DEPARTMENT OF THE TREASURY

Agency Financial Report

Fiscal Year 2015 November 16, 2015

Fiscal Year 2015

DEPARTMENT OF THE TREASURY

Agency Financial Report
Department of the Treasury

Mission Statement

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.

Treasury’s Strategic Goals

1

2 3

4 5

1. Promote domestic economic 

growth and stability while continuing 

reforms of the financial system

2. Enhance U.S. competitiveness 

and job creation, and promote 

international financial stability and 

more balanced global growth

3. Fairly and effectively reform 

and modernize federal financial 

management, accounting, 

 and tax systems

4. Safeguard the financial 

system and use financial 

measures to counter 

national security threats 

5. Create a 21st-century 

approach to government 

by improving efficiency, 

effectiveness, and 

customer interaction
TABLE OF CONTENTS

MESSAGE FROM THE SECRETARY OF THE TREASURY................................................................................................................... 1

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

INTRODUCTION ........................................................................................................................................................................ 2

ORGANIZATION ........................................................................................................................................................................ 3

TREASURY STRATEGIC FRAMEWORK.......................................................................................................................................... 5

PERFORMANCE OVERVIEW........................................................................................................................................................ 7

SUMMARY OF MANAGEMENT AND PERFORMANCE CHALLENGES ................................................................................................. 19

FY 2016 OUTLOOK................................................................................................................................................................... 21

FINANCIAL HIGHLIGHTS........................................................................................................................................................... 22

MANAGEMENT ASSURANCES ..................................................................................................................................................... 29

PART 2: ANNUAL FINANCIAL REPORT

MESSAGE FROM THE ASSISTANT SECRETARY FOR MANAGEMENT AND DEPUTY CHIEF FINANCIAL OFFICER .................................. 36

INSPECTOR GENERAL’S TRANSMITTAL LETTER .......................................................................................................................... 37

INDEPENDENT AUDITORS’ REPORT ON THE DEPARTMENT’S FINANCIAL STATEMENTS.................................................................. 39

MANAGEMENT’S RESPONSE TO INDEPENDENT AUDITORS’ REPORT............................................................................................. 46

FINANCIAL STATEMENTS .......................................................................................................................................................... 47

NOTES TO THE FINANCIAL STATEMENTS .................................................................................................................................... 54

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) ........................................................................................................ 124

PART 3: OTHER INFORMATION (UNAUDITED)

SECTION A: SCHEDULE OF SPENDING........................................................................................................................................ 131

SECTION B: TAX GAP AND TAX BURDEN.................................................................................................................................... 132

SECTION C: MANAGEMENT AND PERFORMANCE CHALLENGES IDENTIFIED BY THE INSPECTORS GENERAL AND THE SECRETARY’S 

RESPONSES .............................................................................................................................................................................. 135

SECTION D: SUMMARY OF FINANCIAL STATEMENT AUDIT AND MANAGEMENT ASSURANCES........................................................ 191

SECTION E:IMPROPER PAYMENTS DETAILED REPORT ............................................................................................................... 192

SECTION F: MATERIAL WEAKNESSES AND AUDIT FOLLOW UP .................................................................................................... 209

SECTION G: FREEZE THE FOOTPRINT ........................................................................................................................................ 216

SECTION H: CIVIL MONETARY PENALTIES INFLATION ADJUSTMENT .......................................................................................... 217

APPENDIX: GLOSSARY OF ACRONYMS ........................................................................................................................................ 220
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U.S. Department of the Treasury | Fiscal Year 2015 

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MESSAGE FROM THE SECRETARY OF THE TREASURY

As we issue the Agency Financial Report for the Department of the Treasury (Treasury or the Department) this 

year, we celebrate the fifth anniversary of two important pieces of legislation that have helped the U.S. 

economy move forward from the 2008 financial crisis: the Small Business Jobs Act of 2010 and the 2010 

Dodd-Frank Wall Street Reform and Consumer Protection Act. These two pieces of landmark legislation 

demonstrate the enormously positive impact that cooperation between Congress and the Executive Branch can 

have on our country. Treasury has been proud to play its part in implementing programs under these laws that 

have brought stability to the financial markets and economic security and growth to the American people. 

Though we remain focused on steering the United States to a stronger economic future, Treasury also acts as a leader in addressing 

critical international issues. The world witnessed the effectiveness of economic sanctions in advancing key national security 

objectives when Iran agreed to a Joint Comprehensive Plan of Action (JCPOA) that will curb its nuclear program in exchange for 

the lifting of specific, nuclear-related sanctions. In addition, over the course of this year, we have successfully advanced U.S. 

growth priorities with the Group of 20 (G-20) and outlined a new framework for financing development throughout the world. 

Finally, as the President charts a new course for U.S. relations with Cuba, Treasury played a leading role through the revision of 

long-standing regulations with a goal of further engaging and empowering the Cuban people. 

Even as we contributed in innovative ways to domestic and international growth and stability, we continued to fulfill our core 

mission to manage the U.S. Government’s finances effectively. This year, we embraced our new role as co-lead with the Office of 

Management and Budget (OMB) in implementing the Digital Accountability and Transparency Act of 2014 (DATA Act), which 

will usher in a new era of federal financial accountability to the American people. Despite severely reduced funding levels, the IRS 

also successfully administered the first tax season in which the Affordable Care Act (ACA)’s individual mandate was in effect.

To maintain our course, we must address key challenges that could hinder our ability to build on these successes. Now that 

Congress passed and the President signed legislation to fund the government and increase the debt limit for the next two years, we 

will focus on working with Congress to secure the funding necessary to administer the country’s tax code effectively and provide the 

level of service taxpayers expect from their government. In addition, we continue to monitor cyber threats and are actively working 

to promote improvements in cybersecurity across the financial sector. Within Treasury, in FY2015, we established the Office of 

Risk Management and the position of Chief Risk Officer to emphasize the identification and mitigation of all types of risk. In 

addition, we will focus on a comprehensive set of management priorities, including improving the way the Department hires and 

engages employees. Without highly qualified and motivated employees, we cannot succeed in our mission. 

As part of this report, Treasury received an unmodified audit opinion on its consolidated financial statements and validated its 

financial and performance data as accurate, complete, and reliable. Treasury strengthened its management controls, including the 

material weaknesses discussed in Part III of this report, and made progress toward achieving U.S. financial systems and control 

objectives. We provide this report as a comprehensive review of the Department’s important work and finances. 

I look forward to building on the progress described in this year’s report and leading our efforts to achieve Treasury’s strategic 

goals for stronger, more sustainable economic growth in the years to come. 

Jacob J. Lew

Secretary of the Treasury 

November 16, 2015 
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U.S. Department of the Treasury | Fiscal Year 2015 

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INTRODUCTION 

This Agency Financial Report (AFR) for Fiscal Year (FY) 2015 presents the Department of the Treasury’s (Treasury or 

the Department) financial information relative to its vital mission and the stewardship of the resources entrusted to us. 

It also highlights Treasury’s priorities, accomplishments, and challenges in implementing programs 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. 

Throughout its rich history, Treasury’s core mission has not changed. Today, with approximately 100,000 employees in 

its ranks, Treasury remains the steward of the U.S. economy — taking in revenue, meeting financial obligations, and, 

when appropriate, borrowing and investing public funds. In recent years, Treasury’s role expanded to include being a 

leader in safeguarding and growing the nation’s economy.

For FY 2015, Treasury used the alternative approach identified in the Office of Management and Budget’s (OMB) Circular 

A-136 to produce its Performance and Accountability Reports, which consists of three reports. 

FY 2015 Performance Report Title Delivery Date Website Location

Agency Financial Report November 16, 2015

(Anticipated)

http://www.treasury.gov/about/budgetperformance/annual-performanceplan/Pages/default.aspx

Annual Performance Report 

(submitted with the Department’s congressional 

Budget Justification)

February 1, 2016 http://www.treasury.gov/about/budgetperformance/Pages/cj-index.aspx

Summary of Performance and Financial 

Information (Citizens’ Report)

February 15, 2016 http://www.treasury.gov/about/budgetperformance/annual-performanceplan/Pages/default.aspx

WHAT’S IN THIS DISCUSSION? 

The Management’s Discussion and Analysis is required supplementary information to the financial statements and 

provides a high-level overview of Treasury’s performance, organized into the following sections:

 The Organization section describes how Treasury is structured, including descriptions of its bureaus and offices.

 The Treasury Strategic Framework section outlines Treasury’s current strategic goals, objectives, agency priority

goals (APGs), and organizational performance management practices.1

 The Performance Overview section summarizes FY 2015 performance for each strategic goal, including selected

accomplishments and key data. Four-year trends are analyzed using colored arrows, with the arrow (up, down, or

side-to-side) indicating the direction and the color (red, yellow, or green) indicating the desirability of the result.

 The Summary of Management and Performance Challenges highlights cross-cutting issues encountered.

 The FY 2016 Outlook section highlights planned next steps to advance Treasury’s strategic priorities.

 The Financial Highlights section analyzes key financial data, including Treasury’s balance sheet, net cost, budgetary

resources, and revenue received.

 The Management Assurances section provides the Secretary’s Assurance Statement related to the Federal Managers’

Financial Integrity Act. This section also describes the Department’s efforts to ensure that Treasury’s financial

management systems comply with applicable accounting principles, internal control standards, and requirements.

1

 Access current and past strategic plans at http://www.treasury.gov/about/budget-performance/strategicplan/Pages/index.aspx and APGs at http://www.performance.gov/agency/department-treasury?view=public#apg
U.S. Department of the Treasury | Fiscal Year 2015 

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ORGANIZATION 

Treasury is organized into the Departmental Offices, seven bureaus, and three inspectors general. The Departmental 

Offices are primarily responsible for policy formulation, while the bureaus are the operating units of the organization.2

2 In addition to the listed organizations, the Office of Risk Management, created in FY 2015, and the Office of Small and Disadvantaged 

Business Utilization report to the Deputy Secretary. Learn more about Treasury’s bureaus and offices on the following pages and at 

http://www.treasury.gov/about/organizational-structure/Pages/default.aspx. For financial reporting purposes, the Departmental 

Offices includes the entities described in the following section, the various funds and programs managed by them (referenced in Part 2 of 

this report), and the Federal Financing Bank (FFB).
U.S. Department of the Treasury | Fiscal Year 2015 

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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) marshals the Department’s intelligence and enforcement functions with the 

twin aims of safeguarding the financial system against illicit use and combating rogue nations, terrorist facilitators, 

weapons of mass destruction proliferators, money launderers, drug kingpins, and other national security threats. 

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 in the United States. 

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.

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. 

Other offices within Departmental Offices include General Counsel, Legislative Affairs, and Public Affairs. 

Three Inspectors General – the Office of the 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 its programs. 

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, 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. 
U.S. Department of the Treasury | Fiscal Year 2015 

5

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 the Department’s 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. 

TREASURY STRATEGIC FRAMEWORK 

The Government Performance and Results Act (GPRA) of 1993 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, Treasury developed a strategic framework supported by best-in-class organizational performance practices to 

ultimately help achieve its strategic goals. 

TREASURY ORGANIZATIONAL PERFORMANCE REVIEW CYCLE

Treasury’s organizational performance reviews provide a regular forum for open dialogue and coordination between 

Department and bureau and office leadership, bringing 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.”

Fall Winter Spring Summer 

Focus

Bureau-level Performance Department-level 

Performance (SOAR) Bureau-level Performance Performance-based Budget

Goals/Outcomes

 Gain a shared

understanding of previous

year’s progress at the

bureau/office level

 Identify and align

priorities

 Recognize successes

 Evaluate cross-agency

progress toward strategic

objectives

 Identify issues to discuss

with OMB at FedStat (a

new annual review with

OMB)

 Assess progress on

priorities

 Surface problems or

assistance needed

 Discuss solutions

 Recognize successes

 Connect priorities to

future funding

 Understand performance

impacts

In addition to these department-level reviews, bureaus and offices validate performance data each quarter and many run 

their own internal performance reviews. 
U.S. Department of the Treasury | Fiscal Year 2015 

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FY 2014-2017 STRATEGIC FRAMEWORK

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

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

Domestic Finance

International 

Affairs

Economic Policy

BEP

Fiscal Service

OCC

TTB

U.S. Mint

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

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

International 

Affairs

TFI

Economic Policy

Tax Policy

2.2: Protect global economic and financial stability and press for marketdetermined 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

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 Domestic Finance

Tax Policy

Fiscal Service

IRS

TTB

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 and Foreign Account Tax Compliance Act, and improve the 

execution of the tax code

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

TFI

Domestic Finance

FinCEN

OCC

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

Aligned APG: Focus Enforcement on High-Priority Threats Using 

Proactive Analysis

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

All Offices and 

Bureaus, led by the 

Office of 

Management

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
U.S. Department of the Treasury | Fiscal Year 2015 

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PERFORMANCE OVERVIEW 

GOAL 1: PROMOTE DOMESTIC GROWTH AND STABILITY WHILE 

CONTINUING REFORMS OF THE FINANCIAL SYSTEM

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

Strategic Objective 1.2: Wind down emergency financial crisis response programs

Strategic Objective 1.3: Complete implementation of financial regulatory reform initiatives, continue monitoring capital markets, 

and address threats to stability

Strategic Objective 1.4: Facilitate commerce by providing trusted and secure U. S. currency, products, and services for use by the 

public

INCREASED ACCESS TO CREDIT AND SAVINGS

The Small Business Jobs Act of 2010 (Jobs Act), which celebrates its fifth anniversary this year, has produced impressive 

results. The law created the State Small Business Credit Initiative (SSBCI), which is charged with increasing the 

availability of credit for small businesses and generating jobs and other economic development benefits for states. 

Because of the program’s success, Treasury seeks to reauthorize it through FY 2023. Since its passage, SSBCI has 

supported more than 12,400 private sector loans or investments to small businesses and helped create or retain more 

than 140,000 jobs, as reported by the small businesses who received the loans and investments.3

 As of June 30, 2015, 

approximately $1.26 billion of $1.46 billion total funds available for disbursement have been provided to the states.4

 As 

of December 2014, states had expended $864 million of these funds to leverage $6.4 billion in new lending or investing. 

The Jobs Act also created the Community Development Financial Institutions (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 capital. Under FY 2013 and 2014 authority, Treasury provided four 

bond guarantees, which supported eight bond loans totaling $525 million. On September 29, 2015, Treasury announced 

that an additional nine bond loans, totaling $327 million, were guaranteed in FY 2015. 

Helping Americans save—for retirement and other goals—is a top priority for Treasury. Millions of workers in America 

either do not have access to an employer-sponsored retirement plan or lack options to save for retirement. In December 

2014, Treasury began the initial pilot phase of myRA, or my Retirement Account, that makes saving for retirement 

simple, safe, and affordable. In addition, Treasury continued to lead the administration’s efforts to help Americans have 

the financial information and skills they need to make sound choices in a complex financial system by chairing the 

interagency Financial Literacy and Education Commission and receiving important recommendations from the 

President’s Advisory Council on Financial Capability for Young Americans. Additionally, Treasury worked closely with 

the Department of Education to improve the federal student loan system. 

ECONOMIC RECOVERY AND STABILITY

FY 2015 also marked the fifth anniversary of the most far-reaching and comprehensive financial reforms since the Great 

Depression: the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). During the 

darkest moments of the 2008 financial crisis, the U.S. economy was contracting at the fastest rate in 50 years. By early 

2009, companies were shedding more than 800,000 jobs a month and, eventually, the unemployment rate reached 10 

percent. The crisis demonstrated that excessive risk-taking, low levels of capital, unsafe lending practices, and 

inadequate oversight within the financial system can have a real impact on the lives of all Americans. By enacting the 

3 SSBCI December 2014 Annual Report

4 SSBCI June 2015 Quarterly Report 
U.S. Department of the Treasury | Fiscal Year 2015 

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Dodd-Frank Act, the U.S. Government set out to reform Wall Street to be more stable, transparent, and focused on 

serving customers. 

Five years later, with nearly all of the major rules written, the financial system is safer, stronger, and more resilient. The 

economy is growing and unemployment rate has dropped to 5.0 percent as of November 2015.5 Regulators have modern, 

common-sense tools to protect taxpayers, and banks have more capital to cover potential losses. And since financial 

crises do not respect national borders, Treasury is working through the Group of 20 (G-20) and Financial Stability Board 

(FSB) to make sure that the Department’s high standards are implemented globally. This year, the FSB will finalize a new 

international standard on total loss absorbing capacity (TLAC) for globally systemically important banks and standards 

for higher loss absorbing capacity for globally systemically important insurers. 

Additionally, the emergency financial crisis response programs continue to wind down effectively. In December 2014, the 

Troubled Asset Relief Program (TARP) fully liquidated its investment in Ally Financial and realized cumulative receipts 

of $19.6 billion ($2.4 billion more than invested). The ultimate cost to taxpayers of TARP programs dropped from the FY 

2009 estimate of $341.0 billion to $37.2 billion as of September 2015. TARP’s foreclosure prevention programs provided 

more than 1.5 million homeowners with permanent mortgage modifications, which equates to approximately $38.7 

billion in realized monthly mortgage payment savings for these homeowners. 

Monitoring for new risks to the financial system and the broader economy remains a top priority for Treasury and other 

regulators. For example, on October 15, 2014, the U.S. Treasury market experienced significant volatility. To better 

understand the sources of that volatility, Treasury, the Board of Governors of the Federal Reserve System, the Federal 

Reserve Bank of New York, the Securities and Exchange Commission, and the Commodity Futures Trading Commission 

conducted an analysis and issued a joint report in July 2015. The report analyzed a host of factors, including changes in 

global risk sentiment and investor positions, and those related to the evolution of Treasury market structure, in an effort 

to explain the events of that day. Treasury will continue to work with partners, including through the Financial Stability 

and Oversight Council (FSOC), to monitor the financial system and investigate any potential threats to financial stability. 

THE FUTURE OF CURRENCY

During the summer of 2015, Secretary Lew announced that the $10 bill, the first in a new family of notes, will undergo a 

redesign and that a woman's portrait will be featured on U.S. paper currency for the first time in more than a century.6 

The newly designed note is also expected to incorporate a raised tactile feature that increases accessibility and usability 

for the blind and visually impaired community. As part of his announcement, the Secretary asked Americans to engage in 

the redesign process by weighing in on whose portrait should be featured and how currency can honor the country’s rich 

history of democracy. Treasury received more than 1.5 million responses from the public to date through face to face 

meetings, roundtables, town halls, Twitter, Instagram, Facebook, emails, and handwritten letters. 

The Department is also working to evaluate the future of coins. The U.S. Mint provided research to Congress on potential 

alternative metals for coins that could drive down metal costs. 

FACILITATION OF COMMERCE

Treasury plays an important role in facilitating commerce for certain industries, such as the alcoholic beverage industry, 

that rely on Treasury’s approval to enter the market. As these industries continue to expand, particularly in the small 

winery, brewery, and spirits areas, new businesses that are qualified to operate are waiting longer for permits. Further, 

increased demand for approvals of alcohol beverage labels and formulas, and declining resources to manage the approval 

5U.S. Bureau of Labor Statistics, November 6, 2015 release.

6 Access https://www.thenew10.treasury.gov/ for more information.
U.S. Department of the Treasury | Fiscal Year 2015 

9

processes, has required Treasury to work to fundamentally reshape these programs. Processing times for these approvals 

have also increased in recent years, which impede compliant commerce for industry members, and are particularly 

detrimental to small business. Recent efforts to reduce processing times—including an expanded list of label revisions 

allowable without new approval—have been outpaced by industry growth. 

KEY PERFORMANCE DATA HIGHLIGHTS

Measure 

(Responsible Bureau/Office) FY 12 FY 13 FY 14 FY 15 4-yr 

Trend

FY 15 

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)

84.9 77.1 70.8 80.1 60.0 Exceeded

Manufacturing costs for currency – dollar 

costs per thousand notes produced (BEP) 43.3 50.5 42.0 43.62 55.0 Exceeded

Seigniorage per dollar issued (Mint) .21 .24 .37 .49 .24 Exceeded

Percent of permit applications processed 

within service standards (TTB) 61 50 58 47 85 Not Met

Percent of label and formula applications 

processed within service standards (TTB) 83 49 67 75 85 Not Met

Explanation of Results

Percentage of CDFI Program loans & investments originated to eligible distressed communities or underserved populations by 

dollar amount (Domestic Finance - CDFI Fund)

This 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 

with safety and soundness considerations. The increase over the prior year was due to full adoption of the 2010 five-year American 

Community Survey (ACS) data to define eligible distressed census tracts (the prior year reporting allowed the use of either 2000 

decennial data or the five-year ACS data). 

Manufacturing costs for currency – dollar costs per thousand notes produced (BEP)

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

materials used, and related manufacturing overhead charges. The FY 2015 cost of manufacturing was lower than anticipated due 

to savings resulting from increased volume and decreased spoilage.

Seigniorage per dollar issued (Mint)

This 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 

2015 results exceeded the target and prior year performance due to a 24 percent increase in circulating shipment volumes coupled 

with a 9 percent reduction in general and administrative costs.

Percent of permit applications processed within service standards (TTB)

This 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. As the majority of permit applications are filed electronically, TTB implemented system 

enhancements in FY 2015 to reduce bottlenecks in the approval process. However, the volume of applications, particularly in the 

manufacturing segments of small wineries, breweries, and distilleries, offset gains and resulted in continued processing delays.

Percent of label and formula applications processed within service standards (TTB)

This 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. Though 

TTB achieved substantial improvement in performance in the last two years, performance remains below target as TTB efforts to

manage the volume of submissions by reducing filing requirements associated with label and formula approval have been offset by 

increased applications due to industry growth. 
U.S. Department of the Treasury | Fiscal Year 2015 

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GOAL 2: ENHANCE U.S. COMPETITIVENESS AND JOB CREATION, AND 

PROMOTE INTERNATIONAL FINANCIAL STABILITY AND MORE BALANCED 

GLOBAL GROWTH

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

Strategic Objective 2.2: Protect global economic and financial stability and press for market-determined foreign exchange rates 

Strategic Objective 2.3: Advance U.S. economic, financial, and national security goals by leveraging multilateral mechanisms 

Identified as a Focus Area for Improvement in FY 2015 due mainly to external factors slowing progress, specifically securing 

congressional approval of the International Monetary Fund (IMF) Reform package.

Strategic Objective 2.4: Provide technical assistance to developing countries working to improve public financial management and 

strengthen their financial systems 

Identified as making Noteworthy Progress in FY 2015 due to the Office of Technical Assistance’s (OTA) reputation in program 

management and the results of recently completed projects, particularly in Latin America where OTA helped to establish Latin America’s 

first Tax Inspector General.

PROGRESS TOWARD BALANCED GROWTH 

Leveraging multilateral mechanisms, Treasury made progress enhancing global economic growth prospects by securing 

commitments from the G-20 countries at the Brisbane Leaders’ Summit in November 2014 to boost near-term demand 

through comprehensive growth strategies and to establish the Global Infrastructure Hub to increase global investment. 

The plan’s emphasis on comprehensive growth strategies to boost demand over the near-term reflected an important U.S. 

policy priority. Additional commitments to boost growth have been secured through the G-20 process in 2015. 

In addition, Treasury defined the policy framework for development finance for the next 15 years by successfully 

negotiating the adoption of the Addis Ababa Action Agenda at the Third International Conference on Financing for 

Development in July 2015. The conference provided a forum to promote a modern and updated approach to 

development finance, including a bold vision for achieving a prosperous, inclusive, and sustainable world free from 

extreme poverty. It also provided the financing framework for the 2030 Agenda for Sustainable Development adopted 

by world leaders in September 2015. The 2030 agenda includes 17 development goals in the areas of domestic resource 

mobilization, private sector investment, combatting illicit finance, sustainable infrastructure, improved data, maternal 

and child health, and others. 

With the United States Trade Representative (USTR), Treasury co-leads the negotiation of financial services chapters of 

free trade agreements. In June 2015, Congress passed Trade Promotion Authority (TPA), which granted the President 

the authority to negotiate trade deals that will then be considered by Congress under an expedited approval process. 

Notable progress was made promoting free trade and open markets by reaching agreement on the largest regional trade 

accord in history, the Trans-Pacific Partnership (TPP) agreement, and by advancing the Transatlantic Trade and 

Investment Partnership and the broader U.S. trade agenda. 

EFFORTS TO PROMOTE GLOBAL STABILITY

Treasury protects and supports American economic prosperity by strengthening the external environment for U.S. 

growth, preventing and mitigating global financial instability, and managing key global challenges. New commitments 

secured from China at the June 2015 Strategic and Economic Dialogue (S&ED) will lead to implementation of economic 

reforms and pro-market policies that will create new opportunities and a more level playing field for U.S. workers and 

firms. They also included commitments from China on the negotiation of international export credit disciplines, 

exchange rate policy and transparency, market access for U.S. high-technology goods and services, and expanded 

participation in China’s markets by U.S. financial services providers. Further commitments were secured during the 
U.S. Department of the Treasury | Fiscal Year 2015 

11

September 2015 State Visit of China’s president in the areas of development finance and foreign investment policy. These 

commitments will serve to protect global economic and financial stability. 

Additionally, Treasury continued efforts with European counterparts to encourage institutional development in the euro 

area and remained engaged with the International Monetary Fund (IMF) to monitor progress toward economic 

stabilization in vulnerable countries like Ukraine and Greece. In May 2015, the U.S. Agency for International 

Development (USAID) and the Hashemite Kingdom of Jordan (Jordan) signed a third sovereign loan guarantee 

agreement that will help Jordan continue to provide critical services to its citizens and support specific economic reforms 

to promote economic stability and growth. These guarantees, which Treasury helped to design, have proven successful in 

supporting Jordan’s reform efforts during a time of regional instability.

INTERNATIONAL LEADERSHIP AND ASSISTANCE

Treasury continues to engage with G-20 members to leverage the FSB to collective advantage, supporting the FSB’s 

objectives of greater financial stability, strong, sustainable, and balanced growth, and a level playing field for firms both 

in the United States and globally. Progress was made on the key objectives for global regulatory reform set out at the 

Pittsburgh Summit in 2009, including: building more resilient financial institutions with higher capital requirements and 

better quality capital; making the over-the-counter (OTC) derivatives markets safer and more transparent; addressing the 

risks posed by the largest, most complex financial institutions; and monitoring potential emerging threats to financial 

stability. 

While Treasury made progress on several key international issues, evolving global geopolitical and financial crises and 

slowing economic growth in key regions and countries required Treasury to respond nimbly to immediate priorities, 

leaving less time for longer-term goals. Compounding these external challenges, Congress again failed, in FY 2015, to 

approve the 2010 IMF Quota and Governance Reforms and provide sufficient support for multilateral assistance 

priorities. This strains the ability of the United States to lead in these institutions and can adversely impact the 

willingness of other countries to engage in advancing U.S. priorities. 

Despite these challenges, Treasury continues to provide critical technical assistance to finance ministries and central 

banks in developing countries. In FY 2015, Treasury’s Office of Technical Assistance (OTA) successfully completed 

several projects in Latin America to provide regional models of excellence in public financial management. For example, 

Treasury’s assistance enabled the establishment of the first tax inspector general within the Colombian government, now 

seen as a leader and model for surrounding countries. In FY2015, OTA also continued to provide technical assistance to 

the Ukrainian government as part of the U.S. Government’s rapid response to stabilize the banking sector and strengthen 

government finances. 

KEY PERFORMANCE DATA HIGHLIGHTS

Measure 

(Responsible Bureau/Office) FY 12 FY 13 FY 14 FY 15 4-yr 

Trend

FY 15 

Target Result vs Target

Timely review of Committee for Foreign 

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

(International Affairs)

N/A 100 100 100 100 Met

Impact of Technical Assistance Programs -

Changes that result from project engagement 

– 5 point scale (International Affairs)

3.1 3.0 2.9 2.9 3.1 Not met

Traction of Technical Assistance Programs –

scope and intensity of engagement – 5 point 

scale (International Affairs)

3.9 3.8 3.7 3.8 3.6 Exceeded

Explanation of Results
U.S. Department of the Treasury | Fiscal Year 2015 

12

Timely review of CFIUS cases (%) (International Affairs)

By statute 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 that the parties have voluntarily withdrawn. The 100 percent result for FY 2015 

reflects that CFIUS timely reviewed all such notified transactions for national security concerns and concluded action transactions 

after determining there were no unresolved national security concerns.

Impact and Traction of Technical Assistance Programs (International Affairs)

Traction is the degree to which OTA’s foreign counterparts are engaging proactively and constructively with OTA advisors, 

particularly at the working level. Traction was relatively high during the reporting period. Impact measures the extent to which a 

project is achieving the intermediate goals and ultimate outcomes described in the project’s terms of reference and work plan

during the fiscal year – such as passage of law or regulation, an increase in government revenues, an improvement in a 

government’s credit rating, or a reduction in financial crimes. The impact measure is primarily a function of the extent to which 

OTA’s foreign counterparts actually make use of OTA’s technical advice and is dependent on a range of factors not within OTA’s 

control, including the policy and political environment, the commitment of in-country actors to reform, overall economic 

conditions, and in some cases, the country’s security environment. Taken together, these factors resulted in a lower average score 

during this reporting period. OTA is sometimes called upon to engage in countries where US foreign policy and national security 

interests are compelling but where the overall political economy and security environment is especially challenging and impact is 

hard to achieve. Sustaining traction in these difficult assistance projects is a mark of the program’s strength. It should also be 

noted that relatively minor deviations from the baseline target are to be expected in assigning an aggregate numerical value to a 

program that consists of many individual projects – the traction and impact figures above are the average of more than 150 

individual project ratings – implemented over multiple countries with different policy and political environments.

GOAL 3: FAIRLY AND EFFECTIVELY REFORM AND MODERNIZE FEDERAL 

FINANCIAL MANAGEMENT, ACCOUNTING, AND TAX SYSTEMS

Strategic Objective 3.1: Improve the efficiency and transparency of federal financial management and government-wide 

accounting 

Identified as a Focus Area for Improvement in FY 2015 due to anticipated work that will be done in FY 2016 to implement the DATA 

Act and USAspending.gov improvements.

Strategic Objective 3.2: Improve the disbursement and collection of federal funds and reduce improper payments made by the 

U.S. Government 

Strategic Objective 3.3: Pursue tax reform, implement the Patient Protection and Affordable Care Act and Foreign Account Tax 

Compliance Act, and improve the execution of the tax code 

INNOVATIONS IN FEDERAL FINANCIAL MANAGEMENT

Treasury constantly seeks to lead the government in modernizing federal financial management. As a co-lead with OMB 

in implementing the Digital Accountability and Transparency Act of 2014 (DATA Act), Treasury engaged with 

communities that create and use federal financial data to make it more transparent and available to the American 

people.7 Once implemented, the DATA Act will make federal spending data more accessible, searchable, and reliable. In 

FY 2015, Treasury and OMB published new data standards based on public input that will help improve the quality of 

federal spending data and enable agencies to use common standards when reporting information. Treasury is also 

developing resources to support federal agencies in adopting the data standards and increasing spending transparency 

based on the DATA Act requirements. Treasury will continue to engage the public in the development of new online tools 

to support greater access to data and, by May 2017, further improve data accuracy on USAspending.gov. 

The amount of college debt increased substantially in recent years, and the United States needs a world-class student 

lending system on par with its higher education system. To develop new solutions to this growing problem, the 

Department of Education partnered with Treasury to launch a pilot in February 2015 that allows Treasury to work 

directly with defaulted student loan borrowers. The pilot will yield valuable data and first-hand experience with the 

collections process, which should provide a better understanding of best practices and how to improve borrower 

outcomes. 

7 For more information on Treasury’s efforts to implement the DATA Act, access https://www.usaspending.gov/Pages/Data-Act.aspx. 
U.S. Department of the Treasury | Fiscal Year 2015

13

FISCAL RESPONSIBILITY

Treasury is entrusted with managing the nation’s finances, collecting money and making payments on behalf of the 

United States. Treasury also determines and executes a borrowing strategy that meets the federal government’s needs at 

the lowest cost over time. Furthermore, Treasury accounts for, and reports on, the U.S. Government’s finances to the 

American people. Sound financial management enables the continual operation of essential government services. 

In May 2015, Treasury changed its cash management policy to hold a higher level of cash to cover one week of average 

disbursements in the case of events that limit market access, such as cyberattacks or natural disasters. This change was

based on a review of policies, recommendations from the Treasury Borrowing Advisory Committee, and an assessment of 

emerging threats. 

