collections (discretionary and 

 mandatory) 3,131 1,593 6 9,548 2,072

Total Budgetary Resources $ 3,641 $ 2,297 $ 111 $ 796,624 $ 3,412

STATUS OF BUDGETARY RESOURCES

New obligations and upward adjustments $ 2,938 $ 996 $ 106 $ 465,204 $ 2,840

Unobligated balance, end of year:

 Apportioned, unexpired accounts 703 (1) 1 281,286 102

 Exempt from apportionment, unexpired accounts - 1,302 - 10,137 -

 Unapportioned, unexpired accounts - - - 39,311 470

 Unexpired unobligated balance, end of year 703 1,301 1 330,734 572

 Expired unobligated balance, end of year 4 686 -

Unobligated balance, end of year 703 1,301 5 331,420 572

Total Status of Budgetary Resources $ 3,641 $ 2,297 $ 111 $ 796,624 $ 3,412

CHANGE IN OBLIGATED BALANCE

Unpaid Obligations:

Unpaid obligations, brought forward, October 1 $ 280 $ 234 $ 22 $ 130,754 $ 95,577

New obligations and upward adjustments 2,938 996 106 465,204 2,840

Outlays (gross) (2,899) (991) (104) (451,834) (2,025)

Recoveries of prior year unpaid obligations (15) (1) (1) (6,353) (6,221)

Unpaid obligations, end of year 304 238 23 137,771 90,171

Uncollected Payments:

Uncollected payments, Federal sources, brought forward, October 1 (6) (4) (4) (227) (512)

Change in uncollected payments, Federal sources 6 - 1 31 105

Uncollected payments, Federal sources, end of year - (4) (3) (196) (407)

Obligated Balance, End of Year $ 304 $ 234 $ 20 $ 137,575 $ 89,764

Obligated Balance, Start of Year $ 274 $ 230 $ 18 $ 130,527 $ 95,065

BUDGET AUTHORITY AND OUTLAYS, NET

Budget authority, gross (discretionary and mandatory) $ 3,131 $ 1,593 $ 106 $ 450,967 $ 2,993

Actual offsetting collections (discretionary and mandatory) (3,137) (1,593) (7) (9,655) (4,969)

Change in uncollected payments, Federal sources

 (discretionary and mandatory) 6 - 1 31 105

Recoveries of prior year paid obligations (discretionary and 

 mandatory) - - - 76 -

Budget Authority, Net (Discretionary and Mandatory) $ - $ - $ 100 $ 441,419 $ (1,871)

Outlays, gross (discretionary and mandatory) $ 2,899 $ 991 $ 104 $ 451,834 $ 2,025

Actual offsetting collections (discretionary and mandatory) (3,137) (1,593) (7) (9,655) (4,969)

Outlays, net (discretionary and mandatory) (238) (602) 97 442,179 (2,944)

Distributed offsetting receipts - - - (69,036) -

Agency Outlays, Net (Discretionary and Mandatory) $ (238)$ (602)$ 97 $ 373,143 $ (2,944)
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1 DEPARTMENT OF THE TREASURY 

 
 

 
 

 
 

 
 


 

 
 

 
 

 
 


 

 
 


 

 
 

SECTION A: COMBINED SCHEDULE OF SPENDING ..........155
 

SECTION B: TAX GAP AND TAX BURDEN .....................156
 

SECTION C: FREEZE THE FOOTPRINT ...........................164
 

SECTION D: MANAGEMENT AND PERFORMANCE
 

CHALLENGES AND THE SECRETARY’S 

RESPONSES ............................................165
 

SECTION E: SUMMARY OF FINANCIAL STATEMENT
 

AUDIT AND MANAGEMENT ASSURANCES ....216
 

SECTION F: IPIA (AS AMENDED BY IPERA AND
 

IPERIA) REPORTING DETAILS....................220
 

SECTION G: CIVIL MONETARY PENALTIES
 

INFLATION ADJUSTMENT ..........................239
 

APPENDIX: GLOSSARY OF ACRONYMS .........................245
 
[Type text] 

2 DEPARTMENT OF THE TREASURY 
DEPARTMENT OF THE TREASURY 155

OTHER INFORMATION | FY 2016 AGENCY FINANCIAL REPORT

SECTION A: COMBINED SCHEDULE OF SPENDING

The following Schedule of Spending (SOS) presents an overview of the funds available and how these funds were spent for 

the Fiscal Year (FY) ended September 30, 2016 and 2015. The financial data used to populate this schedule was also used 

to populate our Statement of Budgetary Resources (SBR). Accordingly, we present the budgetary financial information in 

this schedule on a combined basis rather than on a consolidated basis. The SOS presents Total Resources (or “Total 

Budgetary Resources” per the SBR), Amount Available but Not Agreed to be Spent (or “Unobligated balance, end of year –

Apportioned, unexpired accounts and Exempt from Apportionment, unexpired accounts” per the SBR), and Amount Not 

Available to be Spent (or “Unobligated balances, end of year – Unapportioned, unexpired accounts and Expired 

unobligated balance” per the SBR).

Combined Schedule of Spending (Unaudited)

For Fiscal Years Ended September 30, 2016 and 2015

(in millions) 2016 2015

What Money is Available to Spend?

Total Resources $ 797,299 $ 800,036

Less: Amount Available but Not Agreed to be Spent (275,595) (291,525)

Less: Amount Not Available to be Spent (41,614) (40,467)

Total Amounts Agreed to be Spent $ 480,090 $ 468,044

How was the Money Spent/Issued?

Interest and Dividends1 $ 442,146 $ 413,221

Personnel Compensation and Other Related Benefits 11,209 11,053

Grants, Subsidies, and Contributions2 8,231 7,983

Other Contractual Services 4,644 4,499

Investments and Loans3 2,700 19,235

Other 11,160 12,053

Total Amounts Agreed to be Spent $ 480,090 $ 468,044

Who did the Money go to?

Federal $ 175,882 $ 169,326

Non-Federal 304,208 298,718

Total Amounts Agreed to be Spent $ 480,090 $ 468,044

(1) Interest and Dividends primarily include interest on the public debt and interest expense related to credit reform activities.

(2) Grants, Subsidies, and Contributions primarily include cash payments to States, other political subdivisions, corporations, 

associations, and individuals; credit reform program related subsidies; and contributions to foreign countries.

(3) Investments and Loans primarily include investments made in connection with loans issued for non-credit reform and credit reform 

activities. The decrease is due to a change in our budgetary accounting and reporting policy for the International Monetary Fund (IMF)

(refer to Notes 1AC and 7).
156 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | OTHER INFORMATION

SECTION B: TAX GAP AND TAX BURDEN

TAX GAP 

The tax gap is the difference between the amount of tax imposed by law and what taxpayers actually pay on time. The tax 

gap and associated concepts are a particular way of defining and analyzing compliance and noncompliance and are based 

on tax year liability. The tax gap provides a rough gauge of the level of overall noncompliance and voluntary compliance 

given all the events that occurred during the relevant tax periods and the Internal Revenue Code (IRC) provisions in effect 

at the time. Tax gap estimates provide the Internal Revenue Service (IRS) with periodic appraisals about the nature and 

extent of noncompliance for use in formulating tax administration strategies. 

The IRS is responsible for administering all tax provisions including several non-refundable and refundable tax credits 

(RTC). Eligibility rules for RTC are often complex because they must address complicated family relationships and 

residency arrangements. Compliance with the rules is also difficult for the IRS to verify due to the lack of available third 

party data. The relatively high overclaim error rates for these credits are a result, in part, of this complexity. Measuring 

and reporting on taxpayer compliance related to these various tax provisions is complex and challenging. To measure 

compliance with the current tax system, the IRS estimates the amount of non-compliance as part of the tax gap. 

New Tax Gap Estimates 

The IRS periodically estimates the tax gap. In FY 2016 the IRS released updated estimates covering the Tax Year (TY) 

2008-2010 timeframe. This section of the AFR includes a brief overview of these estimates. More detail can be found in 

documents on the IRS website at www.IRS.gov:

• Description of the Tax Gap (https://www.irs.gov/uac/the-tax-gap) 

• Tax Gap Estimates for Tax Years 2008-2010 (https://www.irs.gov/pub/irs-soi/p1415.pdf) 

The gross tax gap is the amount of tax liability that is not paid voluntarily and timely. The estimated gross tax gap is 

$458 billion. The net tax gap is the gross tax gap less tax that will be subsequently collected through voluntarily 

payments or as the result of IRS administrative and enforcement activities; it is the portion of the gross tax gap that will 

not be paid. It is estimated that $52 billion of the gross tax gap will eventually be collected resulting in a net tax gap of 

$406 billion. 

The tax gap paradigm separates noncompliance into components by type of tax and source of noncompliance. The three 

primary sources of noncompliance that result in payment of less than the tax owed are: (1) the non-filing tax gap (the tax 

not paid on time by those who do not file required returns on time); (2) the underreporting tax gap (the net 

understatement of tax on timely filed returns); and (3) the underpayment tax gap (the amount of tax reported on timely 

filed returns that is not paid on time). The estimated gross tax gap for each of these components is $32 billion, $387 

billion, and $39 billion, respectively. The gross tax gap estimates can also be grouped by type of tax. The estimated gross 

tax gap for individual income tax is $319 billion, for corporation income tax is $44 billion, for employment tax is $91 

billion, and for estate and excise tax combined is $4 billion. These estimates are displayed in the updated schematic 

representation of the estimates, known as the tax gap “map” that follows. 
DEPARTMENT OF THE TREASURY 157

OTHER INFORMATION | FY 2016 AGENCY FINANCIAL REPORT

Individual Income Tax Underreporting Tax Gap Estimates for Tax Years 2008 – 2010

The estimates in the table below provide a breakout of the components of the individual income tax underreporting tax 

gap. The income components are grouped by “visibility” category; i.e., for each component, the table shows the 

component’s share of the individual income tax underreporting tax gap. The table also shows each component’s share of 

the gross tax gap. Business income reported on Schedules C, E, and F accounts for 47 percent of the total individual 

income tax underreporting tax gap for TY 2008—2010. This consists of nonfarm proprietor income which accounts for 29 

percent, flow-through income (partnerships, S corporations, and estates and trusts) which accounts for 8 percent, rent and 

royalty income which accounts for 8 percent, and farm income which accounts for 2 percent. 
158 DEPARTMENT OF THE TREASURY

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Tax Return Line Items Tax Gap

Share of Gross 

Tax Gap

Share of 

Individual 

Income Tax 

Underreporting 

Tax Gap

Net 

Misreporting 

Percentage 1

Gross Tax Gap 458 100% N/A N/A

Individual Income Tax Underreporting Tax Gap 264 58% 100% 22%

Items Subject to Substantial Information 

Reporting and Withholding

5 1% 2% 1%

Wages, salaries, tips 5 1% 2% 1%

Items Subject to Substantial Information 

Reporting

15 3% 6% 7%

Interest Income 1 2 2 3%

Dividend Income 1 2 2 7%

State income tax refunds 1 2 2 13%

Pensions & annuities 5 1% 2% 4%

Unemployment Compensation 1 2 2 6%

Taxable Social Security benefits 7 1% 2% 19%

Items Subject to Some Information Reporting 33 7% 12% 19%

Partnership, S-Corp, Estate & Trust, etc. 22 5% 8% 16%

Alimony income 3 3 3 3

Capital gains 11 2% 4% 27%

Short-term Capital Gains 6 1% 2% 13%

Long-term Capital Gains 5 1% 2% 13%

Items Subject to Little or No Information 

Reporting

136 30% 51% 63%

Form 4797 income 4 1% 1% 42%

Other income 29 6% 11% 49%

Nonfarm proprietor income 78 17% 29% 64%

Farm income 5 1% 2% 71%

Rents & royalties 20 4% 8% 62%

Other Taxes 1 2 2 3%

Unallocated Marginal Effects 12 3% 4% N/A

Income Offsets (Adjustments, Deductions, 

Exemptions)

19 4% 7% 5%

Total Credits 40 9% 15% 26%

Filing Status 5 1% 2% N/A

1

 The net misreporting percentage is the net misreported amount divided by the sum of the absolute values of the amounts that should have been 

reported, expressed as a percentage

2 Less than 0.5 percent

3

 Estimate is based on very small sample size. Estimated tax gap is less than $0.5 billion and NMP is 2%

N/A – Not Applicable

NOTE: Components might not sum totals because of rounding

Tax Gap Estimation Methodology

Estimating the tax gap is inherently challenging and requires assessing the merits of alternative methods, assumptions, 

and data sources. There is no single approach for estimating all the components of the tax gap. Each approach is subject 

to non-sampling error; the component estimates that are based on samples are further subject to sampling error. The 

uncertainty of the estimates is not readily captured by standard errors that typically accompany estimates based on 

sample data. For that reason, standard errors, confidence intervals, and statistical comparisons across years are not 

reported. The report noted above (Publication 1415 rev. 5-2016) provides summary information about the estimation 

methodology used to produce the estimates of the tax gap.
DEPARTMENT OF THE TREASURY 159

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The IRS' National Research Program (NRP) is one important data source used to estimate the tax gap. The NRP involves 

conducting detailed audits of a random sample of taxpayers to measure compliance with all individual income tax 

provisions and focuses on assessing the effect of errors made during return filing. These errors include IRS processing 

errors, unintentional taxpayer mistakes, and intentional taxpayer noncompliance, and result in forgone revenue as well as 

potential refund payments that may not have been made in the correct amounts.

Unlike prior tax gap estimates that pertain to a single tax year, these estimates reflect an estimated average compliance 

rate and associated average annual tax gap for the TY 2008—2010 timeframe. This approach was motivated by the 

decision to pool multiple years of compliance data from the annual individual income tax reporting compliance component 

of the NRP to provide greater reliability of individual income tax underreporting tax gap estimates by sources of 

noncompliance. The individual income tax NRP reporting compliance studies are the foundation for the individual income 

tax underreporting tax gap estimates.

COMPLIANCE WITH INDIVIDUAL INCOME TAX CREDITS

In addition to informing the tax gap estimate, the NRP data are used to conduct in-depth analyses of tax compliance 

problems, to guide IRS enforcement strategies (such as by building models that predict the types of returns most likely to 

have errors), and to develop legislative proposals aimed at improving compliance with the tax laws and reducing the tax 

gap. NRP data are also used to estimate the Earned Income Tax Credit (EITC) improper payment rate. 

Compliance Estimates

The IRS is responsible for administering 21 non-refundable and refundable individual income tax credits. These credits 

account for an estimated 15 percent of the individual income tax underreporting tax gap. EITC accounts for 10 percent of 

the individual income tax underreporting tax gap estimate, followed by the refundable and nonrefundable child tax credit (3 

percent), and the refundable and non-refundable education credits (2 percent). 

These credits generally have many rules that determine eligibility, which may differ based on personal family and living 

arrangements. This complexity can cause tax credit errors. 

As noted in the IRS response to TIGTA’s required annual report of IRS' compliance with the reporting requirements 

contained in the Improper Payments Elimination and Recovery Improvement Act of 2012 (IPERIA) and related legislation 

and Executive Order 13520 (TIGTA 2016-40-036, Without Expanded Math Error Authority Billions of Dollars in Identified 

Potentially Erroneous Earned Income Credit Claims Will Continue to Go Unaddressed Each Year), the IRS stated that it 

plans further NRP analyses of Advanced Child Tax Credit (ACTC) and American Opportunity Tax Credit (AOTC) errors. 

In addition, compliance with Affordable Care Act (ACA) Premium Tax Credit (PTC) will be reported as part of the overall 

tax gap and in other compliance research, once data become available. TY 2014 represents the first year in which 

taxpayers received Advance Premium Tax Credit (APTC) payments, filed for PTC, and reconciled APTC payments and 

PTC amounts. NRP data for TY 2014 is expected to be available in late 2018.
160 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | OTHER INFORMATION

Relationship of Tax Compliance Estimation to Improper Payments

The Improper Payments Elimination Recovery Act of 2010 (IPERA) requires certain reporting for payments programs 

determined to be susceptible to significant improper payments. The focus of IPERA, its subsequent amendments, and 

guidance documents, is on implementing internal controls to prevent and detect improper payments and does not take into 

consideration all aspects of administering tax provisions in a system that relies heavily on voluntary reporting. In keeping

with IPERA requirements, the IRS has historically reported risk assessments for refundable credits and improper 

payment estimates for the EITC in the annual Agency Financial Report (AFR). The IRS has followed this practice largely 

because refundable credits may result in a payment in excess of tax liability. However, the distinction between the portion 

of a credit that offsets tax liability and the portion that is refundable is governed by multiple variables, including other 

return elements and information provided by the taxpayer, some of which are unrelated to the refundable credit in 

question. Evaluating only the refunded portion of a credit offers little insight into where tax compliance occurs or how the 

IRS should address compliance problems. In addition, the same features of the tax system and taxpayer behaviors that 

create the compliance problems with refundable credits also create the risk of noncompliance with other tax provisions. 

Furthermore, examining credits alone provides little guidance about how the IRS should allocate its scarce enforcement 

resources. The IRS reports on the EITC without regard to whether errors are the result of complexity in the tax code, 

taxpayer behavior, or IRS processes, and despite the fact that amounts of tax offset by the credit are currently considered 

negative revenue receipts.

Treasury and IRS analyses as well as audits by GAO and TIGTA have consistently found that payment errors for EITC 

and other tax credit programs are attributable to the complexity of the credits within the tax system, and not rooted in 

internal control weaknesses, financial management deficiencies, or financial reporting failures. Eligibility rules are 

complex and lead to high overclaim error rates for these credits. 

Accountability for Administering Refundable Credits and Strengthening Program Integrity 

Strengthening program integrity throughout the organization is a Departmental priority, extending to senior

executives and program officials at each of our agencies and programs. As evidence of this focus, beginning with senior

leadership and cascading down, performance plans contain strategic goals related to strengthening program integrity,

protecting taxpayer resources, and reducing erroneous refunds from taxpayers’ overclaims. We evaluate senior

executives and program officials as part of their semi-annual and annual performance evaluations on their progress 

toward achieving these goals.

TAX BURDEN

The IRC provides for progressive rates of tax, whereby higher incomes are generally subject to higher rates of tax. The 

following pages present in both graph and table format various income levels and their associated tax liabilities for

individuals and corporations. This information is the most recent available for individuals (tax year 2014) and 

corporations (TY 2013). The graphs and charts are representative of more detailed data and analyses available from the 

IRS Statistics of Income office.

For individuals, the information illustrates, in both percentage and dollar terms, the tax burden borne by varying levels of

Adjusted Gross Income. The corporate information illustrates, for varying corporate asset categories, the tax burden borne 

by these entities as a percentage of taxable income.
DEPARTMENT OF THE TREASURY 161

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Average Adjusted Gross Income (AGI) Reported and Average Individual Income Tax Liability 

Tax Year 2014

Individual Income Tax Liability as a Percentage of AGI 

Tax Year 2014

$1,986 $22,031 $39,178 $71,493 $134,950 $285,153

$1,547,509

$54 $618 $2,164 $6,251 $16,977 $55,531

$422,284

Under $15,000 $15,000 to

under $30,000

$30,000 to

under $50,000

$50,000 to

under $100,000

$100,000 to

under $200,000

$200,000 to

under $500,000

$500,000

or more

Average AGI per return Average income tax per return

2.7% 2.8%

5.5%

8.7%

12.6%

19.5%

27.3%

Under $15,000 $15,000 to

under $30,000

$30,000 to

under $50,000

$50,000 to

under $100,000

$100,000 to

under $200,000

$200,000 to

under $500,000

$500,000

or more
162 DEPARTMENT OF THE TREASURY

FY 2016 AGENCY FINANCIAL REPORT | OTHER INFORMATION

INDIVIDUAL INCOME TAX LIABILITY

Tax Year 2014

Average

Average AGI Income tax Income tax

Adjusted Gross Number of Total per return per return as a

Income taxable returns AGI income tax (in whole (in whole) percentage

(AGI) (in thousands) (in millions) (in millions) dollars) dollars) of AGI

Under $15,000 36,377 $ 72,237 $ 1,968 $ 1,986 $ 54 2.7%

$15,000 under 

$30,000 30,212 665,587 18,657 22,031 618 2.8%

$30,000 under 

$50,000 26,072 1,021,446 56,423 39,178 2,164 5.5%

$50,000 under 

$100,000 32,221 2,303,583 201,406 71,493 6,251 8.7%

$100,000 under 

$200,000 17,501 2,361,756 297,112 134,950 16,977 12.6%

$200,000 under 

$500,000 4,979 1,419,777 276,487 285,153 55,531 19.5%

$500,000 or more 1,245 1,926,649 525,744 1,547,509 422,284 27.3%

Total 148,607 $ 9,771,035 $ 1,377,797
DEPARTMENT OF THE TREASURY 163

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Corporation Tax Liability as a Percentage of Taxable Income

Tax Year 2013 Data

CORPORATION TAX LIABILITY

Tax Year 2013

Total Assets Income subject to tax Total income tax after credits Percentage of income tax 

(in thousands) (in millions) (in millions) after credits to taxable income

Zero Assets $ 43,388 $ 11,044 25.5%

$1 under $500 6,981 1,364 19.5%

$500 under $1,000 4,100 1,035 25.2%

$1,000 under $5,000 11,476 3,376 29.4%

$5,000 under $10,000 7,737 2,502 32.3%

$10,000 under $25,000 12,949 4,236 32.7%

$25,000 under $50,000 12,133 3,918 32.3%

$50,000 under $100,000 14,511 4,666 32.2%

$100,000 under $250,000 25,250 8,047 31.9%

$250,000 under $500,000 29,332 9,040 30.8%

$500,000 under $2,500,000 133,541 39,321 29.4%

$2,500,000 or more 957,085 204,808 21.4%

Total $ 1,258,483 $ 293,357

25.5%

19.5%

25.2%

29.4%

32.3% 32.7% 32.3% 32.2% 31.9% 30.8% 29.4%

21.4%

Zero

Assets

$1

to under

$500

$500

to under

$1,000

$1,000

to under

$5,000

$5,000

to under

$10,000

$10,000

to under

$25,000

$25,000

to under

$50,000

$50,000

to under

$100,000

$100,000

to under

$250,000

$250,000

to under

$500,000

$500,000

to under

$2,500,000

$2,500,000

or more
164 DEPARTMENT OF THE TREASURY

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SECTION C: FREEZE THE FOOTPRINT

One of our key goals is the efficient and effective acquisition, utilization, management, and disposal of our real property 

assets. Under the direction of the Assistant Secretary for Management (ASM), the Senior Real Property Officer (SRPO) is 

responsible for ensuring that we develop and maintain appropriate procedures, reviews, and reporting requirements in 

accordance with our directives, and applicable OMB and GSA regulations that pertain to the acquisition, utilization, and 

disposal of real property.