Treasury also made strides in facilitating agencies’ compliance with the Improper Payments Elimination and Recovery 

Improvement Act of 2012 (IPERIA). In FY 2015, Treasury enhanced its systems to allow for real-time matching of 

payments against death and vendor data. In addition, the incorporation of Privacy Act-restricted data improved vendor 

data matching and reduced false positives by 99.8 percent. Treasury also improved its analytics capabilities and 

developed agency-specific reports that provide a particular agency or program within the agency a high-level summary of 

statistical observations that may contribute to improper payments. These reports provide a means to inform agency 

management about these observations and to determine whether or not the observations call for a more in-depth 

analytical project in partnership with the agency, to assess the issue, determine root cause, and develop internal control 

methodologies to eliminate the issue in the future. 

Despite this progress, challenges inhibiting eligibility verification remain, specifically in gaining access to additional data 

sources that will help prevent improper payments. To help mitigate some of these challenges, the FY 2016 President’s 

Budget included a number of legislative proposals that would, if enacted by Congress, provide Treasury with additional 

tools to combat waste and fraud as well as greater authority to take actions that will prevent payment errors and improve 

compliance.

TAX REFORM AND ADMINISTRATION

Pursuing tax reform remains a top priority for Treasury, along with implementing tax provisions of the Affordable Care 

Act (ACA) and the Foreign Account Tax Compliance Act (FATCA) and administering the existing tax code fairly and 

effectively. In FY 2015, Treasury continued negotiating and signing FATCA agreements. At the end of FY 2015, there 

were 76 signed agreements, including 30 signed during the year, and an additional eight agreements in substance were 

reached. In July 2015, Treasury finalized the first-ever comprehensive tax treaty between the United States and Vietnam, 

which represents a significant step in expanding the U.S. tax treaty network (pending Senate approval). 

To bring better transparency to the tax system and improve enforcement, Treasury successfully persuaded the 

Organization for Economic Cooperation and Development (OECD) to adopt the U.S. model to tighten the net on tax 

evaders. As part of the FY 2016 President’s Budget, Treasury also introduced annual revenue proposals to Congress, 

including 27 new proposals. The Administration’s Fiscal Year 2016 Revenue Proposals included an international tax 

reform section addressing inversions and 45 proposals for business tax reform. Finally in this area, TTB worked with the 

Department of Homeland Security’s (DHS) Customs and Border Protection and other law enforcement partners to 

address illicit trafficking of products through customs bonded warehouses and foreign trade zones. TTB also plans to 

complete full integration into the International Trade Data System to improve excise tax enforcement efforts.

Despite these successes, effective tax administration grows more challenging every year due to the worsening IRS funding 

situation. In the past five years, IRS funding has been reduced by $1.2 billion, causing the IRS to implement severe 
U.S. Department of the Treasury | Fiscal Year 2015

14

controls on all expenditures. These controls, which include restrictions on staff replacement, led to a reduction of almost 

15,500 full-time employees since FY 2010. The funding constraints also significantly affected the IRS’s ability to 

modernize infrastructure and adequately staff systems. By prioritizing resources, the IRS delivered another successful 

filing season in 2015 in terms of return processing: opening on schedule and implementing new provisions of FATCA and 

ACA. The IRS also issued nine out of ten refunds in less than 21 days. The filing season was more challenging in terms of 

customer service, which is discussed further under Goal Five.

The IRS also dedicated significant resources to address tax fraud, resulting in the successful recovery of $813 million in 

2015 and leading to a public-private partnership with software developers, banks, and other industries to identify and 

enact a series of steps to further protect taxpayers from tax-related identity theft in 2016. In 2015, through September, 

the IRS rejected or suspended the processing of 4.5 million suspicious returns and stopped 1.2 million confirmed identity 

theft returns, totaling $7.2 billion. Additionally, through September, the IRS stopped $2.3 billion worth of refunds in 

other types of fraud, totaling $9.5 billion defended against confirmed fraudulent returns. 

KEY PERFORMANCE DATA HIGHLIGHTS

Measure 

(Responsible Bureau/Office) FY 12 FY 13 FY 14 FY 15 4-yr 

Trend

FY 15 

Target Result vs Target

Percentage of Treasury payments and 

associated information made electronically 

(%) (Fiscal Service)

88.3 92.5 94.4 94.8 94.9 Not Met

Percentage of total dollar amount of U.S. 

Government receipts collected electronically 

(%) (Fiscal Service)

97.0 97.0 98.0 98.0 98.0 Met

Percentage of individual returns processed 

electronically (IRS) 80.5 82.5 84.1 85.3 84.6 Exceeded

Taxpayer Self-Assistance Rate (IRS) 78.5 83.3 84.7 88.7 85.0 Exceeded

Explanation of Results

Percentage of Treasury payments and associated information made electronically AND Percentage of total dollar amount of 

U.S. Government receipts collected electronically (Fiscal Service)

Fiscal 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 will expand the number of digital wallet providers and 

online bill payment agencies and will work with partner agencies to identify the best tools and strategies for transitioning more of 

their customers to electronic alternatives.

Percentage of individual returns processed electronically (IRS)

The number of electronically filed individual tax returns divided by the total individual returns filed. The IRS exceeded its FY 2015 

target and FY 2014 performance for individual returns processed electronically. This increase is attributed to taxpayers’ increasing 

use of tax software and tax preparers to file their tax returns. The IRS will continue to process individual returns as efficiently as 

possible to meet future plans.

Taxpayer Self-Assistance Rate (IRS)

The percentage of taxpayer assistance requests resolved using self-assisted automated services. In FY 2015, the Taxpayer SelfAssistance Rate was at an all-time high of 88.7 percent, which was 3.7 percent above target and 4.0 percent more than FY 2014. 

The increase was due to taxpayers' use of Web Services, particularly the "Where's My Refund" application. The IRS will continue to 

promote the web-first strategy to taxpayers, offering a more convenient, efficient, and effective way to meet their needs.
U.S. Department of the Treasury | Fiscal Year 2015 

15

GOAL 4: SAFEGUARD THE FINANCIAL SYSTEM AND USE FINANCIAL 

MEASURES TO COUNTER NATIONAL SECURITY THREATS

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

sector 

Identified as making Noteworthy Progress in FY 2015 due to the progress made in applying little-used authorities to share information 

and implementing the new business system and advanced algorithms to identify targets and pursue enforcement actions as a result of the 

intelligence.

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

 Identified as making Noteworthy Progress in FY 2015 due to the Joint Comprehensive Plan of Action signed in FY 2015 and the new 

regulations regarding Cuba sanctions 

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

Identified in FY 2015 as making Noteworthy Progress due to the significant progress made in coordinating and engaging with 

industry and as a Focus Area for Improvement due to ever-evolving threats and complexities in sharing information.

Strategic Objective 4.4: Protect the integrity of the financial system by implementing, promoting, and enforcing anti-money 

laundering and counterterrorism financing standards 

Aligned APG: Focus Enforcement on High-Priority Threats Using Proactive Analysis 

IMPROVED PROTECTION OF THE FINANCIAL SYSTEM

Treasury works to protect the integrity of the financial system and advance key national security and foreign policy 

objectives through outreach, coordination, and collaboration with public and private sector partners; regulation, 

enforcement, financial intelligence analysis; and targeted financial activities and measures. One of Treasury’s FY 2014-

2015 Agency Priority Goals (APGs) was to use proactive analytics to focus enforcement on high-priority threats. By 

focusing on this APG, Treasury implemented advanced analytics capabilities and improved the use and sharing of 

information on threats to the financial system. In FY 2015, FinCEN initiated daily tactical reporting to law enforcement, 

foreign partners, and the intelligence community through the use of new information technology capabilities. By 

developing and employing business rules in a modernized system, FinCEN automatically screened Bank Secrecy Act 

(BSA) reports daily on topics of national security concern, including terrorist financing, cyber threats, and Ukraine 

kleptocracy. As a result of the efforts, FinCEN quadrupled the intelligence products provided and increased completed 

enforcement actions in FY 2015, compared to FY 2014. 

FinCEN also moved the global community forward on anti-money laundering and counter-terrorism financing policies 

and coordinated multi-lateral efforts to support Ukraine’s efforts to recover misappropriated assets. FinCEN issued the 

first civil enforcement action against a virtual currency exchanger, Ripple Labs, for willfully violating the BSA. 

EFFECTIVENESS OF SANCTIONS PROGRAMS

Through a steady campaign to expose Iran’s deceptive activities in the financial arena, Treasury isolated Iran’s banks 

from the world’s financial centers, wounding its trade and financial strength. Since 2010, these and other efforts led to 

the diplomatic process that produced the Joint Comprehensive Plan of Action in July 2015. This plan will ensure Iran’s 

nuclear program remains exclusively peaceful and, in turn, will lift specified nuclear-related sanctions on Iran upon 

verification from the International Atomic Energy Agency that Iran has implemented key nuclear commitments. This 

success proves that smart, creative, persistent financial efforts, when backed by the superb support of the U.S. 

intelligence community, can change behavior. 

In December 2014, the President announced a set of diplomatic and economic changes to chart a new course in U.S. 

relations with Cuba and further engage and empower the Cuban people. Treasury and the Department of Commerce 

published revised Cuban Assets Control Regulations and Export Administration Regulations, effective in January 2015, 

that will facilitate travel to Cuba for authorized purposes, approve processing of certain financial transactions, and allow 

other activities in the areas of telecommunications, financial services, trade, and shipping. In September 2015, Treasury 
U.S. Department of the Treasury | Fiscal Year 2015

16

and Commerce announced additional amendments to the Cuba sanctions regulations. These regulatory changes build 

upon the January amendments and will further facilitate the normalization process between Cuba and the United States.

FINANCIAL SECTOR CYBER SECURITY 

Cyber threats are vast and evolving—not just increasing in number, but also in types of incidents and means for intrusion. 

The prevalence of cyber risks creates a persistent and complex challenge for financial institutions spanning the sector. 

The financial costs of cyber-attacks are real and increasing; disruption of business, erosion of customers, loss of revenue, 

reputational damage and loss of confidence, and theft of intellectual property are just a few ways cyber-attacks hurt the 

financial system. 

As the Sector Specific Agency for Financial Services, defined under Presidential Policy Directive 21, Critical 

Infrastructure Security and Resilience, Treasury participates in interagency and cross-sector initiatives and plays a key 

role in managing responses to disruptive events. While Treasury’s sector-specific responsibilities include all hazards, 

whether natural or man-made, in recent years the Department has increasingly focused on promoting improvements in 

cybersecurity across the financial sector. In FY 2015, Treasury worked with industry to organize cybersecurity initiatives 

on a national level using the following themes: baseline protections, information sharing, and response and recovery.

In February 2015, the President signed an executive order encouraging and promoting the sharing of cybersecurity threat 

information within the private sector and between private and government entities. Treasury assisted DHS in promoting 

information sharing and analysis and worked this year to automate the information-sharing process. 

To enable effective incident response, Treasury established and convened the first-ever meetings of the Financial and 

Banking Information Infrastructure Committee at the principal level and spearheaded the development of tabletop 

exercises to test cyber-incident response processes. In FY 2015, Treasury hosted three cyber-related exercises with more 

than 25 public and private sector organizations. 

Protecting Treasury’s infrastructure is critical to maintaining a secure financial infrastructure. Consequently, Treasury 

fully committed to OMB’s government-wide cyber-sprint and created an internal cyber dashboard to monitor progress 

and potential threats. As of August 2015, Treasury met OMB’s requirement for strong authentication of users with 

privileged access and was considered a top-performing federal agency for cybersecurity cross-agency priority goal. 

KEY PERFORMANCE DATA HIGHLIGHTS

Measure 

(Responsible Bureau/Office) FY 12 FY 13 FY 14 FY 15 4-yr 

Trend

FY 15 

Target Result vs Target

Percentage of users finding that the financial 

intelligence collected by FinCEN pursuant its 

regulations provides valuable information to 

safeguard the financial system, combat money 

laundering, and counter terrorist financing 

90 80 81 83 82 Exceeded

Impact of TFI programs and activities – 10 

point scale (TFI) 8.1 8.3 8.5 8.8 8.5 Exceeded

Explanation of Results

Percentage of users finding that the financial intelligence collected by FinCEN pursuant its regulations provides valuable 

information to safeguard the financial system, combat money laundering, and counter terrorist financing (FinCEN)

Survey data that looks at the value of FinCEN data, such as whether the data (1) provided unknown information, (2) supplemented 

or expanded known information, (3) verified information, (4) helped identify new leads, (5) opened a new investigation or 

examination, (6) supported an existing investigation or examination, or (7) provided information for an investigative or 

examination report. While the FY 2015 results remain lower than the FY 2012 level, FinCEN exceeded its target of 82 percent and 

the results have increased steadily for the past three years. FinCEN introduced a new query tool late in FY 2013 that changed how 

users access financial intelligence products. While this new tool provides enhanced search capabilities, it appears that limited 

training opportunities for users in FY 2013 caused a drop in results. As a result, since FY 2013, FinCEN has placed greater 
U.S. Department of the Treasury | Fiscal Year 2015 

17

emphasis on both in-person and on-line training that will better assist users and continue to improve performance in this area.

Impact of TFI programs and activities (TFI)

There are several things that account for TFI’s increase in program impact and activities to include the signed Joint Comprehensive 

Plan of Action in FY 2015 that implements sanctions relief to Iran in exchange for Iran taking steps to ensure a peaceful nuclear 

program, as well as the new regulations regarding Cuba sanctions. Additionally, TFI has advanced the rulemaking process for 

Beneficial Ownership, and TFI has continued funding Third Party Money Laundering cases and their operational needs. 

GOAL 5: CREATE A 21ST CENTURY APPROACH TO GOVERNMENT BY 

IMPROVING EFFICIENCY, EFFECTIVENESS, AND CUSTOMER INTERACTION

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

inclusion in Treasury’s organizational culture and business practices 

Strategic Objective 5.2: Support effective, data-driven decision-making and encourage transparency through intelligent gathering, 

analysis, sharing, use, and dissemination of information 

Strategic Objective 5.3: Promote efficient use of resources through shared services, strategic sourcing, streamlined business 

processes, and accountability 

Designated as a Focus Area for Improvement in FY 2015 due to the challenges facing Treasury shared service providers and the 

anticipated efforts in the coming year to standardize products and services.

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

Aligned APG: Increasing IRS Self-Service Options for Taxpayers 

PURSUIT OF BEST-IN-CLASS BUSINESS PRACTICES

Treasury’s future success, both immediate and long term, depends on sustaining and developing the resources required 

to achieve the Department’s mission. These critical resources include finances, physical assets, technology, and most 

importantly, people. In the FY 2014-2017 strategic plan, Treasury committed to capitalizing on 21st century advances in 

knowledge, methods, and technology to manage resources as effectively and efficiently as possible, creating the best value 

for all constituents. 

During FY 2015, Treasury advanced several leading management practices. Treasury continued the workforce planning 

effort that began in FY 2014 and will focus next on the cybersecurity workforce. Treasury also established the Office of 

Risk Management, headed by the Chief Risk Officer, and Treasury’s Deputy Secretary established the Treasury Risk 

Management Committee, which she co-chairs with the Chief Risk Officer, and introduced a more robust risk discussion in 

Treasury’s organizational performance reviews for leaders from different areas to surface potential risks and identify 

effective mitigation actions. 

EMPLOYEE ENGAGEMENT

Recent events, including the cybersecurity breaches at the Office of Personnel Management (OPM) and sustained fiscal 

uncertainty, test employees’ morale and ability to remain engaged. Fortunately, 94 percent of the Treasury responses to

the Federal Employee Viewpoint Survey reflect that employees remain willing to put in extra effort to get a job done and 

88 percent are constantly looking for ways to do their jobs better. In FY 2015, Treasury remained committed to fostering 

an environment where leaders and employees feel encouraged to focus on important principles of good government and 

empowered to take action. Treasury has institutionalized a focus on employee engagement by adopting an annual 

engagement program cycle of data-based action planning, program implementation, and periodic performance reviews. 

Additionally, the management offices responsible for individual and organizational performance management policy and 

implementation created the Performance Alignment Work Group to further improve alignment of individual actions to 

organizational results within Treasury. 

Treasury also continued to foster an environment where every employee feels equally valued. In FY 2015, more than 200 

supervisors and managers participated in a cultural transformation effort focused on diversity and inclusion principles. 
U.S. Department of the Treasury | Fiscal Year 2015

18

Human capital issues, including diversity and inclusion, were regular topics at the organizational performance reviews 

and remain a top priority for Treasury leadership. 

SERVICE TO CUSTOMERS

In Treasury’s efforts to lead more efficient practices in government, Treasury expanded its customer base for shared 

administrative services this year to include the Department of Housing and Urban Development and DHS. While this is 

an indicator of the high quality of Treasury’s products and services, customer feedback indicates that their needs and 

expectations vary greatly. Consequently, Treasury is working to improve communications and standardize services, 

products, and processes to sustain the cost efficiencies of the model and improve customer satisfaction.

Few government agencies have greater interaction with the American people than the IRS, and providing top quality 

service to taxpayers, including helping them understand and meet their tax obligations, remains a central focus for the 

IRS. That is why Treasury’s second FY 2014-2015 APG focused on increasing self-service options for taxpayers, who 

increasingly expect on-demand web-based interactions. In FY 2015, the IRS continued to invest in and prioritize online 

services to meet taxpayer demand for anytime, anywhere, any-device access, delivering innovative digital interactions 

and enhanced support and communication with the tax community and government partners. 

Online service options cost comparatively less and have a greater capacity to assist larger numbers of taxpayers than 

other service channels. At the same time, the IRS recognizes that telephone contact remains a critical and preferred 

mechanism for many taxpayers and, consequently, committed as many resources as possible in FY 2015 to maintaining 

telephone service at acceptable levels. As referenced earlier in this report, between FY 2010 and FY 2015, Congress cut 

the IRS budget by more than $1.2 billion, which represents a cut of nearly 10 percent in nominal dollars and more than 17 

percent with inflation. This impacted the IRS’s ability to serve taxpayers, contributing to the level of service falling to 

38.1 percent in FY 2015. The IRS also experienced increased call volume in FY 2015 and issued 17.6 million disconnects, 

which are automatic call terminations by the IRS after a fixed waiting period. These “courtesy” disconnects are designed 

to limit excessive wait time and direct callers to alternative service channels. 

Increasing the use of online services, however, results in additional challenges. In May 2015, the IRS determined that 

unauthorized third parties used taxpayers’ personal information obtained from sources outside of the IRS to access its

“Get Transcript” application by using stolen information to clear the application’s multi-step user authentication process. 

The required prior personal knowledge about the taxpayer included social security number, date of birth, filing status, 

street address, and answers to several identity verification questions typically known only to the taxpayer. The IRS 

believes some of this information may be used to file fraudulent tax returns during the upcoming 2016 filing season. 

Immediately after this incident, the IRS suspended the “Get Transcript” application and contacted impacted taxpayers, 

directing them to identity theft protection tools available through the IRS and credit-monitoring services made available 

at the IRS’s expense. The IRS also flagged impacted accounts in its core processing system to protect taxpayers moving 

forward. Securing systems and protecting taxpayers’ personal information continues to be a top priority for Treasury. 

Despite the threat of identity theft, taxpayers’ demand for self-service and electronic service options continues to 

increase. The IRS plans to create a more secure online environment by focusing on developing and maintaining strong 

authentication and identity management capabilities. In addition, the IRS provides year-round assistance through 

outreach and education programs, tax forms and publications, and toll-free call centers, taxpayer assistance centers, 

volunteer income tax assistance sites, and tax counseling for the elderly sites. 
U.S. Department of the Treasury | Fiscal Year 2015 

19

KEY PERFORMANCE DATA HIGHLIGHTS

Measure 

(Responsible Bureau/Office) FY 12 FY 13 FY 14 FY 15 4-yr 

Trend

FY 15 

Target Result vs Target

Federal Employee Viewpoint Survey (FEVS) 

Engagement Index – 1 to 100 (%) 

(Management)

70 68 66 66 67 Not Met

Treasury-wide Footprint in Thousands of Sq. 

Ft. (Management) 37,998 37,320 36,418 35,439 36,031 Exceeded

Customer Service Representative Level of 

Service (%) (IRS) 67.6 60.5 64.4 38.1 38.0 Exceeded

Explanation of Results

Federal Employee Viewpoint Survey (FEVS) Engagement Index – 1 to 100 (%) (Management)

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

organization’s leadership. Treasury’s Engagement Index remained constant at 66 percent from 2014 to 2015. Eight out of eleven 

Treasury components increased their Engagement Index by 1 to 5 points from 2014 to 2015. Because of IRS’s size, however, a 

decline of 1 point in its Engagement Index neutralized the effect of other bureau increases. 

Treasury-wide Footprint in Thousands of Sq. Ft. (Management)

This measures 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 600,000 square feet in FY

2016. 

Customer Service Representative Level of Service (%) (IRS)

This measure is defined as 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. In FY 2015, the Customer Service Representative Level of 

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

During the filing season, the level of service was 37.4 percent; however, the overall fiscal year target was exceeded by 0.1 percent. 

FY 2015 Assistor Calls Answered decreased 21 percent and automatic disconnections based on wait times increased 11.6 percent 

when compared to FY 2014. Through extensive communication, the IRS encourages taxpayers to use the Web or automated tools 

and alternate channels to resolve their concerns.

SUMMARY OF MANAGEMENT AND PERFORMANCE CHALLENGES

Several cross-cutting challenges were in identified and discussed in Treasury’s FY 2015 organizational performance 

reviews that affect efforts to achieve its strategic priorities: 

 Changing international conditions and evolving threats: As previously discussed, evolving and

unpredictable global economic and geopolitical conditions affect Treasury’s negotiations and program

implementation. The nature of the threats that Treasury faces in the cybersecurity, anti-money laundering,

and terrorist financing realms are also fast-growing and constantly changing. Additionally, while the economy

has largely recovered, Treasury must remain vigilant to new threats to financial stability and economic growth.

 Uncertain fiscal and legislative environments: The pattern of continuing resolutions and the potential

for a lapse in appropriations constrains Treasury’s ability to plan strategically, impacts its ability to effectively

manage the country’s debt, and reduces the level of service to taxpayers. Additionally, reauthorization of

certain programs and congressional approval of key reforms would enable Treasury to better achieve U.S.

objectives but is difficult to predict and, consequently, to plan for its execution.

 Increased expectations and demand: Treasury has, in recent years, been asked to lead government-wide

implementation of new laws and policies (such as ACA and DATA Act), including the launch of innovative new

tools and pilots, while adjusting to reduced resources and staffing levels.

 Effectiveness of the hiring process: The federal hiring process poses challenges to Treasury organizations

aiming to quickly recruit and hire top talent. Treasury seeks skills that are in high demand in the private

sector, which has more flexibility in hiring practices and incentives.
U.S. Department of the Treasury | Fiscal Year 2015 

20

 Availability of data and analytic capability: Reliance on third party or private sector analysis poses a risk

to the quality of the analysis and recommendations that Treasury provides to senior government officials.

Treasury faces challenges in its efforts to improve decision-making by reducing reliance on third-party

analysis. Additionally, Treasury is structured and, in some cases, statutorily required, to protect data.

Reshaping Treasury’s ability to meet increasing calls in recent years to share data across organizations may

require additional infrastructure and staff.

In addition to the performance challenges discussed above and in 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 2000.8

 These challenges do not necessarily indicate deficiencies in performance; some 

represent inherent risks that require continuous monitoring. Refer to Section C of Part 3, Other Information, for a 

detailed discussion of these challenges, including Treasury’s progress toward addressing them. 

OIG-IDENTIFIED TREASURY-WIDE MANAGEMENT CHALLENGES

 Cyber Threats

 Management of Treasury’s Authorities Intended to Support and Improve the Economy

 Efforts to Promote Spending Transparency and to Prevent and Detect Improper Payments

 Anti-Money Laundering and Terrorist Financing/Bank Secrecy Act Enforcement

 Gulf Coast Restoration Trust Fund Administration

TIGTA-IDENTIFIED IRS MANAGEMENT CHALLENGES 

 Security for Taxpayer Data and IRS Employees

 Implementing ACA and Other Tax Law Changes

 Tax Compliance Initiatives

 Fraudulent Claims and Improper Payments

 Achieving Program Efficiencies and Cost Savings

 Improving Tax Systems and Online Services

 Providing Quality Taxpayer Service Operations

 Globalization

 Taxpayer Protection and Rights

 Human Capital

8 SIGTARP does not provide an annual report to the Secretary because it provides oversight over a program that spans multiple agencies.
U.S. Department of the Treasury | Fiscal Year 2015 

21

FY 2016 OUTLOOK 

In considering the challenges and risks to successful mission delivery facing the Department, Treasury identified several 

initiatives to pursue in FY 2016, including two new agency priority goals (APGs) for FY 2016-2017: 

 Increase secure self-service options for taxpayers (FY 2016-2017 APG led by the IRS).

 Develop and promote financial transparency policies and their adoption by leading, in collaboration with OMB,

the government-wide implementation of the DATA Act (FY 2016-2017 APG led by the Fiscal Assistant

Secretary).

 Continue Treasury’s efforts to expand access to credit and bring private capital back into the housing market by

completing comprehensive housing finance reform; securing the reauthorization of the SSBCI and CDFI Bond

Guarantee programs; and expanding access to long-term savings opportunities for more Americans by

continuing to improve the myRA program and increase its enrollments.

 Secure congressional approval of the 2010 IMF quota and governance reform proposal and confirmations of

nominations to ensure stable and effective U.S. representation at International Financial Institutions.

 Present to the President key findings and potential opportunities to improve the student loan collections process

for defaulted borrowers.

 Secure the funding necessary for the IRS to maintain a balanced enforcement program and deliver the web-first

service model.

 Increase coordination and information sharing efforts across government and private sectors to protect the

stability of the financial system and the interests of American citizens.

 Partner with OMB and the General Services Administration to increase the flexibility with which agencies can

acquire and share data sets and analytic capability.

 Transform the Departmental Offices’ hiring process using Lean Six Sigma process improvement methodologies,

providing best practices for other organizations and making Treasury more competitive as an employer.
U.S. Department of the Treasury | Fiscal Year 2015 

22

FINANCIAL HIGHLIGHTS – FINANCIAL OVERVIEW

The financial highlights below are an analysis of the information included in the Department’s consolidated financial statements 

that appear within Part 2, “Financial Section” of this report. The Department’s principal financial statements have been prepared 

to report the agency’s financial position and results of operations, pursuant to the requirements of 31 USC 3515(b). These 

consolidated financial statements have been prepared from the books and records of the Department 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 should be read with the realization that they 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 fiscal year ended September 30, 2015 

compared to September 30, 2014. 

Summary Financial Information (dollars in billions)

2015 2014 $ Change % Change

Total Assets $ 20,768.7 $ 19,977.0 $ 791.7 4.0%

Total Liabilities $ 20,354.6 $ 19,555.6 $ 799.0 4.1%

Total Net Position $ 414.1 $ 421.4 $ (7.3) (1.7)%

Total Net Cost of Treasury Operations $ 23.5 $ 23.9 $ (0.4) (1.7)%

Net Federal Debt Interest Costs $ 367.3 $ 394.8 $ (27.5) (7.0)%

GSEs Non-Entity Revenue, Net $ (30.8) $ (28.1) $ (2.7) 9.6%

Total Net Cost of Treasury Operations and Non-Entity Costs $ 374.9 $ 404.0 $ (29.1) (7.2)%

Total Budgetary Resources $ 800.0 $ 841.8 $ (41.8) (5.0)%

Agency Outlays, Net $ 370.2 $ 337.7 $ 32.5 9.6%

Net Revenue Received (Custodial) $ 3,024.0 $ 2,816.2 $ 207.8 7.4%

Financial Overview. The Department’s financial performance as of and for the fiscal year ended September 30, 2015, reflects 

several major trends. Most significantly, the outstanding federal debt, including interest, rose by $330.4 billion to $18.2 trillion. 

The Department also incurred a liability at September 30, 2015 totaling $350.7 billion in connection with extraordinary debt 

management measures undertaken by the Department during a delay in raising the statutory debt limit (referred hereinafter as 

“Delay”). Specifically, these measures included, among other things: (i) suspending investments in Treasury debt securities by the 

Government Securities Investment Fund of the Federal Employees’ Retirement System Thrift Savings Plan (TSP), Civil Service 

Retirement and Disability Trust Fund (Civil Service Fund), and the Postal Service Retiree Health Benefits Fund (Postal Benefits 

Fund); and (ii) redeeming early a certain amount of Treasury debt securities held by the Civil Service Fund. The $350.7 billion 

liability reflects the Department’s obligation by statute as of September 30, 2015, to restore to the funds the accumulated principal 

balance of Treasury debt securities bearing the same interest rates and maturity dates that would have been invested by these funds 

had the Delay not occurred (uninvested principal), as well as pay these funds the related lost interest on the uninvested principal.

Additionally, the Department’s “Total Net Cost of Treasury Operations and Non-Entity Costs” for fiscal year 2015 declined by $29.1 

billion in fiscal year 2015 primarily stemming from non-entity activity, including $27.5 billion of lower net federal debt interest 

costs and $2.7 billion of higher revenue from the Department’s investments in two Government-Sponsored Enterprises (GSEs) –

Fannie Mae and Freddie Mac – pursuant to the Department’s Senior Preferred Stock Purchase Agreements (SPSPAs), as amended. 

This was partially offset by a $2.1 billion increase in the net cost reflecting an accrual for the restoration of forgone federal debt 

interest recorded in connection with the Delay. The Department’s 2015 financial performance also reflects the ongoing wind-down 

of the TARP credit programs, principally through sales of securities and principal repayments of loans made under these programs. 
U.S. Department of the Treasury | Fiscal Year 2015 

23

TARP’s wind-down activity in fiscal year 2015 included, among other things, sales of equity investments in the Automotive 

Industry Financing Program and Capital Purchase Program. The continued wind-down of the TARP programs drove reductions in 

the subsidy costs associated with the remaining investments in these programs during fiscal year 2015 due to improved market 

conditions as reflected in the end-of-year reestimates. Subsidy costs recorded in connection with each credit program represent 

the difference between the projected costs of the program and the future cash flows anticipated to be generated by the program. 

Reestimates may occur due to changes in a program’s estimated future cash flows caused by changes in market conditions and 

actual program performance, thereby resulting in an upward or downward reestimate in the credit program receivable to reflect an 

increase or decrease, respectively, in the estimated total cost of the program. 

Figure 1 

Total Assets of $20.8 trillion at September 30, 2015 consist of a receivable due from the General Fund of the U.S. government of 

$18.6 trillion, intra-governmental loans and interest receivable of $1.3 trillion, and fund balance and various other assets which 

totaled $829.9 billion (Figure 2). 

Figure 2 
U.S. Department of the Treasury | Fiscal Year 2015 

24

The $791.7 billion (or 4.0 percent) increase in total assets at the end of fiscal year 2015 over the prior year is primarily due to an 

increase in the “Due from the General Fund of the U.S. Government” account which corresponds to increases in the following 

liabilities: (i) a $330.4 billion increase in federal debt and related interest payable and (ii) a $350.7 billion additional liability for 

the restoration of federal debt principal and interest in connection with the Delay. The net addition to Treasury liabilities at 

September 30, 2015 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 $85.0 billion (or 7.0 percent) to $1.3 trillion at the end of fiscal year 2015 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 (SDRs), as well as investments in, and credit program receivables due from, certain 

financial institutions for which the Department provides financial assistance in an effort to stabilize financial markets. Other assets 

increased by $24.4 billion primarily reflecting an increase in the U.S. government’s operating cash balances. This increase was 

partially offset by a combination of: a reduction in investments, the ongoing wind-down of the TARP programs through sales of 

securities or principal repayments of loans made under these programs, and a reduction in the Department’s reserve position in the 

International Monetary Fund due to loan repayments. 

Figure 3

Total Liabilities of $20.4 trillion at September 30, 2015 principally consist of the federal debt held by the public (Figure 3), 

including interest, of $13.1 trillion, which were mainly issued as Treasury Notes and Bills. Liabilities also include intragovernmental liabilities totaling $6.9 trillion (of which $5.1 trillion represent principal and interest of federal debt in the form of 

Treasury securities held by federal agencies), and various other liabilities totaling $287.2 billion. The $799.0 billion (or 4.1 

percent) increase in total liabilities at the end of fiscal year 2015 over the prior year is attributable to a $330.4 billion 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. An additional $350.7 billion of the increase is attributable to a liability for restoration of federal debt principal and interest 

as of September 30, 2015. This liability relates to uninvested principal and interest owed to funds due to extraordinary measures 

taken by the Department during the Delay. 
U.S. Department of the Treasury | Fiscal Year 2015 

25

The increase in total liabilities is also attributable to a $124.0 billion increase in the “Due to the General Fund of the U.S. 

Government” account, primarily as a result of an increase in intra-governmental loans and interest receivable. The Department, 

through the Fiscal Service, accounts for and reports 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 $414.1 billion at September 30, 2015 represents the combined total of the Department’s cumulative results 

of operations and unexpended appropriations at the end of the fiscal year. The $7.3 billion (1.7 percent) decrease in the net 

position at the end of fiscal year 2015 was principally attributable to $5.4 billion in unexpended appropriations primarily driven by 

a decrease in cancelation of expired funds associated with the TARP programs in fiscal year 2015 over the prior year. 

Figure 4

Total Net Cost of Treasury Operations and Non-Entity Costs, as presented on the Department’s 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, incurred by the Department related to its own entity activities comprising both 

its operating bureaus and DO that are consolidated with the Department. Net Non-Entity Costs represent the gross costs, net of 

earned revenues, incurred by the Department 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 $374.9 

billion and $404.0 billion for fiscal years 2015 and 2014, respectively, a decrease of $29.1 billion (or 7.2 percent) over the prior 

year. Net Cost of Treasury Operations and Net Non-Entity Costs contributed $0.4 billion and $28.7 billion, respectively to the 

year-over-year decrease in net costs. 
U.S. Department of the Treasury | Fiscal Year 2015 

26

Figure 5

Net Cost of Treasury Operations is presented on the Department’s 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). 

The Department’s Net Cost of Treasury Operations totaled $23.5 billion for 2015 compared to $23.9 billion for 2014. Treasury’s 

net costs were relatively unchanged year over year, reflecting a slight decrease of $0.4 billion from the prior year. 

Net Federal Debt Interest Costs primarily reflect interest expense on the federal debt. Federal interest costs decreased by 

$24.6 billion (or 5.7 percent) in fiscal year 2015 primarily attributable to reduced interest rates on Treasury Inflation-Protected 

Securities (TIPS) driven by declines in the Consumer Price Index. This cost for fiscal year 2015 excludes the $2.1 billion accrual for 

the restoration of forgone federal debt interest recorded in connection with the Delay and reported separately from Federal debt 

interest costs. 

GSEs Non-Entity Revenue, Net totaled $30.8 billion for 2015 compared to $28.1 billion for 2014. The $2.7 billion increase in 

this net revenue in 2015 was primarily driven by growth in non-entity revenue from the Department’s two GSE investments. This 

revenue growth is attributable to a $10.5 billion increase at the end of fiscal year 2015 in the fair value of the GSE investments, 

when compared to a $44.4 billion decline in fair value at the end of fiscal year 2014, primarily reflecting higher forecasted GSE 

earnings derived from guarantee fees, lower volatility and risk in the mortgage lending industry, and lower forecasted mortgage 

loan losses due to reduced credit risk assumed by the GSEs. Offsetting this revenue growth was a $52.1 billion year-over year 

decrease in senior preferred stock dividends received from the two GSEs attributable to lower earnings, coupled with a one-time 

benefit recognized in one of the GSE’s historical earnings in fiscal year 2014 that did not recur in 2015. 
U.S. Department of the Treasury | Fiscal Year 2015 

27

Figure 6

Total Budgetary Resources of $800.0 billion were lower in fiscal year 2015 (Figure 6) by $41.8 billion (or 5.0 percent) 

primarily due to a $37.0 billion decrease in appropriations and net unobligated balance from prior year budget authority, and a 

$4.5 billion decrease in spending authority from offsetting collections. These decreases are attributable to the wind-down of the 

TARP programs and budget reductions associated with other of the Department’s programs. 

Agency Outlays, Net of $370.2 billion were higher in fiscal year 2015 (Figure 7) by $32.5 billion (or 9.6 percent) primarily due to 

fewer collections in fiscal year 2015 from the wind-down of the TARP programs, coupled with reduced receipts of preferred stock 

dividends pursuant to the GSEs’ SPSPA program. These receipts offset gross outlays for purposes of reporting net outlays and, 

thus, a reduction in these receipts in 2015 increased the amount of Agency Outlays, Net. 

Figure 7

Net Revenue Received (Custodial), representing net revenue collected by Treasury 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 fiscal year 2015, an increase of 
U.S. Department of the Treasury | Fiscal Year 2015 

28

$207.8 billion (or 7.4 percent) over the prior fiscal year. This increase is attributable mainly to an overall improvement in 

individual and corporate income tax collections.
U.S. Department of the Treasury | Fiscal Year 2015 

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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 Office of Management and Budget Circular No. A-123, 

Management’s Responsibility for Internal Control, Appendix A, Internal Control over Financial Reporting, Treasury provides 

qualified assurance that internal control over financial reporting was operating effectively based on the results of the assessment as 

of June 30, 2015. Treasury’s financial management systems are not in substantial compliance with the Federal Financial 

Management Improvement Act (FFMIA) due to the Internal Revenue Service’s (IRS’s) material weakness related to unpaid tax 

assessments. 

As of September 30, 2015, 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 Year 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. 

Jacob J. Lew 

Secretary of the Treasury 

November 16, 2015 
U.S. Department of the Treasury | Fiscal Year 2015

30

FMFIA

The management control objectives under FMFIA are to reasonably ensure that:

 Obligations and costs are in compliance with applicable law

 Funds, property, and other assets are safeguarded against waste, loss, unauthorized use, or misappropriation

 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.”

Treasury includes resolution of material weaknesses as a performance requirement for every executive, manager, and supervisor. 

Additional information on Treasury’s material weaknesses and remediation progress can be found in Section F of Part 3, Other 

Information.

The Department of Health and Human Services (HHS) and the Department of the Treasury each have responsibilities for ensuring 

payment accuracy in programs created under the Affordable Care Act. Performing comprehensive risk assessments is critical to 

establishing an effective program for achieving payment accuracy in future years. In fiscal year 2015, both Departments finalized 

plans for and began to perform comprehensive improper payment risk assessments to determine areas that might affect Advance 

Premium Tax Credit (APTC), Premium Tax Credit (PTC), Cost-sharing Reduction and Basic Health Plan payment accuracy. Both 

Departments are leveraging the same Federally Funded Research and Development Centers (FFRDC) to assist with conducting 

these risk assessments, which will facilitate interagency coordination and provide a comprehensive assessment of risk that takes 

into account activities by the health insurance marketplaces , HHS and IRS. An update on the status and preliminary results of the 

FFRDC supported risk assessments will be reported in the fiscal year 2016 AFR. In addition, both Departments have established 

internal controls to provide for effective program operations, reliable financial reporting, and compliance with laws and 

regulations.

As discussed in Section F of Part 3, Other Information, Treasury also performed a qualitative risk assessment for all refundable 

credits that included an initial assessment of risks and controls related to net PTC claimed on tax returns after reconciliation of 

APTC.

OMB CIRCULAR NO. A-123, MANAGEMENT’S RESPONSIBILITY FOR INTERNAL CONTROL, APPENDIX A, INTERNAL 

CONTROL OVER FINANCIAL REPORTING

The Department continues to strengthen and improve the execution of the Treasury mission through the application of sound 

internal controls over financial reporting. In compliance with OMB Circular No. A-123, Appendix A, Treasury uses an extensive 

annual testing and assessment methodology that identifies and documents internal controls over financial reporting at the 

transaction level integrated with Government Accountability Office’s Standards for Internal Control In the Federal Government. 

Treasury’s bureaus and offices completed their testing and assessment of internal controls for material transactions as of June 30, 

2015. Treasury provides qualified assurance that internal control over financial reporting was effective as of June 30, 2015, due to 

the IRS’s unpaid tax assessments material weakness.
U.S. Department of the Treasury | Fiscal Year 2015

31

In conjunction with the Department’s A-123, Appendix A, Fiscal Year 2015 Guidance and Implementation Plan, bureaus and offices 

documented their compliance with applicable laws and regulations. Based on these results, the Department is in compliance with 

applicable laws and regulations with the exception of the FFMIA as addressed in the Auditor’s Report included in Part 2 of this 

AFR.

FFMIA AND FINANCIAL MANAGEMENT SYSTEMS 

FFMIA

FFMIA requires federal agencies to implement and maintain financial management systems that comply substantially with federal

financial management systems requirements, applicable federal accounting standards, and the United States Standard General 

Ledger at the transaction level. Section 803(c) (1) of the FFMIA requires the Department to make an annual determination of the

agency’s substantial compliance with Section 803(a) of the Act based on a review of relevant factors. In determining whether the 

Department’s financial systems substantially comply with FFMIA, management considered available information from audit 

reports and other relevant and appropriate information. The Department’s determination leveraged the results of related reviews

such as those required by FISMA and OMB Circular A-123. Key factors used in the determination included: improvements and 

ongoing efforts to strengthen financial management systems and the impact of instances of non-compliance on overall financial 

management system performance.

During fiscal year 2015, Treasury bureaus and offices used a risk-based approach to assess their financial management systems’ 

compliance with FFMIA, as prescribed in OMB Circular A-123, Appendix D. The bureaus and offices conducted self-assessments to 

determine their substantial risk level (low, medium, or high) and compliance. For areas in non-compliance, bureaus and offices are 

required to develop a remediation plan to bring systems into substantial compliance.

All Treasury bureau and office financial management systems are in compliance with FFMIA, with the exception of IRS that did not 

comply with federal financial management systems requirements or applicable federal accounting standards. As required, the IRS

has a remediation plan in place to correct the identified deficiencies. IRS management updates this plan quarterly and Treasury 

management reviews it. In addition, TIGTA audits IRS’s remediation progress annually.

In November 2015, the IRS updated its remediation plan to improve reporting on unpaid assessment balances and remediate this 

material weakness by November 30, 2020. The plan is based on a new Customer Account Data Engine (CADE) 2 Transition State 2 

(TS2) release plan to improve the accuracy of the core individual taxpayer account providing key information needed when 

servicing taxpayer inquiries and enabling the IRS accounting systems to leverage the information for more accurate financial 

reporting. The CADE 2 TS2 release plan will be deployed over seven releases, of which four will affect the material weakness and 

are dependent on receiving requested funding. Releases 2 through 4 will enable the CADE 2 data base to become the authoritative 

source for the financial statements and Release 5 will address the remaining actions necessary to improve the taxpayer account.

The IRS expects that once the financial systems have fully leveraged the capabilities in CADE 2 TS2, this material weakness can be 

downgraded. 

While closure of the material weakness is largely dependent upon implementation of CADE 2 TS2, the IRS is also working on longterm actions that are needed to improve reporting on business taxpayer accounts not within the current scope of CADE 2, and 

improvements needed to internal procedures and methodologies for recording data to the taxpayer accounts. 
U.S. Department of the Treasury | Fiscal Year 2015

32

In July 2015, the IRS developed a series of new long-term actions intended to address the four remaining issues impacting the 

material weakness that are not dependent on CADE 2 TS2. The IRS is currently prioritizing and determining the funding needed to 

complete these actions. In the near-term, the IRS added seven initial actions to the remediation plan scheduled for completion in 

FY 2016.

FINANCIAL MANAGEMENT SYSTEMS FRAMEWORK

The Department’s 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 the Department’s internal and external reporting requirements. The FARS

framework provides essential support each year to Treasury’s efforts to obtain an unqualified audit opinion.

The FARS includes the following component 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 

 Joint Audit Management Enterprise System (JAMES) – an application that tracks information on open audits as well as 

audit report findings, recommendations, and planned corrective actions

Bureaus submit summary-level financial data to TIER on a monthly basis. The TFS application uses the bureau data, which are 

validated by TIER, 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. 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 Treasury bureaus and offices and to other federal entities to support core business activities. Using these services 

reduces the need for Treasury 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. Revenue 

enhancement will occur through economies of scale as new customers are added. In fiscal year 2015 ARC implemented business 

process improvements that resulted in a 50% reduction in customer cost per invoice within the Accounts Payable service line and 

provided assistance to 25 of Fiscal Accounting’s financial management shared service customer agencies that are audited. As a 

result, all 25 agencies are expected to receive clean opinions on their fiscal year 2015 financial statements. ARC is also scheduled to 

finalize the implementation of its first cabinet level customer agency (Department of Housing and Urban Development) for 

Financial Management services. 

GOALS AND THE SUPPORTING FINANCIAL SYSTEM STRATEGIES

Treasury’s 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.
U.S. Department of the Treasury | Fiscal Year 2015

33

Throughout fiscal year 2015, Treasury updated TIER and TFS to meet new and evolving reporting requirements. The TIER Focus 

Group continues to serve as a forum for bureau feedback on TIER enhancements and issues and as a tool for improving 

communication with the bureaus and coordinating changes which impact financial management systems and financial operations.

Treasury also enhanced FARS IT infrastructure this year by upgrading operating system and web server software for FARS 

application servers in all environments. In fiscal year 2016, the Department plans to migrate 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 Treasury’s Data Center Consolidation Initiative (DCCI) and will incorporate new physical hardware for hosting the 

FARS. 

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 Treasury to reduce operating cost, re-engineer 

critical business processes to create efficiencies in execution and documentation of financial reporting, improve the timeliness and 

quality of financial management processes and reporting, enhance internal controls, and improve visibility and audit trail in the 

entire reporting process.

Customer Account Data Engine (CADE 2) daily processing continues to enhance IRS tax administration and improve service to 

taxpayers by enabling faster refunds for taxpayers, more timely account updates, and faster issuance of taxpayer notices. 

In fiscal year 2015, CADE 2 Transition State 2 (TS2) completed a major program milestone, exiting the planning phase with an 

updated comprehensive Release Plan for releases over the next five years. Once completed, the IRS believes that significant 

progress will be made in the mitigation of the Unpaid Assessments Material Weakness for individual tax accounts, taxpayer data 

will be more easily and rapidly accessible for appropriate uses, and the underlying technology will support future continued 

enhancements to improve customer service and taxpayer compliance. 

Also in 2015, the CADE 2 database continued to update daily in pace with the Individual Master File (IMF). When fully 

implemented, the CADE 2 database will provide data to support a variety of tax administration functions. These functions include

inventory analytics and selection; employee customer service support tools; and taxpayer self-service options to order tax account 

transactions transcripts and line-by-line tax return information for a specific tax year, as well as, to track and make payments 

arrangements. 

During 2015, TS2 began to address the IRS’s Unpaid Assessments Material Weakness for individual taxpayer accounts. In January 

2015, CADE2 TS 2 delivered additional benefits by enhancing the Penalty & Interest common code for Filing Season 2015, 

computing consistently across all major applications. The IRS also continued several prototyping efforts to convert legacy code and 

develop a modernized data distribution framework. 

In 2015, CADE 2 TS2 initiated development of Release 2, which will deploy for Filing Season 2016. The Release 2 projects will 

address several aspects of the Material Weakness by: 
U.S. Department of the Treasury | Fiscal Year 2015

34

• Completing CADE 2 Database Conversion project which includes building a long-term CADE 2 database annual 

conversion capability and process for use in Filing Season 2016 and beyond. The database will retain its expanded 

taxpayer history from the previous tax season for approximately two billion taxpayer records for the first time ever.

• Completing the feed to the Integrated Production Model (IPM) establishing an interface to the IRS data warehouse 

enabling financial reporting and analysis on taxpayer accounts to support compliance, customer service, and other needs.

• Completing the Penalty & Interest Adjusted Refundable Credit project to correct failure to pay penalty computations for 

adjusted refundable credits which resulted in 8 million tax modules with inaccurate computations.

In fiscal year 2015, BEP continued to enhance and refine its cloud-based, fully integrated enterprise resource planning system, 

Manufacturing Support Suite (MSS). MSS has reduced manual processes, increased efficiency, improved data quality, and 

provides real time enterprise data and information for improved decision-making. BEP plans to continually focus on improving 

automation and streamlining in a cost-efficient manner in fiscal year 2016.

The Office of the Comptroller of the Currency (OCC) performed routine software maintenance and a PeopleTools Upgrade on its 

Management and Accountability Reporting Tools ($MART) financial system in fiscal year 2015 to maintain productivity for its 

customer base. No upgrades are planned for fiscal year 2016; however, in 2017, the OCC plans to upgrade to a new software 

version to maintain customer service and provide innovative solutions for efficient reporting.

IMPROPER PAYMENTS

Background

The Improper Payments Elimination and Recovery Act of 2010 (IPERA, Pub. L. 111-204) amends the Improper Payments 

Information Act of 2002 (IPIA) and requires agencies to review their programs and activities annually to identify those susceptible 

to significant improper payments. IPERA also generally repeals the Recovery Auditing Act, and significantly increases agency 

payment recapture efforts by expanding the types of payments to be reviewed and lowering the dollar threshold of annual 

payments that requires agencies to conduct payment recapture audit programs. OMB Circular No. A-123, Management’s 

Responsibility for Internal Control, Appendix C, Requirements for Effective Estimation and Remediation of Improper Payments

(A-123, Appendix C), recently amended October 20, 2014, 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. A-123, 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.

Treasury’s Risk Assessment Methodology and Results for FY 2015

In fiscal year 2015, Treasury completed a full program inventory and performed risk assessments to identify programs that have a 

significant risk of improper payments, per the methodology in OMB Circular No. A-123, Appendix C. The risk assessments 

performed on Treasury’s programs and activities in fiscal year 2015 resulted in low and medium risk susceptibility for improper 

payments, except for the IRS’s Earned Income Tax Credit (EITC) program.

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. Treasury estimates that for fiscal year 2015, 
U.S. Department of the Treasury | Fiscal Year 2015

35

between 21.6 percent ($14.2 billion) and 25.9 percent ($17.0 billion) of the total EITC program payments of $65.6 billion were 

overclaims. The IRS has a robust base enforcement program for the EITC which consists of examinations (audits), math error 

notices, and document matching. Details on the IRS’s EITC program can be found in Section E of Part 3, Other Information.

Payment Recapture Audits

Section 2(h) of the 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 cost-effective. Treasury performed the 

payment recapture activities required in A-123, Appendix C during fiscal year 2015. Details on Treasury’s improper payments and 

payment recapture program activities and results can be found in Section E of Part 3, Other Information.

AUDIT FOLLOW-UP PROGRAM

During fiscal year 2015, Treasury continued its efforts to improve both the general administration of internal control issues 

throughout the Department and the timeliness of the resolution of all findings and recommendations identified by the Treasury 

OIG, TIGTA, SIGTARP, GAO, and external auditors. Additional information on Treasury’s audit follow-up activities can be found 

in Section F of Part 3, Other Information.


U.S. Department of the Treasury | Fiscal Year 2015

36

MESSAGE FROM THE ASSISTANT SECRETARY FOR MANAGEMENT AND 

DEPUTY CHIEF FINANCIAL OFFICER 

In fiscal year 2015, 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 

has led and supported government-wide financial management efforts to increase 

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

systems. Treasury continued to build the Office of Risk Management and conducts 

regular meetings of Treasury’s Risk Management Committee, which is co-chaired by the 

Deputy Secretary and Chief Risk Officer, providing a forum for the Department’s 

leaders to identify risk areas, share best practices, and monitor implementation of 

mitigation strategies. 

As part of our efforts to make Treasury data more transparent, the Department, in partnership with the Office of Management and 

Budget, published new data standards to modernize reporting of federal funds. 

In fiscal year 2015, Treasury demonstrated leadership in the areas of fiscal prudence and management excellence by: 

 Receiving an A on our small business report card for the fifth consecutive year;

 Reducing Treasury’s federal real estate footprint by an estimated 3 percent (almost one million square feet) during FY15 , and

projecting another 600,000 plus square foot reduction in fiscal year 2016;

 Strengthening cybersecurity across the financial sector by working with industry to organize cybersecurity initiatives on a

national level and fully committing to the Office of Management and Budget’s cyber-sprint by creating a cyber-dashboard

to identify potential threats; 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 16th 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, 2015 (IRS – 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. 

Brodi L. Fontenot

Assistant Secretary 

for Management 

Dorrice C. Roth

Deputy Chief Financial 

Officer 

Brodi L. Fontenot Dorrice C. Roth 

Assistant Secretary for Management Deputy Chief Financial Officer 

November 16, 2015 November 16, 2015
[Page intentionally left blank] 
U.S. Department of the Treasury | Fiscal Year 2015

37

D E P AR T M E N T O F T H E T R E AS U R Y 

WASHINGTON, D.C. 20220

OFFICE OF

INSPECTOR GENERAL

INSPECTOR GENERAL’S TRANSMITTAL LETTER

November 16, 2015 

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 2015 and 2014 

INTRODUCTION 

The Chief Financial Officer’s Act, as amended, requires the Department of the Treasury’s 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, 2015 and 2014, 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 Bulletin No. 15-02, Audit Requirements for Federal Financial Statements. 

RESULTS OF INDEPENDENT AUDIT 

In its audit of Treasury, KPMG reported 

 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 financial reporting at the Internal Revenue Service;

 a significant deficiency in internal control over information systems at the Bureau of the Fiscal

Service;

 Treasury’s financial management systems did not substantially comply with the requirements of

FFMIA related to Federal financial management systems requirements and Federal accounting

standards.
U.S. Department of the Treasury | Fiscal Year 2015

38

 no reportable noncompliance with laws, regulations, contracts, and grant agreements tested.

KPMG also described the following significant matters: 

 Treasury changed its budgetary accounting policy related to recording obligations for the portion of

the International Monetary Fund New Arrangements to Borrow program not accounted for under the

Federal Credit Reform Act.

 Treasury is a participant in significant legislation and transactions whose purpose is to assist in

stabilizing the financial markets. Also, the consolidated financial statements do not include the

assets, liabilities, or results of operations of commercial entities in which Treasury 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,

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 Treasury 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, 2015 and 2014, 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.

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 16, 2015, 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 Marla A. Freedman, Assistant Inspector 

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

Attachment 

cc: Brodi L. Fontenot 

Assistant Secretary for Management 

Dorrice C. Roth 

Deputy Chief Financial Officer 
KPMG LLP

Suite 12000

1801 K Street, NW 

Washington, DC 20006

KPMG LLP is a Delaware limited liability partnership,

the U.S. member firm of KPMG International Cooperative

(“KPMG International”), a Swiss entity.

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, 2015 and 2014, 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 the

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 $48.7 and $49.2 billion, net cost of operations of $11.8

and $12.1 billion before applicable eliminating entries, budgetary resources of $12.5 and $12.8 billion, and 

custodial activity of $3,304 and $3,069 billion, as of and for the years ended September 30, 2015 and 

September 30, 2014, 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 $28.6 and $35.4 billion, net cost of 

operations of $4.4 and $3.0 billion before applicable eliminating entries, and budgetary resources of $10.2 

and $17.2 billion, as of and for the years ended September 30, 2015 and September 30, 2014, 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; the standards applicable to financial audits contained in Government Auditing Standards issued 

by the Comptroller General of the United States; and 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. 

39
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, 2015 and 2014, 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 Note 21, in 2015 the Department changed its budgetary accounting policy related to 

recording obligations for the portion of the International Monetary Fund New Arrangements to Borrow

program not accounted for under the Federal Credit Reform Act. 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, 2015 and 2014, 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

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, 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 audit 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, 2015, 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. 

41
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 the IRS (Repeat Condition) 

IRS needs to establish internal control over financial reporting and systems in accordance with OMB 

Circular A-123, Management’s Responsibility for Internal Control to ensure reliable and timely financial 

information is obtained, maintained, and reported. IRS continued to make progress in addressing its 

deficiencies in internal control over financial reporting. However, a material weakness in internal control 

over unpaid tax assessments and significant deficiency in internal control over financial reporting systems 

continued to exist in fiscal year 2015 and are 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, 

2015, and thus did not provide reasonable assurance that losses and misstatements that were material in 

relation to the IRS’s financial statements would be prevented or detected and corrected on a timely basis. 

The deficiencies are summarized as follows: 

1. Internal control deficiencies that affected IRS’s management and reporting of taxes receivable and

unpaid tax assessments continued to exist. Specifically, IRS had the following control deficiencies: (1)

taxes receivable and other unpaid tax assessments were not supported by IRS’s core general ledger

system for tax transactions and instead were supported by a labor-intensive manual compensating

estimation process; (2) IRS cannot use the subsidiary ledger and supporting financial systems for

unpaid tax assessments to prepare reliable and useful information to manage and report because of

limitations in IRS’s financial systems and errors in tax payer accounts render the systems unable to

readily distinguish between taxes receivable, unpaid tax assessments, and write-offs in order to

properly classify these components for financial reporting purposes; and (3) IRS did not consistently

record information accurately in taxpayer accounts resulting in IRS having to make numerous

adjustments as part of its process for estimating taxes receivable and other unpaid tax assessments.

2. Internal control deficiencies over financial reporting systems continued to exist that increase the risk

that IRS financial and taxpayer data will remain vulnerable to inappropriate and undetected use,

modification or disclosure. Specifically, the IRS did not consistently: (1) install appropriate security

updates on certain databases and servers that support financial systems; (2) use audit trails and monitor

certain key financial systems; (3) use strong passwords and secure passwords; (4) perform security

testing to determine whether controls were operating effectively; (5) update key mainframe policies

and procedures for auditing and monitoring access.

Additional details related to the material weakness identified above have been provided separately to the 

IRS management by the auditors of the IRS’s financial statements. 

42
Recommendation 

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

material weakness. We recommend that the Assistant Secretary for Management (ASM) and Deputy Chief 

Financial Officer (DCFO) ensure that the IRS implements requisite 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 2015, Fiscal Service 

made progress in remediating the prior-year significant deficiency, however, Fiscal Service's corrective 

action plans were not effectively designed and implemented and we identified additional control 

deficiencies. Specifically, Fiscal Service’s general information technology controls did not provide 

reasonable assurance that: (1) access to computer resources (i.e., data, equipment, and facilities) is 

appropriate and restricted to authorized individuals; (2) responsibilities are properly segregated; (3) 

changes to information system resources are authorized, properly configured, and secured as intended; and 

(4) 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; unauthorized changes to financial systems; 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 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 disclosed no instances of noncompliance or other matters that are required to be reported 

under Government Auditing Standards or OMB Bulletin No. 15-02. 

43
We, and the other auditors, also performed tests of the Department’s 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 (1) Federal financial management systems requirements, and (2) 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 the IRS 

(Repeat Condition), the Department continues to have deficiencies in the IRS’s financial management 

systems.

2. Federal Accounting Standards

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

(Repeat Condition), the Department has a material weakness related to the IRS that affected the 

Department’s ability to prepare its financial statements in accordance with the federal accounting 

standards. Specifically, IRS financial management systems were unable to support the taxes receivable 

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

supplementary information disclosures, in accordance with 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 the 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.

44
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. 

November 16, 2015 

45
U.S. Department of the Treasury | Fiscal Year 2015

46

MANAGEMENT’S RESPONSE TO INDEPENDENT AUDITORS’ REPORT

DEPARTMENT OF THE TREASURY

WASHINGTON, D.C.

ASSISTANT SECRETARY

November 16, 2015

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 2015 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 sixteenth consecutive year.

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

conducting this year's audit contributed greatly to Treasury's successful fiscal year 2015 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.

Brodi L. Fontenot Dorrice C. Roth 

Assistant Secretary for Management Deputy Chief Financial Officer 
U.S. Department of the Treasury | Fiscal Year 2015

47

Consolidated Balance Sheets 

As of September 30, 2015 and 2014 

(In Millions) 

ASSETS 2015 2014

Intra-governmental Assets 

Fund Balance (Note 2) $ 352,526 $ 352,928

Loans and Interest Receivable (Note 3) 1,306,596 1,221,599

Advances to the Unemployment Trust Fund (Note 4) 12,840 20,824

Due From the General Fund (Note 4) 18,632,253 17,949,849

Other Intra-governmental Assets 453 568

Total Intra-governmental Assets 20,304,668 19,545,768

Cash, Foreign Currency, and Other Monetary Assets (Note 5) 253,136 211,868

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

Reserve Position in the International Monetary Fund (Note 7) 8,168 12,834

Taxes, Interest, and Other Receivables, Net (Note 8) 42,034 42,509

Credit Program Receivables, Net (Note 9) 15,145 19,102

Loans and Interest Receivable, Net (Note 7) 5,537 9,499

Investments in Government Sponsored Enterprises (GSE) (Note 10) 106,270 95,810

Investments in International Financial Institutions (Note 11) 7,319 6,891

Other Investments and Related Interest (Note 12) 11,737 17,921

Property, Plant, and Equipment, Net (Note 13) 2,897 2,800

Other Assets 762 898

Total Assets (Note 14) $ 20,768,735 $ 19,976,962

Heritage Assets (Note 13)

The accompanying notes are an integral part of these financial statements.
U.S. Department of the Treasury | Fiscal Year 2015

48

Consolidated Balance Sheets

As of September 30, 2015 and 2014

(In Millions)

 

LIABILITIES 2015 2014

Intra-governmental Liabilities 

Federal Debt and Interest Payable (Notes 4 and 15) $ 5,096,265 $ 5,104,620

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

Other Debt and Interest Payable (Note 16) 12,421 13,733

Due To the General Fund (Note 4) 1,663,955 1,539,951

Other Intra-governmental Liabilities (Note 18) 484 565

Total Intra-governmental Liabilities 6,919,191 6,658,869

 

Federal Debt and Interest Payable (Notes 4 and 15) 13,148,200 12,809,423

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) 49,574 52,358

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

Refunds Payable (Notes 4 and 22) 3,039 4,723

D.C. Federal Pensions and Judicial Retirement Actuarial Liability (Note 17) 8,849 9,159

Other Liabilities (Note 18) 4,940 4,806

Total Liabilities (Note 18) 20,354,621 19,555,575

Commitments and Contingencies (Note 26)

 

NET POSITION

Unexpended Appropriations: 

 Funds from Dedicated Collections (Note 23) 200 200

 Other Funds 343,023 348,412

 Subtotal 343,223 348,612

Cumulative Results of Operations:

 Funds from Dedicated Collections (Note 23) 48,646 46,464

 Other Funds 22,245 26,311

 Subtotal 70,891 72,775

Total Net Position - Funds from Dedicated Collections (Note 23) 48,846 46,664

Total Net Position - Other Funds 365,268 374,723

Total Net Position (Note 19) 414,114 421,387

Total Liabilities and Net Position $ 20,768,735 $ 19,976,962

The accompanying notes are an integral part of these financial statements.
U.S. Department of the Treasury | Fiscal Year 2015

49

Consolidated Statements of Net Cost

For the Fiscal Years Ended September 30, 2015 and 2014

(In Millions)

 2015 2014

Cost of Treasury Operations: 

Financial Program 

Gross Cost $ 14,476 $ 15,124

Less Earned Revenue (3,362) (3,108)

Net Program Cost 11,114 12,016

 

Economic Program 

Gross Cost 19,998 18,354

Less Earned Revenue (8,287) (7,025)

Net Program Cost 11,711 11,329

 

Security Program 

Gross Cost 406 375

Less Earned Revenue (6) (8)

Net Program Cost 400 367

 

Total Program Gross Costs 34,880 33,853

Total Program Gross Earned Revenues (11,655) (10,141)

Total Net Program Cost before Changes in Actuarial Assumptions 23,225 23,712

(Gain)/Loss on Pension, ORB, or OPEB Assumption Changes 299 170

Total Net Cost of Treasury Operations (Note 20) 23,524 23,882

 

Non-Entity Costs:

Federal Debt Interest 406,982 431,618

Restoration of Foregone Federal Debt Interest (Note 15) - 444

Less Interest Revenue from Loans (39,702) (37,216)

Net Federal Debt Interest Costs 367,280 394,846

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

Other Federal Costs, Net (Note 20) 13,601 14,054

GSEs Non-Entity Revenue, Net (Note 10) (30,830) (28,061)

Other, Net (715) (761)

Total Net Non-Entity Costs 351,388 380,078

Total Net Cost of Treasury Operations and Non-Entity Costs $ 374,912 $ 403,960

 

 

The accompanying notes are an integral part of these financial statements. 
U.S. Department of the Treasury | Fiscal Year 2015

50

Consolidated Statements of Changes in Net Position

For the Fiscal Years Ended September 30, 2015 and 2014

(In Millions)

 2015 2014

CUMULATIVE RESULTS OF OPERATIONS (Note 19)