The SRPO is responsible for tracking our real property square footage footprint, and developing the annual agency 

evaluation of compliance for the implementation of the Freeze the Footprint Policy. Under current Departmental 

directives, bureaus may not pursue any new lease space acquisitions without the approval of the ASM’s office. To ensure 

the optimal utilization of our existing space inventory and to achieve real property cost saving and footprint reductions, we

direct all bureaus to pursue consolidation or co-location opportunities into existing inventory before pursuing any new 

space acquisitions.

Additionally, we are taking other actions to maintain overall square footage and reduce the related costs associated with 

real property, including:

• Better utilizing real property by undertaking space realignment; 

• Increasing teleworking, hoteling, and workspace sharing; and

• Maximizing utilization through improved work station standards.

Our total square footage and related operation and maintenance costs associated with real property assets subject to the 

Freeze the Footprint policy (from the latest available reporting year of 2015) compared to the FY 2012 Freeze the 

Footprint baseline (as assigned by GSA) were as follows:

 2012

(in millions) (Baseline) 2015 Change

 

Square Footage 30.0 27.6 (2.4)

Operation and Maintenance Costs $ 80.9 $ 93.0 $ 12.1
DEPARTMENT OF THE TREASURY 165

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SECTION D: MANAGEMENT AND PERFORMANCE CHALLENGES AND THE 

SECRETARY’S RESPONSES

In accordance with the Reports Consolidation Act of 2000, the Inspectors General are required to identify specific 

management and performance challenges facing the Department. At the end of each fiscal year, the Treasury Office of 

Inspector General (OIG) and Treasury Inspector General for Tax Administration (TIGTA) send an update of these 

management challenges to the Secretary and cite any new challenges for the upcoming fiscal year. The Special Inspector 

General for the Troubled Asset Relief Program (SIGTARP) did not identify any management or performance challenges for 

the Office of Financial Stability (OFS). This section contains the management and performance challenges reported by

OIG and TIGTA.
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198 DEPARTMENT OF THE TREASURY

MEMORANDUM FOR: Eric M. Thorson

Treasury Inspector General

J. Russell George

Inspector General for Tax Administration

 

FROM: Jacob J. Lew

Secretary of the Treasury 

SUBJECT: FY 2016 Management and Performance Challenges reported by the 

Treasury Inspector General and the Treasury Inspector General for Tax 

Administration

We reviewed the memoranda from the Treasury Inspector General (IG) and the Treasury Inspector 

General for Tax Administration (TIGTA), dated October 26, 2016 and October 6, 2016, respectively. The 

memoranda provide the IG’s and the TIGTA’s perspective on the most serious management and 

performance challenges facing the Department. The Special Inspector General for the Troubled Asset 

Relief Program (SIGTARP) did not report any management or performance challenges. 

We appreciate the IG and the TIGTA’s work on this effort and value the insights and recommendations 

they have provided. We concur with the reported challenges and will remain committed to focusing 

resources on overcoming these challenges. 

We continue to make progress on these challenges, but overcoming these challenges requires long-term 

strategies for ensuring stable operations as well as sustained management attention and resources. We 

have provided a more detailed report on the actions taken in FY 2016 and planned actions for FY 2017 

and beyond in the following section. 

We look forward to continuing to work with the IG and the TIGTA on these challenges. 
OTHER INFORMATION | FY 2016 AGENCY FINANCIAL REPORT

DEPARTMENT OF THE TREASURY 199

OIG CHALLENGE NO. 1 SUMMARY OF MAJOR ISSUES

Cyber Threats • Exercise due care when authorizing internetwork connections with other 

Federal, State, and local agencies and service provides, and verify that third 

parties comply with Federal policies and standards

• Ensure critical data and information maintained by cloud service providers are 

properly protected

• Provide effective leadership to financial institutions and the financial sector to 

strengthen awareness and preparedness against cyber threats

Domestic Finance (OCIP/FI)/International Affairs

FY 2016 Accomplishments

• Met with principals of the Financial and Banking Information Infrastructure Committee (FBIIC) organizations to discuss strategic, 

policy-level issues around cybersecurity and resiliency for the financial sector; topics included (a) information sharing and removing 

impediments to effective sharing, (b) best practices for regulatory and supervisory policies and approaches, and (c) response and 

recovery exercises and initiatives across the sector

• Met with the Financial Sector Coordinating Council (FSSCC) and FBIIC member agencies to coordinate cybersecurity activities across 

the sector and reinforce a strong public-private partnership around cybersecurity

• Coordinated regional meetings between local FBI and law enforcement and financial institutions to facilitate development of 

relationships between public and private sector partners prior to a cyber event

• Collaborated with other executive agencies and departments to develop the United States Cyber Incident Coordination, 

Presidential Policy Directive 41, to improve public-private incident response coordination

• Tested communication and escalation processes for responding to, and recovering from, cyber-attacks by completing three 

regional and four large-scale financial sector cybersecurity exercises (including one with the electricity subsector) in collaboration 

with representatives from Department of Homeland Security (DHS), Department of Defense (DOD), Department of Justice (DOJ), 

the financial regulators, and private sector

• Created and disseminated 14 circulars on cyber actors’ tactics, techniques, procedures and associated indicators to assist network 

security specialists with network defense capabilities and planning

• Conducted several classified threat briefings and enhanced capabilities to share classified information with financial regulators, 

financial sector companies, and executive agencies and departments

• Conducted a comprehensive survey of Group of 7 (G-7) countries’ measures, regulations, and approaches to cybersecurity in the 

financial sector, as part of the G-7 Cyber Expert Group co-chaired by the Deputy Secretary

Actions Planned or Underway 

• Executing a memorandum of understanding to provide a mechanism through which all FBIIC members (both federal and state) can 

share cyber threat, vulnerability, and incident information

• Planning multiple regional and large-scale financial sector cybersecurity exercises in 2017

• Promoting the roll-out of the United States Cyber Incident Coordination across the financial services sector and coordinating with 

the financial sector’s cyber incident protocols

• Developing materials to help small- and medium-sized financial sector companies with cybersecurity and resiliency, including an 

“exercise in a box” as a tool to help private sector companies conduct internal cybersecurity exercises

• Establishing a mechanism where chief executive officers from financial sector companies can periodically meet with leaders from 

key government agencies, including the financial regulators, to discuss financial sector cybersecurity

• Finalizing and publishing the G-7 Cyber Expert Group’s work on best practices, known as G-7 Fundamental Elements on 

Cybersecurity for the Financial Sector

Management (Chief Information Officer)

FY 2016 Accomplishments

• Provided timely and accurate inputs for the FY 2016 Cybersecurity Strategy implementation to achieve overall President 

Management Council (PMC) Level-2 with achievement in Level 3 in one area

• Deployed first Einstein 3 Accelerated (E3A) countermeasure (Domain Name Service [DNS] sinkholing) at Fiscal Service Trusted 

Internet Connection (TIC)

• Continued enhancing cybersecurity threat awareness among Treasury senior leaders and employees by launching the Phishing 

Awareness Program across all Bureaus

• Launched the Targeted User Training, which provides personalized training to users who have been targets of sophisticated cyberattacks

• Exceeded OMB guidance to complete first iteration of evaluation and prioritization of High Value Assets (HVAs)

• Timely and accurately reported on all required cybersecurity data calls for departmental consolidated reporting - 100% for PMC, 

Cross-Agency Priority (CAP), Federal Information Security Management Act (FISMA) and 98% for Government Security Operations 

Center (GSOC) reporting
FY 2016 AGENCY FINANCIAL REPORT | OTHER INFORMATION

200 DEPARTMENT OF THE TREASURY

• Deployed a new release of the Treasury FISMA Information Management System (TFIMS) which improved the collection and 

management of cybersecurity metadata and increased compliance with National Institute of Standards and Technology (NIST) 

standards through improved controls tracking and management

• Deployed the IRS Threat Sharing Collaboration Site providing a secure space for IRS to share threat information and collaborate 

with peers in other bureaus reducing reliance on email to exchange security information

• Deployed enhancements to the Treasury Computer Security Incident Response Capability (TCSIRC) application for Treasury’s GSOC

increasing compliance with DHS US-CERT requirements

• Deployed the GSOC Cyber Analysis and Reporting Dashboard (CARD) allowing recurring and ad-hoc data calls by visualizing data via 

dashboards

• Completed upgrade to SharePoint 2013 which included new secure protocol and authentication enhancements to make the use of 

claims-based authentication

• Transitioned the Treasury.gov public website authoring environment to Single-Sign On and Personal Identity Verification (PIV) card 

authentication providing greater assurance of identity

• Worked closely with the Bureaus to ensure adherence to BOD 15-01 requirements by monitoring the weekly Cyber Hygiene 

reports/Cyber Exposure Scorecards and remediate any critical findings within 30 days

• Provided Departmental Office (DO) Local Area Network (LAN) and email improvements by implementing the Nessus Tenable 

vulnerability scanner to replace the near end of life McAfee solution and implementing Exchange 2013 to replace Exchange 2007

• Completed compromise assessments of DO, Fiscal Service, and Financial Crimes Enforcement Network (FinCEN) and found no 

evidence of undetected malicious activity

• Collaborated with agency partners on incident response and indicator sharing initiatives

• On-boarded 18 new employees in FY16, and reduced the vacancy rate from 42% to 22%

• Improved the Treasury Secure Data Network (TSDN) by:

o Applying patches to reduce vulnerabilities;

o Creating a TSDN Incident Response Plan;

o Identifying and vetting all Privileged users access;

o Developing a Security Assessment and Authorization (SA&A) package and renewing Authority to Operate (ATO) through 

2019;

o Established Vulnerability Management and Change Management processes/criteria; and 

o Accomplished >90% asset management and monitoring.

Actions Planned or Underway 

• Continue to implement Continuous Diagnostics & Mitigation (CDM) Phase 1 tools in bureaus for the Initial Operating Capability 

(IOC)

• Finalize and operationalize our Cybersecurity Strategy for FY 17

• Implement Single-Sign on for the HR Connect system (our human resource processing system)

• Upgrade and replace HR Connect system infrastructure platform firewalls

Office of the Comptroller of the Currency (OCC)

FY 2016 Accomplishments

• Continued to improve our defense against cyber-attacks and enhance the resiliency of our systems

• Technologies, processes, and controls were implemented and employee awareness was enhanced during the year

• Collaborated with other financial regulators as well as the intelligence and law enforcement communities to address emerging risks

• Began the process of reviewing cybersecurity around critical banking and payments infrastructure

• Recruited security professionals in cyber security office

• Active participation with other federal banking agencies to assess current supervisory guidance and evaluate potential new 

guidance in response to emerging threats 

Actions Planned or Underway 

• Continue outreach activities in support of the ongoing implementation and use of the Cybersecurity Assessment tool by both 

financial institutions and examiners

• Continue to deploy technologies, processes, and controls within OCC to reduce the potential of cybersecurity attacks

• Recruit, retain, and train security professionals (e.g., Information Systems Security Officers - ISSO)

• Reaffirm the need for banks to adequately incorporate resiliency considerations, including recovery from cyber events, into their 

overall governance, risk management, and strategic planning processes
OTHER INFORMATION | FY 2016 AGENCY FINANCIAL REPORT

DEPARTMENT OF THE TREASURY 201

OIG CHALLENGE NO. 2 SUMMARY OF MAJOR ISSUES

Efforts to Promote Spending Transparency and to Prevent 

and Detect Improper Payments

Spending Transparency: Given the broad Government-wide implications 

and critical roles assigned to Treasury by the DATA Act, implementation 

of the DATA Act is deemed an ongoing high risk project and management 

challenge 

Detect Improper Payments: Effectiveness of the Do Not Pay Business 

Center as a tool to prevent and detect improper payments is hindered 

because the center does not have access to Social Security 

Administration’s full death data

Spending Transparency:

Office of the Fiscal Assistant Secretary

FY 2016 Major Accomplishments

• Launched Openbeta.usaspending.gov website to collect public input on the development of the future USASpending.gov website 

• Completed the DATA Act Information Model Schema version 1.o which sets the requirements for federal agencies to submit 

spending data to Treasury and explains the relationships between the data elements

• Made progress in developing the DATA Act operating infrastructure, including developing the DATA Act Broker, a web based tool 

agencies will utilize to submit and validate their data to Treasury for publication on USAspending.gov 

Actions Planned or Underway

• Complete the development of the DATA Act operating infrastructure to collect, validate, standardize, and publish over 400 

spending data elements

• Launch the new USAspending.gov website in May 2017

Detect Improper Payments:

FY 2016 Major Accomplishments

• Expanded access to multiple IPERIA specified data sources

• Added more than 1,500 DNP Portal users to our customer base

• Held multiple agency strategic planning sessions and completed 10 agency analytics projects

Actions Planned or Underway

• Work with OMB to resolve limitations related to the SSA full Death Master File and identify and gain access to other data sources

• Work with OMB to implement a pilot project with a federally-funded state administered program as per the Federal Improper 

Payments Coordination Act of 2015

• Expand DNP's Analytics Service to include predictive and risk-based modeling with agency partners
FY 2016 AGENCY FINANCIAL REPORT | OTHER INFORMATION

202 DEPARTMENT OF THE TREASURY

OIG CHALLENGE NO. 3 SUMMARY OF MAJOR ISSUES

Anti-Money Laundering and Terrorist Financing/Bank 

Secrecy Act (BSA) Enforcement

• Prevent criminal and terrorists from using our financial networks to 

sustain their operations and/or launch attacks against the U.S.

• Vacancies for multiple key positions leads to heightened concerns 

over TFI’s ability to meet mission critical objectives 

• Enhance financial transparency as a way to strengthen efforts to 

combat financial crime and collect, analyze, and report data on 

national threats

• With increasing use of mobile devices for banking, internet banking, 

internet gaming, and peer-to-peer transactions and use of virtual 

currencies, providers under the BSA must understand their 

obligations under the statute

FinCEN

FY 2016 Accomplishments

• Issued two Financial Action Task Force (FATF) advisories that identified jurisdictions with Anti-Money Laundering and Countering 

the Financing of Terrorism (AML/CFT) deficiencies and one cyber threat related advisories to financial institutions regarding E-mail 

compromise fraud schemes

• Continued the Global Rapid Response Program, recovering or restraining over $190M funds obtained through cyber-enabled 

crimes targeting financial institutions and their clients before they could be used by criminals 

• Published the Customer Due Diligence (CDD) final rule that requires identification of beneficial owners of legal entity customers, 

subject to certain exemptions and issued four Notice of Proposed Rulemaking (NPRM) actions, including an NPRM regarding 

investment advisers

• Developed over 100 business rules to screen daily BSA filings to identify reports that merit further review for topics of national 

security concern, such as terrorist financing, cyber threats, and financial fraud 

• Issued geographic targeting order (GTO) in Florida that contributed to the arrests and pending arrests of 22 alleged co-conspirators 

in a complex money laundering scheme with ties to the Mexican Sinaloa drug cartel

• Issued several GTOs targeting priority money laundering threats such as tax fraud by identity theft and the movement of U.S. dollar 

cash across the southern border and trade-based money laundering for priority drug trafficking organizations

• Issued a GTO for real estate fraud and laundering the proceeds through all-cash purchases of luxury real estate in Manhattan and 

Miami

• Issued six penalties totaling $8,660,000 against financial institutions in multiple industry groups 

• Issued two actions under Section 311 of the USA PATRIOT Act against foreign financial institutions of primary money laundering 

concern seeking to protect our nation’s financial system from their criminal activities

• Inspected 427 MOU holders and instituted corrective actions, as necessary, to ensure compliance with safeguards on use of BSA 

information

• Continued daily tactical reporting of terrorism-related financial intelligence to law enforcement and foreign partners and began 

direct distribution of such information to the U.S. intelligence community through intelligence information reports (IIRs)

• Issued secure advisories to financial institutions on red flag indicators of illicit financial activities associated with priority threats, 

including cybercrime and Islamic State of Iraq and Levant (ISIL), resulting in additional reporting of suspicious activity

• Used financial intelligence to identify foreign terrorist fighters (FTFs) facilitation networks related to Daesh/ISIL, Al Qaeda, and 

affiliates with a focus on logistic networks and on the information gaps associated with FTF travel 

Actions Planned or Underway

• Continue to issue guidance and actionable advisories to regulated industries, and cooperative efforts with Federal and State 

regulatory agencies to exchange compliance information and leverage examination resources

• Finalize existing rulemaking proposals and develop new regulations, as warranted, to address money laundering risks or gaps in the 

regulatory framework

• Use advanced analytics capabilities to apply predictive models to BSA data and identify high-value targets suspected of laundering 

proceeds of health care fraud, tax fraud by identity theft, and securities fraud

• Publish advanced analytic products identifying illicit finance networks/schemes, and failed institutions or jurisdictions involved in 

illicit financial activities

• Continue to exercise enforcement authorities where appropriate to ensure compliance with the BSA and combat money 

laundering in all sectors of the financial services industry

• Use the BSA Advisory Group to share information by and between industry and government, provide government feedback to 

industry, and discuss the most sensitive and difficult problems facing organizations

OCC
OTHER INFORMATION | FY 2016 AGENCY FINANCIAL REPORT

DEPARTMENT OF THE TREASURY 203

FY 2016 Accomplishments

• Accelerated the pace of interaction and cooperation on cross-border issues relevant to national regulations

• Collaborated with international agencies to study, organize and implement anti-money laundering practices for banks

Actions Planned or Underway

• Continue emphasis on BSA/AML related risks with national banks

• Continue efforts to work with cross border regulators and participate on international working groups

OIG CHALLENGE NO. 4 SUMMARY OF MAJOR ISSUES

Management of Treasury’s Authorities Intended to 

Support and Improve the Economy

Protect the taxpayer from unnecessary risk associated with the 

implementation and administration of programs intended to support and 

improve the economy, including the provisions of the:

- Small Business Jobs Act of 2010

- American Recovery and Reinvestment Act of 2009

- Housing and Economic Recovery Act of 2008

- Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010

- Resources and Ecosystems Sustainability, Tourist Opportunities, and 

Revived Economies of the Gulf Coast States Act of 2012

Continued Implementation of Dodd-Frank

Financial Stability Oversight Council (FSOC)

FY 2016 Accomplishments

• Completed annual reevaluations of previously designated nonbank financial companies

• Monitored the eight financial market utilities designated in 2012 for enhanced risk-management standards and supervision

• Provided a public update on potential risks to our nation’s financial stability arising from asset management products and activities 

and formed a working group to conduct further analysis

Actions Planned or Underway

• Continue identification of nonbank financial companies for designation for supervision by the Federal Reserve and enhanced 

prudential standards

• Continue to evaluate potential risks to our nation’s financial stability arising from asset management products and activities, in 

particular the use of leverage by hedge funds

• Facilitate tabletop exercises to improve coordination among central counterparties in a stress scenario, and identify potential 

operational improvements

• Continue monitoring for potential risks to our nation’s financial stability, with a focus on significant financial market developments 

and structural vulnerabilities affecting the financial system

• Continue to implement operational improvements to existing processes and procedures related to the work of the FSOC

CDFI Bond Guarantee Program

Community Development Financial Institutions Fund (CDFI Fund)

FY 2016 Accomplishments

• Successfully secured $750 million in the FY 2016 appropriation 

• Bonds totaling $265 million were issued on behalf of four CDFIs in FY 2016

• $1.11 billion has been guaranteed since the inception of the CDFI Bond Guarantee Program, which provides long-term, low-cost 

fixed-rate capital for projects in low-income urban, rural, and Native communities

Actions Planned or Underway

• The FY 2017 budget proposal for the CDFI Bond Guarantee Program proposes the following:

o to extend the CDFI Bond Guarantee Program through FY 2017; 

o to reduce the minimum bond size from $100 million to $25 million;

o to permit the Secretary to adjust the risk-share pool payment requirement, based on the borrower’s credit quality, from 

zero to four percent;
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204 DEPARTMENT OF THE TREASURY

o to collect a mandatory one percent fee from all borrowers; and

o to revise the relending account language to correct a technical drafting error.

Small Business Lending Fund and State Small Business Credit Initiative

Small Business Lending Fund (SBLF)

FY 2016 Accomplishments

• Collected $29.593 million quarterly dividends, interest and fees from SBLF participants

• Coordinated and processed full redemptions for 172 institutions and partial redemptions for 17 others totaling $1.95 billion in 

proceeds. Redemptions as of September 30, 2016 represented 48.51% of the original $4.027 billion disbursed and 56.93% of the 

number of institutions that were originally funded.

• Met with federal regulators to review and plan for managing the large increase in 2015/2016 redemptions

• Participants reported $1.1 billion overall increase in qualified small business lending (6/30/16 vs 6/30/15) (Current and former 

participants)

• Participants reported $11.4 billion overall decrease in qualified small business lending (6/30/16 vs 6/30/15) (Current participants)

Actions Planned or Underway

• Outline future needs for staffing and third party contractors as program evolves post-SBLF step up for bank participants

• Work closely with transition team to ensure new senior staffs are informed of the program status

• Identify possible disposition strategies post transition for banks remaining in the SBLF program and begin discussions regarding the 

step up in rates for CDLF participants in 2018

• Continue to work with participants identified for enhanced monitoring

State Small Business Credit Initiative (SSBCI)

FY 2016 Accomplishments

• Received, tested, and transferred a cumulative $1,420 Million to states as they qualified for subsequent disbursements on their 

allocations ($57 Million in fiscal year 2016)

• Conducted on-site compliance reviews or training sessions with six states

• Evaluated and approved 12 formal modifications to states’ approved SSBCI programs

• Organized final national conference of state SSBCI officials hosted by the OCC

• Published Summary of States’ Quarterly Reports (Quarters ending September 2015, December 2015, March 2016)

• Published Summary of States’ 2015 Annual Reports

• Published SSBCI 2016 Program Evaluation Report

Actions Planned or Underway

• Continue to receive, test, and process requests for subsequent disbursements

• Participate in conferences with state officials

• Continue to publish Quarterly Reports and the final Annual Report

• Continue to coordinate responses to audits of states conducted by the OIG

• Conduct an orderly wind down of the SSBCI Program and Office

Office of Housing and Energy (Recovery Act): (under OIG CHALLENGE NO. 2)

Management of Recovery Act Programs 

Office of the Fiscal Assistant Secretary

FY 2016 Accomplishments 

• Managed the low income housing and specified energy property programs, including the extension of the specified energy 

property program by one year under Section 707 of the Job Creation Act, by supplementing a small core staff in Departmental 

Offices with support from other Treasury offices.

• Continued to process incoming applications for the energy program and make timely awards

• Continued an interagency agreement for the energy program with the Department of Energy to assist with the technical aspects of 

the energy program

• Continued an annual reporting process for the low-income housing program to help ensure projects funded under the program 

remain qualified

Actions Planned or Underway

• Continue the compliance monitoring programs related to the low-income housing and specified energy property programs
OTHER INFORMATION | FY 2016 AGENCY FINANCIAL REPORT

DEPARTMENT OF THE TREASURY 205

• Complete the processing of incoming applications for the energy program 

• Continue to coordinate with IRS’s compliance initiative project regarding the energy program

• Continue assessment of staffing needs

Community Development Financial Institutions Fund

FY 2016 Accomplishments

• Closed out all Recovery Act awards

Actions Planned or Underway

• N/A – The CDFI Fund’s Recovery Act obligations have been completed

Management of the Housing and Economic Recovery Act (HERA)

Domestic Finance – Housing Finance Agencies Initiative (under HERA)

FY 2016 Accomplishments 

• The New Issue Bond Program (NIBP) is the only remaining component of the HFA Initiative. It had an outstanding principal balance 

of approximately $6.5 billion as of September 30, 2016, down approximately $1.3 billion from the prior year balance of $7.8 billion, 

and down approximately $8.8 billion from its original balance of $15.3 billion in December 2009 

• During FY2016, Treasury received timely payment of all NIBP principal, interest and fees that were due

• NIBP has a very high credit quality due to the high degree of Federal and federally-related insurance and guarantees of the 

underlying mortgage collateral, as well as significant over-collateralization in the bond indentures. Mortgage revenue bonds of the 

type collateralizing the NIBP portfolio have historically been an extremely safe long-term investment

• All bonds in the NIBP portfolio are rated either in the AAA/Aaa or AA/Aa categories

Actions Planned or Underway

• NIBP has no policy issues or action items to be resolved. The portfolio will be held to maturity. It declined rapidly in FY2016 and 

will continue its steady decline in the coming year 

• Treasury will continue to monitor the financial health and ratings of all NIBP bond issuers and the overall credit quality of the 

mortgage collateral underlying the NIBP bonds

Office of Financial Stability

FY 2016 Accomplishments

• Net collections $56.0 million from investments under the Troubled Asset Relief Program (TARP) through repayments, warrant 

sales, dividends, and interest payments; with these collections Treasury has cumulatively collected 97.8 percent of the $434.0

billion in program funds disbursed under TARP (101.9 percent when non-TARP AIG shares are included)

• Exited seven positions in banks under the Capital Purchase Program (CPP) (as of September 30, 2016 only 12 of the original 707 

institutions remained in the program)

• Exited seven positions in institutions under the Community Development Capital Initiative (CDCI) (as of September 30, 2016 55 of 

the original 84 institutions remained in the program)

• Allocated $2 billion in additional funding to existing Hardest Hit Fund participants in a way designed to maximize the utilization and 

effectiveness of the funds

Actions Planned or Underway

• Implementing the Early Repayment Option for the CDCI; the plan is designed to dispose of a significant percentage of CDCI 

investments at fair value while eliminating longer term credit and market risk exposure from the portfolio

• Preparing for the retirement of the Modified Housing Assistance (MHA) program as the application deadline of December 30, 2016 

approaches; working with stakeholders to influence framework for loss mitigation following the end of MHA

• Managing implementation and oversight of the Hardest Hit Fund program (HHF) to maximize effectiveness and reduce risks 

associated with the $9.6 billion program

Office of Financial Research (OFR)

FY 2016 Accomplishments

• Completed bilateral repurchase and securities lending data collection pilots in collaboration with the Federal Reserve and the 

Securities Exchange Commission (SEC)

• Launched the OFR U.S. Money Market Fund (MMF) Monitor, an interactive online tool that allows the public to track money 

market funds—information that was not easily accessible before
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206 DEPARTMENT OF THE TREASURY

• Enhanced the global Legal Entity Identifier (LEI) system, and launched phase 2 of the program, which will make information about 

complex ownership structures available to the public

• Evaluated vulnerabilities in central clearing and central counterparties

• Launched a programmatic approach that aligns our priorities with our mission and that coordinates our work on data, research, 

and analysis based on the needs of the OFR’s stakeholders and the mandates of the OFR under the Dodd-Frank Act

Actions Planned or Underway

• Partner with the Federal Reserve and the SEC to design and implement a permanent collection for bilateral repo and sec lending 

data

• Develop and publish additional monitors to track risks in hedge funds, asset-return correlations, and credit risks

• Collect data and publish research evaluating vulnerabilities on shadow banking activities and other consequential threats to 

financial stability

• Partner with the Federal Reserve, the Federal Reserve Bank of New York, and industry to explore the creation of a reference rate 

supporting critical financial market contracts

• Expand the programmatic approach beyond the eight identified programs

RESTORE ACT

Office of the Fiscal Assistant Secretary

FY 2016 Accomplishments

• Published RESTORE Act final rule, followed by an amendment (interim final rule) to assist the Gulf Coast Ecosystem Restoration 

Council (Council) manage its administrative expenses effectively and efficiently

• Updated RESTORE Act funding opportunity announcements and frequently asked questions, and modified our OMB-approved 

forms to conform to the final rule and assist eligible entities apply for and receive grants

• Published trust fund estimate tables to reflect the 15-year civil penalty payment schedule, included in the BP consent decree 

arising from the Deepwater Horizon oil spill, to assist eligible entities, the Council, and NOAA plan for the use of trust fund deposits

• Conducted grants management training for 139 state and local staff in 43 of 48 eligible entities, and conducted initial reviews of 

internal controls for 32 of 48 entities and provided technical assistance to ten additional entities

Actions Planned or Underway

• Work with eligible entities to determine ways to plan for and implement projects for ecological and economic restoration in the 

Gulf Coast Region, given the 15-year BP civil penalty payment schedule

• Continue to offer training and technical assistance in various aspects of grants management to entities to assist them in applying 

for and managing grants

• Collaborate closely with the Fiscal Service on RESTORE Trust Fund allocation tables and Automated Standard Application for 

Payments (ASAP) accounts for Treasury RESTORE Act grants, consistent with established policies and procedures
OTHER INFORMATION | FY 2016 AGENCY FINANCIAL REPORT

DEPARTMENT OF THE TREASURY 207

Matters of Concern No. 1 SUMMARY OF MAJOR ISSUES

Currency and Coin Production • BEP needs to ensure that the design and production projects are 

adequately managed to avoid another instance of production 

deficiencies 

• Mint should ensure comprehensive review of U.S. currency to include 

production and use of coins, the use of alternative metals, and the 

sustainability of Mint facilities for production

• BEP and Mint need to consider the effect of alternative payment 

methods and other technological advances on their respective 

business models, practices, future planning and interactions with 

customers and FRB

FY 2016 Accomplishments

Coin Production

• FY 2016 cost of production for the penny increased slightly to 1.50 cents compared to 1.43 cents in FY 2015, while nickel costs 

decreased to 6.32 cents from 7.44 cents. The cost reductions for the nickel were realized primarily due to the decline in the cost of 

metal, which decreased 21%. In spite of a decline in metal costs, penny and nickel costs continue to remain above face value for 

each denomination.

• Seigniorage (difference between the cost of producing a coin and its face value) has been returned to the general fund in the

amount of $550 million for FY 2016. The second consecutive year of returns at this level. 

• Since the second biennial report in December 2014, the Mint continued extensive testing of six different metal compositions, as 

well as initial testing of other materials that showed potential as either seamless or co-circulate alternatives. 

Currency Production

• Single Note Inspection (SNI): Recovered more than 350 million series 2009 notes for a cost savings of $26 million

• Retooling: The Federal Reserve Board and BEP agreed to modify the existing manufacturing process to eliminate the need to 

package notes in serial number numeric sequence and to add a reclamation process to recover good notes from rejected sheets 

using SNI

• Raised Tactile Feature: Developed and tested six denomination schemes with the blind and visually-impaired community; selected 

a final denomination scheme (four-position, binary on/off rectangle)

• Western Currency Facility Expansion: Submitted a proposal to add approximately 250,000 square feet of new space to 

accommodate equipment to add new security features

• Human Capital Strategic Plan: Developed a framework and roadmap for six main areas: Competency Modeling, Workforce 

Planning, STEM Rotational Training, Apprenticeship and Upward Mobility, Leadership Development, and Knowledge Management

Banknote Design and Development Program

• All internal and external stakeholders approved detailed technical requirements for the next family of notes

• Developed an integrated master schedule for the first note of the new family of notes, currently known as the Catalyst $10.=

• Created “low fidelity” concepts for the Catalyst family; held stakeholder workshops to refine the concepts

• Eight new security features moved into the Concept Development phase; three projects moved into the Test and Optimize phase

• Awarded eight new contracts for security feature research and development moving three projects from the Feasibility phase into 

full development

Actions Planned or Underway

Coin Production

• Continue efforts to increase efficiency and control or reduce the cost to manufacture the nation’s coinage 

• Issue the third biennial report to Congress on alternative coinage materials as required in December 2016 

Currency Production

• SNI: Complete the SNI recovery effort of series 2009 notes in FY 2017; an additional 180 million notes are expected to be 

recovered for a cost savings of $14 million

• Implement the SNI reclamation process for both the NXG $100 note at the Western Currency Facility and the NXG $20 note at the

Washington, DC facility; more than 100 million NXG $100 notes and 50 million NXG $20 notes are expected to be reclaimed in FY 

2017 for a savings of more than $8 million
FY 2016 AGENCY FINANCIAL REPORT | OTHER INFORMATION

208 DEPARTMENT OF THE TREASURY

• Raised Tactile Feature: Final selection of the application method and the feature’s location on the note

• Western Currency Facility Expansion: Start design efforts in 2017 with construction commencing in 2018 – 2019

• Human Capital Strategic Plan: Develop technical competency models for priority job series; implement BEP’s workforce planning 

process within a selected Directorate (FY17); operationalize STEM and Career Development programs; establish management 

processes for all active apprenticeship programs

Banknote Design and Development Program

• Finalize low fidelity design concepts and advance into medium fidelity phase

• The Catalyst $10 note remains targeted for production-readiness in 2020

Matters of Concern No. 2 SUMMARY OF MAJOR ISSUES

Documenting Key Activities and Decisions Promote an effective records management program to ensure Treasury 

management personnel remain aware and vigilant

Management (Privacy, Transparency, and Records)

FY 2016 Accomplishments

• Collaborated with the Office of the General Counsel (OGC) and the Office of the Assistant Secretary for Management (OASM) to 

process 29 Treasury Orders and Directives that were due for review

• Developed and delivered focused training and enhanced information management education to employees on core mission areas 

of Privacy, FOIA, and Records Management

• Provided training for 648 new and 260 departing DO employees in records management in FY 2016 

• Collaborated with bureau privacy officers, took actions to ensure that 97 percent of all employees and contractors completed the 

annual Privacy Awareness Training

• Processed two requests for information from European Union (EU) citizens as required by the Terrorist Finance Tracking Program 

agreement between Treasury and the EU

• Reviewed, revised, and approved eight DO Privacy and Civil Liberties Impact Assessments, 17 DO Privacy Act Systems of Records 

Notices, and 16 Computer Matching Agreements

Actions Planned or Underway

• Continue to collaborate with the OCIO on privacy and transparency issues; particularly in development, certification, and 

implementation of the Capstone email software system to meet the December 31, 2016 deadline for electronically managing email

• Continue to update our records management policies and processes to implement requirements of M-12-18 which include 

developing and issuing a records management strategic plan

• Continue to update Treasury Orders and Directives that are due for review in FY 2017

• Continue to update our FOIA policies and processes to incorporate recent changes to FOIA, including DOJ’s “Release to One, 

Release to All” policy, expected January 2017 and Treasury’s FOIA regulations

• Continue to focus on records management education for new and departing employees in FY 2017
OTHER INFORMATION | FY 2016 AGENCY FINANCIAL REPORT

DEPARTMENT OF THE TREASURY 209

Matters of Concern No. 3 SUMMARY OF MAJOR ISSUES

Enterprise Risk Management (ERM) • Implement guidance to establish a comprehensive and effective 

ERM program

• Implement an ERM capability to integrate strategic planning and

review processes and internal control processes.

Office of Risk Management

FY 2016 Accomplishments

• Held regular discussions of major risk issues with senior leaders at the Treasury Risk Management Committee (co-chaired by the 

Deputy Secretary and the Chief Risk Officer (CRO) and members include Under Secretaries and Assistant Secretaries), that have led 

to follow-up work and deliverables to help mitigate the risks discussed 

• Created a community of practice Treasury-wide through the Enterprise Risk Management Council (chaired by the CRO) to discuss 

ERM and share best practices across all the bureaus 

• Worked closely with OMB on the development of Circular A-123 revisions to incorporate ERM

• Lead in writing “Playbook: Enterprise Risk Management for the U.S. Federal Government”, a helpful guide for agencies to help 

them implement ERM and the requirements of OMB Circular A-123

• Worked with Management to integrate a risk landscape slide discussion into the Quarterly Performance Reviews (QPR)

• Worked with Management on the Strategic Objective Annual Review (SOAR) process

• Worked with the CDFI Fund on model risk management as well as sitting on its Credit Review Board

• Co-chaired the Fiscal High Value Asset Executive Oversight Council to provide oversight and counsel on our most important mission 

critical functions.

• Consulted with several offices in Treasury on specific risk management questions

Actions Planned or Underway

• Continue development of a Treasury-wide ERM Playbook

• Continue working with offices to produce risk profiles which will be used to develop a Treasury-wide risk profile

• Continue Treasury Risk Management Committee and ERM Council meetings in the next administration

• Continue to work with other agencies to help them develop ERM programs by developing an interagency community of practice 

for risk management who will meet on a bimonthly basis
FY 2016 AGENCY FINANCIAL REPORT | OTHER INFORMATION

210 DEPARTMENT OF THE TREASURY

TIGTA CHALLENGE NO. 1 SUMMARY OF MAJOR ISSUES

Security Over Taxpayer Data and Protection of IRS 

Resources

Promote measures for safeguarding the confidentiality of taxpayer 

financial and personal data, and ensuring the protection of IRS 

employees and property

FY 2016 Accomplishments

• Created a new executive position which has the responsibility for leading the development of a strategy to provide consistent

oversight of all authentication needs across IRS functions and programs 

• Established two new offices to provide project management oversight for email policy and archiving implementation and to bring 

the IRS into compliance with the Code of Federal Regulations for records management of email by January 2017 and other 

permanent e-records by January 2020 as required by OMB Memorandum M-12-18, Managing Government Records Directive

• Leveraged National Institute of Standards and Technology (NIST) standards to ensure that implemented authentication processes

used for all current and future online applications provide the required level of assurance for the determined level of 

authentication risk 

• Established a new IRS organization within Cyber Operations with responsibility for monitoring protected applications to detect and 

prevent automated attacks. Conducted monthly meetings between the IRS and the contractor related to the prevention of 

automated attacks, tools in use, and the procedures implemented by the contractor in the use of these tools to prevent automated 

attacks 

• Built refinements into current processes to identify all individuals affected by the Get Transcript application incident and 

developed procedures to assist the IRS in responding to any future unauthorized data accesses

• Mailed notification letters to additional identified taxpayers affected by the Get Transcript application incident and placed their 

accounts on the Dynamic Selection List for heightened levels of identity theft protection on any subsequently filed returns, and 

placed Data Loss Indicators on the accounts 

• Updated policy and developed procedures for monitoring the inventory of external interconnections with financial institutions, 

which included developing a new combined Memorandum of Understanding (MOU)/Interconnection Security Agreement (ISA) 

template to ensure that newly developed ISAs have the same expiration dates for both the MOU and ISA components 

• Collaborated with the Federal Protective Service (FPS) and the TIGTA to improve the safety and security of IRS facilities and

personnel by delivering site-specific, in-person security briefings to employees, holding more than 150 briefings 

Actions Planned or Underway

• Develop major milestones and project plans to upgrade email servers and email archiving functionality, and configure retention 

policies to implement an IRS email records management policy 

• Establish process improvements in the development of ISA with financial institutions and IRS maintenance of the centralized 

interconnections inventory; and update policy and procedures, as needed, to document ISAs’ organizational standards and 

procedures to ensure effective process improvements and efficiencies

• Review the e-Authentication risk assessment process to ensure that the level of authentication risk for all current and future IRS 

online applications accurately reflects the risk to the IRS and taxpayers should an authentication error occur

• Provide Security Specialists with the tools and training needed to monitor and analyze large amounts of data to strengthen 

electronic authentication process controls

TIGTA CHALLENGE NO. 2 SUMMARY OF MAJOR ISSUES

Identity Theft and Impersonation Fraud Impact of tax-related identity theft on tax administration

FY 2016 Accomplishments

• Collaborated with State and City Departments of Revenue of 39 states and the District of Columbia to expand the State Suspicious 

Filer Exchange to include suspicious or potentially fraudulent business tax returns 

• Implemented two new rules designed to identify potential misuse of Employer Identification Numbers (EINs) on Form 1120, U.S. 