Beginning Balance $ 72,775 $ 79,848

Budgetary Financing Sources 

Appropriations Used 430,756 460,593

Non-Exchange Revenue 193 568

Donations and Forfeitures of Cash/Equivalent 4,315 508

Transfers In/Out Without Reimbursement (17) 304

Other (3) 52

Other Financing Sources (Non-Exchange) 

Donation/Forfeiture of Property 78 140

Accrued Interest and Discount on Debt 9,579 7,404

Accrued Interest on Restoration of Federal Debt Principal (Note 15) 2,052 (801)

Transfers In/Out Without Reimbursement 11 (44)

Imputed Financing Sources (Note 20) 669 796

Transfers to the General Fund and Other (Note 19) (74,605) (72,633)

Total Financing Sources 373,028 396,887

Net Cost of Treasury Operations and Non-Entity Costs (374,912) (403,960)

Net Change (1,884) (7,073)

Cumulative Results of Operations 70,891 72,775

 

UNEXPENDED APPROPRIATIONS (Note 19)

Beginning Balance 348,612 361,295

Budgetary Financing Sources 

Appropriations Received (Note 19) 437,085 470,461

Appropriations Transferred In/Out 99 144

Other Adjustments (11,817) (22,695)

Appropriations Used (430,756) (460,593)

Total Budgetary Financing Sources (5,389) (12,683)

Total Unexpended Appropriations 343,223 348,612

Net Position $ 414,114 $ 421,387

 

The accompanying notes are an integral part of these financial statements. 
U.S. Department of the Treasury | Fiscal Year 2015

51

Combined Statement of Budgetary Resources

For the Fiscal Year Ended September 30, 2015 

(In Millions)

 

NonBudgetary 2015

BUDGETARY RESOURCES Budgetary Financing Total

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

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

Other changes in unobligated balance (9,937) (6,779) (16,716)

Unobligated balance from prior year budget authority, net 345,581 419 346,000

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) 9,624 2,072 11,696

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

 

STATUS OF BUDGETARY RESOURCES

Obligations incurred (Note 21) $ 465,204 $ 2,840 $ 468,044

Unobligated balance, end of year: 

 Apportioned 281,286 102 281,388

 Exempt from Apportionment 10,137 - 10,137

 Unapportioned 39,997 470 40,467

Total 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

Obligations incurred (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) $ 451,043 $ 2,993 $ 454,036

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

Change in uncollected payments, Federal sources 

 (discretionary and mandatory) 31 105 136

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.
U.S. Department of the Treasury | Fiscal Year 2015

52

Combined Statement of Budgetary Resources

For the Fiscal Year Ended September 30, 2014

(In Millions)

 

NonBudgetary 2014

BUDGETARY RESOURCES Budgetary Financing Total

Unobligated balance brought forward, October 1 $ 368,339 $ 2,011 $ 370,350

Recoveries of prior year unpaid obligations 3,872 5,365 9,237

Other changes in unobligated balance (18,218) (6,326) (24,544)

Unobligated balance from prior year budget authority, net 353,993 1,050 355,043

Appropriations (discretionary and mandatory) (Note 19) 469,330 - 469,330

Borrowing authority (discretionary and mandatory) (Note 21) - 1,200 1,200

Spending authority from offsetting collections (discretionary and 

 mandatory) 8,222 7,998 16,220

Total Budgetary Resources $ 831,545 $ 10,248 $ 841,793

STATUS OF BUDGETARY RESOURCES

Obligations incurred (Note 21) $ 482,380 $ 9,271 $ 491,651

Unobligated balance, end of year: 

 Apportioned 273,584 603 274,187

 Exempt from Apportionment 16,112 - 16,112

 Unapportioned 59,469 374 59,843

Total unobligated balance, end of year 349,165 977 350,142

Total Status of Budgetary Resources $ 831,545 $ 10,248 $ 841,793

 

CHANGE IN OBLIGATED BALANCE

Unpaid Obligations:

Unpaid obligations, brought forward, October 1 $ 132,978 $ 101,434 $ 234,412

Obligations incurred (Note 21) 482,380 9,271 491,651

Outlays (gross) (480,732) (9,763) (490,495)

Recoveries of prior year unpaid obligations (3,872) (5,365) (9,237)

Unpaid obligations, end of year 130,754 95,577 226,331

Uncollected Payments:

Uncollected payments, Federal sources, brought forward, October 1 (245) (730) (975)

Change in uncollected payments, Federal sources 18 218 236

Uncollected payments, Federal sources, end of year (227) (512) (739)

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

Obligated Balance, Start of Year $ 132,733 $ 100,704 $ 233,437

BUDGET AUTHORITY AND OUTLAYS, NET

Budget authority, gross (discretionary and mandatory) $ 477,552 $ 9,198 $ 486,750

Actual offsetting collections (discretionary and mandatory) (8,186) (19,057) (27,243)

Change in uncollected payments, Federal sources 

 (discretionary and mandatory) 18 218 236

Budget Authority, Net (Discretionary and Mandatory) $ 469,384 $ (9,641) $ 459,743

 

Outlays, gross (discretionary and mandatory) $ 480,732 $ 9,763 $ 490,495

Actual offsetting collections (discretionary and mandatory) (8,186) (19,057) (27,243)

Outlays, net (discretionary and mandatory) 472,546 (9,294) 463,252

Distributed offsetting receipts (125,584) - (125,584)

Agency Outlays, Net (Discretionary and Mandatory) $ 346,962 $ (9,294) $ 337,668

The accompanying notes are an integral part of these financial statements.
U.S. Department of the Treasury | Fiscal Year 2015

53

Statements of Custodial Activity

For the Fiscal Years Ended September 30, 2015 and 2014

(In Millions)

 2015 2014

Sources of Custodial Revenue (Note 22)

Individual Income and FICA Taxes $ 2,799,081 $ 2,605,049

Corporate Income Taxes 389,889 353,141

Estate and Gift Taxes 20,042 20,155

Excise Taxes 99,459 93,405

Railroad Retirement Taxes 6,432 5,954

Unemployment Taxes 9,108 8,612

Deposit of Earnings, Federal Reserve System 96,468 99,235

Fines, Penalties, Interest and Other Revenue 7,085 4,512

Total Revenue Received 3,427,564 3,190,063

Less Refunds and Other Payments (403,607) (373,863)

Net Revenue Received 3,023,957 2,816,200

Non-Cash Accrual Adjustment 1,380 1,967

Total Custodial Revenue 3,025,337 2,818,167

 

Disposition of Custodial Revenue (Note 22)

Amounts Provided to Fund Non-Federal Entities 350 312

Amounts Provided to Fund the Federal Government 3,023,607 2,815,888

Non-Cash Accrual Adjustment 1,380 1,967

Total Disposition of Custodial Revenue 3,025,337 2,818,167

Net Custodial Revenue $ - $ -

 

The accompanying notes are an integral part of these financial statements. 
U.S. Department of the Treasury | Fiscal Year 2015

54

NOTES TO THE FINANCIAL STATEMENTS

TABLE OF CONTENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ................................................................................................................................ 55 .............................

2. FUND BALANCE ................................................................................................................................................................................................ 71 ................

3. LOANS AND INTEREST RECEIVABLE – INTRA-GOVERNMENTAL................................................................................................................................ 73 .............

4. DUE FROM THE GENERAL FUND AND DUE TO THE GENERAL FUND................................................................................................75......................................

5. CASH, FOREIGN CURRENCY, AND OTHER MONETARY ASSETS...............................................................................................................................................

77

6. GOLD AND SILVER RESERVES, AND GOLD CERTIFICATES ISSUED TO THE FEDERAL RESERVE BANKS................................................................ 79 .......................

7. RESERVE POSITION IN THE INTERNATIONAL MONETARY FUND AND RELATED LOANS AND INTEREST RECEIVABLE ................................ 80 ..................................

8. TAXES, INTEREST, AND OTHER RECEIVABLES, NET ................................................................................................................................ 81 .............................

9. CREDIT PROGRAM RECEIVABLES, NET ................................................................................................................................................................ 82 ...............

10. INVESTMENTS IN GOVERNMENT SPONSORED ENTERPRISES ................................................................................................................................ 87 ...............

11. INVESTMENTS IN INTERNATIONAL FINANCIAL INSTITUTIONS ................................................................................................................................ 91 .............

12. OTHER INVESTMENTS AND RELATED INTEREST................................................................................................................................ 91 .................................

13. PROPERTY, PLANT, AND EQUIPMENT, NET ................................................................................................................................................................ 92 ........

14. NON-ENTITY VS. ENTITY ASSETS................................................................................................................................................................ 93 ......................

15. FEDERAL DEBT AND INTEREST PAYABLE AND RELATED LIABILITIES ................................................................................................ 94...................................

16. OTHER DEBT AND INTEREST PAYABLE ................................................................................................................................................................ 98 ..............

17. D.C. FEDERAL PENSIONS AND JUDICIAL RETIREMENT ACTUARIAL LIABILITY................................................................................................ 99 ......................

18. LIABILITIES ....................................................................................................................................................................................................................

101

19. NET POSITION ................................................................................................................................................................................................................

102

20. CONSOLIDATED STATEMENTS OF NET COST AND NET COSTS OF TREASURY SUB-ORGANIZATIONS ........................................................................................

103

21. ADDITIONAL INFORMATION RELATED TO THE COMBINED STATEMENTS OF BUDGETARY RESOURCES ....................................................................................

109

22. COLLECTION AND DISPOSITION OF CUSTODIAL REVENUE .................................................................................................................................................

112

23. FUNDS FROM DEDICATED COLLECTIONS ..........................................................................................................................................................................

114

24. RECONCILIATION OF NET COST OF TREASURY OPERATIONS AND NON-ENTITY COSTS TO BUDGET ........................................................................................

118

25. SCHEDULE OF FIDUCIARY ACTIVITY .................................................................................................................................................................................

119

26. COMMITMENTS AND CONTINGENCIES...............................................................................................................................................................................

120

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED – SEE ACCOMPANYING AUDITORS’ REPORT)........................................................................................

124
U.S. Department of the Treasury | Fiscal Year 2015

55

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. REPORTING ENTITY

The accompanying financial statements include the operations of the U.S. Department of the Treasury (Department or Treasury),

one of 24 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. The following paragraphs describe the activities of the reporting entity. 

The Department was established by an Act of Congress approved on September 2, 1789. Many subsequent acts affected the 

development of the Department, delegating new duties to its 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 Departmental overseas operations; and directing the manufacture of coins, currency, and other products for customer 

agencies and the public. 

The Department’s reporting entities include Departmental Offices (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 Office of 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. 

The Department’s 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). The Department’s financial 

statements reflect the reporting of its own entity activities, comprising both the Department’s operating bureaus and DO that are 

consolidated with the Department. This includes appropriations received to conduct its operations and revenue generated from 

those operations. They also reflect the reporting of certain non-entity (custodial) functions it performs 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. The Department’s 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. 

Following generally accepted accounting principles (GAAP) for federal entities, the Department does not consolidate into its 

financial statements the assets, liabilities, or results of operations of any financial organization or commercial entity in which it 

holds 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. 
U.S. Department of the Treasury | Fiscal Year 2015

56

B. BASIS OF ACCOUNTING AND PRESENTATION

The financial statements have been prepared from the accounting records of the Department in conformity with GAAP for federal 

entities, and the Office of Management and Budget (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). FASAB is recognized by the American Institute of Certified Public Accountants 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 2015 and 2014 

information. 

To provide additional clarity to its financial statements, the Department has 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 the Department's 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 represents other assets; (iv) Liability for Restoration of Federal Debt Principal and Interest and Due To the 

General Fund represent other intra-governmental liabilities; (v) Liability for Restoration of Federal Debt Principal and Interest, 

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 Pensions 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. 

Transactions and balances among the Department’s entities have been eliminated from the Consolidated Balance Sheets, the 

Consolidated Statements of Net Cost, and the Consolidated Statements of Changes in Net Position. The Statements of Budgetary 

Resources are presented 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 the accounting records of the Department 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. 

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 the Department is a component of the U.S. government, a 

sovereign entity and, accordingly, its 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 
U.S. Department of the Treasury | Fiscal Year 2015

57

owed in excess of available, congressionally appropriated funds or other amounts, and there is no certainty that the appropriations 

will be enacted. 

Certain fiscal year 2014 activity and balances presented on the financial statements have been reclassified to conform to the 

presentation in the current year, the effects of which are immaterial. 

There are numerous acronyms used throughout the notes herein as well as other sections of this Agency Financial Report (AFR). 

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 the Department’s accounts with the U.S. government’s central accounts from which 

the Department is authorized to make expenditures and pay liabilities. It is an asset because it represents the Department’s claim 

to the U.S. government’s resources. Fund balance is not equivalent to unexpended appropriations because it also includes nonappropriated 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 issued by the Department, through FFB. No loan loss allowance or credit reform subsidy costs are recorded for 

loans purchased from federal agencies or for guaranteed loans made to non-federal borrowers because the outstanding balances 

(interest and principal) are guaranteed by those agencies. 

Intra-governmental non-entity loans and interest receivable from other federal agencies represent the principal and related interest 

receivable on loans issued by the Department, through the Fiscal Service. The Department acts 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 the Department’s intermediary role in issuing these loans, the Department does not record a loan loss

allowance related to these non-entity intra-governmental loans. Instead, loan loss allowances and subsidy costs are recognized by 

the ultimate lender, the federal agency that issued the loans to the public. Interest revenue on intra-governmental loans is accrued 

when earned. 

E. ADVANCES TO THE UNEMPLOYMENT TRUST FUND

Advances are issued to the Department of Labor’s (DOL) Unemployment Trust Fund from the General 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. 

Advances are repaid 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 the Department’s 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. The balances in these TGA accounts are transferred into the Federal 

Reserve Bank of New York’s (FRBNY) TGA throughout the day. 
U.S. Department of the Treasury | Fiscal Year 2015

58

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. 

The Department’s foreign currency investments having original maturities of three months or less are classified as cash 

equivalents. Special Drawing Rights (SDRs) 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

Federal taxes receivable, net, and the corresponding liability due to the General Fund, are not accrued until related tax returns are 

filed or assessments are made by the IRS and agreed to by either the taxpayer or the court. Additionally, the prepayments are 

netted against liabilities. Accruals are made to reflect penalties and interest on taxes receivable through the balance sheet date. 

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. An allowance for doubtful accounts is recorded 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. Compliance assessments and related write-offs are not reported 

on the balance sheet. Statutory provisions require the accounts to be maintained until the statute for collection expires. 

H. CREDIT PROGRAM RECEIVABLES, NET

The Department accounts for all of its 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 the Department’s state and 

local Housing Finance Agency (HFA) initiative programs, SBLF program, CDFI programs, certain portions of the Department’s 

participation in the IMF, and the Troubled Asset Relief Program (TARP) (refer to Note 9). 

To account for the Department’s credit program receivables, the Department applies 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, which was promulgated as a result of FCRA, 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, the Department estimates 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, the Department first predicts or 
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estimates the future performance of direct and guaranteed loans when preparing its annual budget. The data used for these 

budgetary estimates are re-estimated 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. The re-estimated data is then used to report the cost of the loans disbursed under the direct or 

guaranteed loan program as a “Program Cost” in the Department’s Consolidated Statements of Net Cost. 

Cash flows associated with the Department’s 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. Security-level data and assumptions used as the basis for cash flow model forecasts and 

program performance are drawn 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:

 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, priority of payments, and 

performance of underlying collateral

 Discount rate, Market Adjusted Discount Rate (MRADR), and SDR exchange rate

 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 the Department’s credit programs represents the difference between the 

Department’s projected costs of the program and the future cash flows anticipated to be received by the Department. The subsidy 

allowance specifically takes into consideration projected repayments and defaults and the projected cost of borrowings. The 

allowance is amortized to reflect the difference between projected and actual financing costs. 

The Department’s actions, as well as changes in legislation, may impact estimated future cash flows and related subsidy costs. The 

cost or cost savings of a modification is recognized 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

The Department holds 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). These non-federal 

investment holdings are presented at their fair value. Changes in the valuation of these investments are recorded as non-entity 

exchange transactions on the Consolidated Statements of Net Cost. Dividends related to these investments are also recorded as 

non-entity exchange transactions, and accrued when declared. 

The GSE Senior Preferred Stock Purchase Agreements (SPSPAs), entered into by the Department with each GSE when the GSEs 

were placed under conservatorship, require the Department to increase its investment in the GSEs’ senior preferred stock if, at the 
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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. As funding to the GSEs to pay their excess liabilities is appropriated directly to the Department, 

such payments, as needed, are reported 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 in Due To the General 

Fund, as the Department holds the investment on behalf of the General Fund. 

Investments in International Financial Institutions

The Department, on behalf of the United States, invests 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, the Department, on 

behalf of the United States, provides 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 nonmarketable equity investments valued at cost on the Department’s Consolidated Balance Sheets.

In addition, the Department, on behalf of the United States, contributes funding to MDBs to finance grants and extend credit to 

poor countries at below market-based interest rates. These U.S. contributions, also referred to as “concessional window” 

contributions, are reported as an expense within the Economic Program on the Department’s Consolidated Statements of Net Cost. 

Other Investments and Related Interest

The ESF holds most of the Department’s foreign currency investments. The ESF’s other foreign currency denominated assets and 

investment securities are available-for-sale securities recorded at fair value. These holdings are normally invested in interestbearing securities issued or held through foreign governments or monetary authorities. Interest on investments, amortization of 

premiums, and accretion of discounts are recognized on an accrual basis. Premiums and discounts are amortized or accreted over 

the life of the related investment security as an adjustment to yield using 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. Costs for developing internal-use software are accumulated in work-in-development until a project is placed 

into service and testing and final acceptances are successfully completed. Once completed, the costs are transferred to depreciable 

property. 

The Department leases land and buildings from the General Services Administration (GSA) to conduct most of its operations. Such 

leases do not 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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The Department’s bureaus are diverse both in size and in operating environment. Accordingly, the Department’s 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 capitalization thresholds for internal-use software generally range from $50,000 to 

$250,000 (except for IRS which generally range from $10 million to $50 million). The Department also uses 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 

Departmental 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. Leasehold improvements are depreciated over the term of the lease or the useful life of the

improvement, whichever is shorter. Capital leases are depreciated 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 the Department’s diversity of PP&E. Land and land

improvements, construction-in-progress, and internal-use software in development are not depreciated. The Department records 

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. All acquisition, reconstruction, and betterment costs for the Treasury multi-use heritage 

asset buildings are capitalized as general PP&E and depreciated over their service life. 

K. FEDERAL DEBT AND INTEREST PAYABLE

Debt and associated interest are reported on the accrual basis of accounting. Interest costs are accrued as expense when incurred 

and are reported on the Consolidated Statements of Net Cost as non-entity costs. Certain Treasury securities are issued at a 

discount or premium. These discounts and premiums are amortized over the term of the security using an interest method for all 

long-term securities and the straight-line method for short-term securities. 

L. COMMITMENTS AND CONTINGENCIES

The Department, through FFB, makes loan commitments with federal agencies, or private sector borrowers whose loans are 

guaranteed by federal agencies, to extend credit for their own use (refer to the accounting policy above entitled “Loans and Interest 

Receivable, Intra-Governmental”). The Department establishes loan commitments when the Department and other parties fully 

execute promissory notes in which the Department becomes obligated to issue such loans immediately or at some future date. The 

Department reduces loan commitments when it issues the loans or when the commitments expire. Most obligations of the 

Department give a borrower the contractual right to a loan or loans immediately or at some point in the future within an agreed 

upon timeframe. 

The Department, on behalf of the United States, subscribes 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 the Department issues instruments of subscription stating its intention to subscribe to 

the U.S. portion of callable capital, subject to the amounts provided for in appropriations acts. Additionally the Department, on 

behalf of the United States, participates in the IMF through certain borrowing arrangements that supplement IMF resources.

In accordance with SFFAS No. 5, Accounting for Liabilities of the Federal Government, the Department recognizes material 

contingent liabilities when the following criteria are met:
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 A past event or exchange transaction has occurred

 A future cash outflow is probable

 A future cash outflow is measurable

The estimated liability recorded by the Department 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, the minimum amount in the range is recognized, and the range and a description 

of the nature of the contingency are disclosed. The Department follows 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, the Department 

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

The Department records the SDR holdings as part of “Cash, Foreign Currency, and Other Monetary Assets,” and the SDR 

allocations as the “Allocation of Special Drawing Rights” liability when the IMF allocates SDRs to the Department. The liabilities 

represent the amount that is payable in the event of liquidation of, or withdrawal by the United States from, the SDR department of 

the IMF or cancellation of the SDRs.

SDR holdings increase primarily as a result of IMF SDR allocations. SDR transactions are recorded as incurred. They include 

acquisitions and sales of SDRs, interest received on SDR holdings, interest charges on SDRs allocations, and valuation 

adjustments. The U.S. government receives remuneration in SDRs from the IMF based on claims on the IMF as represented by the 

U.S. Reserve Position. The remuneration is credited to the ESF which transfers to either the TGA or a specified financing 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. The certificates may be issued 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 the Department at such times and in such amounts as the Secretary may determine, and do not bear interest. 

Certificates issued to the FRB are reported 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. Amounts that the Department has concluded to be valid refunds owed to taxpayers are recorded as a liability 
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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 – FECA ACTUARIAL 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 the Department for these paid 

claims. Generally, the Department reimburses 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 the 

Department. The second component is the estimated liability for future workers compensation as a result of past events. Both 

components are reported 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

Annual and compensatory leave earned by the Department’s employees, but not yet used, is reported as an accrued liability. The 

accrued balance is adjusted 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. Sick and other 

leave are expensed as taken, and the Department does not record a liability for such amounts because employees do not vest in sick 

and other leave benefits. 

Q. PENSION COSTS, OTHER RETIREMENT BENEFITS, AND OTHER POST-EMPLOYMENT BENEFITS

Federal Pension Costs, Other Retirement Benefits, and Other Post-Employment Benefits

The Department recognizes the full costs of its employees’ pension benefits, including recognizing imputed costs for the difference 

between the estimated service cost and the contributions made by the Department. However, the assets and liabilities associated 

with these benefits are recognized by the Office of Personnel Management (OPM) rather than the Department. 

Most employees of the Department 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 the 

Department contributes 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 threetiered retirement system consisting of a Basic Benefit Plan, Thrift Savings Plan (TSP), and Social Security Benefits. Employees 

hired after December 31, 1986 are automatically covered by FERS and Social Security. For the FERS Basic Benefit Plan, the 

Department contributes between 11.1 percent and 13.2 percent for regular employees, and between 26.5 percent and 28.8 percent 

for law enforcement officers. The TSP under FERS is a 401(k)-type savings plan in which the Department automatically 

contributes one percent of base pay and matches any employee contributions up to an additional four percent of base pay. For 

most employees hired after December 31, 1983, the Department also contributes 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. The Department reports the full cost of providing other retirement benefits (ORB). The Department 

also recognizes 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 the 
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Department’s 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 certain health 

and life insurance benefits for certain of its retired employees who meet eligibility requirements. The OCC also separately sponsors 

a 401(k) plan in addition to the TSP.

District of Columbia Federal Pensions and Judicial Retirement Plans

Pursuant to Title XI of the Balanced Budget Act of 1997, as amended, the Department became responsible for certain District of 

Columbia (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 actuarial liability is based upon 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 D.C. Federal Pensions 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 Pensions and Judicial retirement plans use the same underlying yield curve but, unlike the D.C. Federal Pension Funds, 

OPM converts to a single equivalent rate.

R. REVENUE AND FINANCING SOURCES

The Department’s activities are financed either through exchange revenue it receives 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 and accompanying photocopy 

and reproduction charges. Exchange revenues are recognized when earned; i.e., goods are delivered or services are rendered. 

Revenue from reimbursable agreements is recognized when the services are provided. Non-exchange revenues are recorded when 

received or accrued when the Department has a legal claim through the respective collecting bureau. Appropriations used are 

recognized as financing sources when related expenses are incurred or assets are purchased. 

The Department also incurs certain costs that are paid in total or in part by other federal entities, such as pension costs, the 

FEHBP, and any un-reimbursed payments made from the Treasury Judgment Fund on behalf of the Department. These 

subsidized costs are recognized on the Consolidated Statements of Net Cost, and the imputed financing for these costs is recognized 

on the Consolidated Statements of Changes in Net Position. As a result, there is no effect on net position. Other non-exchange 

financing sources, such as donations and transfers of assets without reimbursements, are also recognized for the period in which 

they occurred on the Consolidated Statements of Changes in Net Position. 

The Department recognizes revenue it receives from disposition of forfeited property as non-exchange revenue on the Consolidated 

Statements of Changes in Net Position. The costs related to the Forfeiture Fund program are reported on the Consolidated 

Statements of Net Cost. The Treasury Forfeiture Fund 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 Treasury Forfeiture Fund. 

Forfeited property balances are reported in “Other Assets” on the Consolidated Balance Sheets. 

S. CUSTODIAL REVENUES

Non-entity revenue reported on the Department’s Statements of Custodial Activity includes cash collected by the Department, 

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. The Statements of 
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Custodial Activity are presented on the “modified accrual basis.” The Department recognizes revenues as cash is collected, and 

records a “non-cash accrual adjustment” representing the net increase or decrease during the reporting period in net revenuerelated assets and liabilities, mainly taxes receivable. 

T. APPROPRIATIONS AND OTHER BUDGETARY ACTIVITY

Combined Statement of Budgetary Resources Activity

Appropriations are recorded when authorized by legislation. Incurred obligations of appropriations are recorded when the 

Department places an order or signs a contract for goods and services, awards a grant, or takes other actions that require the 

Department to make payments to the public or another federal entity. Outlays are recorded when disbursements are made. 

Permanent and Indefinite Appropriations

Permanent and indefinite appropriations are used to disburse tax refunds, income tax credits, and child tax credits. Refund 

payment funding is recognized 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. Tax refunds and credits are reported 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. 

The Department also has two permanent and indefinite appropriations related to debt activity. One is used to pay interest on the 

public debt securities; 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. Debt redemption appropriations are related to the Department’s 

liability and are reported on the Department’s Consolidated Balance Sheet. Interest appropriations are recorded at the beginning 

of the fiscal year and again at mid-year, if necessary, and any unused authority is returned 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. 

The Department also has 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. The Department’s renewable energy project is also 

covered by permanent indefinite appropriations.

Additionally, the Department has other permanent and indefinite appropriations to make certain payments on behalf of the U.S. 

government. These appropriations are provided 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, the Department is 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

The Department has made certain estimates and assumptions relating to the reporting of assets, liabilities, revenues, expenses, and 

the disclosure of contingent liabilities to prepare its financial statements. Actual results may differ from these estimates. It is 

possible that the results of operations, cash flows and/or the financial position of the Department may be materially affected in 

future periods by adverse changes in the outlook for the key assumptions underlying management’s estimates. Transactions 

subject to estimates principally include loan and credit program receivables, credit reform subsidy costs, investments in GSEs and 

other non-federal securities and related impairment, tax receivables, loan guarantees, depreciation, imputed costs, actuarial 
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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.

The Department accounts for all of its 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. The Department recognizes 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 the Department has an equity interest, estimates of expected default, and prepayment 

rates. 

The Department uses 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. Forecasts of future cash flows 

are updated based on actual program performance to date, additional information about the portfolio, additional publicly available 

relevant historical market data on securities performance, revised expectations for future economic conditions, and enhancements 

to cash flow projection methods. 

The Department performs annual calculations, as of September 30, to assess its need for recording an estimated liability in 

accordance with SFFAS No. 5 related to the Department’s 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 the Department’s 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 primary input into the investment valuation for the senior 

preferred stock is the present value of the projected quarterly dividend payments, and a key input for the warrants is the market 

value of the shares of common stock of the GSEs which are traded on the over-the-counter (OTC) Bulletin Board. The Department 

evaluates the need for adjusting its 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. Any changes in valuation, including 

impairment, are recorded and disclosed in accordance with SFFAS No. 7, Accounting for Revenue and Other Financing Sources. 

Since the valuation is an annual process, the change in valuation of the preferred stock and warrants are deemed 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 

required to be funded by the Department. Except as expressly noted herein, the Department has not revalued or included in its 

estimates as of September 30, 2015 the effects of any new developments that may have occurred subsequent to September 30, 

2015. Refer to the accounting policy Note 1Q 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-thantemporary is accounted for as an impairment, and the carrying value is reduced to fair value for financial reporting purposes. To 
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determine whether an impairment is other-than-temporary, the Department considers whether it has the ability and intent to hold 

the investment until a market price recovery, and considers whether evidence indicating the cost of the investment is recoverable 

outweighs evidence to the contrary. 

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. The Department takes on possible credit risk when it makes direct loans or 

guarantees to non-federal entities, provides credits to foreign entities, or becomes exposed to institutions which engage in financial 

transactions with foreign countries (refer to Note 12). The following programs of the Department 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, 

TARP, and certain portions of the Department’s participation in the IMF. 

The Department’s activities generally focus on the underlying problems in the credit markets. These programs were developed 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 the Department 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 assumed by the 

Department 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 that budgetary costs of the troubled assets and 

guarantees of troubled assets be calculated by adjusting the discount rate for market risks. The Department’s cost estimates for the 

TARP programs are adjusted 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. As directed by Congress, a MRADR is also used in the credit reform model for certain portions of the Department’s 

participation in the IMF. 

The Department faces 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 the Department’s counterparties. 

Y. FUNDS FROM DEDICATED COLLECTIONS

The Department accounts 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. These specifically identified 

revenues and other financing sources are required by statute to be used for designated activities, benefits, or purposes. The 

Department applies 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 
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non-federal sources, such funding is predominantly non-federal, or the non-federal funding is material to the Department’s 

financial statements. 

Z. ALLOCATION TRANSFERS

The Department is 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 the U.S. 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 the Department receives 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). 

The Department allocates funds, as the parent, to the Department of Energy and Department of Health and Human Services 

(HHS). Also, the Department receives 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. These activities are not reported 

in the Department’s consolidated financial statements, but instead are reported in Note 25. 

AB. RELATED PARTIES AND OTHER ENTITIES

The primary “related parties” with whom the Department conducts business are other federal agencies, mainly through the normal 

lending activities of the Fiscal Service and the FFB. These activities are disclosed 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 the Department an advisory role in the FHFA’s actions as the 

conservator for Fannie Mae and Freddie Mac. The Department has no transactions with FHFA, but rather transacts directly with 

the GSEs. The Department also utilizes 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 behalf of the Department. 

Federal Reserve System

The Federal Reserve System (FR System) was created by Congress under the Federal Reserve Act of 1913. 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 
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System is not included in the federal budget. It is considered an independent central bank, and its decisions are not ratified by the 

executive branch of the U.S. government. 

The Department interacts with the FRBs in a variety of ways, including the following:

 The FRBs serve as the Department’s fiscal agent and depositary, executing banking and other financial transactions on the 

Department’s behalf. The Department reimburses 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 the Department on behalf of the U.S. government 

(refer to Notes 8 and 22).

The Department also consults with the FR System on matters affecting the economy and certain financial stability activities. The 

above financial activities involving the Department are accounted for and disclosed in the Department’s consolidated financial 

statements. In accordance with SFFAC No. 2, Entity and Display, the FR Systems’ assets, liabilities, and operations are not 

consolidated into the Department’s financial statements.

Federal Reserve System Structure 

The Board is an independent organization governed by seven members who are appointed by the President and confirmed by the 

Senate. The full term of a 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. 

The FOMC is comprised of the seven Board members and five of the 12 FRB presidents, and is charged with formulating and 

conducting monetary policy primarily through open market operations (the purchase and sale of certain securities in the open 

market), the principal tool of national monetary policy. These operations affect the amount of reserve balances available to 

depository institutions, thereby influencing overall monetary and credit conditions. The 12 FRBs are chartered under the Federal 

Reserve Act, which requires each member bank to own the capital stock of its FRB. Supervision and control of each FRB is 

exercised by a board of directors, of which three are appointed by the Board of Governors of the FR System, and six are elected by 

their member banks. 

The FRBs participate in formulating and conducting monetary policy, distribute currency and coin, and serve as fiscal agents for 

the Department, 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 and $1.9 trillion at September 30, 2015 and 2014, respectively (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. 
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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 at http://www.federalreserve.gov.