Corporation Income Tax Return filings. During 2016, these filters identified 740 returns with refund claims of over $74.3 million

• Created a “Tax Practitioner Guide to Business Identity Theft” that informs tax professionals about the risks of business identity 

theft, how they can help their business clients navigate the process of protecting their information from misuse, and who to 

contact if they suspect their business’s identity has been stolen 

• Collaborated with Security Summit participants to implement additional safeguards to protect taxpayers’ federal and state tax

accounts from identity thieves

• Promoted events designed to educate private sector entities, law enforcement partners, and taxpayers about identity theft and tax 

scams
OTHER INFORMATION | FY 2016 AGENCY FINANCIAL REPORT

DEPARTMENT OF THE TREASURY 211

• Participated in outreach presentations focused on theft from tax preparation and payroll service businesses and issued identity 

theft communications via news releases, Tax Tips, and social media platforms

Actions Planned or Underway

• Complete programming changes that will permit the systemic locking of suspicious business tax accounts associated with 

suspicious EINs and update procedures to recognize the improved account lock-down capability 

• Engage tax software developers and the tax preparer community to identify additional data elements from individual and 

corporate tax returns to improve taxpayer authentication and identify possible identity theft scams

• Implement additional improvements to Business Master File (BMF) identity theft filters for Form 1120, U.S. Corporation Income Tax 

Return, and Form 1041, U.S. Income Tax Return for Estates and Trusts

• Identify areas for improvement and take additional actions to increase awareness of business identity theft 

TIGTA CHALLENGE NO. 3 SUMMARY OF MAJOR ISSUES

Implementing the Affordable Care Act and Other Tax Law 

Changes 

Effectively implement new tax provisions, including tax-related health 

care provisions of the Patient Protection and Affordable Care Act (ACA), 

and the American Recovery and Reinvestment Act (Recovery Act)

FY 2016 Accomplishments

• Developed and distributed education and outreach materials for employers, tax professionals, and taxpayers, which included 

employer webinars, news updates via social media, information returns, and ACA tax provision requirements related to return 

filing and the PTC

• Identified non-filers of the Medical Device Excise Tax using publicly available data from the Food and Drug Administration and 

Customs and Border Protection and mailed notices to a sample of taxpayers to evaluate the impact of the notices on compliance

• Reconciled the Exchange Periodic Data to the Centers for Medicare and Medicaid Services records of disbursements paid to the 

marketplace insurance companies

• Ensured adherence to established standards and guidelines during financial systems testing of the Individual Income Tax Credits 

report and APTC and PTC reconciliation reports through increased monitoring 

• Performed improper payment risk assessments, in conjunction with the Department of Health and Human Services (HHS), to 

identify areas that might affect the APTC, PTC, Cost Sharing Reduction, and Basic Health Program payment accuracy and 

determined the risk was medium 

• Established internal controls to enable and monitor effective program operations, reliable financial reporting, and compliance with 

laws and regulations 

Actions Planned or Underway

• Ensure adherence to established standards and guidelines during financial systems testing of the Individual Income Tax Credits 

report and APTC and PTC reconciliation reporting through increased monitoring

• Analyze tax year 2015 data to identify potential “stop filers” – taxpayers who filed in prior years but not in 2015 – and develop a 

plan to test options to bring taxpayers into compliance

• Implement recommendations from the risk assessment study to strengthen controls around the PTC program

TIGTA CHALLENGE NO. 4 SUMMARY OF MAJOR ISSUES

Improving Tax Compliance Improve compliance and fairness in the application of the tax laws

FY 2016 Accomplishments

• Evaluated field collection revenue officers’ level of burden for case inventories by measuring volume and complexity and 

determined they were operating at the maximum productivity level based on current Internal Revenue Manual (IRM) guidelines for 

case assignments

• Applied the Bi-Partisan Budget Act (BBA) of 2015 to FY 2013 filing data to analyze partnership data for the purposes of 

understanding the number of partnership structures affected and to determine the potential effect on the partnership 

examination process

• Revised Federal Tax Deposit (FTD) soft notices into three versions designed to be more specifically related to the different types of 

change in deposits or deposit penalty assessment that are identified in the selection process. This improvement will ensure earlier 

contact with taxpayers who are predicted to owe taxes at the end of the quarter, which will in turn encourage greater taxpayer 

response rates and reduce the amount of dollars owed when the taxpayer actually enters accounts receivable. The revised letters 

also allow for flexibility with regard to “call-back” information, making it a lower cost option by reducing the impact on IRS 

resources
FY 2016 AGENCY FINANCIAL REPORT | OTHER INFORMATION

212 DEPARTMENT OF THE TREASURY

• Developed recommendations to improve backup withholding compliance and oversight under IRC section 3406

• Implemented compliance programming to capture and track the volume of taxpayers subject to a Refund Hold in one year and who 

file their tax returns in the following five years 

Actions Planned or Underway

• Test the lower cost FTD soft notices treatment using notices without “call back” information and measure the results as compared 

to the notices that require a call back response or a response by correspondence

• Implement the Field Inventory Process Improvement Team project. This Future State pilot will explore opportunities to increase 

revenue officers’ productivity by testing three different inventory selection and assignment processes

• Establish an implementation plan for enforcing backup withholding processes after approval of final recommendations 

• Add future-filing compliance programming to capture and track the volume of taxpayers who are subject to a Refund Hold when 

complete data is available for TY 2015 filers

• Revise the non-filer strategy to include improving the effectiveness of non-filer notices in order to reach more taxpayers and 

improve the overall notice response rate 

• Perform a detailed evaluation of return delinquency notice metrics to define and determine notice effectiveness, and utilize notice 

response data and notice effectiveness research results to develop a strategy specific to return delinquency notice effectiveness. 

The analysis will include results stratified by non-filer priority. The IRS will also ensure the strategy aligns with Future State themes 

and will include key non-filer metrics in appropriate Enterprise goals 

TIGTA CHALLENGE NO. 5 SUMMARY OF MAJOR ISSUES

Reducing Fraudulent Claims and Improper Payments Effective protection of taxpayer funds

FY 2016 Accomplishments

• Developed a way to measure how paid return preparers respond to IRS efforts to curb erroneous and fraudulent earned income 

tax credit (EITC) claims in order to identify the most effective approaches for outreach and compliance

• Analyzed identity theft return information from filing season 2015, resulting in the conclusion that the volume of confirmed and 

likely identity theft with a foreign address is an extremely low percentage of the total identity theft population - a determination 

that will assist the IRS in better evaluating refund fraud trends and improving fraud filter performance

• Implemented two new rules designed to identify potential misuse of EINs on Form 1120, U.S. Corporation Income Tax Return filings

• Conducted a W-2 Verification Code (VC) pilot for filing season 2016 with four payroll service providers, which tested the capability 

of a VC to confirm the integrity of Form W-2 data

• Developed a revised risk assessment questionnaire that better reflected IRS business processes and more accurately assessed the 

risk of improper payments for the IRS refundable credits 

Actions Planned or Underway

• Administer Public Law 114-113, Protecting Americans from Tax Hikes (PATH), by incorporating paid preparer returns claiming the 

American Opportunity Tax Credit, Child Tax Credit, and Additional Child Tax Credit into a combined Refundable Credits Return 

Preparer program to reduce improper payments and erroneous claims filed by preparers who fail to exercise due diligence

• Continue implementing improvements to BMF identity theft filters for Form 1120, U.S. Corporation Income Tax Return and Form 

1041, U.S. Income Tax Return for Estates and Trusts

• Monitor known bad EINs and addresses and cross-reference Social Security Numbers to identify and neutralize the misuse of EINs

• Increase the scope of the W-2 VC pilot in filing season 2017 by increasing the number of W-2s in the pilot to about 50 million forms 

and types of W-2 issuers to include additional payroll service providers and a large federal organization
OTHER INFORMATION | FY 2016 AGENCY FINANCIAL REPORT

DEPARTMENT OF THE TREASURY 213

TIGTA CHALLENGE NO. 6 SUMMARY OF MAJOR ISSUES

Improving Tax Systems and Expanding Online Services Modernize taxpayer systems and improve efficiency of operations

FY 2016 Accomplishments

• Deployed several Customer Account Data Engine 2 (CADE 2) Transition State 2 projects for filing season 2016, which: allowed a

more effective way to record and retain taxpayer history; corrected and automated failure to pay calculations for the adjusted 

refundable credits; and aggregated and provided taxpayer data to downstream systems across the IRS

• Enhanced the capability to detect and block fraud in real-time by integrating other web-facing applications, including the Return 

Review Program, to determine an individual taxpayer risk profile and detect possible fraudulent usage 

• Created the capability to stream e-Authentication log data to the Cybersecurity Data Warehouse for fraud analysis

• Established goals and implemented performance measures to determine the effectiveness of the backup and restoration process 

for selected non-mainframe servers that perform various functions, including: running various operating systems such as versions 

of Microsoft Server, Linux, and UNIX; operating as servers for databases, the web, e-mail, and files; and supporting the IRS network 

infrastructure. Employed selected measures to ensure performance was consistent with stated goals

• Reviewed all network server backup and restoration problem management cases to ensure adherence to the problem 

management process and identified and remediated root causes. Briefed all employees on the proper use of the problem 

management processes 

• Released the Future State vision for modernizing taxpayer service and enforcement, and prioritized investments in online accounts 

and other digital capabilities aligned with the vision

Actions Planned or Underway

• Leverage the CADE 2 database for all individual taxpayer account data and generate data necessary to build financial and legal 

transcripts

• Focus on the financial material weakness for individual taxpayer accounts in the Individual Master File (IMF)

• Implement the data services framework to provide CADE 2 data to downstream systems via modernized data distribution services, 

providing legacy and modernized data formats

• Establish a foundation for a modernized individual tax-processing engine by reengineering core IMF posting, settlement, and 

analysis functions into Java-based programs

• Establish updated access authorization documentation for the Integrated Production Model (IPM) in each of the source systems 

and conduct an annual validation of IPM service accounts 

• Upgrade the network server backup software to the most current version, contingent upon funding. Maintain alignment with IRS 

processes and procedures to assess, prioritize, and implement upgrades intended to ensure the IRS continues to use the most 

current version of the software 

• Develop guidelines for the Infrastructure Currency initiative in order to capture repeatable processes and identify instances in 

which those processes correlate with efforts to assess, prioritize, and implement upgrades intended to ensure the IRS continues to 

use the most current version of the software

• Develop an Online Account that builds upon several stand-alone tools on IRS.gov such as Get Transcript, Direct Pay, and Online 

Payment Agreement.

TIGTA CHALLENGE NO. 7 SUMMARY OF MAJOR ISSUES

Providing Quality Taxpayer Service Operations Improve taxpayer service

FY 2016 Accomplishments

• Aligned projects and investments with the Future State vision, and identified new opportunities to improve taxpayer service and 

compliance using digital services and other Future State capabilities

• Added five new topics to the Interactive Tax Assistant on IRS.gov for the 2016 filing season: Taxes Schedule A, Retirement 

Contribution Credit, Tip Income, Child and Dependent Credit, and Scholarships, Fellowships, and Grants

• Promoted the availability of self-service options for taxpayers by educating taxpayers using traditional service channels, social 

media, videos, and public service announcements

• Transitioned additional Taxpayer Assistance Centers (TACs) to the appointment-based model, increasing the number of TACS that 

operate using appointments for walk-in service, which has resulted in significant reductions in wait time 

• Increased the number of partners with Virtual Service Delivery (VSD) capability, which provides face-to-face service to taxpayers in 

non-TAC locations

• Identified a test location for placement of VSD in a Social Security Administration (SSA) office and began exploring techniques that 

will allow the SSA and the IRS video networks to connect securely
FY 2016 AGENCY FINANCIAL REPORT | OTHER INFORMATION

214 DEPARTMENT OF THE TREASURY

Actions Planned or Underway

• Educate and encourage taxpayers to use alternative services with a special emphasis on any changes dictated by recent 

Congressional requirements and the IRS' Future State initiatives

• Provide appointment service at the remaining TACs by the end of calendar year 2016 

• Communicate best practices and strategies for resource optimization in the delivery of the Volunteer Income Tax Assistance and 

Tax Counseling for the Elderly programs

• Assess current procedures to develop a consistent process related to the Automated Age Listing, which identifies cases needing 

immediate attention 

• Notify taxpayers when the IRS has reason to believe they may be victims of employment-related identity theft and subsequently 

evaluate the results to determine an appropriate course of action with respect to the previously identified potential victims 

• Develop processes to ensure that examiners complete the Form 9409, IRS/SSA Wages Worksheet, when required, and to 

appropriately track the delivery of Forms 9409 to the Social Security Administration

TIGTA CHALLENGE NO. 8 SUMMARY OF MAJOR ISSUES

Impact of Global Economy on Tax Administration Increase the outreach efforts to foreign governments on cross-border 

transactions

FY 2016 Accomplishments

• Updated the Foreign Account Tax Compliance Act (FATCA) Compliance Roadmap with activities for identifying non-compliance by 

Foreign Financial Institutions 

• Conducted outreach and education to address errors made by paid preparers on Form 1116, Foreign Tax Credit (FTC), and 

presented the topic at the 2016 National Tax Forums in an effort to educate as many paid tax practitioners as possible

• Implemented controls related to Form 1116 by programming a new error code, updating policy and procedures to include 

instructions on processing the form, and updating the 2016 Coding and Editing Individual Income Tax Returns Training

• Deployed enhancements to the FATCA registration system, which included enabling foreign financial institutes to provide a 

sponsoring entity a Global Intermediary Identification Number , and to manage sponsored entities and sponsored subsidiary 

branches, and enabled an automated process for Financial Institutions (FIs) to update their registration status and to change FI 

types and/or transfer under a new lead FI

• Investigated counter-terrorism referrals identified through the course of normal compliance activity, including investigations 

related to the use of charitable organizations suspected of knowingly being involved in illicit financing of terrorist activities

• Conducted awareness and training programs for employees on how to recognize and understand indicators of the misuse of 

charities to fund terrorism, and participated in the Financial Action Task Force (Mutual Evaluation of the United States relating to 

U.S. efforts in the counter-terrorism arena)

• Reviewed withdrawn or denied offshore voluntary disclosure requests to determine if the IRS adequately addressed the tax 

noncompliance of taxpayers who were denied entry to or withdrew from the Offshore Voluntary Disclosure Program (OVDP) 

• Conducted weekly reviews of all denied and withdrawn OVDP applications from the date of receipt to ensure any taxpayer 

information that was erroneously received was immediately routed to the appropriate unit 

Actions Planned or Underway 

• Use referrals to investigate tax-exempt entities related to counterterrorism matters and, if applicable, move those referrals into 

the larger national security arena

• Work closely with the FBI’s Terrorist Financing Operations Section to identify those funding terrorist activities through the 

use/abuse of charitable organizations

• Provide project management support to the Organization for Economic Co-operation & Development (OECD) Global Forum 

Secretariat as the Common Transmission System (CTS) project begins, and work with the International Data Exchange System 

(IDES) vendor to determine steps necessary to transition from an IDES-only environment to one where IDES is complemented by 

CTS to ensure system compatibility and that the U.S. can fulfill its treaty obligations in a safe and efficient manner

• Explore opportunities to review future denied or withdrawn offshore voluntary disclosure requests for compliance actions 

• Monitor and adhere to established timeliness guidelines for taxpayers to respond to offshore voluntary disclosure-related 

correspondence and follow those guidelines during the initial eligibility determination, case building, and certification processes
OTHER INFORMATION | FY 2016 AGENCY FINANCIAL REPORT

DEPARTMENT OF THE TREASURY 215

TIGTA CHALLENGE NO. 9 SUMMARY OF MAJOR ISSUES

Protecting Taxpayer Rights Apply the tax laws fairly

FY 2016 Accomplishments

• Provided guidance to Automated Collection System Support (ACSS) sites to conduct research for a new taxpayer address when the

lien notice envelope shows multiple reasons for return

• Revised IRM 5.10.4, Seizure and Sale, Actions Prior to Sale, for advertising the sale of seized property and issued a memorandum to 

all Field Collection and Property Appraisal Liquidation Specialist Group Managers and Revenue Officers reminding them of their 

responsibility to follow IRM 5.10.4.8 (5), which explains the process for documenting revisions to the fair market value

• Expanded the Suspicious Filer Exchange to include 43 states and 6 municipalities whereby the IRS and states share information for 

confirmed identity theft and questionable returns through secure data transfers, for use with filter and authentication processes

• Utilized data from examination closure results to foster a culture of data-driven decision making to improve examination processes 

and procedures, assess training needs, and improve case selection models

• Established a process to expedite the sharing of significant tax incidents or threats amongst Security Summit partners

• Incorporated the Taxpayer Bill of Rights in employee training

Actions Planned or Underway 

• Develop data elements for business returns so that the Tax Software Industry may provide suspicious business return information

• Provide federal and state tax agencies data fields for use in identifying suspicious tax returns

• Test the address verification research procedures for effectiveness and revise IRM 5.19.6, Liability Collection, ACS Support, to align 

with the test findings and clarify the procedures, as needed

• Revise IRM 5.12.7, Notice of Lien Preparation and Filing, and IRM 5.19.4, Enforcement Action, to clarify procedures for identifying 

the address of the secondary taxpayer when requesting Notice of Federal Tax Liens on joint liabilities 

• Revise IRM 5.19.6.17.4(5), Undeliverable Notice of Federal Tax Lien, to reflect the language found in IRM 5.12.6.3.17(7), Processing 

Lien Collection Due Process Notices Returned by the USPS

TIGTA CHALLENGE NO. 10 SUMMARY OF MAJOR ISSUES

Achieving Program Efficiencies and Cost Savings Use resources to focus on producing the best value for stakeholders

FY 2016 Accomplishments

• Collaborated with FPS to develop a process to obtain current and future FPS Facility Security Assessments (FSA) for IRS facilities; 

determined that IRS Security Staff would obtain copies of the FSAs and continue to conduct risk assessments in IRS occupied 

facilities, integrating the FPS FSA findings in risk assessments and revalidation processes 

• Collaborated with DOD and BFS to expand the use of the Federal Payment Levy Program (FPLP) and determined there were needed 

programming changes to exclude disability payments from the military retirement payment file

• Integrated the Enterprise Software Governance Board governance and executive review process into the Infrastructure Executive

Steering Committee’s standard operating procedures for mainframe software licensing as part of the process to identify additional 

savings in software spending

• Established a Risk Acceptance Form and Tool directory, which provides a consistent framework for the IRS to document business 

decisions in the context of risk appetite and/or acceptance 

• Developed examples of key risk indicators for four enterprise risk themes

• Completed a performance measures report that identifies cost and revenue data for IRS notices to help determine total costs of 

programs

• Implemented a requirement that training events with the same course material provided at the same location and for the same 

dates be approved and reported as one event 

• Centralized the retention of the final cost, approval, and reporting information for events with expenses exceeding $20,000 to 

ensure that information is accurate and available to meet Treasury Department and IRS requirements 

Actions Planned or Underway 

• Implement military payments in the FPLP upon notification of the DOD’s programming changes

• Develop podcasts to foster awareness of Enterprise Risk Management for all IRS employees
FY 2016 AGENCY FINANCIAL REPORT | OTHER INFORMATION

216 DEPARTMENT OF THE TREASURY

SECTION E: SUMMARY OF FINANCIAL STATEMENT AUDIT AND 

MANAGEMENT ASSURANCES

SUMMARY OF FINANCIAL STATEMENT AUDIT

Audit Opinion: Unmodified

Restatement: No

Material Weakness

Beginning 

Balance New Resolved Consolidated Ending Balance

Material Weakness in Internal Control 

Over Financial Reporting at the IRS 1 0 0 0 1

Total Material Weaknesses 1 0 0 0 1

SUMMARY OF MANAGEMENT ASSURANCES

EFFECTIVENESS OF INTERNAL CONTROL OVER FINANCIAL REPORTING (FMFIA § 2)

Statement of Assurance: Modified

Material Weakness

Beginning 

Balance New Resolved Consolidated Reassessed

Ending 

Balance 

IRS – Unpaid Tax Assessments 1 1 0 0 0 0 1

EFFECTIVENESS OF INTERNAL CONTROL OVER OPERATIONS (FMFIA § 2) 

Statement of Assurance: Modified

Material Weaknesses

Beginning 

Balance New Resolved Consolidated Reassessed

Ending 

Balance 

Bureau of the Fiscal Service – Control 

Deficiencies in the Processes used to 

Prepare the Consolidated Governmentwide Financial Statements2 1 0 0 0 0 1

Total Material Weaknesses 1 0 0 0 0 1

CONFORMANCE WITH FINANCIAL MANAGEMENT SYSTEM REQUIREMENTS (FMFIA § 4)

Statement of Assurance: Federal Systems conform to financial management system requirements

Non-Conformances

Beginning 

Balance New Resolved Consolidated Reassessed

Ending 

Balance 

Total non-conformances 0 0 0 0 0 0

COMPLIANCE WITH SECTION 803(a) OF THE FEDERAL FINANCIAL MANAGEMENT IMPROVEMENT ACT 

(FFMIA)

Agency Auditor

1. Federal Financial Management System Requirements Lack of compliance noted

2. Applicable Federal Accounting Standards Lack of compliance noted

3. USSGL at Transaction Level No lack of compliance noted

 

1 GAO, Financial Audit: IRS’ Fiscal Years 2015 and 2014 Financial Statements, GAO-16-146 (Washington, D.C.: November 12, 2-15) 2 GAO, Financial Audit: U.S. Government’s Fiscal Years 2015 and 2014 Consolidated Financial Statements, GAO-16-357R (Washington, D.C.: February 25, 

2016)
OTHER INFORMATION | FY 2016 AGENCY FINANCIAL REPORT

DEPARTMENT OF THE TREASURY 217

TREASURY’S MATERIAL WEAKNESSES

FMFIA AND FFMIA REQUIREMENTS

The Federal Managers’ Financial Integrity Act (FMFIA) requires agencies to establish and maintain internal control to 

ensure that Federal programs operate efficiently, effectively, and in compliance with laws and regulations. The Secretary 

must evaluate and report annually on (a) whether there is reasonable assurance that the Agency’s controls are achieving 

their intended objectives and (b) material weaknesses in the Agency’s controls (FMFIA Section 2). Additionally, the 

Secretary must evaluate and report separately on whether the Agency’s financial management systems comply with 

government-wide requirements (FMFIA Section 4). The Federal Financial Management Improvement Act of 1996 

(FFMIA) requires agencies to implement and maintain management systems that substantially comply with Federal 

financial management systems requirements. The requirements of the FMFIA serve as an umbrella under which other 

reviews, evaluations, and audits should be coordinated and considered to support management’s assertion about the 

effectiveness of internal control over operations, financial reporting, and compliance with laws and regulations.

As of September 30, 2016, we had two material weaknesses under Section 2 of the FMFIA, summarized as follows:

Summary of FMFIA Material Weaknesses Section 2 Section 4 Total

Balance at the Beginning of Fiscal Year 2016 2 0 2

Closures/Downgrades during Fiscal Year 2016 0 0 0

Reassessed during Fiscal Year 2016 0 0 0

New Material Weakness Declared during Fiscal Year 2016 0 0 0

Balance at the End of Fiscal Year 2016 2 0 2
FY 2016 AGENCY FINANCIAL REPORT | OTHER INFORMATION

218 DEPARTMENT OF THE TREASURY

Below are highlights of Treasury’s two material weaknesses:

Material Weakness Highlights

INTERNAL REVENUE SERVICE – Improvements needed in internal control over unpaid tax assessments. 

SUMMARY: GAO identified control deficiencies that affected IRS’ management and reporting of unpaid tax assessments. GAO reported 

that (1) IRS’ reported balances for taxes receivable and other unpaid tax assessments were not supported by its core general ledger 

system for tax transactions; (2) system deficiencies in IRS’ subsidiary ledger and supporting financial systems for unpaid tax assessments 

did not allow it to produce reliable and useful information with which to manage and report; and (3) various other control deficiencies 

that led to errors in taxpayer accounts. 

Because of these deficiencies, IRS’ financial systems currently do not provide the accurate and complete transaction-level financial 

information necessary to enable IRS to reliably classify and report unpaid tax assessment balances in accordance with federal 

accounting standards. The material weakness in internal control over unpaid tax assessments was primarily caused by financial system 

limitations and errors in taxpayer accounts that rendered IRS’ systems unable to readily distinguish between taxes receivable, 

compliance assessments, and write-offs in order to properly classify these components for financial reporting purposes.

GAO RECOMMENDATION: The IRS Commissioner should direct the appropriate IRS officials to establish and implement formal policies 

and procedures to annually review unpaid tax assessments that are manually classified to determine whether the classification is 

correct for the current fiscal year.

Actions Completed in FY 2016 What Remains to be Done

 Completed the FY 2015 “After the Audit” report and 

issued the results to the business owners for follow-up 

and corrective action

 The IRS continuously updated a series of long-term 

actions intended to address all issues impacting the 

material weakness which, based on funding, will be 

integrated into the unpaid assessments material 

weakness action plan

 Ten action items from the remediation plan were closed 

and eight added

 Under CADE2 TS2, implemented a pending payment 

project as part of a multi-phase approach that will allow 

IRS to utilize payments that have been received, but not 

posted

 Implement action items from the long-term action plan 

to close the material weakness

 Implement CADE2 TS2 financial material weakness 

functionality by January 2019

 Test for downgrade of the financial material weakness in 

FY 2019 and request downgrade by GAO for FY 2020 with 

a target completion date of November 30, 2020

 Complete the downgrade and closure of the material 

weakness in FY 2021
OTHER INFORMATION | FY 2016 AGENCY FINANCIAL REPORT

DEPARTMENT OF THE TREASURY 219

Material Weakness Highlights

BUREAU OF FISCAL SERVICE – Improvements needed in controls over the processes used to prepare the U.S. Consolidated Financial 

Statement (CFS).

SUMMARY: GAO identified control deficiencies in Treasury's and OMB’s processes used to prepare the CFS. These control 

deficiencies contributed to material weaknesses in internal control that involve the federal government's inability to 

• adequately account for and reconcile intragovernmental activity and balances between federal entities;

• reasonably assure that the CFS are (1) consistent with the underlying audited entities' financial statements, (2) properly 

balanced, and (3) in accordance with U.S. generally accepted accounting principles;

• reasonably assure that the information in the (1) Reconciliations of Net Operating Cost and Unified Budget Deficit and (2) 

Statements of Changes in Cash Balance from Unified Budget and Other Activities is complete and consistent with the 

underlying information in the audited entities' financial statements and other financial data;

• verifying the accuracy of certain data transfers of federal entity-reported financial data used in the CFS preparation process; 

and

• determining whether user accounts already exist before establishing or recertifying user accounts in certain federal financial

systems used in the CFS preparation process to help ensure that users are not assigned incompatible roles.

GAO RECOMMENDATIONS:

1. The Secretary of the Treasury should direct the Fiscal Assistant Secretary to develop and implement sufficiently detailed 

procedures, including ensuring the independence of information used in data reconciliations, to verify the accuracy of data 

transfers of federal entity-reported financial data used in the CFS preparation process.

2. The Secretary of the Treasury should direct the Fiscal Assistant Secretary to develop and implement procedures to 

determine whether user accounts already exist before establishing or recertifying user accounts in the Government-wide 

Treasury Account Symbol Adjusted Trial Balance System or Government-wide Financial Report System.

Actions Completed in FY 2016 What Remains to be Done

 Monitored the root cause analysis and corrective 

action plans provided by federal entities for any 

recurring intergovernmental differences

 Expanded the monitoring of intergovernmental 

differences to additional federal entities to ensure 

sufficient coverage of material items

 Collected data from all identified reporting entities 

and/or showed their data was immaterial

 Outlined the procedures for obtaining audit coverage 

over a newly identified significant entity or newly 

identified material line items in the year they become 

significant

 Expanded on the robust remediation plan that was 

developed in FY 2015 to highlight the interim 

milestones and identify outcome measures to help 

track and maintain progress

 Obtain independent audit assurance on the General 

Fund of the U.S. Government

 Demonstrate that the legal contingencies fairly 

represent the amount of legal payments made during 

a fiscal year

 Document the process of gathering the list of treaties 

and international agreements in the U.S. Government 

and put a process in place to ensure that each agency 

is properly reporting in their agency AFR

 Work with federal entities to report criminal debt for 

inclusion in the government-wide financial statements

 Partner with FASAB to revise the federal entities’ 

Reconciliation of Net Cost of Operations to Budget

footnote to assist Treasury in demonstrating the 

consistency to audited entities’ financial statements 

when preparing the Reconciliation of Net Operating 

Cost and Unified Budget Deficit

 Monitor a new monthly cash reconciliation to show 

completeness for both statements: the Reconciliation 

of Net Operating Costs and Unified Budget Deficit and 

the Statements of Changes in Cash Balance from 

Unified Budget and Other Activities
FY 2016 AGENCY FINANCIAL REPORT | OTHER INFORMATION

220 DEPARTMENT OF THE TREASURY

SECTION F: IPIA (AS AMENDED BY IPERA AND IPERIA) REPORTING 

DETAILS

Our FY 2016 Improper Payments Information Act Report includes information required by the Improper Payments 

Information Act of 2002 (IPIA) as amended by IPERA and IPERIA, Executive Order 13520, Reducing Improper Payments 

and Eliminating Waste in the Federal Government, OMB Circular A-123, Management’s Responsibility for Enterprise 

Risk Management and Internal Control, Appendix C, Requirements for Effective Estimation and Remediation of Improper 

Payments and OMB Circular A-136.

I. RISK ASSESSMENT

Each year, we develop a comprehensive inventory of the funding sources for all programs and activities and distribute it to 

our bureaus and offices. The bureaus and offices must perform risk assessments at the payment type level (e.g., payroll, 

contracts, vendors, travel, etc.). Our risk assessment process follows the nine risk factors outlined in OMB Circular A-123, 

Appendix C. The factors considered in the determination of risk levels include:

• Whether the program or activity reviewed is new to the agency

• The complexity of the program or activity reviewed, particularly with respect to determining correct payment amounts

• The volume of payments made annually

• Whether payments or payment eligibility decisions are made outside of the agency, for example, by the State or local 

government, or a regional Federal office

• Recent major changes in program funding, authorities, practices, or procedures

• The level, experience, and quality of training for personnel responsible for making program eligibility determinations 

or certifying that payments are accurate

• Inherent risks of improper payments due to the nature of agency programs or operations

• Significant deficiencies in the audit reports of the agency including, but not limited to, the agency Inspector General 

or the Government Accountability Office (GAO) audit report findings, or other relevant management findings that 

might hinder accurate payment certification

• Results from prior improper payment work

During FY 2016, we continued the use of our robust risk assessment process. 

For those payment types resulting in a high risk level that comprise at least 1.5 percent and $10 million in total program 

outlays or $100 million at any rate, (1) statistical sampling must be performed to determine the improper payment rate, 

and (2) a corrective action plan must be developed and submitted to the Department and OMB for approval. Responses to 

the risk assessments produce a score that falls into pre-determined categories of risk. The following table describes the 

actions required at each risk level:

Risk Level Required Action(s)

High Risk > 1.5% Error Rate & > $10 Million or $100,000,000 

at any error rate

Establish corrective action plan

Medium Risk Review Payment Controls for Improvement Opportunity

Low Risk Monitor annually through the risk assessments
OTHER INFORMATION | FY 2016 AGENCY FINANCIAL REPORT

DEPARTMENT OF THE TREASURY 221

Below is a list of all programs assessed in FY 2016. The risk assessments performed on these programs and activities

resulted in low and medium risk levels for susceptibility to improper payments. The EITC program is deemed a high risk, 

high priority program by the Department and OMB. As a result, no new EITC risk assessment was required or 

performed.

Bureau Program Name

Susceptible to 

Significant IPs

Alcohol Tax and Trade Bureau Salaries and Expenses No

Internal Revenue Collection PR No

Bureau of Engraving and Printing Bureau of Engraving and Printing Fund No

Bureau of the Fiscal Service Administrative Resource Center No

Check Forgery Insurance Fund No

Claims for Contract Disputes No

Corporation for Public Broadcasting No

D.C. Water & Sewage No

Debt Collection Special Fund No

Fed. Pay – DC Water & Sewer No

Fed. Pay – Emergency Planning & Security No

Fed. Pay – School Improvement No

Fed. Pay – Resident Tuition Sup No

Financial Agency Services No

Fiscal Service Administration Salaries and Expenses No

FRB Reimbursements No

Interest on the Public Debt No

Interest on Uninvested Funds No

Judgements, Court of Claims No

Judgements, US Courts No

Payment to Legal Services Corporation No

Payment to Resolution Funds Corporation No

Refund Money Erroneously Rec’d No

Reimbursements to Federal Reserve Banks No

Travel Promotion Fund, Corporation for Travel Promotion No

Community Development 

Financial Institutions Fund

CDFI BGP Financing Fund No

CDFI Financing No

CDFI Program No

District of Columbia Pensions D.C. Federal Pension Fund No

DC Judicial Retirement & Sur. No

Departmental Offices Grants for Specified Energy Property in Lieu of TC No

IA Technical Assistance Allocation Account No

Salaries and Expenses No

State Small Business Credit Initiative No

Office of Terrorism and Financial Intelligence (TFI) No

Treasury Forfeiture Fund No

Financial Crimes 

Enforcement Network

Salaries and Expenses No
FY 2016 AGENCY FINANCIAL REPORT | OTHER INFORMATION

222 DEPARTMENT OF THE TREASURY

Internal Revenue Service Affordable Health Care Program No

Build America Bond Payments, Recovery Act No

Business Systems Modernization No

Informant Reimbursement No

Information Systems No

Pay. – Child Credit Exceeds Liab (Additional Child Tax Credit) Yes 3

Payment to Issuer of New Clean Renewable Energy Bond No

Payment to Issuer of Qualified Energy Conservation Bond No

Payment to Issuer of Qualified School Construction Bonds No

Payment to Issuer of Qualified Zone Academy Bonds No

Payment Where Adoption Credit Exceeds Liab for Tax No

Payment Where American Opportunity Credit, Recovery Act (American 

Opportunity Tax Credit)

Yes 3

Refund – Corporations No

Refund Collection No

Refund Collection – Interest No

Refundable Premium Assistance Tax Credit (Premium Tax Credit) Yes 3

Refunds – Alternative Minimum Tax Credit No

Small Business Insurance Tax Credit No

Tax Law Enforcement No

Taxpayer Services No

International Monetary Fund US Quota, IMF Executive No

Office of International Assistance Contribution International Develop Association No

Contribution to African Develop Bank No

Contribution to African Develop Fund No

Contribution to Asian Develop Bank No

Contribution to Clean Technology Fund No

Contribution to Inter-Amer. Development No

Contribution to International Bank for Reconstruction & Development No

Contribution to Strategic Climate Fund No

Contribution to the Asian Development Fund, Funds No

Global Environment Facility, Funds Appropriated to No

Global Food Security Fund No

International Fund for Agriculture Development No

Office of Financial Research Financial Research Fund No

Office of Financial Stability Home Affordable Modification Program No

Salaries and Expenses No

Office of the Comptroller 

of the Currency

Assessment Funds No

Office of the Inspector General Salaries and Expenses No

Special Inspector General for 

Troubled Asset Relief Program

Salaries and Expenses No

The Mint Public Enterprise Revolving Fund No

Treasury Inspector General 

For Tax Administration

Salaries and Expenses No

 3 The program was assessed at Medium Risk. In accordance with the Treasury-Wide Guidance for the FY 2016 Implementation of OMB Circular A-123, 

Appendix C, Requirements for Effective Estimation and Remediation of Improper Payments guidance, IRS submitted an Internal Control Improvement 

plan for the program.
OTHER INFORMATION | FY 2016 AGENCY FINANCIAL REPORT

DEPARTMENT OF THE TREASURY 223 

In FY 2016, the IRS evaluated the ACTC and the AOTC as part of the risk assessment process using a qualitative risk 

assessment. The risk assessment determined the risk of ACTC and AOTC to be medium. Additionally, as noted in Part 1, 

the IRS also conducted an assessment of the PTC, which also resulted in a determination of a medium risk level. A risk 

assessment was not conducted for the EITC program, which has been deemed a high priority / high risk program by OMB. 

Estimating improper payments does not take into consideration all aspects of administering tax provisions in a system 

that relies heavily on voluntary reporting as well as statutory requirements that the IRS process tax returns and pay any 

related tax refunds within 45 days of receipt of the tax return or the tax return due date, whichever is later, or accrue and 

pay interest on the refund amount beyond this 45 day period to the taxpayer. 

Reporting tax refunds under the tax gap section of the AFR allows for the appropriate discussion of misreporting errors 

and resources dedicated to the IRS' compliance strategy. For refund returns claiming multiple credits, the IRS reports 

noncompliance related to these credits as part of the estimation of tax gap. The tax gap estimates reveal a more accurate 

picture of taxpayer behavior than other types of reporting, so the IRS reports on the underreporting related to tax and 

refundable and non-refundable tax credits under tax gap in the Department’s AFR. 

In order to maintain accountability for all refundable credit programs, we will continue to perform risk assessments on all 

IPERA-implicated refundable tax credit programs and will plan to estimate any that exceed the thresholds delineated in 

IPERA as part of the overall tax gap (e.g. NRP compliance studies and root cause analyses) estimation process, describing 

this determination in the AFR. In addition, consistent with recent reporting practice, we continue to report these results 

in the Improper Payments section of the AFR.

Corrective Actions for High-Priority Programs

Under Executive Order (EO) 13520 and its implementing guidance, OMB identifies programs that have more than $750 

million in annual estimated improper payments and that contribute substantially to the government-wide improper 

payment estimate. These programs, known as high-priority programs, are required to perform certain activities, 

including: selecting Accountable Officials to oversee the agency’s improper payment efforts; posting improper payment 

information to www.PaymentAccuracy.gov; and developing supplemental measures in addition to the annual error rate 

measures. 

EITC is the only program deemed by OMB as a high-priority program. Accordingly, the IRS has worked to meet the EO’s 

additional requirements for this high-risk program, and information on the IRS’ efforts may be found on 

www.PaymentAccuracy.gov. In addition, while root causes of errors in our programs can fluctuate from year to year, the 

IRS remains focused on reducing the annual error rates for all noncompliant behavior, and is taking many actions to 

prevent and reduce payment errors. For FY 2016, the Department continued to report on EITC including the 

Supplemental Measures and will evaluate with OMB reporting for FY 2017 and beyond. 

II. SAMPLING AND ESTIMATION 

EITC Program

The EITC is a refundable federal tax credit that offsets income taxes owed by low-income workers who qualify and

provides a refund if the credit exceeds the amount of taxes owed. 
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224 DEPARTMENT OF THE TREASURY

As described below, the IRS engages in a number of activities to encourage voluntary compliance, performs certain 

automatic checks of all claims, and audits some claims before tax refunds are paid, all of which prevent improper 

payments. In addition, as with all tax provisions, IRS performs some examinations after refunds are paid, and 

subsequently recovers some improper payments. The improper payment amounts reported below include improper 

overclaims plus the absolute value of underpayments, less certain erroneous payments that are prevented or recovered. 

The error rate is the net improper payment amount divided by the total amount of EITC claimed. 

In keeping with the requirements of IPERIA, we update the estimate of improper payments annually. The EITC improper 

payment rate is estimated using a statistically valid sample of about 2,700 returns audited through the IRS’ NRP. This 

sample is sufficient to estimate the improper payment rate with plus or minus 2.5 percentage point precision and 90 

percent confidence. For TY 2012 (the most recent study completed), the estimated gross amount of improper payments 

was $17.7 billion and the total amount of EITC claimed was $64.0 billion. The amount of erroneous EITC payments 

prevented or recovered on tax year 2012 returns was $2.3 billion. This results in a net improper payment amount of $15.4

billion, or 24.0 percent of the total EITC claimed (or between 22.2 percent and 25.9 percent, accounting for sampling 

error). The current estimated error rate of 24.0 percent is consistent in magnitude with the five-year average error rate of 

about 24 percent. 

Applying this rate estimated from data for TY 2012 to the estimated FY 2016 level of EITC claims ($69.8 billion) yields an 

estimated amount of improper payments for FY 2016 of $16.8 billion (or between $15.5 and $18.1 billion).

III. IMPROPER PAYMENTS REPORTING 

EITC is our only high-risk program that is susceptible to improper payments. Although high-priority programs are 

generally required to report reduction targets, setting improper payment reduction targets for this program does not 

create meaningful goals for us. This is due to the complexity of the tax law around EITC, lack of independent data 

regarding EITC eligibility, and the significant annual turnover within the participating population. The following table 

provides the improper payment reduction outlook for the EITC:
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DEPARTMENT OF THE TREASURY 225

TABLE 1 – IMPROPER PAYMENT REDUCTION OUTLOOK ($ IN MILLIONS)

Program

2015 Claims2015 IP %2015 IP $2016 Claims2016 IP %2016 IP $2016 Overpayment $2016 Underpayment $2017 Est. Claims2017 Est. IP %2017 Est. IP $2018 Est. Claims2018 Est. IP %2018 Est. IP $2019 Est. Claims2019 Est. IP %2019 Est. IP $

EITC

$65,600.0023.80%$15,600.00$69,786.2324.02%$16,762.65$16,762.65*$68,995.4824.02%$16,572.71$70,028.7324.02%$16,820.90$66,886.8224.02%$16,066.21

TOTAL

$65,600.0023.80%$15,600.00$69,786.2324.02%$16,762.65$16,762.65*$68,995.4824.02%$16,572.71$70,028.7324.02%$16,820.90$66,886.8224.02%$16,066.21

* 2016 Underpayments: The information on underpayments is based on a very small number of taxpayers and therefore has been combined with 

overpayments to prevent potential disclosure of taxpayer information.

Estimated Claims: Estimated total claims for the EITC are based on projections of EITC tax expenditures plus outlays as estimated by the Office of Tax 

Analysis within the Department of the Treasury, adjusted to account for the difference between taxpayer claims and amounts received by taxpayers due to 

return processing and enforcement.

IP %: The estimated net improper payment rate (IP %) for FY 2015 was estimated using a statistically valid random sample of 

TY 2011 individual income tax returns that claimed the EITC. The FY 2016 – FY 2019 estimated net improper payment rates were estimated using a 

statistically valid random sample of TY 2012 individual income tax returns that claimed the EITC.

IP $: The estimated amount of net improper payments (IP $) equals the estimated IP % multiplied by the Estimated Claims.