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 the Department its residual (or excess) earnings after providing for the cost of operations, payment of

dividends, and reservation of an amount necessary to equate surplus with paid-in capital. These residual earnings may vary due to, 

among other things, changes in the SOMA balance levels that may occur in conducting monetary policy. In the event of losses, or a 

substantial increase in capital, an FRB will suspend its payments to the U.S. Treasury until such losses or increases in capital are 

recovered through subsequent earnings. The FRB residual earnings of $96.5 billion and $99.2 billion for fiscal years ended 

September 30, 2015 and 2014, respectively, are reported as custodial revenues on the Department’s Statements of Custodial 

Activity. They constituted 2.8 percent and 3.1 percent of the Department’s total custodial revenues collected in fiscal years 2015 

and 2014, respectively. “Taxes, Interest and Other Receivables, Net” includes a receivable for FRB’s residual earnings which 

represents the earnings due to the U.S. Treasury as of September 30, but not collected by the U.S. Treasury until after the end of 

the month (refer to Note 8). 
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2. FUND BALANCE 

As of September 30, 2015 and 2014, Fund Balance consisted of the following (in millions):

2015 2014

Appropriated Funds $ 344,691 $ 347,180

Revolving Funds 6,269 4,225

Special Funds 686 754

Clearing Funds 511 446

Deposit Funds 80 74

Other Funds (principally Receipt, Suspense, and Trust Funds) 289 249

Total Fund Balance $ 352,526 $ 352,928

Appropriated funds consist of amounts appropriated annually by Congress to fund the operations of the Department. 

Revolving funds are used 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 components within the Department. The financing funds 

relate to credit reform activities.

Special funds include funds designated for specific purposes. Clearing funds represent reconciling differences with the 

Department’s 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, 2015 and 2014, the status of the fund balance consisted of the following (in millions): 

2015 2014

Unobligated Balance - Available $ 291,525 $ 290,299

Unobligated Balance - Not Available 40,467 59,843

Unpaid Obligations 227,339 225,592

Subtotal 559,331 575,734

Adjustment for Borrowing Authority (93,963) (99,248)

Adjustment for ESF (91,066) (98,071)

Adjustment for IMF (14,809) (22,931)

Adjustment for Intra-Treasury Investments (13,075) (8,086)

Adjustment for Authority Unavailable for Obligations 3,872 3,786

Other Adjustments 2,236 1,744

Total Status of Fund Balance $ 352,526 $ 352,928

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, such amounts may be used 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. 
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Since the following line items do not 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 Borrowing Authority – Borrowing authority is in budgetary status reported on the Combined Statements of 

Budgetary Resources but not in the Fund Balance because amounts have not been received

 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 IMF – The reserve position in the IMF, loans and interest receivable, 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 other monetary assets

 Adjustments for Intra-Treasury Investments – Budgetary resources include Treasury security investments; however, the 

money has been moved from the Fund Balance to Investments, which is eliminated on the Consolidated Balance Sheets

 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, 2015 and 2014, the Department had no budgetary authority in the Fund Balance that was specifically withheld 

from apportionment by the OMB. The balances in non-entity funds, such as certain deposit funds (e.g., seized cash), are being held 

by the Department 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. 
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3. LOANS AND INTEREST RECEIVABLE – INTRA-GOVERNMENTAL 

ENTITY INTRA-GOVERNMENTAL

The Department, through FFB, issues 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 the 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. The Department has not recognized any credit-related losses on its loans, nor has 

the Department recorded an allowance for uncollectible intra-governmental loans. 

As of September 30, 2015 and 2014, entity intra-governmental loans (issued by the FFB) and interest receivable consisted of the 

following (in millions): 

Loans Interest 2015 Loans Interest 2014

Receivable Receivable Total Receivable Receivable Total

Department of Agriculture $ 41,675 $ 26 $ 41,701 $ 42,725 $ 23 $ 42,748

Department of Energy 15,746 70 15,816 14,770 60 14,830

United States Postal Service(1) 15,000 52 15,052 15,000 47 15,047

Department of Education 1,393 11 1,404 1,267 10 1,277

Other Agencies 107 - 107 5 - 5

Total Entity Intra-governmental $ 73,921 $ 159 $ 74,080 $ 73,767 $ 140 $ 73,907

(1) The United States Postal Service (USPS) experienced an operating deficit in both fiscal years 2015 and 2014. The Department, 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. 
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NON-ENTITY INTRA-GOVERNMENTAL 

The Department, through the Fiscal Service, accounts for and reports 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, 2015 and 2014, non-entity intra-governmental loans (issued by the Fiscal Service) and interest receivable that 

were due to the General Fund consisted of the following (in millions):

Loans Interest 2015 Loans Interest 2014

Receivable Receivable Total Receivable Receivable Total

Department of Education $ 1,050,373 $ - $ 1,050,373 $ 965,394 $ - $ 965,394

Department of Agriculture 69,894 3 69,897 68,718 2 68,720

Department of Housing & Urban

 Development 27,048 - 27,048 27,661 - 27,661

Department of Homeland Security 23,020 - 23,020 24,081 - 24,081

Export Import Bank of the U.S. 22,725 - 22,725 21,634 - 21,634

Department of Transportation 8,972 - 8,972 8,185 - 8,185

Small Business Administration 7,175 - 7,175 7,756 - 7,756

Department of Labor 5,687 - 5,687 5,872 - 5,872

Department of Energy 4,961 26 4,987 4,452 25 4,477

Railroad Retirement Board 3,498 39 3,537 3,532 41 3,573

National Credit Union Administration 2,300 2 2,302 2,600 1 2,601

Overseas Private Investment

 Corporation 2,157 - 2,157 2,807 - 2,807

Department of Defense 1,509 - 1,509 1,392 - 1,392

Department of Health and Human 

 Services 1,305 - 1,305 894 - 894

Other Agencies 1,822 - 1,822 2,645 - 2,645

Total Non-Entity Intra-

 governmental $ 1,232,446 $ 70 $ 1,232,516 $ 1,147,623 $ 69 $ 1,147,692

Total Intra-governmental Loans

 and Interest Receivable (Entity 

 and Non-Entity) $ 1,306,367 $ 229 $ 1,306,596 $ 1,221,390 $ 209 $ 1,221,599
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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. 

General Fund assets, such as loans and interest receivable, cash, and investments in the GSEs, are held and managed by the 

Department on behalf of the U.S. government, and constitute resources available to meet the operating needs of the U.S. 

government. These Department-managed assets are separately reported on the Consolidated Balance Sheets, with a corresponding 

amount reported as Due To the General Fund that represents a liability to reflect assets owed by the Department 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. These Department-managed liabilities are separately reported 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, 2015 and 2014, the General Fund liabilities owed by the Department exceeded the assets held on behalf of the 

General Fund by $17.0 trillion and $16.4 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, 2015 and 2014, Due From the General Fund included the following non-entity liabilities (in millions):

Liabilities Requiring Funding from the General Fund 2015 2014

Federal Debt and Interest Payable - Held by the Public (Note 15) $ 13,148,200 $ 12,809,423

Federal Debt and Interest Payable - Intra-governmental (Note 15) 5,096,265 5,104,620

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) 3,039 4,723

Adjustment for Eliminated Liabilities 34,092 31,083

Total Due From the General Fund $ 18,632,253 $ 17,949,849

The Adjustment for Eliminated Liabilities principally represents investments in U.S. government securities held by the 

Department’s reporting entities that were eliminated against Federal Debt and Interest Payable Intra-governmental.
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As of September 30, 2015 and 2014, Due To the General Fund included the following non-entity assets (in millions):

Assets to be Distributed to the General Fund 2015 2014

Fund Balance $ 589 $ 540

Loans and Interest Receivable - Intra-governmental (Note 3) 1,232,516 1,147,692

Advances to the Unemployment Trust Fund 12,840 20,824

Cash Due to the General Fund (Held by the Department) (Note 5) 193,449 153,532

Accounts Receivable - Intra-governmental 390 500

Foreign Currency 85 49

Custodial Gold without certificates and Silver held by the U.S. Mint 25 25

Taxes and Other Non-Entity Receivables Due to General Fund 41,992 42,295

Credit Reform Downward Subsidy Re-estimates 288 1,490

Loans and Interest Receivable 21 71

Investments in Government Sponsored Enterprises (Note 10) 106,270 95,810

Adjustment for Eliminated Assets 75,490 77,123

Total Due To the General Fund $ 1,663,955 $ 1,539,951

The assets to be distributed to the General Fund do not represent all of the non-entity assets managed by the Department. Refer to

Note 14 for all non-entity assets held by the Department. 

The Fund Balance reported above represents the non-entity funds held by the Department 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 general use by the Department. 

Advances have been issued from the General Fund to the DOL’s Unemployment Trust Fund to disburse to states for unemployment 

benefits. The Department transfers 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 the Treasury reporting entities, 

which were eliminated against Loans and Interest Receivable Intra-governmental held by the Fiscal Service.
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5. CASH, FOREIGN CURRENCY, AND OTHER MONETARY ASSETS

Cash, Foreign Currency, and Other Monetary Assets held as of September 30, 2015 and 2014 were as follows (in millions): 

2015 2014

Entity:

Cash $ 40 $ 84

Foreign Currency and Foreign Currency Denominated Assets 8,310 4,438

Other Monetary Assets:

 Special Drawing Right Holdings 50,336 53,154

 U.S. Dollars Held in Cash by the IMF 149 140

Total Entity 58,835 57,816

Non-Entity:

Operating Cash of the U.S. government 193,325 153,202

Foreign Currency 85 49

Miscellaneous Cash Held by All Treasury Reporting Entities 891 801

Total Non-Entity 194,301 154,052

Total Cash, Foreign Currency, and Other Monetary Assets $ 253,136 $ 211,868

Non-entity operating and other miscellaneous cash due to the General Fund which was held by the Department consisted of the 

following as of September 30, 2015 and 2014(in millions): 

 2015 2014

Operating Cash - FRB Account $ 198,716 $ 158,302

Outstanding Checks (5,391) (5,100)

Total Operating Cash of the U.S. government 193,325 153,202

Miscellaneous Cash 133 413

Subtotal 193,458 153,615

Amounts Due to the Public (9) (83)

Total Cash Due to the General Fund (Note 4) $ 193,449 $ 153,532

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, 2015 and 2014 using current exchange rates plus accrued 

interest. 

Foreign Currency Denominated Assets 

FCDA holdings are normally invested 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 $8.3 billion and $4.4 billion as of September 30, 

2015 and 2014, 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 amended, the Department issued 

certificates to the Federal Reserve, valued at $5.2 billion which were reported as a liability on the Consolidated Balance Sheets as of 
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September 30, 2015 and 2014. 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 market value 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, and the British pound sterling. The U.S. SDR holdings (assets resulting from various SDR-related activities 

including remuneration on the U.S. reserve position) and allocations from the IMF (liabilities of the United States coming due only 

in the event of a liquidation of, or the United States’ withdrawal from, the SDR department of the IMF, or cancellation of SDRs) are 

revalued 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, 2015 and 2014, the total amount of SDR holdings of the United States was the equivalent of $50.3 billion and 

$53.2 billion, respectively. As of September 30, 2015 and 2014, the total value of SDR allocations to the United States was the 

equivalent of $49.6 billion and $52.4 billion, respectively.

NON-ENTITY

Non-entity cash, foreign currency, and other monetary assets principally include the Operating Cash of the U.S. government which 

is managed by the Department. 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 the 

Department’s 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. 
U.S. Department of the Treasury | Fiscal Year 2015

79

6. GOLD AND SILVER RESERVES, AND GOLD CERTIFICATES ISSUED TO 

THE FEDERAL RESERVE BANKS

The Department, through the Mint, is 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 being held by the Department 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 bookentry form to the FRBs. The Department’s liability incurred by issuing the Gold Certificates, as reported on the Consolidated 

Balance Sheets, is limited to the gold being held by the Department at the statutory value. Upon issuance of Gold Certificates to the 

FRBs, the proceeds from the certificates are deposited into the operating cash of the U.S. government. All of the Department’s 

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, 2015 and 2014, the values of gold and silver reserves 

consisted of the following:

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

2014

Statutory 2014

Carrying Market Market

Statutory Value Rate Per Value

 FTOs Rate (in millions) FTO (in millions)

Gold 248,046,116 $ 42.2222 $ 10,473 $ 1,216.50 $ 301,748

Gold Held by Federal Reserve Banks 13,452,811 $ 42.2222 568 $ 1,216.50 16,365

Total Gold 261,498,927 11,041 318,113

Silver 16,000,000 $ 1.2929 21 $ 17.11 274

Total Gold and Silver Reserves $ 11,062 $ 318,387
U.S. Department of the Treasury | Fiscal Year 2015

80

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. The Supplemental Appropriations Act of 2009 (P.L. 111-32) provided for 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. The increases in the U.S. quota and NAB 

arrangement became effective in fiscal year 2011. Unlike all prior U.S. funding for the IMF, P.L. 111-32 subjects the increases in 

both the U.S. quota and the NAB to the requirements of FCRA. All U.S. quota and NAB funding prior to P.L. 111-32, referred to as 

“non-FCRA funds,” do not result in net budgetary outlays. All such funding provided pursuant to P.L. 111-32, referred to as “FCRA 

funds,” is accounted for in accordance with credit reform accounting guidelines (refer to Note 9). A credit program receivable is 

established for FCRA fund amounts disbursed. Additionally, FCRA fund amounts disbursed do not result in net budgetary outlays, 

except for subsidy costs of the programs which constitute the excess of program disbursements over the net present value of 

expected future repayments.

RESERVE POSITION IN THE INTERNATIONAL MONETARY FUND

Quota subscriptions are paid 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 the Department and maintained by the FRBNY, represents the 

Department’s 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, 2015 and 2014, the U.S. quota in the IMF was SDR 42.1 billion. The 

equivalent U.S. dollar value of the U.S. quota consisted of the following (in millions):

 Non- Total Non- Total 

 FCRA FCRA 2015 FCRA FCRA 2014

Letter of Credit (1) $ 43,980 $ 5,786 $ 49,766 $ 42,243 $ 5,514 $ 47,757

Reserve Position (2) 8,168 1,195 9,363 12,834 1,859 14,693

Total U.S. Quota in the IMF $ 52,148 $ 6,981 $ 59,129 $ 55,077 $ 7,373 $ 62,450

(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 that is held in cash in an IMF account 

at the FRBNY. 

(2) The Reserve Position amounts shown in the non-FCRA columns are included in “Reserve Position in the IMF” as reported on the

Consolidated Balance Sheets, while amounts shown in the FCRA columns are included in “Credit Program Receivables, Net” as reported

on the Consolidated Balance Sheets. The FCRA amount shown represents the outstanding disbursement under P.L. 111-32 at the 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. 

The Department periodically adjusts this balance to maintain the SDR value of the U.S. quota. As of September 30, 2015 and 2014, 

the U.S. quota reflects a net downward adjustment in value of $3.3 billion and $2.2 billion, respectively, due to the appreciation of 

the U.S. dollar against the SDR. 
U.S. Department of the Treasury | Fiscal Year 2015

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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 currently participates 

in two such arrangements – the NAB and the General Arrangements to Borrow (GAB). In accordance with P.L. 111-32 which 

provided for an increase in the United States’ participation in the NAB of up to the dollar equivalent of SDR 75 billion, the United 

States increased its NAB participation from SDR 6.6 billion to SDR 69.1 billion, which was equivalent to $97.0 billion and $102.4 

billion as of September 30, 2015 and 2014, respectively. As of September 30, 2015 and 2014, under the U.S. NAB arrangement 

with the IMF, there was $5.5 billion and $9.4 billion of U.S. non-FCRA loans outstanding, net of $439 million and $413 million of 

allowance for loan loss, respectively, and $4.0 billion and $4.2 billion of U.S. FCRA loans (refer to Note 9) outstanding under the 

NAB arrangement, respectively. These amounts are liquid and interest-bearing claims on the IMF, and the non-FCRA portions are 

reported as Loans and Interest Receivable, Net on the Consolidated Balance Sheets, while the FCRA portions are reported as Credit 

Program Receivables, Net on the Consolidated Balance Sheets. As of September 30, 2015 and 2014, the IMF had not utilized the 

GAB.

8. TAXES, INTEREST, AND OTHER RECEIVABLES, NET

As of September 30, 2015 and 2014, Taxes, Interest, and Other Receivables, Net consisted of the following (in millions):

 2015 2014

Non-Entity 

Federal Taxes Receivable, Gross $ 171,159 $ 156,158

Less: Allowance on Taxes Receivable (130,141) (116,143)

Interest Receivable on FRB Deposits of Earnings 264 1,681

Other Receivables 821 687

Less: Allowance on Other Receivables (103) (78)

Total Non-Entity (Note 14) 42,000 42,305

 

Entity 

Miscellaneous Entity Receivables and Related Interest 34 204

Total Taxes, Interest, and Other Receivables, Net $ 42,034 $ 42,509

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 is established to represent an estimate for uncollectible amounts. The portion of taxes receivable 

estimated to be collectible and the allowance for doubtful accounts is 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. 

The Department does not establish an allowance for the receivable on deposits of FRB earnings.
U.S. Department of the Treasury | Fiscal Year 2015

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9. CREDIT PROGRAM RECEIVABLES, NET

The Department administers 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, 2015 and 2014, Credit Program Receivables, Net consisted of the 

following (in millions):

2015 2014

State and Local Housing Finance Agency Program (GSE sponsored) $ 6,919 $ 7,617

Small Business Lending Fund Program 2,395 3,150

International Monetary Fund Programs:

 U.S. Quota in the IMF Program (FCRA portion) 1,163 1,836

 New Arrangements to Borrow Program (FCRA portion) 4,005 4,237

Troubled Asset Relief Program 482 2,174

Other 181 88

Total $ 15,145 $ 19,102

STATE AND LOCAL HOUSING FINANCE AGENCY (HFA) PROGRAM (GSE SPONSORED)

Under the Housing and Economic Recovery Act (HERA), the Department, together with the FHFA, Fannie Mae, and Freddie Mac, 

created a program in October 2009 to provide support to HFAs. This program was 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. The HFA Program is comprised of: (i) the New Issue Bond Program (NIBP) and (ii) the Temporary Credit and Liquidity 

Program (TCLP) which ended in fiscal year 2015. As of September 30, 2015 and 2014, the HFA net credit program receivable of 

$6.9 billion and $7.6 billion, respectively, included a positive subsidy allowance of $865 million and $1.1 billion, respectively, 

which reflects the Department’s projection that the HFA program will result in a net cost to the Department after accounting for 

repayments, interest, and fees. 

Under the terms of the NIBP, the Department purchased securities of Fannie Mae and Freddie Mac backed by new mortgage 

revenue bonds issued by HFAs. As of September 30, 2015 and 2014, the NIBP gross credit program receivable was $7.8 billion and

$8.7 billion, respectively. The Department performed a financial statement re-estimate of the NIBP program’s cost as of 

September 30, 2015 and 2014. These re-estimates resulted in a downward re-estimate, or a decrease in the cost of the program, of 

$17 million as of September 30, 2015, and an upward re-estimate, or an increase in the cost of the program, of $175 million as of 

September 30, 2014. The downward re-estimate in fiscal year 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. The upward re-estimate in fiscal year 2014 was primarily driven by lower forecasted prepayment rates that 

increased the cost of the program since HFA bonds carry a lower weighted average coupon than the funding cost of the program. 

Under the terms of the TCLP, the Department purchased participation certificates issued by Fannie Mae and Freddie Mac, 

representing participating interests in credit and liquidity facilities that the GSEs provided to certain HFAs as part of the program. 

Fannie Mae and Freddie Mac provided replacement credit and liquidity facilities to HFAs to help reduce the costs of maintaining 

existing financing and relieve financial strains on the HFAs. As of September 30, 2014, the credit and liquidity facilities covered 

$851 million of single-family and multi-family variable-rate demand obligations. The Department agreed to support the GSE 

replacement credit and liquidity facilities by purchasing from the GSEs interests in certain HFA bonds in the event such bonds 

were tendered to the GSEs. During the course of the program, the participating HFAs replaced the credit and liquidity facilities 

provided by the GSEs with alternate facilities provided by private sector banks. In July 2015, the last participating HFA received 

alternative liquidity facilities from private sector banks, resulting in the closure of the TCLP. From inception through the closure of 
U.S. Department of the Treasury | Fiscal Year 2015

83

the program, none of the HFA bonds had been tendered to the GSEs and, accordingly, the Department had not disbursed any 

funds. As such, the Department did not perform September 30, 2015 or 2014 subsidy re-estimates for TCLP. 

SMALL BUSINESS LENDING FUND PROGRAM 

The Small Business Jobs Act of 2010 (P.L. 111-240) created the SBLF program. Pursuant to the Act, the Department 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 the Department 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 were then 

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. For those institutions that did increase lending, the rate will increase to 9.0 percent and 13.8 percent 

for C Corporation and S Corporation banks, respectively, remaining in the program, effective March 2016. The Department treats 

these purchases of capital as direct loans in accordance with the requirements of FCRA. The Department’s authority to provide 

new capital to SBLF participants expired in September 2011 and, accordingly, there were no new capital disbursements since that 

date. As of September 30, 2015 and 2014, SBLF’s net credit program receivable was $2.4 billion and $3.2 billion, respectively. 

These amounts include a negative subsidy allowance of $32 million, and a positive subsidy allowance of $36 million at September 

30, 2015 and 2014, respectively, which reflects the Department’s projection that the SBLF program will result in net income to the 

Department in fiscal year 2015, and a net cost to the Department in fiscal year 2014. 

The Department performed financial statement re-estimates of the program’s cost as of September 30, 2015 and 2014 which 

resulted in a downward re-estimate, or a decrease in the cost of the program of $42 million, and an upward re-estimate, or an 

increase in the cost of the program, of $24 million, respectively. Both the 2015 and 2014 downward and upward re-estimates were 

driven by changes in performance assumptions, actual performance to-date, and actual program funding costs. The 2015 

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. The 2014 performance 

assumptions anticipated an overall cost to the program due to lower dividend rates, both actual and projected, paid by participating 

institutions relative to previously projected dividend rates. 

INTERNATIONAL MONETARY FUND PROGRAMS 

The Supplemental Appropriations Act of 2009 authorized an increase in the U.S. quota in the IMF, as well as an increase in U.S. 

participation in the NAB, one of the IMF’s supplemental borrowing arrangements (refer to Note 7). The legislation applied FCRA 

to both program increases and, thus, the program increases are treated as direct loans to the IMF. For U.S. budget and accounting 

purposes, there are effectively two portions of the IMF quota and NAB programs. As of September 30, 2015 and 2014, the U.S. 

quota in the IMF totaled $59.1 billion and $62.5 billion, respectively, and comprised a FCRA and non-FCRA portion of $7.0 billion 

and $52.1 billion, respectively, at September 30, 2015, and $7.4 billion and $55.1 billion, respectively, at September 30, 2014. As of 

September 30, 2015 and 2014, the U.S. NAB arrangement with the IMF totaled $97.0 billion and $102.4 billion, respectively, and 

comprised a FCRA and non-FCRA portion of $87.6 billion and $9.4 billion, respectively, at September 30, 2015, and $92.6 billion 

and $9.8 billion, respectively, at September 30, 2014. These designations only affect the manner in which the Department 

accounts for the use and repayment of these funds. The U.S. commitments to the IMF are denominated in SDRs and, thus, the 

dollar amounts of these commitments fluctuate with the SDR valuation rate. The following is a discussion of the FCRA portions of 

both the U.S. quota and NAB programs. 
U.S. Department of the Treasury | Fiscal Year 2015

84

United States Quota in the IMF Program

At September 30, 2015 and 2014, the Department reported a net credit program receivable of $1.2 billion and $1.8 billion, 

respectively, representing amounts disbursed under the FCRA portion of the U.S. quota’s reserve position, net of a positive subsidy 

allowance of $181 million and $159 million, respectively. This positive subsidy reflects the Department’s projection that the 

program will result in a net cost to the Department after accounting for repayments and net interest. During fiscal year 2015, the 

Department had repayments of $651 million, resulting in net proceeds less than cost of $74 million. The Department reported the 

remaining undisbursed FCRA portion of the U.S. quota totaling $5.8 billion and $5.5 billion at September 30, 2015 and 2014, 

respectively, as a letter of credit (refer to Note 7). The Department performed financial statement re-estimates of the program’s 

cost as of September 30, 2015 and 2014. The re-estimates resulted in an increase in program costs (or an upward re-estimate) of 

$92 million and $59 million for fiscal years 2015 and 2014, respectively, primarily due to a fluctuation in the valuation of the SDR 

rate since the calculation of the prior fiscal year’s re-estimate. 

New Arrangements To Borrow Program

FCRA disbursements outstanding under the NAB for fiscal years ended 2015 and 2014 totaled a net credit program receivable of 

$4.0 billion and $4.2 billion, respectively. The program had a positive subsidy allowance of $366 million and $134 million as of 

September 30, 2015 and 2014, respectively.

The Department performed a financial statement re-estimate of the program’s cost as of September 30, 2015 and 2014. These reestimates resulted in an increase in the projected cost of the program (or an upward re-estimate) of $232 million and $145 million 

as of September 30, 2015 and 2014, respectively. The re-estimates are primarily driven by the fluctuation in the valuation of the 

SDR rate since the prior year’s re-estimate.

TROUBLED ASSET RELIEF PROGRAM

Through TARP, the Department made direct loans and equity investments, and entered into other credit programs. TARP’s 

authority to make new commitments to purchase or guarantee troubled assets expired in October 2010. Since then, the 

Department has wound down substantially all of the various programs under TARP through recoveries of investments in the form 

of repayments, sales, dividends, interest, and other income. During 2015 and 2014, the Department sold its remaining equity 

investments held in support of the Automotive Industry Financing Program. As of September 30, 2015, TARP held investments in 

support of two remaining programs: the Capital Purchase Program (CPP) and the Community Development Capital Initiative 

(CDCI) program. The following discussion focuses on significant transactions that occurred for the programs administered by 

TARP during fiscal years 2015 and 2014.

The Department invested a total of $16.3 billion in Ally Financial, Inc. (Ally) (formerly known as GMAC Inc.) between December

2008 and December 2009 to help support Ally’s ability to originate new loans to automotive dealers and consumers, and to help 

address GMAC’s capital needs. As a result of exchanges, conversions, warrant exercises, and sales since the Department’s initial

investment, the Department’s remaining investment held in Ally as of September 30, 2013 consisted of 981,971 (pre-split) shares of 

Ally common stock (or 304.4 million common shares after considering a 310-for-1 Ally common stock split in April 2014), along 

with 119 million shares of Ally Series F-2 Mandatorily Convertible Preferred Securities. Between fiscal years 2015 and 2014, the 

Department sold all of the Ally common stock and Series F-2 preferred stock held. During fiscal year 2014, the Department sold 

410,000 (pre-split) shares and 113 million (post-split) shares (or an aggregate equivalent of 240.1 million post-split shares) of Ally 

common stock for a total of $5.8 billion in cash proceeds, resulting in net proceeds less than cost of $1.4 billion. In fiscal year 2014, 

Ally also repurchased all of the Series F-2 preferred stock from the Department for $5.2 billion, and the Department received an 

additional $725 million for the elimination of certain rights under an original agreement, resulting in net proceeds in excess of cost 

of $300 million. During fiscal year 2015, the Department sold the remaining 64.1 million (post-split) shares of Ally common stock 
U.S. Department of the Treasury | Fiscal Year 2015

85

held for $1.5 billion, resulting in net proceeds less than cost of $290 million. The fair value of the remaining 64.1 million (postsplit) shares of Ally common stock held by the Department at September 30, 2014 was $1.5 billion, based on the New York Stock 

Exchange quoted market price. 

In fiscal year 2009, the Department invested a total of $51.0 billion in General Motors Company (GM) (formerly known as General 

Motors Corporation). Through various sales and restructurings of its investment, the Department’s remaining investment held in 

GM as of September 30, 2013 consisted of 101 million shares of GM common stock which were sold in fiscal year 2014 for $3.8 

billion, resulting in net proceeds less than cost of $639 million. 

TARP implemented the CPP in fiscal year 2009 to help stabilize the financial system by providing capital to certain viable U.S. 

financial institutions. The CPP was designed to increase the capacity of those institutions to lend to businesses and consumers and 

support the economy. Under this program, the Department invested a total of $204.9 billion in senior perpetual preferred stock, 

subordinated debentures, and common stock warrants, with a ten-year term, from qualifying U.S. controlled banks, savings 

associations, and certain bank and savings and loan holding companies. As a result of repayments and sales since this program’s 

implementation, the Department had remaining CPP investments valued at $99 million and $281 million as of September 30, 2015 

and 2014, respectively. In fiscal years 2015 and 2014, repayments and sales of CPP investments totaled $197 million and $1.5

billion, resulting in net proceeds less than cost of $52 million and $169 million in fiscal years 2015 and 2014, respectively. 

To help unlock the flow of credit to consumers and small businesses in underserved communities, the Department created the 

CDCI program in fiscal year 2010 to provide additional low-cost capital in Community Development Financial Institutions 

(CDFIs). Under the terms of the program, the Department purchased senior preferred stock (or subordinated debt) from eligible 

CDFIs with an initial dividend rate of 2.0 percent that will increase to 9.0 percent after eight years. The Department invested a 

total of $570 million in various institutions under the CDCI. As a result of repayments since this program’s implementation, the 

Department had remaining CDCI investments valued at $383 million and $372 million as of September 30, 2015 and 2014, 

respectively. In fiscal years 2015 and 2014, the Department received $19 million and $10 million in repayments, respectively. 

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 the Department’s credit programs for the fiscal years ended September 30, 2015 and 2014. 

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 2015 and 2014 could result from disbursements of loans from both current year cohorts and prior year(s) cohorts, 

and also includes re-estimates. Amounts reported in the line item “Net Credit Program Receivables” are not necessarily the same 

as the proceeds that the Department would expect to receive from selling these assets.
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IMF- IMF- 2015

(in millions) HFA SBLF Quota NAB TARP Other (2) TOTAL

Credit Program Receivables, Net: 

 Credit Program Receivables, Gross $ 7,784 $ 2,363 $ 1,344 $ 4,371 $ 714 $ 201 $ 16,777

 Subsidy Cost Allowance (865) 32 (181) (366) (232) (20) (1,632)

Net Credit Program Receivables $ 6,919 $ 2,395 $ 1,163 $ 4,005 $ 482 $ 181 $ 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 $ 679 $ 16 $ 2,074

 Subsidy Cost for Disbursements - - - - - (1) (1)

 Fees, Interest and Dividend Revenue Received 241 38 1 2 28 3 313

 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) (25) (8) (505)

Balance, Ending, Before Re-estimates 882 10 89 134 474 10 1,599

 Subsidy Re-estimates (17) (42) 92 232 (242) 10 33

Balance, Ending $ 865 $ (32) $ 181 $ 366 $ 232 $ 20 $ 1,632

 

Re-estimates 

 Interest on Re-estimate $ (3) $ (4) $ - $ - $ - $ 1 $ (6)

 Technical/Default Re-estimate (14) (38) 92 232 (242) 9 39

Total Re-estimates – Increase (Decrease) in 

 Subsidy Cost $ (17) $ (42) $ 92 $ 232 $ (242) $ 10 $ 33

 

Reconciliation of Subsidy Costs: 

 Subsidy Cost for Disbursements $ - $ - $ - $ - $ - $ (1) $ (1)

 Subsidy Re-estimates (17) (42) 92 232 (242) 10 33

Total Credit Program Receivables Subsidy Costs $ (17) $ (42) $ 92 $ 232 $ (242) $ 9 $ 32

Administrative Expense $ 2 $ 11 $ - $ - $ - $ 2 $ 15

 

 IMF- IMF- 2014

(in millions) HFA SBLF Quota NAB TARP Other (3) TOTAL

Credit Program Receivables, Net: 

 Credit Program Receivables, Gross $ 8,667 $ 3,186 $ 1,995 $ 4,371 $ 2,853 $ 104 $ 21,176

 Subsidy Cost Allowance (1,050) (36) (159) (134) (679) (16) (2,074)

Net Credit Program Receivables $ 7,617 $ 3,150 $ 1,836 $ 4,237 $ 2,174 $ 88 $ 19,102

New Credit Program Loans Disbursed $ - $ - $ - $ 718 $ - $ 52 $ 770

Obligations for Loans Not Yet Disbursed $ - $ - $ - $ - $ 126 $ 502 $ 628

 

Reconciliation of Subsidy Cost Allowance: 

 Balance, Beginning $ 915 $ 28 $ 99 $ (15) $ 5,627 $ 17 $ 6,671

 Subsidy Cost for Disbursements - - - 2 - 3 5

 Fees, Interest, and Dividend Revenue Received 266 60 2 4 245 1 578

 Net Proceeds from Sales and Repurchases of Assets 

 Less than Cost - - - - (1,889) - (1,889)

 Loans Written Off - - - - (1,623) - (1,623)

 Subsidy Allowance Amortized (1) (306) (76) (1) (2) (189) (2) (576)

Balance, Ending, Before Re-estimates 875 12 100 (11) 2,171 19 3,166

 Subsidy Re-estimates 175 24 59 145 (1,492) (3) (1,092)

Balance, Ending $ 1,050 $ 36 $ 159 $ 134 $ 679 $ 16 $ 2,074

 

Re-estimates 

 Interest Rate Re-estimate $ - $ - $ - $ - $ - $ (6) $ (6)

 Interest on Re-estimate 29 2 - 1 - - 32

 Technical/Default Re-estimate 146 22 59 144 (1,492) 3 (1,118)

Total Re-estimates – Increase (Decrease) in 

 Subsidy Cost $ 175 $ 24 $ 59 $ 145 $ (1,492) $ (3) $ (1,092)

 

Reconciliation of Subsidy Costs: 

 Subsidy Cost for Disbursements $ - $ - $ - $ 2 $ - $ 3 $ 5

 Subsidy Re-estimates 175 24 59 145 (1,492) (3) (1,092)

Total Credit Program Receivables Subsidy Costs $ 175 $ 24 $ 59 $ 147 $ (1,492) $ - $ (1,087)

Administrative Expense $ 5 $ 14 $ - $ - $ - $ 1 $ 20

(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 3.00% and 9.41%, respectively.