As an alternative to providing reduction targets for EITC, we have collaborated with OMB on the development of a series 

of supplemental measures. These measures should provide a more nuanced assessment of the EITC program and of our

efforts to limit improper payments than would be provided by standard reduction targets. We provided the following 

supplemental measures to OMB: 

• The Annual Error Rate, which identifies the percentage of total EITC payments that are improper

• The amount of Revenue Protected, which shows the total value of erroneous payments prevented, or recovered 

through compliance activities

• The amount of Revenue Protected from Paid Preparer Treatments, which shows dollars erroneously or fraudulently 

claimed by paid tax preparers but not paid out, by Treasury

• The number of Preparer Due Diligence Penalties Proposed, reflecting the effectiveness of Treasury efforts to ensure 

paid tax preparers are submitting accurate, non-fraudulent EITC claims on behalf of taxpayers
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226 DEPARTMENT OF THE TREASURY

These measures are tracked and updated annually based on Tax Filing Season results and are posted to the 

PaymentAccuracy.gov website. The table below shows estimated values for these measures:

TABLE 1.1 – FY 2016 EITC IMPROPER PAYMENT SUPPLEMENTAL MEASURES

Measure FY 2016 Value FY 2015 Value FY 2014 Value

Annual Error Rate Total Claims $69.8 Billion $65.6 Billion $65.2 Billion

Improper Payments $16.8 Billion $15.6 Billion $17.7 Billion

Revenue Protected Dollars $5.7 Billion $7.3 Billion $6.4 Billion

Returns 1.8 Million 2.9 Million 2.3 Million

Revenue Protected from

Paid Preparer Treatments

Dollars $384 Million $399 Million $365 Million

Preparers 26,253 20,598 18,105

Preparer Due Diligence Penalties 

Proposed

Dollars $32.8 Million $34.3 Million $39.1 Million

Preparers 1,137 1,042 1,372

IV. IMPROPER PAYMENT ROOT CAUSE CATEGORIES

Beginning in FY 2015, the IRS has been required to categorize improper payments using one or more of the following root 

causes: Program Design or Structural Issues, Inability to Authenticate Eligibility, Failure to Verify, Administrative or 

Process Errors, Medical Necessity, Insufficient Documentation to Determine, and Other.

TABLE 2 – IMPROPER PAYMENT ROOT CAUSE CATEGORY MATRIX ($ IN MILLIONS)

Reason for Improper Payment

EITC

Overpayments Underpayments

Program Design or Structural Issue $1,005.76 -

Inability to Authenticate Eligibility $15,756.89 -

Failure to 

Verify:

Death Data - -

Financial Data - -

Excluded Party Data - -

Prisoner Data - -

Other Eligibility Data (explain) - -

Administrative

or Process

Error Made by:

Federal Agency * **

State or Local Agency 

Other Party (e.g., participating lender, health care provider, 

or any other organization administering Federal dollars)

- -

Medical Necessity - -

Insufficient Documentation to Determine

Other Reason (a) (explain) - -

Other Reason (b) (explain) - -

Total $16,762.65 $0

* None identified in the statistically valid sample used to estimate the improper payment

** The information on underpayments is based on a very small number of taxpayers and has therefore been combined with overpayments to 

prevent potential disclosure of taxpayer information

Based on the updated improper payment reason categories, for FY 2016 IRS estimated that the root causes for EITC 

improper payments were:
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DEPARTMENT OF THE TREASURY 227

Inability to Authenticate Eligibility

It is estimated that $15.7 billion or 94 percent of improper payments are from the inability to authenticate eligibility. The 

majority of these errors are associated with the inability to authenticate qualifying child eligibility requirements, mainly 

relationship and residency requirements, but also the exceptions to the age requirement (full-time student and disability). 

Authentication is difficult because there is a lack of internal or external databases available with information that would 

help IRS to make a determination of eligibility.

Another major cause of error in this category is taxpayer income misreporting, mainly self-employment income, where the 

income is not reported to the IRS by a third party. This category of errors also includes filing status errors, when married

couples incorrectly file as single or head of household. Additional errors include data on marital status and living 

arrangements not being available.

Program Design or Structural Issues

It is estimated that approximately $1.0 billion or 6 percent of improper payments are from program design limitations. 

These errors relate to certain income misreporting, tiebreaker errors, and joint return errors of qualifying children.

Program design errors occur because information needed to confirm payment accuracy is not available at the time the 

return is processed. For income misreporting, payer information, such as Form W-2, is typically not available to the IRS 

until after the filing season; therefore the IRS is unable to fully match wages and other income sources against the return 

at time of filing.

A very small portion of errors are attributable to tiebreaker errors, where more than one taxpayer claims the same 

qualifying child. The IRS processes returns as they are filed and cannot know of duplicate situations when the first return 

is filed or who is actually qualified in a tiebreaker situation. Situations where a qualifying child files a joint return also 

make up a small portion of this category. A child cannot be a qualifying child if he/she files a joint return for a reason 

other than claiming a refund. However, all returns are not filed at the same time, so the IRS cannot identify this situation 

until both returns are filed.

The IRS has implemented the following corrective actions to address the root causes identified:

TABLE 2.1 – CORRECTIVE ACTION CATEGORIES 

Reason for Improper Payment

Examination ClosuresMath Error NoticesDocument MatchingAmended ReturnsTwo and 10 Year BansIdentity Theft and FraudCriminal InvestigationsSoft NoticesReturn Preparer InitiativesReturn Preparer Outreach and EducationSoftware Developer Working Group

Program Design or Structural Issue X X X X X X X X X

Inability to Authenticate Eligibility X X X X X X X X X X
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228 DEPARTMENT OF THE TREASURY

V. IMPROPER PAYMENT CORRECTIVE ACTIONS 

This section describes the ongoing and planned corrective actions to reduce the improper payment rate for the EITC

program.

EITC Enforcement 

The IRS’ strategy with respect to improper payments is to intervene early to ensure compliance with the law. In FY 2016, 

the IRS addressed improper payments through its compliance programs as well as through expansive outreach and 

education efforts to taxpayers and preparers. The IRS’ EITC enforcement programs protected approximately $3.6 billion. 

The revenue includes EITC and other credits and taxes recovered or prevented from being paid in error in FY 2016, on 

returns filed in 2016 or earlier years and selected for EITC enforcement. (In contrast, the $2.3 billion subtracted from 

gross improper payments to yield the net improper payment amount for TY 2012 above includes EITC amounts only on 

returns filed for TY 2012, selected for examination or document matching.)

Corrective actions to reduce EITC improper payments include the following:

• Examinations – The IRS identifies tax returns for examination and, in the majority of cases, holds the EITC portion of 

the refund until an audit can be conducted. The IRS also holds the ACTC portion of the refund on these EITC 

examinations. 

• Math Error – Refers to an automated process through which the IRS identifies math or other irregularities and 

automatically prepares an adjusted return for a taxpayer.

• Document Matching – Involves comparing income information provided by the taxpayer with matching information 

(e.g., W-2s, 1099s) from employers and other third parties to identify discrepancies.

The chart below shows that the IRS conducted 380,331 EITC program examinations, issued 150,000 math error notices, 

and performed 792,305 document matching reviews.

TABLE 2.2 – COMPLIANCE ACTIVITIES

FY11 FY12 FY13 FY14 FY15* FY16** FY17*** FY11-FY17

Total

Audit Closures 483,574 487,408 483,070 435,638 445,594 380,331 325,000 3,040,615

Math Error Notices 293,450 270,492 241,975 194,127 166,611 150,000 120,000 1,436,655

Document Matching 1,178,129 985,172 906,994 1,053,304 1,710,904 792,305 790,000 7,416,808

Amended Returns1 14,317 13,284 8,130 17,723 24,282 9,910 9,900 97,546

* Restated actual

** Preliminary data

*** Estimate based on FY16 preliminary data and FY17 preliminary estimates

1 Amended returns are a subset of Audit Closures

These compliance activities had a significant effect, protecting revenue of $3.6 billion in FY 2016. Treasury projects that 

continued enforcement efforts will protect a total of nearly $26.6 billion in revenue through FY 2017, as shown below.
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DEPARTMENT OF THE TREASURY 229

TABLE 2.3 – PROTECTED REVENUE FROM COMPLIANCE ACTIVITIES (IN MILLIONS)

FY11 FY12 FY13 FY14 FY15* FY16** FY17*** FY11-FY17

Total

Audit Closures 2,039.90 2,049.23 2,113.73 1,751.32 1,991.06 1,835.23 1,568.00 13,348.47

Math Error Notices 353.92 314.34 299.03 243.34 226.82 208.50 166.80 1,812.75

Document Matching 1,323.54 1,554.75 1,422.60 1,385.06 2,313.96 1,570.54 1,570.00 11,140.45

Amended Returns1 39.38 38.45 26.18 52.42 76.63 34.65 34.65 302.36

Total 3,756.74 3,956.77 3,861.54 3,432.14 4,608.47 3,648.92 3,339.45 26,604.03

* Restated actual.

** Preliminary data.

*** Estimate based on fiscal year 2016 preliminary data.

Maximizing Current Business Processes

In addition to base compliance program efforts, the following efforts contributed to the IRS’ strategy of identifying and 

reducing improper EITC refund claims in FY 2016:

EITC IPERA Methodology and Estimate: Completed a new error rate estimate based on the EITC component of the Tax 

Year 2012 National Research Plan (NRP) study that meets IPIA standards for measuring and reporting on improper 

payments.

FY 2017 Action Plan and FY 2016 Root Cause Analysis Reports: Completed the FY 2017 action plan to reduce improper 

payments and a root cause analysis based on NRP data.

Compliance Studies: Continued analysis of the most recent compliance study and NRP data to inform our compliance 

strategy and amend EITC administration where feasible.

Two and 10 Year Bans: Imposed 601 two-year bans and 118 10-year bans for cases where the IRS determined during an

EITC audit that the taxpayer intentionally disregarded the rules and regulations or committed fraud. 

Identity Theft and Fraud: Detected and stopped almost 538,000 fraudulent returns through our fraud detection filters 

from being processed, preventing nearly $1.5 billion in improper EITC payments.

Criminal Investigations: Continued to stop fraudulent EITC refund claims through our Criminal Investigation (CI) 

division. Through September 2016, CI issued 254 EITC Questionable Refund Program (QRP) scheme indictments and 83 

EITC Return Preparer indictments. CI also secured 240 and 91 convictions, respectively, on outstanding indictments. 

Soft Notices: Sent more than 85,000 letters to alert taxpayers that a qualifying child for the EITC claimed on their returns 

had also been claimed by another person. 

Dependent Database (DDb) Soft Notice Test: Issued 25,600 soft notices to taxpayers who appeared to have filed TY 2014 

returns claiming EITC with either qualifying child or Schedule C income errors. The test population included previously

untreated repeat DDb rule/Schedule C filter breakers and first time claimants who self-prepared their returns. The soft 

notices encourage taxpayers to self-correct their current year return (via an amended return), if needed and to file 

accurate returns in the future.

Return Preparer Initiatives: As a part of the FY 2016 EITC Return Preparer Strategy, the IRS completed activities 

associated with a suite of progressive EITC preparer treatments, addressing over 26,000 preparers (up from 21,000 in FY 

2015) selected through our risk-based scoring model, before and during the filing season.
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230 DEPARTMENT OF THE TREASURY

• The IRS completed 813 pre-filing season Due Diligence Visits (DDVs) with a penalty rate of 82% and more than $25 

million in proposed penalties. Criminal investigation and/or revenue agents completed 164 educational Knock-andTalk Visits (KTV). The IRS also mailed more than 18,000 educational notices and called more than 1,300 preparers 

before the FY 2016 filing season.

• The IRS closed 295 filing season DDVs with a penalty rate of 82% and over $4.4 million in proposed penalties. The 

IRS also proposed penalties of almost $249,000 on 19 of 28 DDVs completed as a follow-up for those preparers who 

received pre-filing season KTVs but did not improve their due diligence. The IRS mailed more than 9,400 educational 

notices and called over 2,200 preparers during the 2016 filing season.

• The analysis of the FY 2016 EITC Return Preparer Strategy revealed that, in addition to the proposed penalties 

described above, the preparer treatments protected more than $474 million ($384 million EITC and $90 million Child 

Tax Credit).

Return Preparer Penalties: Proposed almost $1 million in penalties to 78 TY 2015 EITC return preparers, and more than 

$2 million in penalties for 132 TY 2014 EITC return preparers, for failure to exercise due diligence by attaching Form 

8867, Paid Preparer's Earned Income Credit Checklist, to taxpayer returns, as authorized by IRC §6695(g) and Treasury

Regulation §1.6695–2. The IRS also sent more than 2,500 warning letters and 300 electronic alerts for TY 2015 to warn 

preparers that did not attach Form 8867 to taxpayer returns.

Return Preparer Outreach and Education: Focused outreach and education efforts on EITC return preparers to educate 

them on EITC and due diligence requirements. Almost 15,300 preparers received a certificate of completion for the 

English and Spanish interactive EITC Due Diligence Training module. Additionally, more than 6,900 preparers attended 

the Refundable Credits – New Rules, New Laws seminar and almost 4,900 preparers attended the Your Due Diligence 

Requirements: What’s New for You in 2017 seminar at the 2016 National Tax Forums. 

Servicewide EITC Strategy: Continued activities to evaluate potential new solutions identified to address improper 

payments.

Supplemental Measures: Continued to report supplemental measures that capture key components of revenue protected 

through compliance activities and paid return preparer treatments, as well as paid return preparer due diligence penalties 

proposed.

Software Developer Working Group: Continued our partnership with members of key tax software associations to reduce 

EITC errors and assist preparers in meeting their EITC due diligence requirements.

Taxpayer Outreach and Education: The IRS conducted its EITC outreach campaign, including the tenth annual EITC 

Awareness Day, which centered on EITC underserved populations and included focused compliance messages. Through 

collaboration with IRS national, state, and local partners as well as Congressional and government officials, the IRS held 

more than 240 local events, resulting in media coverage that helped spread the word about the EITC tax credit. The IRS 

also held interviews in English and Spanish, resulting in more than 1,500 radio stations and 480,000 newspapers sharing 

the interviews. Social media outreach continued to expand with Twitter EITC messages reaching 5.8 million people and 

Thunderclap, a new tool for IRS this year, reaching almost 373,000 people. Also for the year, nearly 601,800 taxpayers 

visited the EITC Assistant on IRS.GOV, a tool that allows taxpayers to determine if they qualify for the credit.

Legislative Proposals: Include the following FY 2017 legislative proposals:

• Provide greater flexibility to address correctable errors to help the IRS deny certain erroneous EITC claims before 

paying refunds.
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DEPARTMENT OF THE TREASURY 231

• Increase oversight of paid tax return preparers to help promote high quality services and improve voluntary 

compliance.

• Simplify the rules for claiming the EITC without a qualifying child for taxpayers who reside with a child that they do 

not claim as a dependent, in order to reduce taxpayer burden and improve EITC compliance.

Enterprise Research: Assessed the results of the FY 2016 enterprise research strategy and developed the FY 2017 

strategy in partnership with internal organizations to better focus EITC compliance and outreach activities using research 

data.

EITC Summit: The IRS hosted an EITC Summit that was attended by numerous EITC stakeholders including tax 

industry professionals, representatives of state and federal agencies, consumer advocates, and representatives from nongovernment organizations. The objective was to obtain different perspectives on ways to reduce EITC errors, mitigate 

compliance risks, increase participation for eligible EITC populations, and ease taxpayer and government burden.

VI. INTERNAL CONTROL OVER PAYMENTS

IRS Internal Control Framework

EITC improper payments are not rooted in internal control weakness, financial management deficiencies, or financial 

reporting failures but through the inherent difficulty of delivering benefits through the tax system. Much of the difficulty 

administering the EITC derives from the complexity of its statutory eligibility requirements. Whether a taxpayer meets

these eligibility rules may be difficult for the taxpayer to understand and cannot be independently confirmed by the IRS 

using third-party corroborating data. The computation of improper payments, as established by OMB, also does not take 

into consideration all internal control processes in place that stop erroneous returns from being processed. For example, 

the controls and filters in the IRS' fraud and identity theft programs stop EITC returns with billions of dollars in 

fraudulently claimed EITC.

The IRS has internal controls in place to verify eligibility when data are available. For example, the IRS may reject a 

return from processing or systemically adjust a return if a Social Security Number is incorrect, data on the return is not 

consistent with eligibility requirements, or the return contains mathematical errors. The IRS cannot verify that key EITC 

eligibility criteria are met in the absence of a burdensome tax audit. The IRS' internal controls include a sophisticated 

scoring and selection program for EITC examinations that identifies a significant number of high risk returns, but due to 

limited resources the IRS cannot examine all returns identified. For those that the IRS does examine, about 80 percent 

are examined in a pre-refund environment where the IRS holds the EITC refund until eligibility is verified by taxpayers.

The IRS has a strong internal control environment based on a risk assessment around EITC and other programs 

administered and make decisions based on overall cost-benefit considerations. The IRS annually reviews and enhances its 

compliance plan that addresses erroneous EITC. Each year the IRS updates its strategy using the most recent research 

findings (e.g. compliance studies and root cause analyses), prior year audit results, TIGTA/GAO audit findings, and 

legislative updates. The IRS also submits legislative proposals which, if approved by Congress, may further enhance 

efforts to address areas of risk and reduce improper payments.

The IRS reviews and updates Internal Revenue Manuals (IRMs) throughout the year and ensures that IRS employees who 

administer refundable credits receive annual training and have the requisite knowledge to address the evolving nature of 

improper payments and fraud. Employees are also encouraged to bring internal control problems to management’s 

attention. In fact, processes are in place to address internal control questions and concerns through the Service-wide 

Electronic Research Project (SERP) feedback application.
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232 DEPARTMENT OF THE TREASURY

The IRS conducts routine reviews to ensure that EITC internal control processes are worked in accordance with written 

procedures. The IRS constantly monitors its compliance activities through established management information reports. 

The data is shared with all stakeholders and managers who directly implement or lead EITC control activities. The IRS 

shares ongoing program information with policy and decision-makers via monthly and quarterly briefings.

Listed below are the ratings for EITC Internal Control Standards.

TABLE 3 – STATUS OF INTERNAL CONTROLS

Internal Control Standards

Earned Income Tax Credit

(020x0906000)

Control Environment 4

Risk Assessment 3

Control Activities 4

Information and Communication 4

Monitoring 4

Legend:

4 = Sufficient controls are in place to prevent improper payments

3 = Controls are in place to prevent improper payments but there is room for improvement

2 = Minimal controls are in place to prevent improper payments

1 = Controls are not in place to prevent improper payments

VII. ACCOUNTABILITY

The Secretary of the Treasury has delegated responsibility for addressing improper payments to the Assistant Secretary 

for Management (ASM). Improper payments fall under the Department’s management and internal control program. A 

major component of the internal control program is risk assessments, which are an extension of each bureau’s annual 

improper payment elimination and recovery review process, as required under OMB Circular A-123, Appendix C. Under 

Treasury Directive 40-04, Treasury Internal (Management) Control Program, executives and other managers are required 

to have management control responsibilities as part of their annual performance plans. With oversight mechanisms such 

as the Treasury CFO Council and the Management Controls Executive Steering Committee, managerial responsibility and 

accountability in all management and internal control areas are visible and well-documented. We have identified 

executives who are responsible and accountable for reducing the level of EITC overclaims, while other senior and mid-level 

officials have responsibility for monitoring progress in this area as bureau and program internal control officers.

VIII. AGENCY INFORMATION SYSTEMS AND OTHER INFRASTRUCTURE

Overall, we have the internal controls, human capital, and information systems and other infrastructure it needs to reduce 

improper payments to the targeted levels.

IX. BARRIERS

A number of factors continue to serve as barriers to reducing overclaims in the EITC program. These include:

• Complexity of the tax law 

• Lack of correctible error authority, (which would require Congressional authorization)

• Lack of independent data with which to verify EITC eligibility and structure of the EITC, which has taxpayers 

submitting claims without the IRS having information to validate eligibility

• Confusion among taxpayers about their eligibility contributing to overclaims and underclaims

• High turnover of eligible claimants
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DEPARTMENT OF THE TREASURY 233

• Unscrupulous and/or incompetent return preparers

• Fraud

None of these factors can be considered the primary driver of program error. However, these barriers severely impede the 

IRS’ dual mission of issuing refunds to those who are entitled, while ensuring refunds are paid only to those who truly 

qualify for the credit. 

Also, statutory requirements further constrain the IRS’ ability to ensure that EITC claims are valid before they are 

processed and paid. Since the EITC is administered through the Internal Revenue Code (IRC), it is claimed by taxpayers 

during the filing and processing of their tax returns. The IRC requires the IRS to process tax returns and pay any related 

tax refunds within 45 days of receipt of the tax return or the tax return due date, whichever is later. Beyond this 45 day 

period interest begins accruing on the refund amount, which must be paid along with the refund to the taxpayer. For the 

majority of EITC returns, which tend to be filed early in the filing season, the IRS does not receive information to verify 

income reporting accuracy or other data needed to validate these EITC claims at the time of filing or within a reasonable 

period thereafter in which a taxpayer would expect their refund. The IRS faces further challenges when attempting to 

validate the EITC claims of filers with non-wage income. The requirements, expectations, and data accessibility relative 

to the timely payment of refunds constrain the IRS’ ability to conduct up-front verification of claims. These conditions 

distinguish EITC and its administration through the tax system from the extensive validity checks conducted by agencies 

administering other federal programs that typically establish eligibility prior to the issuance of payments or benefits.

The IRS submitted legislative proposals in the FY 2017 Budget to help address EITC improper payments.

X. RECAPTURE OF IMPROPER PAYMENTS REPORTING

In accordance with IPERA and OMB Circular A-123, Appendix C, we perform and report annually on our payment 

recapture program. During FY 2016, we issued contracts and other reviewed payments totaling approximately $11 billion. 

The amended act expanded the payment types reviewed beyond just contracts to include grants, benefits, loans, and 

miscellaneous payments.

Our annual risk assessment process includes a review of pre-payment controls that minimize the likelihood and 

occurrence of improper payments. We require each bureau and office to conduct post-award audits and report on payment 

recapture activities, contracts issued, improper payments made, and recoveries achieved. Bureaus and offices may use 

payment recapture audit contingency firms to perform many of the steps in their payment recapture auditing program 

and identify candidates for payment recapture action. However, no Treasury bureaus used contractors to perform 

recapture activities for fiscal year 2016. Treasury employees performed this work.

We consider both pre- and post-reviews to identify payment errors a sound management practice that should be included 

among basic payment controls. All bureaus have a process in place to identify improper payments during pre- and postreviews. When applicable, bureaus may use the results of the Treasury IGs and GAO reviews to help identify payment 

anomalies and target areas for improvement. However, we apply extensive payment controls at the time each payment is 

processed, making recapture activity minimal.
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234 DEPARTMENT OF THE TREASURY

TABLE 4 – OVERPAYMENT PAYMENT RECAPTURES WITH AND WITHOUT RECAPTURE AUDIT PROGRAMS ($ IN MILLIONS)

Overpayments Recaptured through Payment Recapture Audits Overpayments 

Recaptured 

outside of 

Payment 

Recapture 

Audits 

Contracts Grants Benefits Other Totals

Program or ActivityAmount IdentifiedAmount Recaptured2016 Recapture Rate (%)2017 Recapture Rate Target (%)2018 Recapture Rate Target (%)Amount IdentifiedAmount Recaptured2016 Recapture Rate (%)2017 Recapture Rate Target (%)2018 Recapture Rate Target (%)Amount IdentifiedAmount Recaptured2016 Recapture Rate (%)2017 Recapture Rate Target (%)2018 Recapture Rate Target (%)Amount IdentifiedAmount Recaptured2016 Recapture Rate (%)2017 Recapture Rate Target (%)2018 Recapture Rate Target (%)Amount IdentifiedAmount RecoveredAmount IdentifiedAmount Recaptured

BEP .0000 .0000 100% 100% 100% N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A .0000 .0000 .6845 .6000

FSA .0176 .0176 100% 100% 100% N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A .1167 .0162 14% 80% 80% .1343 .0339 .0000 .0000

ARC .0143 .0143 100% 100% 100% N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A .0028 .0036 126% 100% 100% .0171 .0179 .0000 .0000

CDFI .0000 .0000 100% 100% 100% .6135 .6135 100% 100% 100% N/A N/A N/A N/A N/A .0004 .0004 100% 100% 100% .6139 .6139 .0000 .0000

DCP .0000 .0000 100% 100% 100% N/A N/A N/A N/A N/A 1.717 1.487 87% 87% 87% .0000 .0000 0% 0% 0% 1.717 1.487 .0000 .0000

DO .0241 .0501 208% 100% 100% N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A .1109 .0481 43% 80% 80% .1349 .0982 .0000 .0000

FinCEN .0000 .0000 100% 100% 100% N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A .0089 .0091 102% 100% 100% .0089 .0091 .0000 .0000

IRS .0700 .0700 100% 100% 100% N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A .0700 .0700 .9622 .9622

Mint .0051 .0055 108% 100% 100% N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A .0752 .0339 45% 80% 80% .0803 .0395 .0000 .0000

OFS .0000 .0000 100% 100% 100% N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A .9730 .6642 68% 80% 80% .9730 .6642 .0000 .0000

OIG .0000 .0000 100% 100% 100% N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A .0088 .0067 76% 80% 80% .0088 .0067 .0000 .0000

SIG .0000 .0000 100% 100% 100% N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A .0004 .0001 16% 80% 80% .0004 .0001 .0000 .0000

TIGTA .0010 .0000 0% 80% 85% N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A .0072 .0035 49% 80% 80% .0082 .0035 .0000 .0000

TTB .0423 .0423 100% 100% 100% N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A .0043 .0036 84% 84% 84% .0466 .0460 .0000 .0000

Total .1744 .1998 115% 100% 100% .6135 .6135 100% 100% 100% 1.717 1.487 87% 87% 87% 1.309 .7894 60% 80% 80% 3.813 3.090 1.647 1.562
OTHER INFORMATION | FY 2016 AGENCY FINANCIAL REPORT

DEPARTMENT OF THE TREASURY 235

In FY 2016, we determined that conducting a Payment Recapture Audit on the following six low risk programs was not

cost-effective: 

• Fiscal Service Debt Activity Programs 

• Fiscal Service Treasury Managed Accounts

• Fiscal Service Trust Funds Management 

• Treasury Executive Office for Asset Forfeiture 

• Departmental Offices International Financial Institutions – International Assistance Programs 

• The Office of the Comptroller of the Currency Assessment Funds

The Fiscal Service Debt Activity Programs, Treasury Managed Accounts disbursements, and Trust Funds Management 

programs continued to reflect a low risk level in nearly every group and payment type category assessed.

The Treasury Executive Office for Asset Forfeiture’s program payments were deemed low risk. However, based on the 

high dollar value requiring minimal resources, the Executive Office for Asset Forfeiture will continue to conduct internal 

contract audits on the payments. 

The DO International Financial Institutions non-federal payments to the Multilateral Development Banks are submitted 

by either a voucher on a letter of credit administered by the Federal Reserve Bank of New York or through direct cash 

payments via the Fiscal Service Secure Payment System. Based on the volume of payments processed by OAS, it would

not be cost effective to perform a payment recapture audit.

The OCC assessment funds risk assessment has resulted in a low risk rating each of the last five years for all rating 

categories.

Based on the above justifications, payment recapture audits for these programs were not deemed cost effective. We sent 

notifications on these justifications to OMB and the Treasury OIG in October 2016.
FY 2016 AGENCY FINANCIAL REPORT | OTHER INFORMATION

236 DEPARTMENT OF THE TREASURY

TABLE 5 – DISPOSITION OF FUNDS RECAPTURED THROUGH PAYMENT RECAPTURE AUDIT PROGRAMS ($ IN 

MILLIONS)

TABLE 6 – AGING OF OUTSTANDING OVERPAYMENTS IDENTIFIED IN THE PAYMENT RECAPTURE AUDITS ($ 

IN MILLIONS)

Program or Activity

Type of 

Payment

Amount Outstanding 

(0-6 months)

Amount Outstanding 

(6 months to 1 year)

Amount Outstanding 

(over 1 year)

Amount 

Determined to be 

not Collectible*

BEP C - - 0.0845 -

FSA O 0.0605 0.0202 0.0134 0.0111

ARC O - - - 0.0008

DCP B 0.1170 0.1455 0.3741 0.4832

DO C/O 0.0554 0.0000 0.0127 0.0046

FinCEN N/A 0.0000 0.0000 0.0000 0.0001

IRS C 0.0000 0.0000 0.0001 0.0000

Mint C/O 0.0211 0.0027 0.0175 0.0111

OFS O 0.3087 0.0002 0.0000 0.0069

OIG O 0.0004 0.0000 0.0018 0.0000

SIGTARP O 0.0003 0.0000 0.0000 0.0016

TIGTA C/O 0.0048 0.0000 0.0000 0.0005

TTB C/O 0.0005 0.0001 0.0003 0.0003

Prior Year bureau 

combined balances **

- - - - 0.0751

Totals 0.5687 0.1687 0.5044 0.5953

Legend:

C = Contract

B = Benefits

O = Other

* Cumulative balances from FY 2012 to FY2016

** Combined bureau cumulative balances prior to FY 2012

Program 

or 

Activity

Amount 

Recaptured

Type of 

Payment

Agency 

Expenses to 

Administer the 

Program

Payment 

Recapture 

Auditor 

Fees

Financial 

Management 

Improvement 

Activities

Original 

Purpose

Office of 

Inspector 

General

Returned 

to 

Treasury Other *

FSA 0.0339 C/O - - - 0.0335 - - 0.0004

ARC 0.0179 C/O - - - 0.0171 - - 0.0007

CDFI 0.6139 G/O - - - 0.6139 - - -

DCP 1.4865 B - - - 1.4865 - - -

DO 0.0982 C/O - - - 0.0666 - - 0.0317

FinCEN 0.0091 O - - - 0.0071 - - 0.0020

IRS 0.0700 C - - - 0.0303 - - 0.0396

Mint 0.0395 C/O - - - 0.0395 - - -

OFS 0.6642 C/O - - 0.6642 - -

OIG 0.0067 O - - - 0.0066 - - 0.0001

SIGTARP 0.0001 O - - - 0.0001 - - -

TIGTA 0.0035 O - - - 0.0027 - - 0.0009

TTB 0.0460 C/O - - - 0.0432 - - 0.0028

Totals 3.0895 - - - 3.0113 - - 0.0782

Legend:

C = Contract

G = Grants

B = Benefits

O = Other

* Funds returned to expired account
OTHER INFORMATION | FY 2016 AGENCY FINANCIAL REPORT

DEPARTMENT OF THE TREASURY 237

Of the bureaus reporting an amount determined not to be collectible in the table above, we determined all of the write-off 

amounts to be immaterial, with the exception of the District of Columbia Pensions (DCP). The amount determined not to 

be collectible was based on individual debt cases deemed uncollectible after thorough reviews resulting in a determination 

to cease active collective actions. 

XI. ADDITIONAL COMMENTS

In FY 2016, the OIG issued Report Number OIG-16-041, Treasury Was Not in Compliance with IPERA for Fiscal Year 

2015 Due to High Improper Payment Rate for the Earned Income Tax Credit Program, which covered the IPERA program 

as presented in our FY 2015 Agency Financial Report. During FY 2016, we implemented corrective actions to address the 

findings and recommendations in the OIG report.

XII. AGENCY REDUCTION OF IMPROPER PAYMENTS WITH THE DO NOT PAY INITIATIVE

The IPERIA requires pre-payment and pre-award reviews to determine program or award eligibility and to prevent 

improper payments before the release of any Federal funds. This review must include the relevant databases as 

prescribed by IPERIA, including:

• the death records maintained by the Commissioner of Social Security;

• the General Services Administration’s Excluded Parties List System (EPLS), (or the updated System for Award 

Management (SAM));

• the Debt Check Database (Debt Check);

• the Credit Alert System or Credit Alert Interactive Voice Response System (CAIVRS) of the Department of Housing 

and Urban Development;

• the List of Excluded Individuals/Entities (LEIE) of the Office of Inspector General of the Department of Health and 

Human Services; and

• the Prisoner Update Processing System (PUPS) of the Social Security Administration, as added to IPERIA by the 

Bipartisan Budget Act of 2013, Pub. L. 113–67.

All bureaus have incorporated pre-payment and pre-award reviews, as mandated by IPERIA, through established internal 

control processes and procedures that require reviews against the databases consolidated within the Do Not Pay Business 

Center or through their own established databases. All Treasury non-tax payments are compared against the Death 

Master File (DMF) and SAM Exclusion Records at the time of payment via the Do Not Pay Business Center. Matches that 

occur are then reviewed by staff at the appropriate bureau to determine if the payment was proper or improper. No 

bureau has identified incorrect information within the original databases.
FY 2016 AGENCY FINANCIAL REPORT | OTHER INFORMATION

238 DEPARTMENT OF THE TREASURY

TABLE 7 – RESULTS OF THE DO NOT PAY INITIATIVE IN PREVENTING IMPROPER PAYMENTS (IN MILLIONS)

Number (#) of 

payments 

reviewed for 

possible 

Improper 

Payments

Dollars ($) of 

payments 

reviewed for 

possible Improper 

Payments

Number (#) of 

payments 

stopped *

Dollars ($) of 

payments 

stopped *

Number (#) of 

potential 

improper 

payments 

reviewed and 

determined 

accurate **

Dollars ($) of 

potential 

improper 

payments 

reviewed and 

determined 

accurate **

Reviews 

with the Do 

Not Pay 

databases 2.97 $54,533.00 - - 0.003 $56.09

Reviews 

with

databases 

not listed in 

IPERIA as 

Do Not Pay 

databases N/A N/A N/A N/A N/A N/A

Note: The period covering the data is October 2015 to August 2016

* Payments stopped is currently not applicable since the Do Not Pay matching and adjudication process is based on post payment results.

** Potential improper payments reviewed and determined accurate includes the total number of matches identified by the Do Not Pay Initiative that 

were adjudicated as proper by the agency.

The change to the Payment Automation Manager (PAM) standard format from Payments, Claims, and Enhanced 

Reconciliation (PACER) system, has increased the quantity of Department’s payments reviewed with the DMF. 
OTHER INFORMATION | FY 2016 AGENCY FINANCIAL REPORT

DEPARTMENT OF THE TREASURY 239

SECTION G: CIVIL MONETARY PENALTIES INFLATION ADJUSTMENT

The Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (the 2015 Act) amended the Federal Civil 

Penalties Inflation Adjustment Act of 1990 (the Inflation Adjustment Act), to improve the effectiveness of civil monetary 

penalties (CMP) and to maintain their deterrent effect. The 2015 Act requires agencies to: 1) use an interim final 

rulemaking (IFR) to adjust the level of civil monetary penalties in 2016 with an initial “catch-up” adjustment, 2) continue 

to make annual inflation adjustments in future years, and 3) report on these adjustments annually. The 2015 Act 

requires that agencies publish IFRs with new penalty levels in the Federal Register by July 1, 2016, and for these 

penalties to take effect no later than August 1, 2016. The Inflation Adjustment Act and the 2015 Act exclude penalties 

under the Internal Revenue Code of 1986 and the Tariff Act of 1930. The table below depicts the covered civil monetary 

penalties that are under our purview.

Statutory Authority Penalty (Name or 

Description)

Year 

Enacted

Latest Year of 

Adjustment (via 

Statute or 

Regulation)

Current Penalty 

Level ($ 

Amount or 

Range)(1)

Sub-Agency 

Bureau/ 

Entity

Location for Penalty 

Update Details

50 U.S.C. App. 16(b)(1) 

Trading with the Enemy Act 

(TWEA), section 16(b)

Sanctions violation 1917 2016 $83,864 DO (OFAC)

81 FR 43070 (July 1, 

2016) 

https://www.treasury.

gov/resourcecenter/sanctions/Docu

ments/fr81_43070.pdf

50 U.S.C. 1705 

International Emergency 

Economic Powers Act (IEEPA), 

section 206

Sanctions violation 1977 2016

The greater of 

$284,582 or 

twice the value 

of the 

underlying 

transaction

DO (OFAC) Same as above

18 U.S.C. 2339B(b) 

Antiterrorism and Effective 

Death Penalty Act (AEDPA) of 

1996 

Sanctions violation 1996 2016

The greater of 

$75,122 or twice 

the amount of 

which a financial 

institution was 

required to 

retain 

possession and 

control

DO (OFAC) Same as above

21 U.S.C. 1906(b) 

Foreign Narcotics Kingpin 

Designation Act (FNKDA), 

section 807

Sanctions violation 1999 2016 $1,414,020 DO (OFAC) Same as above

19 U.S.C. 3901-3913 

Clean Diamond Trade Act 

(CDTA)

Sanctions violation 2003 2016 $12,856 DO (OFAC) Same as above

15 U.S.C. 6701 note 

Terrorism Risk Insurance Act 

(TRIA), as amended

Civil Penalty 2002 2016 $1,311,850

DO (Federal 

Insurance 

Office)

An interim final rule is 

being reviewed by 

OMB and to be 

published in the 

Federal Register(2)

12 U.S.C. 1829b(j) 

Bank Secrecy Act, as amended

Recordkeeping Violations 

for Funds Transfers 1988 2016 $19,787 FinCEN

Federal Register 81 (30 

June 2016) 

https://www.gpo.gov/

fdsys/pkg/FR-2016-06-

30/pdf/2016-

15653.pdf
FY 2016 AGENCY FINANCIAL REPORT | OTHER INFORMATION

240 DEPARTMENT OF THE TREASURY

Statutory Authority Penalty (Name or 

Description)

Year 

Enacted

Latest Year of 

Adjustment (via 

Statute or 

Regulation)

Current Penalty 

Level ($ 

Amount or 

Range)(1)

Sub-Agency 

Bureau/ 

Entity

Location for Penalty 

Update Details

12 U.S.C. 1955 

Bank Secrecy Act, as amended

Willful/Grossly Negligent 

Recordkeeping Violations 1988 2016 $19,787 FinCEN Same as above

31 U.S.C. 5318(k)(3)(C) 

Bank Secrecy Act, as amended

Failure to Terminate 

Correspondent Relationship 

with Foreign Bank

2001 2016 $13,384 FinCEN Same as above

31 U.S.C. 5321(a)(1) 

Bank Secrecy Act, as amended

General Civil Penalty 

Provision for Willful 

Violations of Bank Secrecy 

Act requirements. 

1986 2016 $53,907 to 

$215,628 FinCEN Same as above

31 U.S.C. 5321(a)(5)(B)(i) 

Bank Secrecy Act, as amended

Foreign Financial Agency 

Transaction - Non-willful 

Violation 

2004 2016 $12,459 FinCEN Same as above

31 U.S.C. 5321(a)(5)(C) 

Bank Secrecy Act, as amended

Foreign Financial Agency 

Transaction - Willful 

Violation 

2004 2016 $124,588 FinCEN Same as above

31 U.S.C. 5321(a)(6)(A) 

Bank Secrecy Act, as amended

Negligent Violation by 

Financial Institution or NonFinancial Trade or Business1986 2016 $1,078 FinCEN Same as above

31 U.S.C. 5321(a)(6)(B) 

Bank Secrecy Act, as amended

Pattern of Negligent Activity 

by Financial Institution or 

Non-Financial Trade or 

Business 

1992 2016 $83,864 FinCEN Same as above

31 U.S.C. 5321(a)(7) 

Bank Secrecy Act, as amended

Violation of Due Diligence 

Requirements for 

Correspondent Bank 

Accounts Involving Foreign 

Persons/Private Banking 

Accounts 

2001 2016 $1,338,420 FinCEN Same as above

31 U.S.C. 5330(e) 

Bank Secrecy Act, as amended

Civil Penalty for Failure to 

Register as Money 

Transmitting Business 

1994 2016 $7,954 FinCEN Same as above

12 U.S.C. 93(b) 

Sec. 5239(b) of the Revised 

Statutes

Tier 1 Violation of Various 

Provisions of the National 

Bank Act

1978 2016 $9,468 OCC

Federal Register 81 (1 

July 2016): 43021-

43028 

www.occ.gov/newsissuances/federalregister/81fr43021.pdf

12 U.S.C. 93(b) 

Sec. 5239(b) of the Revised 

Statutes

Tier 2 Violation of Various 

Provisions of the National 

Bank Act

1978 2016 $47,340 OCC Same as above

12 U.S.C. 93(b) 

Sec. 5239(b) of the Revised 

Statutes

Tier 3 Violation of Various 

Provisions of the National 

Bank Act

1978 2016 $1,893,610 OCC Same as above

12 U.S.C. 164 

Sec. 5213 of the Revised 

Statutes

Tier 1 Violation of Reporting 

Requirements 1869(3) 2016 $3,787 OCC Same as above

12 U.S.C. 164 

Sec. 5213 of the Revised 

Statutes

Tier 2 Violation of Reporting 

Requirements 1869(3) 2016 $37,872 OCC Same as above

12 U.S.C. 164 

Sec. 5213 of the Revised 

Statutes

Tier 3 Violation of Reporting 

Requirements 1869(3) 2016 $1,893,610 OCC Same as above

12 U.S.C. 481 

Sec. 5240 of the Revised 

Statues

Refusal of Affiliate to 

Cooperate in Examination 

(NB)

1864(3) 2016 $9,468 OCC Same as above
OTHER INFORMATION | FY 2016 AGENCY FINANCIAL REPORT

DEPARTMENT OF THE TREASURY 241

Statutory Authority Penalty (Name or 

Description)

Year 

Enacted

Latest Year of 

Adjustment (via 

Statute or 

Regulation)

Current Penalty 

Level ($ 

Amount or 

Range)(1)

Sub-Agency 

Bureau/ 

Entity

Location for Penalty 

Update Details

12 U.S.C. 504 

Sec. 29 of the Revised Statues

Tier 1 Violation of Various 

Provisions of the Federal 

Reserve Act

1978 2016 $9,468 OCC Same as above

12 U.S.C. 504 

Sec. 29 of the Revised Statues

Tier 2 Violation of Various 

Provisions of the Federal 

Reserve Act

1978 2016 $47,340 OCC Same as above

12 U.S.C. 504 

Sec. 29 of the Revised Statues

Tier 3 Violation of Various 

Provisions of the Federal 

Reserve Act

1978 2016 $1,893,610 OCC Same as above

12 U.S.C. 1817(j)(16) 

Sec. 7(j)(16) of the Federal 

Deposit Insurance Act

Tier 1 Violation of Change in 

Bank Control Act 1978 2016 $9,468 OCC Same as above

12 U.S.C. 1817(j)(16) 

Sec. 7(j)(16) of the Federal 

Deposit Insurance Act

Tier 2 Violation of Change in 

Bank Control Act 1978 2016 $47,340 OCC Same as above

12 U.S.C. 1817(j)(16) 

Sec. 7(j)(16) of the Federal 

Deposit Insurance Act

Tier 3 Violation of Change in 

Bank Control Act 1978 2016 $1,893,610 OCC Same as above

12 U.S.C. 1818(i)(2) 

Sec. 8(i)(2) of the Federal 

Deposit Insurance Act

Tier 1 Violation of Law, 

Unsafe or Unsound 

Practice, or Breach of 

Fiduciary Duty

1978 2016 $9,468 OCC Same as above

12 U.S.C. 1818(i)(2) 

Sec. 8(i)(2) of the Federal 

Deposit Insurance Act

Tier 2 Violation of Law, 

Unsafe or Unsound 

Practice, or Breach of 

Fiduciary Duty

1978 2016 $47,340 OCC Same as above

12 U.S.C. 1818(i)(2) 

Sec. 8(i)(2) of the Federal 

Deposit Insurance Act

Tier 3 Violation of Law, 

Unsafe or Unsound 

Practice, or Breach of 

Fiduciary Duty

1978 2016 $1,893,610 OCC Same as above

12 U.S.C. 1820(k)(6)(A)(ii) 

Sec. 10(k)(6)(A)(ii) of the 

Federal Deposit Insurance Act

Violation of PostEmployment Restrictions 2004 2016 $311,470 OCC Same as above

12 U.S.C. 1832(c ) 

Sec. 2 of Public Law 93-100

Violation of Withdrawals by 

Negotiable or Transferable 

Instrument for transfers to 

Third Parties (National 

Bank)