(3) CDFI Financial Assistance Direct Loan Program budget subsidy rates for Interest Differential and for Defaults were 1.41%, and 7.48%, respectively. 
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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 the Department invested in the GSEs by entering into a Senior Preferred Stock Purchase Agreement (SPSPA) 

with each GSE. These actions were taken to preserve the GSEs’ assets, ensure a sound and solvent financial condition, and mitigate 

systemic risks that contributed to market instability. The purpose of such actions is to maintain the solvency of the GSEs so they 

can continue to fulfill their vital roles in the 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, the Department 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-transferrable 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, declined to $2.4 billion 

on January 1, 2014, and $1.8 billion on January 1, 2015, and will continue to decline by $600 million at the beginning of each 

calendar year thereafter until it reaches zero by calendar year 2018. The GSEs will not pay a quarterly dividend if their positive net 

worth is below the required capital reserve threshold. Cash dividends of $20.4 billion and $72.5 billion were received during fiscal 

years ended September 30, 2015 and 2014, respectively. Dividends received in fiscal year 2014 were attributable, in part, to a 

federal income tax benefit that was recognized in the earnings of one GSE in fiscal year 2014.

The SPSPAs, which have no expiration date, provide for the Department 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, the 

liquidation preference of the initial 1,000,000 shares is increased by the amount of the draw. There were no payments to the GSEs 

for the fiscal years ended September 30, 2015 and 2014. 

ACCOUNTING TREATMENT

Entity Transactions― If the Department estimates a contingent liability to the GSEs, this liability will be accrued and reported 

on the Department’s Consolidated Balance Sheets and funded through the Department’s direct appropriations. The liability 

accrual, if any, will be reflected at its gross amount as an “entity” cost on the Department’s Consolidated Statements of Net Cost, 

and within the line item, “Cumulative Results of Operations” on the Department’s Consolidated Balance Sheets, without 

considering the increase in senior preferred stock liquidation preference/fair value adjustments, and future dividend receipts from 

the GSEs.
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Non-Entity Transactions― If actual payments are made 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 the 

Department’s 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 that are 

likewise reported as “GSEs Non-Entity Cost (Revenue).”

INVESTMENTS IN GSES 

As of September 30, 2015 and 2014, the Department’s investments in the GSEs consisted of the following (in millions): 

Gross Cumulative

Investments Valuation 9/30/2015

GSEs Investments 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

Gross Cumulative

Investments Valuation 9/30/2014

GSEs Investments As of 9/30/14 Gain/(Loss) Fair Value

Fannie Mae Senior Preferred Stock $ 116,989 $ (64,289)$ 52,700

Freddie Mac Senior Preferred Stock 72,160 (40,760) 31,400

Fannie Mae Warrants Common Stock 3,104 4,606 7,710

Freddie Mac Warrants Common Stock 2,264 1,736 4,000

Total GSEs Investments $ 194,517 $ (98,707)$ 95,810

SENIOR PREFERRED STOCK AND WARRANTS FOR COMMON STOCK

In determining the fair value of the senior preferred stock and warrants for common stock, the Department 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 of the nature of the instruments, which are not publicly traded and for which 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, 2015 when compared to September 30, 2014, primarily reflecting higher forecasted GSE 

earnings derived from guarantee fees, lower volatility and risk in the mortgage lending industry, and lower forecasted mortgage 

loan losses due to reduced credit risk assumed by the GSEs. 

The fair value of the warrants is impacted by 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 
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warrants increased at the end of fiscal year 2015, when compared to 2014, primarily due to increases 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, a series of long-term financial forecasts are prepared to assess, as of 

September 30, the likelihood and magnitude of future draws to be required by the GSEs under the SPSPAs within the forecast time 

horizon. The Department used 25-year financial forecasts prepared through year 2040 and 2039 in assessing if a contingent 

liability was required as of September 30, 2015 and 2014, respectively. If future payments under the SPSPAs are deemed to be

probable within the forecast horizon, the Department will estimate and accrue a contingent liability to the GSEs to reflect the 

forecasted equity deficits of the GSEs. This accrued contingent liability will be undiscounted and will not take into account any of 

the offsetting dividends that could be received, as the dividends, if any, would be owed directly to the General Fund. Such recorded 

accruals will be adjusted in subsequent years as new information develops or circumstances change. 

Based on its annual assessment, the Department estimated no probable future funding draws as of September 30, 2015 and 2014, 

and thereby accrued no contingent liability. At September 30, 2015 and 2014, 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, the Department relies 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, 2015 

include three potential wind-down scenarios, with varying assumptions regarding the timing as to when new guaranteed mortgagebacked securities would cease being issued by the GSEs. 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 is required under the 

amended SPSPAs to be reduced to $250 billion by December 31, 2018.

ESTIMATION FACTORS

The Department’s forecasts concerning the GSEs may differ from actual experience. Estimated senior preferred values and future 

draw amounts will depend on numerous factors that are difficult to predict including, but not limited to, changes in government 

policy with respect to the GSEs, the business cycle, inflation, home prices, unemployment rates, interest rates, changes in housing 

preferences, home financing alternatives, availability of debt financing, market rates of guarantee fees, outcomes of loan 

refinancings and modifications, new housing programs, and other applicable factors. 

FINANCIAL PERFORMANCE OF THE GSES

The summarized unaudited aggregated financial condition of the GSEs as of September 30, 2015 and 2014, along with their 

summarized unaudited aggregated financial operating results for the nine months ended of September 30, 2015 and 2014 were as 

follows (in millions): 
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2015 2014

Combined Assets

 Investment Securities $ 177,395$ 206,154

 Mortgage Loans 4,770,323 4,701,174

 Other 245,211 245,772

Total Combined Assets 5,192,929 5,153,100

Combined Liabilities

 Long-Term Debt 4,944,536 4,894,011

 Other 243,091 247,504

Total Combined Liabilities 5,187,627 5,141,515

Combined Net Equity $ 5,302$ 11,585

For the Nine Months Ended September 30 

Combined Net Interest Income $ 27,691$ 25,502

Combined Benefit for Loan Losses 2,934 3,457

Combined Net Interest Income After Benefit for Loan Losses $ 30,625$ 28,959

Combined Net Income $ 12,706$ 20,360

Combined Regulatory Capital - Minimum Capital Deficit as of September 30 $ (232,671)$ (228,267)

The financial information above excludes financial guarantees not consolidated on the GSEs’ balance sheets.

The above information was taken directly from the quarterly reports filed with the SEC, which are publicly available on the SEC’s 

website (www.SEC.gov) and also the GSE investor relations websites.

GSES NON-ENTITY REVENUE

For the fiscal years ended September 30, 2015 and 2014, GSEs Non-Entity Revenue consisted of the following (in millions): 

Summary of GSEs Non-Entity Revenue 2015 2014

Fair Value (Gain)/Loss on GSEs Warrants/Preferred Stock $ (10,460)$ 44,411

GSEs Preferred Stock Dividends (20,370) (72,472)

Total GSEs Non-Entity Revenue, Net $ (30,830)$ (28,061)

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 increased fees”) which began in April 2012, and is effective through October 1, 2021. The increased fees are 

remitted to the Department and not retained by the GSEs. Accordingly, the increased fees do not affect the profitability of the 

GSEs. For fiscal years 2015 and 2014, the GSEs remitted to the Department the increased fees totaling $2.4 billion and $1.9 billion, 

respectively, which are reported within the line item entitled “Fines, Penalties, Interest and Other Revenue” on the Department’s 

Statements of Custodial Activity. 
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11. INVESTMENTS IN INTERNATIONAL FINANCIAL INSTITUTIONS 

As of September 30, 2015 and 2014, Investments in International Financial Institutions (or Multilateral Development Banks) 

consisted of the following (in millions):

2015 2014

International Bank for Reconstruction and Development $ 2,658 $ 2,471

Inter-American Development Bank (1) 1,898 1,796

Asian Development Bank 986 879

European Bank for Reconstruction and Development 636 636

International Finance Corporation 569 569

African Development Bank 302 270

North American Development Bank 225 225

Multilateral Investment Guarantee Agency 45 45

Total $ 7,319 $ 6,891

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 are typically invested in interest-bearing securities 

issued or held through foreign governments or monetary authorities (refer to Note 5). ESF holds most of the Department’s foreign 

currency investments. Of the total $11.6 billion fair value of foreign investments (excluding interest receivable) held at September 

30, 2015, $4.2 billion will mature within one year, $7.1 billion will mature after one year but before five years, and $0.3 billion will 

mature after five years but before ten years. 

As of September 30, 2015 and 2014, Other Investments and Related Interest consisted of the following (in millions):

Cost/ Unamortized 9/30/15

Acquisition (Premium)/ Interest Net Unrealized 9/30/15

Type of Investment 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

Cost/ Unamortized 9/30/14

Acquisition (Premium)/ Interest Net Unrealized 9/30/14

Type of Investment Value Discount Receivable Investment Gain/(Loss) Fair Value

Foreign Investments:

 Euro Bonds & Notes $ 5,286 $ 135 $ 65 $ 5,486 $ 91$ 5,577

 Japanese Government Bonds 5,678 13 3 5,694 7 5,701

 Other FCDAs 6,623 - - 6,623 3 6,626

Other Investments 28 (2) - 26 (9) 17

Total Non-Federal $ 17,615 $ 146 $ 68 $ 17,829 $ 92$ 17,921
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13. PROPERTY, PLANT, AND EQUIPMENT, NET

As of September 30, 2015 and 2014, Property, Plant, and Equipment, Net consisted of the following (in millions):

2015

Net

Depreciation Service Accumulated Book

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

2014

Net

Depreciation Service Accumulated Book

Method Life Cost Depreciation Value

Buildings, structures and facilities S/L 3 - 50 years $ 740 $ (396)$ 344

Furniture, fixtures and equipment S/L 2 - 20 years 2,861 (1,983) 878

Construction in progress N/A N/A 68 - 68

Land and land improvements N/A N/A 18 (1) 17

Internal-use software in use S/L 2 - 15 years 2,270 (1,302) 968

Internal-use software in development N/A N/A 289 - 289

Assets under capital lease S/L 2 - 25 years 18 (6) 12

Leasehold improvements S/L 2 - 25 years 413 (189) 224

Total $ 6,677 $ (3,877)$ 2,800

The service life ranges vary significantly due to the diverse nature of PP&E held by the Department.

HERITAGE ASSETS

The Department has a total of fifteen heritage assets, of which five are considered multi-use, for fiscal years 2015 and 2014. 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 considered 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. 
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14. NON-ENTITY VS. ENTITY ASSETS 

Non-entity assets are those that are held and managed by the Department on behalf of the U.S. government (General Fund) but are 

not available for use by the Department. As of September 30, 2015 and 2014, the Department’s total assets, segregated between 

non-entity and entity, are shown below (in millions): 

 2015

 Non-Entity Entity Total

Intra-governmental Assets: 

Fund Balance (a) $ 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) (b) 194,301 58,835 253,136

Gold and Silver Reserves (Note 6) (c) 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 (d) 21 51,544 51,565

Total Assets $ 20,233,163 $ 535,572 $ 20,768,735

(a) $589 million of the non-entity balance represents assets held on behalf of the General Fund (refer to Note 4).

(b) $193.4 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 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.

 2014

 Non-Entity Entity Total

Intra-governmental Assets:

Fund Balance (e) $ 1,988 $ 350,940 $ 352,928

Loans and Interest Receivable (Note 3) 1,147,692 73,907 1,221,599

Advances to the Unemployment Trust Fund (Note 4) 20,824 - 20,824

Due From the General Fund (Note 4) 17,949,849 - 17,949,849

Other Intra-governmental Assets 500 68 568

Total Intra-governmental Assets 19,120,853 424,915 19,545,768

Cash, Foreign Currency, and Other Monetary Assets (Note 5) (f) 154,052 57,816 211,868

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

Taxes, Interest, and Other Receivables, Net (Note 8) 42,305 204 42,509

Investments in GSEs (Note 10) 95,810 - 95,810

Other Assets (h) $ 72 69,873 69,945

Total Assets 19,424,154 $ 552,808 $ 19,976,962

(e) $540 million of the non-entity balance represents assets held on behalf of the General Fund (refer to Note 4).

(f) $153.5 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 $19.1 billion, a reserve position in the IMF of $12.8 billion, and other 

various assets on the Consolidated Balance Sheets not separately presented in this table.
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15. FEDERAL DEBT AND INTEREST PAYABLE AND RELATED 

LIABILITIES

The Department 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 HUD.

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, represent balances of Treasury securities held by individual 

federal agencies with either the authority or the requirement to invest excess receipts in U.S. Treasury securities in which the 

principal and interest are guaranteed by the full faith and credit of the U.S. government. 

Federal Debt and Interest Payable as of September 30, 2015 and 2014 was as follows (in millions):

Held by Other Federal Agencies (Intra-governmental) 2015 2014

Beginning Balance $ 4,994,682 $ 4,725,136

New Borrowings/(Repayments) - Net (14,084) 269,546

Subtotal at Par Value 4,980,598 4,994,682

Premium/(Discount) 75,144 67,586

Debt Principal Not Covered by Budgetary Resources (Note 18) 5,055,742 5,062,268

Interest Payable Covered by Budgetary Resources 40,523 42,352

Total $ 5,096,265 $ 5,104,620

 

Held by the Public 2015 2014

Beginning Balance $ 12,784,971 $ 11,976,279

New Borrowings - Net of Repayments 338,876 808,692

Subtotal at Par Value 13,123,847 12,784,971

Premium/(Discount) (31,378) (29,379)

Debt Principal Not Covered by Budgetary Resources (Note 18) 13,092,469 12,755,592

Interest Payable Covered by Budgetary Resources 55,731 53,831

Total $ 13,148,200 $ 12,809,423

FEDERAL DEBT HELD BY OTHER FEDERAL AGENCIES

Certain federal agencies are allowed to invest excess funds in debt securities issued by the Department on behalf of the U.S.

government. The terms and the conditions of debt securities issued are designed to meet the cash needs of the U.S. government. 

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), for fiscal years 2015 and 2014 was 3.1 percent and 3.3 percent, 

respectively. The average intra-governmental interest rate on TIPS for both fiscal years 2015 and 2014 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, 2015 and 2014 was as follows (in millions): 
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2015 2014

Social Security Administration $ 2,808,287 $ 2,782,918

Office of Personnel Management 831,167 958,796

Department of Defense Agencies 747,402 694,595

Department of Health and Human Services 267,121 276,085

All Other Federal Entities - Consolidated 326,621 282,288

Total Federal Debt Held by Other Federal Agencies $ 4,980,598 $ 4,994,682

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, 2015 and 

2014 consisted of the following (in millions): 

Average

Interest

(at par value) 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

Average

Interest

(at par value) Term Rates 2014

Marketable:

Treasury Bills 1 Year or Less 0.1% $ 1,409,627

Treasury Notes Over 1 Year - 10 Years 1.8% 8,160,196

Treasury Bonds Over 10 Years 4.9% 1,534,068

Treasury Inflation-Protected Securities (TIPS) 5 Years or More 0.9% 1,044,676

Treasury Floating Rate Notes (FRN) 2 Years 0.1% 122,985

Total Marketable 12,271,552

Non-Marketable On Demand to Over 40 Years 2.3% 513,419

Total Federal Debt Held by the Public $ 12,784,971

The Department generally issues Treasury bills, notes, bonds, and TIPS to meet the borrowing needs of the U.S. government. The 

Department issues marketable bills at a discount or at par, and pays 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. Treasury bills are 

issued with a term of one year or less.

The Department issues marketable notes and bonds as long-term securities that pay semi-annual interest based on the securities’

stated interest rates. These securities are issued 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. Treasury notes are issued with a term of over one year to ten years, and Treasury bonds are 

issued with a term of more than ten years. The Department also issues TIPS that have interest and redemption payments tied to 

the Consumer Price Index (CPI) for all Urban Consumers, a widely used measurement of inflation. TIPS are issued with a term of 
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five years or more, and the principal for TIPS is adjusted 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 

$90.0 billion and $97.1 billion as of September 30, 2015 and 2014, respectively.

Treasury also issues marketable Floating Rate Notes (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 is indexed to the highest acceptable discount rate of the most recent 

13-week marketable bill auction. These securities, like marketable notes and bonds, are issued 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. These notes were issued in fiscal years 2015 and 2014 with a term of two years.

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, 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. As of September 30, 2014, 

the FRBs had total holdings of $1.9 trillion which: (i) excluded $535 billion in Treasury securities used in overnight reverse 

repurchase transactions, and (ii) included a net of $2.3 billion in Treasury securities held by the FRB as collateral for securities 

lending activities. Treasury securities are held by the FRB in the FRB System Open Market Account for the purpose of conducting 

monetary policy.

STATUTORY DEBT LIMIT 

Congress provided the Department 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 the Department to 

deviate from its 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, the Department may undertake the following extraordinary 

measures: (i) suspend new issuances of Treasury debt 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 debt 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 debt securities held by the Civil Service 

Fund for non-Treasury debt securities (refer to Note 16); and (v) issue cash management bills to manage short-term financing 

needs. 

When the period of delay in raising the statutory debt limit ends, the Department discontinues its use of extraordinary measures 

and resumes its normal debt management operations. Furthermore, the Department is required by the relevant statutes, to restore 

the TSP, Civil Service Fund and Postal Benefits Fund with the accumulated principal balance of Treasury debt 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). The Department is also required by the relevant statutes, to pay these funds the related lost interest 

(forgone interest) on the uninvested principal. The Department is not required by statute to restore the ESF and state and local 

governments with uninvested principal or lost interest incurred during a period of delay. 
U.S. Department of the Treasury | Fiscal Year 2015

97

A delay in raising the statutory debt limit occurred from May 20, 2013 through October 16, 2013. On October 17, 2013, Congress 

enacted the Continuing Appropriations Act, 2014 (P.L. 113-46) which temporarily suspended the statutory debt limit through 

February 7, 2014. On February 8, 2014, in accordance with P.L. 113-46, the statutory debt limit was raised to $17.212 trillion, the 

amount of the qualifying federal debt securities outstanding on that date. A delay in raising the statutory debt limit also occurred 

from February 10, 2014 until February 15, 2014. On February 15, 2014, Congress enacted the Temporary Debt Limit Extension Act

(P.L. 113-83) which temporarily suspended the debt limit through March 15, 2015. On March 16, 2015, in accordance with P.L. 113-

83, the statutory debt limit was raised to $18.113 trillion, the amount of the qualifying federal debt securities outstanding on that 

date. Another delay in raising the statutory debt limit occurred from March 16, 2015 until November 2, 2015. On 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. 

In fiscal year 2014, following the end of the delays in the debt limit raise that occurred in that year, the Department restored the 

funds involved in the extraordinary measures undertaken between May 20, 2013 and February 15, 2014 with uninvested principal 

and interest totaling $364.7 billion and $1.2 billion, respectively. Of the $1.2 billion of forgone interest paid in fiscal year 2014, 

$444 million was accrued and reported as a non-entity expense within the line item, “Restoration of Foregone Federal Debt 

Interest,” on the Department’s Consolidated Statements of Net Cost for the fiscal year ended September 30, 2014.

The March 16, 2015 delay in raising the statutory debt limit did not end until November 2, 2015 and, as such, none of the 

uninvested principal and foregone interest payable as a result of the extraordinary measures had been restored to the TSP, Civil 

Service Fund or Postal Benefits Fund as of September 30, 2015. Accordingly, the Department 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 forgone interest payable to the funds for the period March 16, 2015 through September 30, 2015 totaling $2.1 billion. This 

liability, coupled with an additional liability for the uninvested principal and foregone interest that was incurred during the 

remainder of the period of the delay from October 1, 2015 through November 2, 2015, was payable to the three funds following the 

end of the delay. 

The liability for the uninvested principal and foregone interest payable as of September 30, 2015 was reported on the Department’s 

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 Civil Service Fund and 

Postal Benefits Fund which are administered by OPM (the 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” 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). Additionally, the accrued forgone interest expense totaling $2.1 billion was reported as a 

non-entity expense within the line item, “Accrued Restoration of Foregone Federal Debt Interest,” on the Consolidated Statements 

of Net Cost, with an offsetting amount reported within the line item, “Accrued Interest on Restoration of Federal Debt Principal,” 

on the Consolidated Statements of Changes in Net Position. The Department also recorded the $2.1 billion as an other financing 

source on the Consolidated Statements of Changes in Net Position.

In addition to those activities previously discussed, other types of extraordinary measures were taken during the period of the 

delay, including temporarily suspending investments in Treasury debt securities by the ESF, temporarily suspending new issuances 

of SLGS securities, and utilization of FFB to redeem outstanding Treasury debt securities held by the Civil Service Fund (refer to 

Note 16). Extraordinary measures continued through November 2, 2015 when the delay in raising the debt limit ended and 

Congress enacted a law to temporarily suspend the debt limit. On November 2, 2015, the Department resumed normal debt 

management operations. On this date, the Department restored uninvested principal of $204.8 billion to the TSP, and $147.8 
U.S. Department of the Treasury | Fiscal Year 2015

98

billion to the two OPM funds. The Department also restored foregone interest to the TSP on November 3, 2015 in the amount of 

$1.7 billion. Foregone interest payable to the two OPM funds totaling $978 million will be restored on the next semi-annual 

interest payment date of December 31, 2015. In addition, the Department authorized ESF and state and local governments to 

resume investments in Treasury debt securities. 

16. OTHER DEBT AND INTEREST PAYABLE

The Department, through FFB, has outstanding borrowings and related accrued interest owed to the Civil Service Fund. At 

September 30, 2015 and 2014, FFB had outstanding borrowings of $12.4 billion and $13.7 billion, inclusive of $106 million and 

$121 million of accrued interest payable, respectively. During fiscal years 2015 and 2014, the Department, through FFB, paid $1.3 

billion and $1.4 billion in principal, respectively. 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. The outstanding borrowings at 

September 30, 2014 had stated interest rates that ranged from 2.88 percent to 4.63 percent per annum, and an effective interest 

rate of 3.52 percent. Maturity dates ranged from June 30, 2016 to June 30, 2024 for outstanding borrowings at September 30, 

2015, and from June 30, 2015 to June 30, 2024 for outstanding borrowings at September 30, 2014.

On October 15, 2015, the Department, through FFB, exchanged $2.7 billion of non-Treasury debt securities that did not count 

against the debt limit, for an equivalent amount of Treasury debt securities held by the Civil Service Fund that did count against the 

debt limit. FFB used the Treasury debt 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 debt

securities it had received from FFB, which thereby helped the Department to remain below the statutory debt limit. The 

Department, FFB, and the Civil Service Fund took this extraordinary measure to help prevent Treasury debt from exceeding the 

statutory debt limit. These transactions resulted in an additional $2.7 billion outstanding debt obligation owed by FFB to the Civil 

Service Fund as of October 15, 2015 to be reported as an intra-governmental liability on the Department’s Consolidated Balance 

Sheets entitled “Other Debt and Interest Payable.” 
U.S. Department of the Treasury | Fiscal Year 2015

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17. D.C. FEDERAL PENSIONS AND JUDICIAL RETIREMENT ACTUARIAL 

LIABILITY

Title XI of the Balanced Budget Act of 1997, as amended was 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 its responsibility, the Department manages 

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). The Department is 

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 are related to creditable service performed on or before June 30, 1997, 

while the Judicial Retirement Fund benefit payments are related 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, 2015 and 2014 is as follows (in millions): 

2015 2014

Beginning Liability Balance $ 9,159 $ 9,164

Pension Expense:

Normal Cost 6 6

Interest on Pension Liability During the Year 161 170

Actuarial (Gains) Losses During the Year:

From Experience (230) 210

From Discount Rate Assumption Change 541 192

From Other Assumption Changes (246) (26)

Total Pension Expense 232 552

Less Amounts Paid (542) (557)

Ending Liability Balance $ 8,849 $ 9,159
U.S. Department of the Treasury | Fiscal Year 2015

100

Additional Information ($ in millions):

D.C. Federal Judicial 2015

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%

D.C. Federal Judicial 2014

Pension Fund Retirement Fund Total

Amount Received from the General Fund $ 468 $ 10 $ 478

Annual Rate of Investment Return Assumption 1.76% - 4.32% 1.76% - 4.32%

Future Annual Rate of Inflation and Cost-Of-

 Living Adjustment:

 Police Officers 2.39% N/A

 Firefighters 2.39% N/A

 Teachers 2.51% N/A

 Judicial N/A 2.50%

Future Annual Rate of Salary Increases:

 Police Officers 2.31% N/A

 Firefighters 2.20% N/A

 Teachers 3.00% N/A

 Judicial N/A 1.90%
U.S. Department of the Treasury | Fiscal Year 2015

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18. LIABILITIES

LIABILITIES NOT COVERED BY BUDGETARY AND OTHER RESOURCES 

As of September 30, 2015 and 2014, liabilities not covered by budgetary and other resources consisted of the following (in 

millions): 

 2015 2014

Intra-governmental Liabilities Not Covered by Budgetary 

 and Other Resources 

Federal Debt Principal, Premium/Discount (Note 15) $ 5,055,742 $ 5,062,268

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

Other Intra-governmental Liabilities 114 124

Total Intra-governmental Liabilities Not Covered by Budgetary 5,201,922 5,062,392

 and Other Resources

Federal Debt Principal, Premium/Discount (Note 15) 13,092,469 12,755,592

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 Pensions and Judicial Retirement - Actuarial 

 Liability (Unfunded) 5,038 5,373

Other Liabilities 1,080 1,164

Total Liabilities Not Covered by Budgetary and Other Resources 18,516,162 17,835,583

Total Liabilities Covered by Budgetary and Other Resources 1,838,459 1,719,992

Total Liabilities $ 20,354,621 $ 19,555,575

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, 2015 and 2014, consisted of the following (in millions): 

Non- 2015 Non- 2014

Current Current Total Current Current Total

Intra-governmental

Accounts Payable $ 182 $ - $ 182 $ 212 $ - $ 212

Unfunded Federal Workers Compensation 

 Program Liability (FECA) 45 53 98 46 54 100

Other Accrued Liabilities 201 3 204 248 5 253

Total Intra-governmental $ 428 $ 56 $ 484 $ 506 $ 59 $ 565

With the Public

Liability for Deposit Funds (Held by the

 U.S. government for Others)

 and Suspense Accounts $ 251 $ - $ 251 $ 222 $ - $ 222

Actuarial Federal Workers Compensation 

 Program Liability (FECA) - 588 588 - 616 616

Accrued Funded Payroll and Benefits 342 - 342 303 - 303

Accounts Payable and Other Accrued

 Liabilities 3,692 67 3,759 3,597 68 3,665

Total With the Public $ 4,285 $ 655 $ 4,940 $ 4,122 $ 684 $ 4,806
U.S. Department of the Treasury | Fiscal Year 2015

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19. NET POSITION

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. Adjustments related to 

unexpended appropriations, such as cancellations of expired funds or rescissions, are reported as “Other Adjustments” on the 

Consolidated Statements of Changes in 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 pensions, and (d) expenses for 

contingent liabilities.

APPROPRIATIONS RECEIVED

The amount reported as “Appropriations Received” is appropriated by Congress 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 Statement of Changes in Net Position 

under “Other Financing Sources” includes the following for the years ended September 30, 2015 and 2014 (in millions): 

 2015 2014

Categories of Transfers to the General Fund and Other 

Interest Revenue $ 42,015 $ 40,245

Increase in Liquidation Preference of GSEs Preferred Stock, 

 GSEs Preferred Stock Dividends and Valuation Changes (Note 10) 30,830 28,061

Downward Re-estimates of Credit Reform Subsidies (Note 9) 326 1,598

Other 1,434 2,729

Total $ 74,605 $ 72,633

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. The interest 

revenue is accrued on inter-agency loans held by the Department on behalf of the U.S. government. A corresponding amount is 

reported on the Consolidated Statements of Net Cost under “Non-Entity Costs: Less Interest Revenue from Loans.” The amount 

reported on the Consolidated Statements of Net Cost is reduced by eliminations with Treasury bureaus. The credit reform 

downward re-estimate subsidies that are transferred to the General Fund result from a change in forecasts of future cash flows. 

The “Other” line mainly represents collections from other federal agencies as reimbursement of costs incurred by the Department 

for its administration of trust funds established within the Social Security Act. The Department is directed by statute to execute 
U.S. Department of the Treasury | Fiscal Year 2015

103

these administrative services. 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 United States 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. 

20. CONSOLIDATED STATEMENTS OF NET COST AND NET COSTS OF 

TREASURY SUB-ORGANIZATIONS

The Department’s Consolidated Statements of Net Cost display information on a consolidated basis. The Department consists of 

DO and seven operating bureaus that the Department provides 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

Intra-departmental costs/revenues resulting from the provision of goods and/or services on a reimbursable basis among 

Departmental sub-organizations are reported as costs by providing sub-organizations and as revenues by receiving suborganizations. The Department recognized intra-departmental imputed costs on the Consolidated Statements of Net Cost of $596

million and $564 million during fiscal years 2015 and 2014, respectively. Accordingly, such costs or revenues are eliminated in the 

consolidation process.

INTRA-GOVERNMENTAL COSTS

Intra-governmental costs relate to the source of goods and services purchased by the Department and not to the classification of 

the related intra-governmental revenue.

In certain cases, other federal agencies incur costs that are directly identifiable to the Department’s operations. In accordance with 

SFFAS No. 30, Inter-Entity Cost Implementation Amending SFFAS No. 4, Managerial Cost Accounting Standards and Concepts, 

the Department recognizes identified costs paid on behalf of the Department by other agencies. The imputed inter-departmental 

financing sources currently recognized by the Department include the actual cost of future benefits for the federal pension plans 

that are paid by other federal entities, the FEHB, and any un-reimbursed contract dispute payments made from the Treasury 

Judgment Fund on behalf of the Department. The funding for these costs is reflected 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 behalf of the Department were $669 million and $796 million for the fiscal years ended September 30, 2015 and 2014, 

respectively.
U.S. Department of the Treasury | Fiscal Year 2015

104

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, the Department has 

presented the gross costs and earned revenues by the Department’s major program categories as defined by the strategic goals 

reported in its fiscal years 2014 – 2017 Strategic Plan. The majority of Treasury 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 the Department’s 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, the net

costs associated with the Department’s Management program-related goals are combined with the net costs associated with the 

Financial program-related strategic goals. 

The Department’s 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. These costs are not reflected as program costs related to the Department’s strategic 

plan missions. Such costs are eliminated in the consolidation process to the extent that they involve transactions with Treasury 

sub-organizations. 