1973 2016 $2,750 OCC Same as above

12 U.S.C. 1832(c ) 

Sec. 2 of Public Law 93-100

Violation of Withdrawals by 

Negotiable or Transferable 

Instrument for transfers to 

Third Parties (Federal 

Savings

Associations)

1973 2016 $2,500 OCC Same as above

12 U.S.C. 1884 

Sec. 5 of the Bank Protection 

Act of 1968

Violation of the Bank 

Protection Act 1968 2016 $275 OCC Same as above

12 U.S.C. 1972(2)(F) 

Sec. 106(b)(2)(F) of the Bank 

Holding Company Act 

Amendments of 1970

Tier 1 Violation of AntiTying Provisions Regarding 

Correspondent Accounts, 

Unsafe or Unsound 

Practices, or Breach of 

Fiduciary Duty

1978 2016 $9,468 OCC Same as above
FY 2016 AGENCY FINANCIAL REPORT | OTHER INFORMATION

242 DEPARTMENT OF THE TREASURY

Statutory Authority Penalty (Name or 

Description)

Year 

Enacted

Latest Year of 

Adjustment (via 

Statute or 

Regulation)

Current Penalty 

Level ($ 

Amount or 

Range)(1)

Sub-Agency 

Bureau/ 

Entity

Location for Penalty 

Update Details

12 U.S.C. 1972(2)(F) 

Sec. 106(b)(2)(F) of the Bank 

Holding Company Act 

Amendments of 1970

Tier 2 Violation of AntiTying Provisions Regarding 

Correspondent Accounts, 

Unsafe or Unsound 

Practices, or Breach of 

Fiduciary Duty

1978 2016 $47,340 OCC Same as above

12 U.S.C. 1972(2)(F) 

Sec. 106(b)(2)(F) of the Bank 

Holding Company Act 

Amendments of 1970

Tier 3 Violation of AntiTying Provisions Regarding 

Correspondent Accounts, 

Unsafe or Unsound 

Practices, or Breach of 

Fiduciary Duty

1978 2016 $1,893,610 OCC Same as above

12 U.S.C. 3110(a) 

Sec. 16(a) of the International 

Banking Act of 1978

Violation of Various 

Provisions of the 

International Banking Act 

(Federal Branches and 

Agencies)

1991 2016 $43,275 OCC Same as above

12 U.S.C. 3110(c) 

Sec. 16(c) of the International 

Banking Act of 1978

Tier 1 Violation of Reporting 

Requirements of the 

International Banking Act 

(Federal Branches and 

Agencies)

1991 2016 $3,462 OCC Same as above

12 U.S.C. 3110(c) 

Sec. 16(c) of the International 

Banking Act of 1978

Tier 2 Violation of Reporting 

Requirements of the 

International Banking Act 

(Federal Branches and

Agencies)

1991 2016 $34,620 OCC Same as above

12 U.S.C. 3110(c) 

Sec. 16(c) of the International 

Banking Act of 1978

Tier 3 Violation of Reporting 

Requirements of the 

International Banking Act 

(Federal Branches and 

Agencies)

1991 2016 $1,730,990 OCC Same as above

12 U.S.C. 3909(d)(1) 

Sec. 910(d)(1) of the 

International Lending 

Supervision Act of 1983

Violation of International 

Lending Supervision Act 1983 2016 $2,355 OCC Same as above

15 U.S.C. 78u-2(b) 

Sec. 21B(b) of the Securities 

Exchange Act of 1934

Tier 1 (natural person) 

Violation of Various 

Provisions of the Securities 

Act, the Securities Exchange 

Act, the Investment 

Company Act or the 

Investment Advisers Act

1990 2016 $8,908 OCC Same as above

15 U.S.C. 78u-2(b) 

Sec. 21B(b) of the Securities 

Exchange Act of 1934

Tier 1 (other person) 

Violation of Various 

Provisions of the Securities 

Act, the Securities Exchange 

Act, the Investment 

Company Act or the 

Investment Advisers Act

1990 2016 $89,078 OCC Same as above

15 U.S.C. 78u-2(b) 

Sec. 21B(b) of the Securities 

Exchange Act of 1934

Tier 2 (natural person) 

Violation of Various 

Provisions of the Securities 

Act, the Securities Exchange 

Act, the Investment 

Company Act or the 

Investment Advisers Act

1990 2016 $89,078 OCC Same as above
OTHER INFORMATION | FY 2016 AGENCY FINANCIAL REPORT

DEPARTMENT OF THE TREASURY 243

Statutory Authority Penalty (Name or 

Description)

Year 

Enacted

Latest Year of 

Adjustment (via 

Statute or 

Regulation)

Current Penalty 

Level ($ 

Amount or 

Range)(1)

Sub-Agency 

Bureau/ 

Entity

Location for Penalty 

Update Details

15 U.S.C. 78u-2(b) 

Sec. 21B(b) of the Securities 

Exchange Act of 1934

Tier 2 (other person) 

Violation of Various 

Provisions of the Securities 

Act, the Securities Exchange 

Act, the Investment 

Company Act or the 

Investment Advisers Act

1990 2016 $445,390 OCC Same as above

15 U.S.C. 78u-2(b) 

Sec. 21B(b) of the Securities 

Exchange Act of 1934

Tier 3 (natural person) 

Violation of Various 

Provisions of the Securities 

Act, the Securities Exchange 

Act, the Investment 

Company Act or the 

Investment Advisers Act

1990 2016 $178,156 OCC Same as above

15 U.S.C. 78u-2(b) 

Sec. 21B(b) of the Securities 

Exchange Act of 1934

Tier 3 (other person) 

Violation of Various 

Provisions of the Securities 

Act, the Securities Exchange 

Act, the Investment 

Company Act or the 

Investment Advisers Act

1990 2016 $890,780 OCC Same as above

15 U.S.C. 1639e(k) 

Sec. 129E(k) of the Truth in 

Lending Act

First Violation - Violation of 

Appraisal Independence 

Requirements

2010 2016 $10,875 OCC Same as above

15 U.S.C. 1639e(k) 

Sec. 129E(k) of the Truth in 

Lending Act

Subsequent Violations -

Violation of Appraisal 

Independence 

Requirements

2010 2016 $21,749 OCC Same as above

42 U.S.C. 4012a(f)(5) 

Sec. 102(f)(5) of the Flood 

Disaster Protection Act of 1973

Flood Insurance 1994 2016 $2,056 OCC Same as above

12 U.S.C. 1464(v) 

Sec. 5(v) of the Home Owners' 

Loan Act

Tier 1 Reports of Condition -

Savings Associations 1989 2016 $3,787 OCC Same as above

12 U.S.C. 1464(v) 

Sec. 5(v) of the Home Owners' 

Loan Act

Tier 2 Reports of Condition -

Savings Associations 1989 2016 $37,872 OCC Same as above

12 U.S.C. 1464(v) 

Sec. 5(v) of the Home Owners' 

Loan Act

Tier 3 Reports of Condition -

Savings Associations 1989 2016 $1,893,610 OCC Same as above

12 U.S.C. 1467(d) 

Sec. 9(d) of the Home Owners' 

Loan Act

Refusal of Affiliate to 

Cooperate in Examination 1989 2016 $9,468 OCC Same as above

12 U.S.C. 1467a(r) 

Sec. 10(r) of the Home Owners' 

Loan Act

Tier 1 Late/Inaccurate 

Reports (Federal Savings 

Associations)

1989 2016 $3,787 OCC Same as above

12 U.S.C. 1467a(r) 

Sec. 10(r) of the Home Owners' 

Loan Act

Tier 2 Late/Inaccurate 

Reports (Federal Savings 

Associations)

1989 2016 $37,872 OCC Same as above

12 U.S.C. 1467a(r) 

Sec. 10(r) of the Home Owners' 

Loan Act

Tier 3 Late/Inaccurate 

Reports (Federal Savings 

Associations)

1989 2016 $1,893,610 OCC Same as above
FY 2016 AGENCY FINANCIAL REPORT | OTHER INFORMATION

244 DEPARTMENT OF THE TREASURY

Statutory Authority Penalty (Name or 

Description)

Year 

Enacted

Latest Year of 

Adjustment (via 

Statute or 

Regulation)

Current Penalty 

Level ($ 

Amount or 

Range)(1)

Sub-Agency 

Bureau/ 

Entity

Location for Penalty 

Update Details

27 U.S.C. 218 

Federal Alcohol Administration 

Act, as amended; Section 207 

of the Alcohol Beverage 

Labeling Act of 1988, P.L. 100-

690 

Violation 1988 2016 $19,787 TTB

Federal Register 82 (1 

July 2016)

43062 – 43065

https://www.ttb.gov/r

egulation_guidance/ab

lapenalty.html

31 U.S.C. 333 

Prohibition of Misuse of 

Department of the Treasury 

Names, Symbols, etc.

Misuse of Treasury name or 

symbol 1994 None $5,000 Department Wide None

31 U.S.C. 333 

Prohibition of Misuse of 

Department of the Treasury 

Names, Symbols, etc.

Misuse of Treasury name or 

symbol in broadcast or 

telecast

1994 None $25,000 Department 

Wide None

31 U.S.C. 3729 

False Claims Act False Claims Act 1986 2016

$10,781 to 

$21,563 plus 3 

times the 

amount of 

damages which 

the Government 

sustains because 

of the act

Department 

Wide

Department of Justice 

(DOJ) issued 

regulations at Federal 

Register 81 (30 June 

2016) 42491 - 42503

31 U.S.C. 3802 

Program Fraud Civil Remedies 

Act

Program Fraud Civil 

Remedies Act 1986 2016

Up to $10,781 

for each claim 

plus 2 times the 

amount of the 

claim

Department 

Wide

DOJ issued regulations 

at Federal Register 81 

(30 June 2016) 42491 -

42503

(1) Current penalty level amounts represent the maximum penalty amounts.

(2) We did not previously have a regulation addressing the civil penalty authority under TRIA. On April 1, 2016, we published a proposed rule 

revising the rules for the Terrorism Risk Insurance Program created under TRIA, which included for the first time a proposed civil penalty 

provision [81 FR 18950 (April 1, 2016)]. We cleared an interim final rule addressing the annual readjustment of the civil penalty as required 

by the Federal Civil Penalties Inflation Act Improvements Act of 2015 and submitted the rule to OMB for final review in July 2016, and for 

publication in the Federal Register. Final Program Rules have not been published as of the date of this report.

(3) For purposes of calculating the appropriate inflation factor, OMB’s guidance issued February 24, 2016 uses the calendar year 1914 CMO 

Catch-Up Adjustment Multiplier for all penalties enacted prior to 1914.
OTHER INFORMATION | FY 2016 AGENCY FINANCIAL REPORT

DEPARTMENT OF THE TREASURY 245

APPENDIX: GLOSSARY OF ACRONYMS

Glossary of Acronyms 

ACA Patient Protection and Affordable Care Act

ACH Automated Clearinghouse

ACS Automated Collection System

ACTC Additional Child Tax Credit

AFR Agency Financial Report

AFS Alternative Finance Structure

AGI Adjusted Gross Income

AIG American International Group, Inc.

Ally Ally Financial, Inc.

AML Anti-Money Laundering

APG Agency Priority Goals

APR Annual Performance Report

APTC Advanced Premium Tax Credit

ARC Administrative Resource Center

ARRA American Recovery and Reinvestment Tax Act of 2009

ASAP Automated Standard Application for Payments

ASM Assistant Secretary for Management

BDP Banknote Development Process

BEP Bureau of Engraving and Printing

BPXP BP Exploration & Production Inc.

BSA Bank Secrecy Act

CADE2 Customer Account Data Engine

CDCI Community Development Capital Initiative

CDFI Community Development Financial Institutions

CFIUS Committee on Foreign Investment in the United States

CFO Chief Financial Officer

CFS Consolidated Financial Statements

CI Criminal Investigation

CIGFO Council of Inspectors General on Financial Oversight

CISA Cybersecurity Information Sharing Act

CISO Chief Information Security Officer

Civil Service Fund Civil Service Retirement and Disability Trust Fund

CMF Capital Magnet Fund

CMP Civil Monetary Penalties

CMS Centers for Medicare & Medicaid Services

CPI Consumer Price Index

CPP Capital Purchase Program

CSR Cost Sharing Reduction

CSRS Civil Service Retirement System

CY Calendar Year

D.C District of Columbia
FY 2016 AGENCY FINANCIAL REPORT | OTHER INFORMATION

246 DEPARTMENT OF THE TREASURY

Glossary of Acronyms 

DAIMS V1.0 Information Model Schema Version 1.0

DATA Act Digital Accountability and Transparency Act

DCAA Defense Contract Audit Agency

DDb Dependent Database

DDV Due Diligence Visits

DHS Department of Homeland Security

DLP Data Loss Prevention

DNP Do Not Pay

DO Departmental Offices

Dodd-Frank Act Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010

DOL Department of Labor

DMF Death Master File

EESA Emergency Economic Stabilization Act of 2008

EITC Earned Income Tax Credit

ERM Enterprise Risk Management

ESA Exchange Stabilization Agreement

ESF Exchange Stabilization Fund

Fannie Mae Federal National Mortgage Association

FARS Financial Analysis and Reporting System

FASAB Federal Accounting Standards Advisory Board

FATCA Foreign Account Tax Compliance Act

FCDA Foreign Currency Denominated Assets

FCRA Federal Credit Reform Act

FDC Funds from Dedicated Collections

FDIC Federal Deposit Insurance Corporation

FECA Federal Employees’ Compensation Act

FEGLI Federal Employees Group Life Insurance

FEHBP Federal Employees Health Benefits Program

FERS Federal Employees’ Retirement System

FEVS Federal Employee Viewpoint Survey

FFB Federal Financing Bank

FFI Foreign Financial Institutions

FFIEC Federal Financial Institutions Examination Council

FFMIA Federal Financial Management Improvement Act of 1996

FFRDC Federally Funded Research and Development Center

FHFA Federal Housing Finance Agency

FinCEN Financial Crimes Enforcement Network

Fiscal Service Bureau of the Fiscal Service

FISMA Federal Information Security Management Act

FITARA Federal Information Technology Acquisition Reform Act

FIU Financial Intelligence Unit

FMFIA Federal Managers’ Financial Integrity Act

FOMC Federal Open Market Committee
OTHER INFORMATION | FY 2016 AGENCY FINANCIAL REPORT

DEPARTMENT OF THE TREASURY 247

Glossary of Acronyms 

FPS Federal Protective Service

FR System Federal Reserve System

FRB Federal Reserve Bank

FRBNY Federal Reserve Bank of New York

Freddie Mac Federal Home Loan Mortgage Corporation

FRN Floating Rate Note

FS Fiscal Service

FSB Financial Stability Board

FSOC Financial Stability Oversight Council

FTO Fine Troy Ounce

FY Fiscal Year

G-20 Group of 20

GAAP Generally Accepted Accounting Principles

GAB General Arrangements to Borrow

GAO U.S. Government Accountability Office

General Fund General Fund of the U.S. government

GLEIS Global Legal Entity Identifier System

GM General Motors Company

GPRA Government Performance and Results Act of 1993

GSA General Services Administration

GSE Government Sponsored Enterprise

GTO Geographic Targeting Order

HERA Housing and Economic Recovery Act

HFA Housing Finance Agency

HVA High Value Assets

HHS Department of Health and Human Services

HUD Department of Housing and Urban Development

IDT Identify Theft

IG Inspector General

IMF International Monetary Fund

IP Improper Payment

IPIA Improper Payments Information Act of 2002, as amended by IPERA

IP PIN Identity Protection Personal Identification Number

IPERA Improper Payments Elimination and Recovery Act

IPERIA Improper Payments Elimination and Recovery Act Improvement Act of 2012

IRC Internal Revenue Code

IRS Internal Revenue Service

IT Information Technology

JAMES Joint Audit Management Enterprise System

JCPOA Joint Comprehensive Plan of Action

Jobs Act Small Business Jobs Act of 2010

LOS Level of Service

MDB Multilateral Development Bank
FY 2016 AGENCY FINANCIAL REPORT | OTHER INFORMATION

248 DEPARTMENT OF THE TREASURY

Glossary of Acronyms 

Mint United States Mint

MMF Money Market Funds

MOU Memoranda of Understanding

MRADR Market Risk Adjusted Discount Rate

MSS Manufacturing Support Suite

NAB New Arrangements to Borrow

NAFA North American Framework Agreement

NIBP New Issue Bond Program

NIST National Institute of Standards and Technology

NLS National Library Service for the Blind and Physically Handicapped

NRP National Research Program

OAS Office of International Affairs

OCC Office of the Comptroller of the Currency

ODCP Office of D.C. Pensions

OFAC Office of Foreign Assets Control

OFR Office of Financial Research

OFS Office of Financial Stability

OIG Office of the Inspector General

OMB Office of Management and Budget

OPEB Other Post-Employment Benefits

OPM Office of Personnel Management

ORB Other Retirement Benefits

OTA Office of Technical Assistance

OTC Over the Counter

P&I Penalty & Interest

PB President’s Budget

Postal Benefits Fund Postal Service Retiree Health Benefits Fund

PP&E Property, Plant, and Equipment

PTC Premium Tax Credit

PTIN Preparer Tax Identification Number

RESTORE Act Resources and Ecosystems Sustainability, Tourist Opportunities and Revived 

Economies of the Gulf Coast States Act of 2012

RTC Resolution Trust Corporation

SBLF Small Business Lending Fund

SBR Statement of Budgetary Resources

SDR Special Drawing Rights

SEC Securities and Exchange Commission

SFFAC Statement of Federal Financial Accounting Concepts

SFFAS Statement of Federal Financial Accounting Standards

SIGTARP Special Inspector General for the Troubled Asset Relief Program 

SNI Single Note Inspection

SOAR Strategic Objective Annual Review

SOMA System Open Market Account
OTHER INFORMATION | FY 2016 AGENCY FINANCIAL REPORT

DEPARTMENT OF THE TREASURY 249

Glossary of Acronyms 

SOS Schedule of Spending

SPS Secure Payment System

SPSPA Senior Preferred Stock Purchase Agreements

SRP Shared Responsibility Payment

SRPO Senior Real Property Officer

SSA Social Security Administration

SSBCI State Small Business Credit Initiative

TAC Taxpayer Assistance Center

TARP Troubled Asset Relief Program

TCLP Temporary Credit and Liquidity Program

TFF Treasury Forfeiture Fund

TFI Terrorism and Financial Intelligence

TFRP Trust Fund Recovery Penalty

TFS TIER Financial Statements

TGA Treasury General Account

TIER Treasury Information Executive Repository

TIGTA Treasury Inspector General for Tax Administration

TIPS Treasury Inflation-Protected Securities

TPP Trans-Pacific Partnership

TRIP Terrorism Risk Insurance Program

TS2 Transition State 2

TSP Thrift Savings Plan

TTB Alcohol and Tobacco Tax and Trade Bureau

USC United States Code

USPS United States Postal Service

USSGL United States Standard General Ledger

VITA Volunteer Income Tax Assistance

VOC Voice of the Customer

VSD Virtual Service Delivery

WIPS Wireless Intrusion Prevention System
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WEBSITE INFORMATION

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

Alcohol and Tobacco Tax and Trade Bureau............................................................................................................................. www.ttb.gov

Bureau of Engraving & Printing .....................................................................................................................................................www.bep.gov

Fiscal Service.....................................................................................................................................................................www.fiscal.treasury.gov

Community Development Financial Institutions Fund..............................................................................................www.cdfifund.gov

Financial Crimes Enforcement Network ...............................................................................................................................www.fincen.gov

Internal Revenue Service ....................................................................................................................................................................www.irs.gov

Office of the Comptroller of the Currency...................................................................................................................................www.occ.gov

U.S. Mint .............................................................................................................................................................................................www.usmint.gov

The Financial Stability Plan.................................................................................................................................. www.financialstability.gov

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

The Recovery Act.......................................................................................................................................................................www.recovery.gov

Office of Inspector General ............................................................................................................................................www.treasury.gov/oig

Treasury Inspector General for Tax Administration...........................................................................................................www.tigta.gov

Special Inspector General for the Troubled Asset Relief Program ..........................................................................www.sigtarp.gov

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