Non-entity other federal costs shown on the Consolidated Statements of Net Cost for the years ended September 30, 2015 and 2014 

consisted of the following (in millions): 

2015 2014

Credit Reform Interest on Uninvested Fund (Intra-governmental) $ 8,088 $ 7,800

Resolution Funding Corporation 2,628 2,628

Judgment Claims and Contract Disputes 1,885 2,642

Corporation for Public Broadcasting 445 445

All Other Payments 555 539

Total $ 13,601 $ 14,054
U.S. Department of the Treasury | Fiscal Year 2015

105

20. CONSOLIDATED STATEMENT OF NET COST AND NET COSTS OF 

TREASURY SUB-ORGANIZATIONS (IN MILLIONS)

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. 
U.S. Department of the Treasury | Fiscal Year 2015

106

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
U.S. Department of the Treasury | Fiscal Year 2015

107

20. CONSOLIDATED STATEMENT OF NET COST AND NET COSTS OF 

TREASURY SUB-ORGANIZATIONS (IN MILLIONS) (CON’T):

For Fiscal Year Ended September 30, 2014

 

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 $ - $ 364 $ 3,231 $ - $ 4,348 $ -

Less: Earned Revenue - (150) (3,146) - (95) -

Intra-governmental Net Costs - 214 85 - 4,253 -

Gross Costs with the Public - 1,407 883 - 8,286 -

Less: Earned Revenue - - (2) - (398) -

Net Costs with the Public - 1,407 881 - 7,888 -

 Net Cost: Financial Program - 1,621 966 - 12,141 -

ECONOMIC PROGRAM

Intra-governmental Gross Costs 105 - 760 - - 74

Less: Earned Revenue (5) - (96) - - (3)

Intra-governmental Net Costs 100 - 664 - - 71

Gross Costs with the Public 517 - 13,815 - - 2,700

Less: Earned Revenue (661) - (2,531) - - (2,781)

Net Costs with the Public (144) - 11,284 - - (81)

 Net Cost (Revenue): Economic Program (44) - 11,948 - - (10)

SECURITY PROGRAM

Intra-governmental Gross Costs - - 172 31 - -

Less: Earned Revenue - - (22) - - -

Intra-governmental Net Costs - - 150 31 - -

Gross Costs with the Public - - 158 79 - -

Less: Earned Revenue - - - - - -

Net Costs with the Public - - 158 79 - -

 Net Cost: Security Program - - 308 110 - -

Total Net Program Cost (Revenue)

 Before Changes in Actuarial

 Assumptions (44) 1,621 13,222 110 12,141 (10)

(Gain)/Loss on Pension, ORB, or OPEB

 Assumption Changes - - 166 - - -

Total Net Cost of (Revenue From)

 Treasury Operations $ (44)$ 1,621 $ 13,388 $ 110 $ 12,141 $ (10)

(a) Of the total $11.9 billion of net cost reported by Departmental Offices for the Economic Program, OFS, DO Policy Offices, Treasury International

Assistance Programs, and ESF contributed $3.0 billion, $3.7 billion, $2.2 billion and $1.9 billion respectively. Other net costs were spread

throughout other DO programs or offices. 
U.S. Department of the Treasury | Fiscal Year 2015

108

20. CONSOLIDATED STATEMENT OF NET COST AND NET COSTS OF 

TREASURY SUB-ORGANIZATIONS (IN MILLIONS) (CON’T):

For Fiscal Year Ended September 30, 2014

Program Costs

Office of the 

Comptroller of the 

Currency

Alcohol

and

Tobacco

Tax and

Trade

Bureau

Combined 

Total Eliminations

2014 

Consolidated

FINANCIAL PROGRAM

Intra-governmental Gross Costs $ - $ 14 $ 7,957 $ 3,449 $ 4,508

Less: Earned Revenue - (2) (3,393) (687) (2,706)

Intra-governmental Net Costs - 12 4,564 2,762 1,802

Gross Costs with the Public - 40 10,616 - 10,616

Less: Earned Revenue - (2) (402) - (402)

Net Costs with the Public - 38 10,214 - 10,214

 Net Cost: Financial Program - 50 14,778 2,762 12,016

ECONOMIC PROGRAM

Intra-governmental Gross Costs 147 14 1,100 728 372

Less: Earned Revenue (29) (1) (134) (93) (41)

Intra-governmental Net Costs 118 13 966 635 331

Gross Costs with the Public 910 40 17,982 - 17,982

Less: Earned Revenue (1,010) (1) (6,984) - (6,984)

Net Costs with the Public (100) 39 10,998 - 10,998

 Net Cost (Revenue): Economic Program 18 52 11,964 635 11,329

SECURITY PROGRAM

Intra-governmental Gross Costs - - 203 65 138

Less: Earned Revenue - - (22) (14) (8)

Intra-governmental Net Costs - - 181 51 130

Gross Costs with the Public - - 237 - 237

Less: Earned Revenue - - - - -

Net Costs with the Public - - 237 - 237

 Net Cost: Security Program - - 418 51 367

Total Net Program Cost (Revenue)

 Before Changes in Actuarial

 Assumptions 18 102 27,160 3,448 23,712

(Gain)/Loss on Pension, ORB, or OPEB

 Assumption Changes 4 - 170 - 170

Total Net Cost of (Revenue From)

 Treasury Operations $ 22 $ 102 $ 27,330 $ 3,448 $ 23,882
U.S. Department of the Treasury | Fiscal Year 2015

109

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 advance payment has been made, but for which delivery or performance has not yet occurred. Undelivered orders at 

September 30, 2015 and 2014 are shown below (in millions): 

2015 2014

Paid $ 7 $ 9

Unpaid 170,646 165,644

Undelivered orders at the end of the year $ 170,653 $ 165,653

CONTRIBUTED CAPITAL

Contributed capital represents the current year authority and prior year balances of amounts actually transferred through nonexpenditure 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, 2015 and 2014 was $171 million and $25 million, respectively. 

APPORTIONMENT CATEGORIES OF OBLIGATIONS INCURRED

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. Obligations incurred for direct and reimbursable obligations by apportionment category for the fiscal years 

ended September 30, 2015 and 2014 are shown below (in millions): 

2015 2014

Direct - Category A $ 105 $ 117

Direct - Category B 37,291 41,689

Direct - Exempt from Apportionment 425,027 444,343

Total Direct 462,423 486,149

Reimbursable - Category B 4,549 4,400

Reimbursable - Exempt from Apportionment 1,072 1,102

Total Reimbursable 5,621 5,502

Total Direct and Reimbursable $ 468,044 $ 491,651

TERMS OF BORROWING AUTHORITY USED

Several Departmental 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. Repayment requirements are defined by OMB Circular No. A-11. 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, the excess will be repaid 

to the Department. If principal and interest do not exceed interest expense due, the Department will borrow the difference. The 

Department makes periodic principal repayments based on the analysis of cash balances and future disbursement needs. All 

interest on borrowings are due on September 30. Interest rates on FCRA borrowings range from 0.03 percent to 7.59 percent.
U.S. Department of the Treasury | Fiscal Year 2015

110

AVAILABLE BORROWING

The available borrowing authority and related changes in available borrowing authority as of and for the fiscal years ended 

September 30, 2015 and 2014 are shown below (in millions): 

2015 2014

Beginning Balance $ 99,248 $ 103,333

Current Authority 921 1,200

Borrowing Authority Withdrawn (6,098) (4,404)

Borrowing Authority Converted to Cash (108) (881)

Ending Balance $ 93,963 $ 99,248

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 2015, was not 

published at the time that these financial statements were issued. The President’s Budget is expected to be published in February 

2016, and can be located at the OMB website http://www.whitehouse.gov/omb 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 2014 Agency Financial Report and the actual fiscal year 2014 balances included in the fiscal year 2016 President’s 

Budget. 
U.S. Department of the Treasury | Fiscal Year 2015

111

Reconciliation of Fiscal Year 2014 Combined Statement of Budgetary Resources

to the Fiscal Year 2016 President's Budget

(in millions)

Budgetary 

Resources

Outlays (net 

of offsetting 

collections)

Distributed 

Offsetting 

Receipts

Net 

Outlays

Obligations 

Incurred

Statement of Budgetary Resources (SBR) Amounts $ 841,793 $ 463,252 $ (125,584) $ 337,668 $ 491,651

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) 104,553 104,553 - 104,553 104,553

Tax and Trade Bureau (TTB) non-entity collections for Puerto Rico 303 303 - 303 303

Continued dumping subsidy - U.S. Customs and Border Patrol 253 62 - 62 62

Non-Treasury offsetting receipts - - (18) (18) -

Subtotal 105,109 104,918 (18) 104,900 104,918

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) (48,364) (5,811) - (5,811) (10,497)

Offsetting collections net of collections shown in PB - - (369) (369) -

Treasury offsetting receipts shown in other chapters of PB - - 6 6 -

Expired funds in SBR (8,227) - - - -

Other 4 4 1 5 3

Subtotal (56,587) (5,807) (362) (6,169) (10,494)

President's Budget Amounts $ 890,315 $ 562,363 $ (125,964) $ 436,399 $ 586,075

(1) These are primarily refundable Earned Income Tax Credit, Child Tax Credit, and the Premium Tax Credit reported with refunds as custodial 

activities in the Department’s financial statements and thus are not reported as budgetary resources.

(2) The largest of these resources relate to the Department’s 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 are 

presumed to be available for only one fiscal year unless otherwise noted in the annual appropriation language. Unobligated 

balances in unexpired fund symbols are available in the next fiscal year for new obligations unless some restrictions had 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 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.

CHANGE IN BUDGETARY ACCOUNTING

Effective in fiscal year 2015, the Department changed its budgetary accounting policy for the accounting and reporting of nonFCRA NAB budgetary balances in accordance with guidance provided by the OMB. This guidance allows for the cumulative total 

disbursed funds of the non-FCRA NAB program to be reported as Obligations Incurred on the Combined Statements of Budgetary 

Resources. This change in accounting is reported as a decrease of $10.6 billion in the line item, “Unapportioned”, and an increase 

of $10.6 billion in the line item, “Obligations Incurred”, on the Combined Statements of Budgetary Resources for the fiscal year 

ended September 30, 2015. In accordance with OMB guidance, this change in accounting is only applied prospectively 

commencing with fiscal year 2015. This budgetary adjustment had no impact on the non-FCRA NAB proprietary accounts as of 

and for the fiscal year ended September 30, 2015.
U.S. Department of the Treasury | Fiscal Year 2015

112

22. COLLECTION AND DISPOSITION OF CUSTODIAL REVENUE

The Department collects the majority of federal revenue from income and excise taxes. Collection activity, by revenue type and tax 

year, for the fiscal years ended September 30, 2015 and 2014 are shown below (in millions): 

Tax Year

Pre- 2015

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 Custodial Revenue 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 Custodial Revenue 76,663 25,996 - - 102,659

Total Custodial Revenue $ 2,214,412 $ 1,131,143 $ 32,913 $ 49,096 $ 3,427,564

Less Amounts Collected for Non-Federal Entities 350

Total Custodial Revenue $ 3,427,214

Tax Year

Pre- 2014

2014 2013 2012 2012 Collections

Individual Income and FICA Taxes $ 1,691,131 $ 864,318 $ 24,251 $ 25,349 $ 2,605,049

Corporate Income Taxes 252,895 87,966 1,188 11,092 353,141

Estate and Gift Taxes 44 7,005 879 12,227 20,155

Excise Taxes 71,133 22,080 56 136 93,405

Railroad Retirement Taxes 4,579 1,370 3 2 5,954

Unemployment Taxes 4,141 4,306 52 113 8,612

Fines, Penalties, Interest & Other Revenue -

 Tax Related 262 - - 1 263

Tax Related Custodial Revenue 2,024,185 987,045 26,429 48,920 3,086,579

Deposit of Earnings, Federal Reserve System 76,944 22,291 - - 99,235

Fines, Penalties, Interest & Other Revenue -

 Non-Tax Related 3,317 932 - - 4,249

Non-Tax Related Custodial Revenue 80,261 23,223 - - 103,484

Total Custodial Revenue $ 2,104,446 $ 1,010,268 $ 26,429 $ 48,920 $ 3,190,063

Less Amounts Collected for Non-Federal Entities 312

Total Custodial Revenue $ 3,189,751
U.S. Department of the Treasury | Fiscal Year 2015

113

AMOUNTS PROVIDED TO FUND THE U.S. GOVERNMENT 

For the years ended September 30, 2015 and 2014, collections of custodial revenue transferred to other federal entities were as 

follows (in millions): 

2015 2014

Department of the Interior $ 638 $ 769

General Fund 3,022,969 2,815,119

Total $ 3,023,607 $ 2,815,888

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, was as follows for 

the years ended September 30, 2015 and 2014 (in millions): 

Tax Year

2015

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

Tax Year

2014

2014 2013 2012

Pre2012Refunds / 

Payments

Individual Income and FICA Taxes $ 13,681 $ 290,791 $ 23,988 $ 7,298 $ 335,758

Corporate Income Taxes 4,439 10,935 6,655 13,285 35,314

Estate and Gift Taxes - 227 419 234 880

Excise Taxes 454 900 182 207 1,743

Railroad Retirement Taxes - 2 - 18 20

Unemployment Taxes - 114 16 18 148

Total $ 18,574 $ 302,969 $ 31,260 $ 21,060 $ 373,863

FEDERAL TAX REFUNDS AND OTHER AMOUNTS PAYABLE

As of September 30, 2015 and 2014, refunds and other amounts payable consisted of the following (in millions):

2015 2014

Internal Revenue Service $ 3,025 $ 4,722

Alcohol and Tobacco Tax and Trade Bureau 14 1

Total $ 3,039 $ 4,723
U.S. Department of the Treasury | Fiscal Year 2015

114

23. FUNDS FROM DEDICATED COLLECTIONS

The majority of the Department’s FDC activities are attributed to the ESF. In addition, such funds managed by BEP, Mint, and

OCC (the Department’s non-appropriated bureaus) and certain funds managed by the IRS are public enterprise (or revolving) 

funds and receive no appropriations from the Congress. Other miscellaneous FDCs are managed by the Fiscal Service, DO, IRS, 

FRF, and TFF.

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 0205445002 Debt Collection Special Fund

Fiscal Service 0205445003 Debt Collection Special Fund

Fiscal Service 0209/05445 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

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

FRF 020X5590 Financial Research Fund

TFF 020X5697 Treasury Forfeiture Fund

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 U.S. 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.
U.S. Department of the Treasury | Fiscal Year 2015

115

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 Treasury 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, and public donations, 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. The 

Department’s 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 cash collected by the Fiscal Service is deposited in the 

General Fund, which uses the cash for general government purposes.

The investments provide Department bureaus and other federal agencies with authority to draw upon the General Fund to make 

future benefit payments or other expenditures. When the Department 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 the Department bureaus and other federal agencies and a liability of the Fiscal Service. The General 

Fund is liable to the Fiscal Service. Because the Department 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.

The balances related to the investments made by the Department bureaus are not displayed on the Department’s financial 

statements 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 Department bureaus (refer to Note 4).
U.S. Department of the Treasury | Fiscal Year 2015

116

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

Net Cost of (Revenue From) 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
U.S. Department of the Treasury | Fiscal Year 2015

117

Summary Information for Funds from Dedicated Collections

as of and for the Fiscal Year Ended September 30, 2014

Public

Exchange Enterprise/

Stabilization Revolving Other FDC Combined

(in millions) Fund Funds Funds FDC Funds

ASSETS

Fund Balance $ - $ 930 $ 687 $ 1,617

Investments and Related Interest - Intra-governmental 22,649 935 2,827 26,411

Cash, Foreign Currency and Other Monetary Assets 57,592 - 26 57,618

Investments and Related Interest 17,904 - - 17,904

Other Assets - 1,787 148 1,935

Total Assets $ 98,145 $ 3,652 $ 3,688 $ 105,485

LIABILITIES

Intra-governmental Liabilities $ - $ 34 $ 629 $ 663

Certificates Issued to Federal Reserve Banks 5,200 - - 5,200

Allocation of Special Drawing Rights 52,358 - - 52,358

Other Liabilities 6 411 183 600

Total Liabilities 57,564 445 812 58,821

Net Position

Unexpended Appropriations 200 - - 200

Cumulative Results of Operations 40,381 3,207 2,876 46,464

Total Liabilities and Net Position $ 98,145 $ 3,652 $ 3,688 $ 105,485

Statement of Net Cost

Gross Cost $ 3,875 $ 4,453 $ 538 $ 8,866

Less: Earned Revenue (1,976) (4,490) (134) (6,600)

Gains/Losses on Pension, ORB, or OPEB Assumption Changes - 4 - 4

Total Net Cost of (Revenue From) Operations $ 1,899 $ (33)$ 404 $ 2,270

Statement of Changes in Net Position

Cumulative Results of Operations:

Beginning Balance $ 42,280 $ 3,065 $ 3,132 $ 48,477

Budgetary Financing Sources - (22) 69 47

Other Financing Sources - 131 79 210

Total Financing Sources - 109 148 257

Net Cost of (Revenue From) Operations (1,899) 33 (404) (2,270)

Change in Net Position (1,899) 142 (256) (2,013)

Ending Balance $ 40,381 $ 3,207 $ 2,876 $ 46,464
U.S. Department of the Treasury | Fiscal Year 2015

118

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, 2015 and 2014, the 

Reconciliation of Net Cost of Operations to Budget consisted of the following (in millions):

 2015 2014

RESOURCES USED TO FINANCE ACTIVITIES

Budgetary Resources Obligated: 

Obligations Incurred (Note 21) $ 468,044 $ 491,651

Less: Spending Authority from Offsetting Collections and Recoveries of Prior Year Unpaid 

 Obligations (27,062) (36,244)

Obligations Net of Offsetting Collections and Recoveries 440,982 455,407

Less: Distributed Offsetting Receipts (69,036) (125,584)

Net Obligations 371,946 329,823

 

Other Resources:

Donations and Forfeiture of Property 78 140

Financing Sources for Accrued Interest and Discount on Debt 9,579 7,404

Financing Sources for Accrued Interest on Restoration of Federal Debt Principal (Note 15) 2,052 (801)

Transfers In/Out Without Reimbursement 11 (44)

Imputed Financing Sources from Cost Absorbed by Others 669 796

Transfers to the General Fund and Other (Note 19) (74,605) (72,633)

Net Other Resources Used to Finance Activities (62,216) (65,138)

Total Resources Used to Finance Activities 309,730 264,685

 

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 5,195 (6,217)

Resources that Fund Expenses Recognized in Prior Periods (1,284) (9,409)

Budgetary Offsetting Collections & Receipts that do not affect Net Cost of Treasury 

 Operations and Non-Entity Costs (66,860) (127,130)

Adjustment to Accrued Interest and Discount on Debt 4,949 5,260

Resources that Finance the Acquisition of Assets or Liquidation of Liabilities (896) 1,053

Other Resources or Adjustments to Net Obligated Resources that do not Affect Net Cost of 

 Treasury Operations and Non-Entity Costs (2,226) (1,649)

Total Resources Used to Finance Items Not Part of the Net Cost of Treasury Operations and 

 Non-Entity Costs (61,122) (138,092)

Total Resources Used to Finance the Net Cost of Treasury Operations and Non-

 Entity Costs 370,852 402,777

 

Total Components of Net Cost of Treasury Operations and Non-Entity Costs That Will 

 Require or Generate Resources in Future Periods 393 (1,688)

Total Components of Net Cost of Treasury Operations and Non-Entity Costs That Will Not 

 Require or Generate Resources (a) 3,667 2,871

Total Components of Net Cost of Treasury Operations and Non-Entity Costs

 That Will Not Require or Generate Resources in the Current Period 4,060 1,183

Net Cost of Treasury Operations and Non-Entity Costs $ 374,912 $ 403,960

(a) The Components not requiring or generating resources primarily include depreciation and amortization and revaluation of assets or

liabilities. 
U.S. Department of the Treasury | Fiscal Year 2015

119

25. SCHEDULE OF FIDUCIARY ACTIVITY

The following funds have been identified by the Department as meeting the criteria for fiduciary activity. Details of the funds are 

provided below.

Bureau Fund Code Authority Fund Title/Description

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 020X6133 31 USC 1322 Payment of Unclaimed Moneys

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

Unclaimed monies were authorized by 31 USC 5119, which authorized the Fiscal Service to collect unclaimed monies on behalf of 

the public. Other fiduciary activities by the Department as listed above are included in All Other Fiduciary Funds.

Schedule of Fiduciary Activity 

2015 2014

Unclaimed All Unclaimed All

Monies - Other Total Monies - Other Total

Fiscal Fiduciary Fiduciary Fiscal Fiduciary Fiduciary

(in millions) Service Funds Funds Service Funds Funds

Fiduciary Net Assets, Beginning of

 the Year $ 580 $ 140 $ 720 $ 551 $ 155 $ 706

Increases:

 Contributions to Fiduciary Net Assets 31 273 304 34 338 372

 Investment earnings - 1 1 - 1 1

Total Increases 31 274 305 34 339 373

Decreases:

 Disbursements to and on behalf

 of beneficiaries (3) (281) (284) (5) (354) (359)

Total Decreases (3) (281) (284) (5) (354) (359)

Net Increase (Decrease) in

 Fiduciary Assets 28 (7) 21 29 (15) 14

Fiduciary Net Assets, End of Year $ 608 $ 133 $ 741 $ 580 $ 140 $ 720
U.S. Department of the Treasury | Fiscal Year 2015

120

Schedule of Fiduciary Net Assets

2015 2014

Unclaimed All Unclaimed All

Monies - Other Total Monies - Other Total

Fiscal Fiduciary Fiduciary Fiscal Fiduciary Fiduciary

(in millions) Service Funds Funds Service Funds Funds

Fiduciary Net Assets

Cash and Cash Equivalents $ 608 $ 118 $ 726 $ 580 $ 126 $ 706

Investments - 20 20 - 19 19

Total Fiduciary Assets 608 138 746 580 145 725

Less: Fiduciary Liabilities - (5) (5) - (5) (5)

Total Fiduciary Net Assets $ 608 $ 133 $ 741 $ 580 $ 140 $ 720

26. COMMITMENTS AND CONTINGENCIES

LEGAL CONTINGENCIES

The Department is 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. The Department discloses contingent liabilities where the conditions for liability 

recognition have not been met and the likelihood of unfavorable outcome is more than remote. The Department does not accrue 

for possible losses related to cases where the potential loss cannot be estimated 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 the Department’s Judgment Fund, which is separate from the 

operating resources of the Department. For cases related to the Contract Disputes Act of 1978 and awards under federal antidiscrimination and whistle-blower protection acts, the Department must reimburse the Judgment Fund from future 

appropriations.

In the opinion of the Department’s 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 the 

Department’s consolidated financial statements, except for the pending legal actions described below which may have a materially 

adverse impact on the consolidated financial statements depending on the outcomes of the cases.

Pending Legal Actions

 Tribal Trust Fund Cases: Numerous cases have been filed in the U.S. District Courts in which Native American Tribes seek a 

declaration that the United States has not provided the tribes with a full and complete accounting of their trust funds, and seek 

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 the Department 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. 

The Department is unable to determine the likelihood of an unfavorable outcome or an estimate of potential loss at this time.

 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 Northern District of Iowa, the U.S. District Court for the District of Delaware, and the 
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U.S. District Court for the Eastern District of Kentucky, 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 the Department 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 the Department 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. The Department is unable to determine the 

likelihood of an unfavorable outcome or an estimate of potential loss at this time.

 Starr International Co., Inc. v. United States: The plaintiff, an American International Group, Inc. (AIG) shareholder that 

brought suit on behalf of two classes of shareholders, alleges that the U.S. government violated the Fifth Amendment to the 

United States Constitution by illegally exacting or taking property without just compensation. One class, the Credit Agreement 

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

connection with an $85 billion loan 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. The Department is unable to determine the likelihood of an unfavorable outcome or make an 

estimate of potential loss at this time.

 Estes v. United States: The State of Kansas filed a complaint in the U.S. Court of Federal Claims requesting the Department to 

redeem matured savings bonds not possessed by Kansas, but which have registered owners with last known addresses in Kansas. 

The Department informed the State of Kansas that it would not redeem these savings bonds since it was not the registered owner 

of the bonds. The U.S. government filed a motion to dismiss the complaint. On August 20, 2015, the court dismissed one claim 

in the complaint and denied the U.S. government’s motion with respect to other claims. The Department is 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 the Department to cease charging a user fee to obtain a PTIN and asking for more information than is 

necessary to issue a PTIN. The Department is unable to determine the likelihood of an unfavorable outcome or an estimate of 

potential loss at this time.

 Anonymous Whistleblower v. United States: A whistleblower case was filed in the U.S. Tax Court under seal. The anonymous 

claimant allegedly provided confidential information about tax fraud committed by multiple other taxpayers to the IRS. Having 

been denied a whistleblower award, the claimant has filed a claim in the U.S. Tax Court. The case is currently being held in 

abeyance until the Court determines the scope and standard of review it will follow. The Department is 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 was 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. The Department has determined
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there is a reasonably possible likelihood of unfavorable outcomes in some of the cases. The total alleged damages for these cases 

approximate $273 million. 

 Langbord v. U.S. Department of the Treasury: A case was filed in the U.S. District Court for the Eastern District of

Pennsylvania in which the plaintiffs, after voluntarily surrendering ten 1933 Double Eagle gold coins they had in their

possession, requested either the return of the coins, or compensation by the government of $40 million. The U.S. government

contends the coins should not have been in the plaintiffs’ possession as they are considered public property of the U.S.

government. The Department has determined there is a reasonably possible likelihood of an unfavorable outcome.

 Other Legal Actions: The Department also is 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. It is not expected that these cases will have a material adverse effect on the Department’s financial

position or results.

OTHER COMMITMENTS AND CONTINGENCIES

Loan Commitments 

The Department, through the FFB, makes loan commitments with federal agencies, or private sector borrowers whose loans are 

guaranteed by federal agencies, to extend them credit for their own use (refer to Notes 1L and 3). As of September 30, 2015 and 

2014, the Department had loan commitments totaling $14.6 billion and $17.9 billion, respectively. 

Multilateral Development Banks 

The Department, on behalf of the United States, has 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, 2015 and 2014, U.S. callable capital in MDBs was as follows 

(in millions): 

2015 2014

Inter-American Development Bank $ 45,082 $ 40,983

International Bank for Reconstruction and Development 40,498 37,570

Asian Development Bank 18,572 16,014

European Bank for Reconstruction and Development 3,055 3,055

African Development Bank 3,550 3,042

North American Development Bank 1,275 1,275

Multilateral Investment Guarantee Agency(1) 315 315

Total $ 112,347 $ 102,254

(1) Both fiscal years 2015 and 2014 include commitments of $22 million for the undisbursed portion of the subscription to paid-in capital 

investments. 

Amounts included in the above table do not include amounts for which the Department may be liable to pay if future congressional 

action is taken to fund executed agreements between the Department and certain MDBs. 

Terrorism Risk Insurance Program 

The Terrorism Risk Insurance Act (TRIA), signed into law in November 2002, was originally enacted to address market 

disruptions resulting from terrorist attacks on September 11, 2001. Most recently, the Terrorism Risk Insurance Program 

Reauthorization Act of 2015 extended the Terrorism Risk Insurance Program (TRIA Program) until December 31, 2020. TRIA 

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 TRIA Program is activated upon the certification of an “act of 
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terrorism” by the Secretary in consultation with the Secretary of the U.S. Department of Homeland Security and the U.S. Attorney 

General. If a certified act of terrorism occurs, insurers may be eligible to receive reimbursement from the U.S. government for 

insured losses in connection with certified acts of terrorism resulting in more than $100 million in insured losses once a particular 

insurer has also satisfied its designated deductible amount. Insured losses above this amount will be shared between insurance 

companies and the U.S. government. TRIA includes both mandatory and discretionary authority for the Department to recoup 

federal payments made under the TRIA Program 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 TRIA 

as of September 30, 2015 or 2014. 

Exchange Stabilization Agreement

The North American Framework Agreement (NAFA), signed by the Department in 1994, includes the Exchange Stabilization 

Agreement (ESA) with Mexico. The Department, through the ESF, has 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 shall bear interest based on a then current rate tied to 

U.S. Treasury bills. There were no drawings outstanding on the ESF swap line as of September 30, 2015 and 2014. 

New Arrangements to Borrow 

The Supplemental Appropriations Act of 2009 (P.L. 111-32) provided the authorization and appropriation for an increase in the 

United States’ participation in the New Arrangements to Borrow (NAB). Because the U.S. financial participation in the IMF is

denominated in SDRs, P.L. 111-32 authorized and appropriated up to the dollar equivalent of SDR 75 billion to implement this 

commitment. Accordingly, the United States agreed to increase its participation in the NAB from SDR 6.6 billion to SDR 69.1 

billion, pursuant to IMF Executive Board Decision No. 14577-(10/35). Total U.S. participation in the NAB of SDR 69.1 billion was 

equivalent to $97.0 billion and $102.4 billion as of September 30, 2015 and 2014, respectively. Refer to Notes 7 and 9 for more 

information on the NAB. 

Housing Programs Under TARP 

Housing programs under TARP are designed to provide stability for both the housing market and homeowners. These programs 

assist homeowners who are experiencing financial hardships to remain in their homes until their financial position improves or 

they relocate to a more sustainable living situation, and to obtain other assistance designed to prevent foreclosures. As of 

September 30, 2015 and 2014, the Department had committed up to $37.5 billion and $38.5 billion, respectively, for these 

programs. Outstanding commitments totaled $19.0 billion and $24.4 billion as of September 30, 2015 and 2014, respectively. For 

fiscal years 2015 and 2014, payments made on behalf of the housing programs under TARP totaled $4.2 billion and $4.3 billion, 

respectively, reported within the Economic Program on the Consolidated Statements of Net Cost. 

Commitment to GSEs 

The SPSPA agreements between the Department and each GSE, which have no expiration date, provide for the Department 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, 2015 and 2014, the Department's maximum remaining potential commitment to the GSEs was $258.1 billion. Refer 

to Note 10 for further information. 
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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

The Department estimated that $4.8 billion and $7.8 billion as of September 30, 2015 and 2014, respectively, may be payable as 

other claims for tax refunds. This estimate represents amounts (principal and interest) that may be paid for claims pending 

judicial review by the federal courts or internally, by Appeals. In fiscal year 2015, the total estimated payout (including principal 

and interest) for claims pending judicial review by the federal courts and appeals courts is $2.1 billion and $2.7 billion, respectively. 

In fiscal year 2014, the total estimated payout (including principal and interest) for claims pending judicial review by the federal 

courts and appeals courts was $3.1 billion and $4.7 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. Under 

Internal Revenue Code Section 6201, the Department is authorized and required to make inquiries, determinations, and 

assessments of all taxes which have not been 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. The Department also has 

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, unpaid assessments require taxpayer or court agreement to be considered federal taxes 

receivable. Assessments not agreed to by taxpayers or the courts are considered compliance assessments and are not considered 

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 are considered federal taxes receivable. 

Assessments with little or no future collection potential are called 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 

these assessments be maintained until the statute for collection expires. 

Although compliance assessments and write-offs are not considered 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, 2015 and 2014, were as follows (in millions): 
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125

2015 2014

Total Unpaid Assessments $ 389,000 $ 380,000

Less: Compliance Assessments (80,000) (86,000)

Write Offs (138,000) (138,000)

Gross Federal Taxes Receivable 171,000 156,000

Less: Allowance for Doubtful Accounts (130,000) (116,000)

Federal Taxes Receivables, Net $ 41,000 $ 40,000

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 $2 billion as of September 30, 2015 and 2014. The related unpaid assessments of those businesses are reported as taxes 

receivable or write-offs, but the Department may also recover portions of those businesses’ unpaid assessments from any and all 

individual officers and directors against whom a trust fund recovery penalty is assessed. 

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, special occupational taxes are collected from certain tobacco businesses. During fiscal years 

2015 and 2014, TTB collected approximately $22.3 billion and $22.2 billion in taxes, interest, and other revenues, respectively. 

Federal excise taxes are also collected 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. 

Substantially all of the taxes collected by TTB, net of related refund disbursements, are remitted to the General Fund. The 

Department further distributes this revenue to Federal agencies in accordance with various laws and regulations. The firearms and 

ammunition excise taxes are an exception. Those revenues are remitted to the Fish and Wildlife Restoration Fund under 

provisions of the Pittman-Robertson Act of 1937. 

DEFERRED MAINTENANCE

In fiscal years 2015 and 2014, the Department had no material amounts of deferred maintenance costs to report on vehicles, 

buildings, and structures owned by the Department. 

Deferred maintenance applies to owned PP&E. Deferred maintenance is maintenance that was not performed when it should have 

been, or was scheduled to be, and is put off or delayed for a future period. Maintenance is defined 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. Periodic condition assessments, physical inspections, and review of manufacturing 

and engineering specifications, work orders, and building and other structure logistics reports can be used under these 

methodologies. 
U.S. Department of the Treasury | Fiscal Year 2015

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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, 2015 and 2014 

disaggregated by Treasury reporting entity rather than by Treasury major budget account, since Treasury manages its budget at the 

reporting entity level. 
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127

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 prior year unpaid obligations - 52 12,408 2 95

Other changes in unobligated balance - (28) (16,567) (1) (108)

Unobligated balance from prior year budget authority, net 71 1,063 342,523 56 1,068

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) 666 261 5,902 - 137

Total Budgetary Resources $ 737 $ 419,961 $ 360,572 $ 168 $ 12,549

STATUS OF BUDGETARY RESOURCES

Obligations incurred $ 636 $ 418,734 $ 32,979 $ 121 $ 11,534

Unobligated balance, end of year:

 Apportioned 101 1,142 278,786 44 612

 Exempt from Apportionment - 4 8,824 - 7

 Unapportioned - 81 39,983 3 396

Total 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

Obligations incurred 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 $ 418,898 $ 18,049 $ 112 $ 11,481

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

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, $38 billion, $25 billion, and 

$15 billion, respectively. The remainder is spread throughout other offices. 
U.S. Department of the Treasury | Fiscal Year 2015

128

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 prior year unpaid obligations 15 1 1 6,353 6,221

Other changes in unobligated balance (11) - (1) (9,937) (6,779)

Unobligated balance from prior year budget authority, net 510 704 5 345,581 419

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 9,624 2,072

Total Budgetary Resources $ 3,641 $ 2,297 $ 111 $ 796,624 $ 3,412

STATUS OF BUDGETARY RESOURCES

Obligations incurred $ 2,938 $ 996 $ 106 $ 465,204 $ 2,840

Unobligated balance, end of year:

 Apportioned 703 (1) 1 281,286 102

 Exempt from Apportionment - 1,302 - 10,137 -

 Unapportioned - - 4 39,997 470

Total 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

Obligations incurred 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 $ 451,043 $ 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

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)
U.S. Department of the Treasury | Fiscal Year 2015

129

Fiscal Year 2014 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 $ 59 $ 735 $ 366,944 $ 44 $ 990

Recoveries of prior year unpaid obligations - 39 9,061 3 115

Other changes in unobligated balance - (7) (24,427) (1) (86)

Unobligated balance from prior year budget authority, net 59 767 351,578 46 1,019

Appropriations (discretionary and mandatory) - 448,094 9,368 112 11,657

Borrowing authority (discretionary and mandatory) - - 1,200 - -

Spending authority from offsetting collections (discretionary and 

 mandatory) 700 219 11,621 - 156

Total Budgetary Resources $ 759 $ 449,080 $ 373,767 $ 158 $ 12,832

STATUS OF BUDGETARY RESOURCES

Obligations incurred $ 688 $ 448,041 $ 27,085 $ 103 $ 11,751

Unobligated balance, end of year:

 Apportioned 71 1,001 271,912 52 645

 Exempt from Apportionment - 4 15,397 - 7

 Unapportioned - 34 59,373 3 429

Total unobligated balance, end of year 71 1,039 346,682 55 1,081

Total Status of Budgetary Resources $ 759 $ 449,080 $ 373,767 $ 158 $ 12,832

CHANGE IN OBLIGATED BALANCE

Unpaid Obligations:

Unpaid obligations, brought forward, October 1 $ 50 $ 508 $ 232,096 $ 23 $ 1,297

Obligations incurred 688 448,041 27,085 103 11,751

Outlays (gross) (631) (447,214) (27,085) (95) (11,604)

Recoveries of prior year unpaid obligations - (39) (9,061) (3) (115)

Unpaid obligations, end of year 107 1,296 223,035 28 1,329

Uncollected Payments:

Uncollected payments, Federal sources, brought forward, October 1 (64) (32) (833) (3) (30)

Change in uncollected payments, Federal sources 17 7 218 2 (7)

Uncollected payments, Federal sources, end of year (47) (25) (615) (1) (37)

Obligated Balance, End of Year $ 60 $ 1,271 $ 222,420 $ 27 $ 1,292

Obligated Balance, Start of Year $ (14)$ 476 $ 231,263 $ 20 $ 1,267

BUDGET AUTHORITY AND OUTLAYS, NET

Budget authority, gross (discretionary and mandatory) $ 700 $ 448,313 $ 22,189 $ 112 $ 11,813

Actual offsetting collections (discretionary and mandatory) (684) (229) (22,680) (2) (149)

Change in uncollected payments, Federal sources

 (discretionary and mandatory) 17 7 218 2 (7)

Budget Authority, Net (Discretionary and Mandatory) $ 33 $ 448,091 $ (273)$ 112 $ 11,657

Outlays, gross (discretionary and mandatory) $ 631 $ 447,214 $ 27,085 $ 95 $ 11,604

Actual offsetting collections (discretionary and mandatory) (684) (229) (22,680) (2) (149)

Outlays, net (discretionary and mandatory) (53) 446,985 4,405 93 11,455

Distributed offsetting receipts - (41,788) (83,281) - (515)

Agency Outlays, Net (Discretionary and Mandatory) $ (53)$ 405,197 $ (78,876)$ 93 $ 10,940

(a) Of the $374 billion of Total Budgetary Resources for Departmental Offices, GSE and OFS had $259 billion and $17 billion, respectively. The 

remainder is spread throughout other offices. 
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Fiscal Year 2014 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 $ 496 $ 1,076 $ 6 $ 368,339 $ 2,011

Recoveries of prior year unpaid obligations 18 - 1 3,872 5,365

Other changes in unobligated balance (22) - (1) (18,218) (6,326)

Unobligated balance from prior year budget authority, net 492 1,076 6 353,993 1,050

Appropriations (discretionary and mandatory) - - 99 469,330 -

Borrowing authority (discretionary and mandatory) - - - - 1,200

Spending authority from offsetting collections (discretionary and 

 mandatory) 2,876 641 7 8,222 7,998

Total Budgetary Resources $ 3,368 $ 1,717 $ 112 $ 831,545 $ 10,248

STATUS OF BUDGETARY RESOURCES

Obligations incurred $ 2,862 $ 1,014 $ 107 $ 482,380 $ 9,271

Unobligated balance, end of year:

 Apportioned 506 (1) 1 273,584 603

 Exempt from Apportionment - 704 - 16,112 -

 Unapportioned - - 4 59,469 374

Total unobligated balance, end of year 506 703 5 349,165 977

Total Status of Budgetary Resources $ 3,368 $ 1,717 $ 112 $ 831,545 $ 10,248

CHANGE IN OBLIGATED BALANCE

Unpaid Obligations:

Unpaid obligations, brought forward, October 1 $ 198 $ 223 $ 17 $ 132,978 $ 101,434

Obligations incurred 2,862 1,014 107 482,380 9,271

Outlays (gross) (2,762) (1,003) (101) (480,732) (9,763)

Recoveries of prior year unpaid obligations (18) - (1) (3,872) (5,365)

Unpaid obligations, end of year 280 234 22 130,754 95,577

Uncollected Payments:

Uncollected payments, Federal sources, brought forward, October 1 (6) (4) (3) (245) (730)

Change in uncollected payments, Federal sources - - (1) 18 218

Uncollected payments, Federal sources, end of year (6) (4) (4) (227) (512)

Obligated Balance, End of Year $ 274 $ 230 $ 18 $ 130,527 $ 95,065

Obligated Balance, Start of Year $ 192 $ 219 $ 14 $ 132,733 $ 100,704

BUDGET AUTHORITY AND OUTLAYS, NET

Budget authority, gross (discretionary and mandatory) $ 2,876 $ 641 $ 106 $ 477,552 $ 9,198

Actual offsetting collections (discretionary and mandatory) (2,852) (641) (6) (8,186) (19,057)

Change in uncollected payments, Federal sources

 (discretionary and mandatory) - - (1) 18 218

Budget Authority, Net (Discretionary and Mandatory) $ 24 $ - $ 99 $ 469,384 $ (9,641)

Outlays, gross (discretionary and mandatory) $ 2,762 $ 1,003 $ 101 $ 480,732 $ 9,763

Actual offsetting collections (discretionary and mandatory) (2,852) (641) (6) (8,186) (19,057)

Outlays, net (discretionary and mandatory) (90) 362 95 472,546 (9,294)

Distributed offsetting receipts - - - (125,584) -

Agency Outlays, Net (Discretionary and Mandatory) $ (90)$ 362 $ 95 $ 346,962 $ (9,294)


U.S. Department of the Treasury | Fiscal Year 2015

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SECTION A: COMBINED SCHEDULE OF SPENDING

Combined Schedule of Spending (Unaudited) 

For Fiscal Years Ended September 30, 2015 and 2014 

(In Millions) 

The following Schedule of Spending (SOS) presents an overview of the funds available for the Department to spend and how the 

Department spent these funds as of and for the fiscal year ended September 30, 2015 and 2014. The financial data used to 

populate this schedule is the same underlying data used to populate the Department’s Statement of Budgetary Resources (SBR). 

Accordingly, the budgetary financial information in this schedule is presented on a combined basis rather than on a consolidated 

basis. Specifically, 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 and Exempt from Apportionment” per the SBR), and 

Amount Not Available to be Spent (or “Unobligated balances, end of year – Unapportioned” per the SBR).

2015 2014

What Money is Available to Spend?

Total Resources $ 800,036 $ 841,793

Less: Amount Available but Not Agreed to be Spent (291,525) (290,299)

Less: Amount Not Available to be Spent (40,467) (59,843)

Total Amounts Agreed to be Spent $ 468,044 $ 491,651

How was the Money Spent/Issued?

Interest and Dividends1 $ 413,221 $ 441,926

Investments and Loans2 19,235 8,465

Personnel Compensation and Other Related Benefits 11,053 11,249

Grants, Subsidies, and Contributions3 7,983 15,915

Other Contractual Services 4,499 4,252

Other 12,053 9,844

Total Amounts Agreed to be Spent $ 468,044 $ 491,651

Who did the Money go to?

Federal $ 169,326 $ 195,616

Non-Federal 298,718 296,035

Total Amounts Agreed to be Spent $ 468,044 $ 491,651

(1) Interest and Dividends is primarily comprised of Interest on the Public Debt and interest expense related to credit reform activities. 

(2) Investments and Loans primarily include investments made in connection with loans issued for credit reform and non-credit reform 

activities. 

(3) Grants, Subsidies, and Contributions are primarily comprised of cash payments to States, other political subdivisions, corporations, 

associations, and individuals; credit reform program related subsidies; and contributions to foreign countries. 
U.S. Department of the Treasury | Fiscal Year 2015

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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 

arises from the three types of noncompliance: not filing required tax returns on time or at all (the nonfiling gap), underreporting 

the correct amount of tax on timely filed returns (the underreporting gap), and not paying on time the full amount reported on 

timely filed returns (the underpayment gap). Of these three components, only the underpayment gap is observed; the nonfiling 

gap and the underreporting gap must be estimated. Each instance of noncompliance by a taxpayer contributes to the tax gap, 

whether or not the IRS detects it, and whether or not the taxpayer is even aware of the noncompliance. Some of the tax gap 

arises from intentional (willful) noncompliance, and some of it arises from unintentional mistakes. 

The collection gap is the cumulative amount of tax, penalties, and interest assessed over many years, but not paid by a certain 

point in time, which the IRS expects will remain uncollectible. In essence, it represents the difference between the total balance 

of unpaid assessments and the net taxes receivable reported on the balance sheet of the IRS. The tax gap and the collection gap 

are related and overlapping concepts, but they have significant differences. The collection gap is a cumulative balance sheet 

concept for a particular point in time, while the tax gap is like an income statement item for a single year. Moreover, the tax gap 

estimates include all noncompliance, while the collection gap includes only amounts that have been assessed (a small portion of 

all noncompliance) and have not yet reached their statutory collection expiration date. Also, the tax gap includes only tax, while 

the collection gap includes tax, penalties, and interest. 

TAX BURDEN

The Internal Revenue Code 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 2013) and corporations (tax 

year 2012). 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. 
U.S. Department of the Treasury | Fiscal Year 2015

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0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

Under $15,000 $15,000 under

$30,000

$30,000 under

$50,000

$50,000 under

$100,000

$100,000 under

$200,000

$200,000 under

$500,000

$500,000 or

more

Dollars 

Average Adjusted Gross Income (AGI) Reported and Average Individual 

Income Tax Liability Tax Year 2013 

Average AGI per return

Average income tax per return

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

Under $15,000 $15,000 under

$30,000

$30,000 under

$50,000

$50,000 under

$100,000

$100,000

under

$200,000

$200,000

under

$500,000

$500,000 or

more

Percentage 

Individual Income Tax Liability as a Percentage of AGI 

Tax Year 2013 

INDIVIDUAL INCOME TAX LIABILITY 

Tax Year 2013 

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 37,255 $ 76,709 $ 2,093 $ 2,059 $ 56 2.7%

$15,000 under 

$30,000 30,556 671,851 18,614 21,988 609 2.8%

$30,000 under 

$50,000 25,753 1,008,621 55,379 39,165 2,150 5.5%

$50,000 under 

$100,000 31,803 2,272,956 198,233 71,470 6,233 8.7%

$100,000 under 

$200,000 16,426 2,209,424 278,504 134,508 16,955 12.6%

$200,000 under 

$500,000 4,488 1,277,489 250,646 284,645 55,848 19.6%

$500,000 or more 1,070 1,576,579 431,571 1,473,438 403,337 27.4%

Total 147,351 $ 9,093,629 $ 1,235,040
U.S. Department of the Treasury | Fiscal Year 2015

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0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

Zero Assets $1 under

$500

$500 under

$1,000

$1,000

under

$5,000

$5,000

under

$10,000

$10,000

under

$25,000

$25,000

under

$50,000

$50,000

under

$100,000

$100,000

under

$250,000

$250,000

under

$500,000

$500,000

under

$2,500,000

$2,500,000

or more

Percentage 

Corporation Tax Liability as a Percentage of Taxable Income 

Tax Year 2012 Data 

CORPORATION TAX LIABILITY

Tax Year 2012 

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 $ 16,712 $ 4,788 28.7%

$1 under $500 7,196 1,433 19.9%

$500 under $1,000 3,521 785 22.3%

$1,000 under $5,000 11,870 3,433 28.9%

$5,000 under $10,000 7,557 2,438 32.3%

$10,000 under $25,000 12,705 4,107 32.3%

$25,000 under $50,000 11,352 3,690 32.5%

$50,000 under $100,000 14,208 4,595 32.3%

$100,000 under $250,000 25,864 8,190 31.7%

$250,000 under $500,000 29,767 9,297 31.2%

$500,000 under $2,500,000 122,526 36,757 30.0%

$2,500,000 or more 886,522 188,341 21.2%

Total $ 1,149,800 $ 267,854
U.S. Department of the Treasury | Fiscal Year 2015

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SECTION C: MANAGEMENT AND PERFORMANCE CHALLENGES 

IDENTIFIED BY THE INSPECTORS GENERAL AND THE SECRETARY’S 

RESPONSES

In accordance with the Reports Consolidation Act of 2000, the Inspectors General is 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 

did not provide the Secretary with an annual update on management and performance challenges. This section contains the 

management and performance challenges letters from OIG and TIGTA and the Secretary’s responses describing actions taken and 

planned to address the challenges. 
U.S. Department of the Treasury | Fiscal Year 2015

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October 30, 2015

INFORMATION MEMORANDUM FOR SECRETARY LEW

FROM: Eric M. Thorson /s/ 

Inspector General

SUBJECT: Management and Performance Challenges Facing the

Department of the Treasury (OIG-CA-16-002)

In accordance with the Reports Consolidation Act of 2000, we are providing you with our 

perspective on the most serious management and performance challenges facing the Department 

of the Treasury.

We are reporting five challenges, which are updated from last year.

 Cyber Threats

 Management of Treasury’s Authorities Intended to Support and Improve the Economy

 Efforts to Promote Spending Transparency and to Prevent and Detect Improper Payments

 Anti-Money Laundering and Terrorist Financing/Bank Secrecy Act Enforcement

 Gulf Coast Restoration Trust Fund Administration

In addition to the above challenges, we continue to report our elevated concerns about two 

matters: currency and coin production and documenting key activities and decisions.

This year, we also combined two Challenges that were reported separately in the previous year’s 

memorandum. Specifically, we incorporated last year’s Challenge, “Continued Implementation

of Dodd-Frank,” into the broader Challenge, “Management of Treasury’s Authorities Intended to

Support and Improve the Economy.” We did this because many requirements directed to 

Treasury and the Treasury Secretary in the Dodd-Frank Wall Street Reform and Consumer 

Protection Act (Dodd-Frank) have been addressed, and the offices and functions called for by the 

Act have now been in place for a number of years.

In assessing the Department’s most serious challenges, we remain mindful of external factors 

that affect Treasury. Congress has not resolved much unfinished business when it comes to the 

Federal budget, the Nation’s debt, and the long-term sustainability of the Social Security and 

Medicare programs. Other pressures on Federal spending continue, such as the military action 

against the Islamic State of Iraq and the Levant and continued operations in Afghanistan. The 

polarized political environment in which the Federal Government has been operating since 2010, 

with the repeated cycle of budget and debt ceiling stopgaps, has resulted in waste and 

inefficiency.
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In an early draft of this memorandum which was shared with the Department, I included the debt 

limit impasse as a new challenge for this year because of the immediacy of the need to raise the 

debt ceiling to avoid potentially catastrophic consequences to the U.S. and world economies

from a debt default, and the uncertainty as to the Congressional action in that regard. I removed 

that challenge in this final memorandum as Congress has passed legislation, as of the date of this 

writing, for a temporary extension of the debt limit until March 15, 2017. That said, a more longterm solution to the recurring debt ceiling impasse still requires continued Treasury effort. Cyber 

threats to Treasury operations and the financial sector, which we elevated to a Challenge last 

year, will continue to be a serious risk for the foreseeable future. Additionally, Treasury 

administers programs that are inherently high-risk, such as programs to combat terrorist 

financing. With respect to Dodd-Frank, the mechanisms put in place to promote financial

stability have not yet be tested in a time of crisis.

Treasury has, throughout the years, had to administer major new programs and initiatives 

intended to support and improve the country’s economy. In nearly every case, the Department 

has had to start up and administer new programs and operations with thin staffing and very 

limited, if any, new resources. That situation remains the same. Again, we cannot emphasize 

enough to the Department’s stakeholders how critically important it is that Treasury is resourced

sufficiently to carry out its authorities and responsibilities to include maintaining a strong control 

environment.

2015 Management and Performance Challenges

Challenge 1: Cyber Threats

Cybersecurity represents one of the most serious challenges facing the Nation today. A reliable 

critical infrastructure, including information systems and networks, is vital to our national 

security and economic stability. Cyber threats are a persistent concern as Treasury’s information 

systems are critical to the core functions of government and the Nation’s financial infrastructure. 

As cyber threats continue to evolve and become more sophisticated and subtle, they pose an 

ongoing challenge for Treasury to fortify and safeguard its internal systems and operations and 

the financial sector it oversees.

Attackers frequently exploit vulnerable networks in a string of trusted connections to gain access 

to government systems. Cyber attacks against Federal agencies are increasing in frequency and 

severity. The cyber intrusion of the Department of State’s networks was used as a route to 

penetrate computer systems at the White House and gain access to the President’s e-mail

account. An attack against the Joint Chief of Staff’s e-mail forced management to take the 

system off line, cleanse it, and build in new protections. The recent cyber attacks against the 

Office of Personnel Management’s networks allowed intruders access to personal data on tens of 

millions of people, including millions with security clearances.

In our recent audits of selected Treasury bureaus, we found that security measures were not 

sufficient at the time to fully prevent and detect vulnerabilities to their networks and systems. In 

addition to Treasury’s own networks and systems, management must be cognizant of, and
U.S. Department of the Treasury | Fiscal Year 2015

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mitigate, the risks posed by attacks made against other agencies and Treasury contractors and 

subcontractors. Treasury frequently enters into interconnection agreements with other Federal, 

State, and local agencies, and service providers, to conduct its business. Treasury management 

must exercise due care when authorizing such internetwork connections and verify that third 

parties comply with Federal policies and standards. Management is also challenged with 

ensuring that critical data and information maintained by cloud service providers are properly 

protected.

Cyber attacks on financial institutions continue to evolve at an accelerated rate, and include 

distributed denial of service attacks, phishing attacks, and fraudulent wire payments. Organized 

hacking groups leverage published and unpublished vulnerabilities and vary their methods to 

make attacks hard to detect and even harder to prevent. Criminal groups and nation-states are 

constantly seeking to steal information; commit fraud; and disrupt, degrade, or deny access to 

information systems.

Effective public-private coordination continues to be required to address the cyber threat against 

the Nation’s critical infrastructure. In this regard, Treasury is looked upon to provide effective 

leadership to financial institutions in particular, and the financial sector in general, to strengthen 

awareness and preparedness against cyber threats.

Challenge 2: Management of Treasury’s Authorities Intended to Support and Improve the

Economy

Congress provided Treasury with broad authorities to address the financial crisis under the 

Housing and Economic Recovery Act (HERA) and the Emergency Economic Stabilization Act 

(EESA) enacted in 2008, the American Recovery and Reinvestment Act of 2009 (Recovery Act), 

and the Small Business Jobs Act of 2010. In response to the call for further financial reform, 

Congress passed Dodd-Frank in July 2010. As we stated last year, to a large extent Treasury’s 

program administration under these acts has matured, but challenges remain in managing 

Treasury’s programs and its outstanding investments as well as ensuring financial reform under 

Dodd-Frank. Our discussion of this challenge will begin with reforms under Dodd-Frank and

then address the others for which Treasury is responsible. 

Continued Implementation of Dodd-Frank

Among other things, Dodd-Frank established the Financial Stability Oversight Council (FSOC), 

which you chair as the Treasury Secretary. FSOC’s mission is to identify risks to financial 

stability that could arise from the activities of large, interconnected financial companies; promote 

market discipline; and respond to any emerging threats to the financial system.

FSOC accomplished much over the past year. As required, FSOC issued its fifth annual report in 

May 2015. FSOC also designated one nonbank financial company for supervision by the Board 

of Governors of the Federal Reserve System (FRB) in December 2014. Additionally, FSOC 

completed annual reevaluations for the three nonbank financial companies previously designated 

and did not rescind the designations. In February 2015, FSOC adopted changes related to its 

process for reviewing nonbank financial companies for potential designation to increase the
U.S. Department of the Treasury | Fiscal Year 2015

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transparency of its determinations and to formalize certain practices. Furthermore, FSOC also 

engaged in work to analyze risks associated with the asset management industry and the potential 

of such risks to affect U.S. financial stability. FSOC must continue to work in an effective

manner to meet all of its responsibilities.

Dodd-Frank also established the Council of Inspectors General on Financial Oversight (CIGFO), 

which I chair as the Treasury Inspector General. The Council facilitates the sharing of 

information among member Inspectors General with a focus on reporting our concerns that may 

apply to the broader financial sector and ways to improve financial oversight. Accordingly, 

CIGFO is an important source of independent analysis to FSOC.

As required, CIGFO met quarterly and issued its fifth annual report in July 2015. CIGFO also 

established its fourth Working Group in September 2014 to assess FSOC activities related to 

interest rate risk. The Working Group determined that FSOC monitors interest rate risk on an 

ongoing basis by facilitating the sharing of financial expertise and information among FSOC 

members and member agencies and by making annual report recommendations. The Working 

Group noted that since 2011, FSOC’s annual reports to Congress have discussed interest rate risk 

and recommended actions to address that risk. In that regard, FSOC’s 2013 annual report

included three interest rate risk recommendations and the 2014 annual report included two 

interest rate risk recommendations. To that end, the Working Group recommended that FSOC 

document in its annual reports its rationale for removing previously reported recommendations 

related to interest rate risk. In the view of the Working Group, the lack of explanation to remove 

previously reported recommendations created a lack of transparency around the process for 

removing such recommendations. In response to the Working Group’s recommendation, FSOC 

stated that to the extent that it no longer recommends action related to a risk area identified in the 

prior annual report, FSOC will consider how to provide additional information regarding the 

Council’s decision and analysis. Going forward, CIGFO will continue to review FSOC

operations and efforts to oversee the U.S. financial system.

As we have stated in the past, the intention of Dodd-Frank is most notably to prevent, or at least 

minimize, the impact of a future financial sector crisis on the U.S. economy. To accomplish this, 

Dodd-Frank placed great responsibility with Treasury. This management challenge from our 

perspective is to maintain an effective FSOC process

1

that timely identifies and appropriately 

responds to emerging risks, particularly in times of economic growth when government action to 

curtail risky behavior in marketplaces can be unpopular and seen as unnecessary.

Small Business Lending Fund and State Small Business Credit Initiative

The Small Business Jobs Act created within Treasury a $30 billion Small Business Lending Fund

(SBLF) to assist financial institutions with increasing the availability of credit to small 

businesses. It also provided Treasury with $1.5 billion to allocate to eligible State programs 

through the State Small Business Credit Initiative (SSBCI). These programs represented key

1 FSOC is supported by the Office of Financial Research and the Federal Insurance Office; both are offices within

Treasury.
U.S. Department of the Treasury | Fiscal Year 2015

140

initiatives of the Administration to support job creation by facilitating increased lending to small 

businesses.

Under SBLF, Treasury invested approximately $4 billion in 332 participating financial 

institutions through September 2011, when the investment authority ended. The intent of these 

investments was to stimulate lending to small businesses. However, participating financial 

institutions were not required to increase lending activity or report on how Treasury’s investment 

was used. Institutions must pay dividends to Treasury at rates ranging from 1 to 9 percent, which 

automatically step-up to as high as 13.8 percent in late 2015/early 2016. Eighty-eight (88) 

institutions have since exited the program redeeming approximately $1.6 billion of their

securities as of September 2015. While more institutions are expected to exit the program as 

dividend rates increase, some institutions may not be able to redeem their securities and exit the 

program.

Under SSBCI, Treasury disbursed approximately $1.3 billion to 57 participating States, 

territories, and eligible municipalities as of September 2015. These funds may be used for 

programs that partner with private lenders and investors to extend credit to or invest in small 

businesses. Treasury must ensure that SSBCI participants are accountable for the proper use of 

these funds as primary oversight is at the participant level.

The challenge to Treasury is to continue exercising sufficient oversight to ensure that (1) funds 

are used appropriately and intended results are being achieved, (2) SBLF dividends and interest 

owed are paid, and (3) the SBLF program is wound down as institutions exit. Regarding SSBCI, 

an additional challenge to Treasury’s oversight is that the Department’s authority to use SSBCI 

funds for administrative activities ends in fiscal year 2017, yet States’ SSBCI programs will be 

ongoing.

Bond Guarantee Program

The Small Business Jobs Act provided Treasury with authority to guarantee bonds issued for 

eligible community and economic development activities. As the program administrator, 

Treasury’s Community Development Financial Institutions (CDFI) Fund experienced challenges 

in standing up the program, which was eventually established in June 2013. CDFI Fund oversees 

the issuance of the bonds and the use of the bond proceeds by eligible CDFIs to make financing 

more accessible in underserved communities. To date, Treasury has issued $852 million in bond 

guarantees. Given that the program is still in its formative years, our office plans to assess the 

CDFI Fund’s administration of this program.

Housing and Economic Recovery Act and the Emergency Economic Stabilization Act

Through several HERA and EESA programs, Treasury injected capital into financial institutions 

and businesses.

Under HERA, Treasury supports the financial solvency of the Federal National Mortgage 

Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), 

which continue to operate under the conservatorship of the Federal Housing Finance Agency. To
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maintain the positive net worth of these two government sponsored enterprises (GSE), Treasury 

has invested approximately $187 billion in senior preferred stock in the two enterprises.2 While 

the GSEs have not required additional support since fiscal year 2012, their futures remain 

uncertain and further assistance may be required. If such support is needed, the current funding 

capacity available to Fannie Mae is $117.6 billion and available to Freddie Mac is $140.5 billion. 

Treasury must also continue to monitor the underlying assets of its $7.8 billion investment in the 

GSEs under the Housing Finance Agency Initiative, which supports State and local housing 

finance agencies. 

Until a solution to address housing finance reform is reached, it is difficult to predict what lies 

ahead for winding down the Fannie Mae and Freddie Mac investments. 

We also note that Treasury continues to administer programs established under the Troubled 

Asset Relief Program. That program, however, is not under the jurisdictional oversight of our 

office. 

Recovery Act Programs 

Since 2009, Treasury has been responsible for overseeing an estimated $150 billion of funding 

and tax relief for programs intended to strengthen the economy through financial stimulus. While 

funding for non-Internal Revenue Service programs is coming to a close, Treasury should 

continue to oversee awards totaling around $30 billion under Treasury’s payments-in-lieu of tax 

credit programs – to persons for specified energy properties and to States for low-income 

housing projects. In this regard, approximately 101,000 recipients remain obligated to comply 

with the terms of their awards over an extended period of time (5 years for specified energy 

property payments and 15 years for funded low-income housing projects). The level of risk 

involved in this program is evidenced by the fact that our Office of Investigations has several 

open matters involving program participants. 

Challenge 3: Efforts to Promote Spending Transparency and to Prevent and Detect

Improper Payments

Spending Transparency

The Digital Accountability and Transparency Act of 2014 (DATA Act), signed into law in May 

2014, requires the Federal Government to provide consistent, reliable, and useful online data 

about how it spends taxpayer dollars. The stated purpose of the law is to 

 expand the Federal Funding Accountability and Transparency Act of 2006 by disclosing 

direct Federal agency expenditures and linking Federal contract, loan, and grant spending 

information to programs of Federal agencies, enabling taxpayers and policy makers to track 

Federal spending more easily; 

2 Treasury’s cumulative investment of $187 billion in the GSEs’ senior preferred stock is comprised of 

approximately $116 billion in Fannie Mae and approximately $71 billion in Freddie Mac.
U.S. Department of the Treasury | Fiscal Year 2015

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 establish Government-wide data standards for financial data and provide consistent, reliable, 

and searchable Government-wide spending data that is displayed for taxpayers and policy 

makers on USASpending.gov (or a successor system);

 simplify reporting for entities receiving Federal funds by streamlining reporting requirements 

and reducing compliance costs while improving transparency;

 improve the quality of data submitted to USASpending.gov by holding Federal agencies 

accountable for the completeness and accuracy of the data submitted; and

 apply approaches developed by the Recovery Accountability and Transparency Board to 

spending across the Federal Government.

To fulfill its purpose, the DATA Act imposed certain requirements on the Treasury Secretary, 

the Director of the Office of Management and Budget (OMB), the Inspectors General of each 

Federal agency, and the Comptroller General of the United States. In brief, the DATA Act 

required Treasury and OMB to establish Government-wide financial data standards for reporting 

spending by Federal agencies and entities receiving Federal funds by May 2015 and further 

requires Treasury and OMB to:

 by May 2017, ensure this financial data is accurately posted and displayed on

USASpending.gov, or a successor system; and

 by May 2018, ensure the data standards established are applied to the data made available on 

the website.

Inspectors General of each Federal agency, including Treasury, are required by the Act to 

conduct three biennial reviews beginning in 2016 of a statistically valid sample of spending data 

submitted by the agency and the implementation of data standards by the agency. The Inspector 

General (IG) community has identified an anomaly with the timing of these reviews in that the 

first required report on data submitted is due prior to the date that agencies are required to submit 

data in accordance with the Act. The IG community is working with the Government 

Accountability Office and Congress to resolve this issue.

Implementing the DATA Act is a complex undertaking requiring a significant level of 

interagency coordination and cooperation to develop, establish, and apply new financial data 

standards and to develop new data handling methodologies (referred to as the data exchange 

schema) within a short timeframe. As of September 15, 2015, 20 months from the date by which 

agencies must report Federal spending data in accordance with data standards established under 

the Act, Treasury and OMB officials have issued the data standards and developed a 

methodology for agencies to follow when implementing the DATA Act. While an important 

achievement, much work remains. For example, questions regarding some data standards remain

and a final determination regarding the applicability of the DATA Act to certain agencies has not 

yet been made. In addition, the data exchange schema, processes, and systems needed for 

agencies to submit data are still being developed. Agencies were recently required to submit 

DATA Act implementation plans to OMB, which are under review. However, open issues such

as those described above may hinder agencies’ ability to determine the full scope of the 

implementation effort required.
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Given the broad government-wide implications and critical roles assigned to Treasury by the 

DATA Act, we consider this a high risk implementation project and management challenge. It 

should be noted that we have initiated a series of audits of Treasury’s efforts to meet its 

responsibilities under the DATA Act.

3

Detect Improper Payments

In light of the continuing problem with improper payments (estimated at $125 billion, or 4.5 

percent of all program outlays, for fiscal year 2014), the Federal Government has intensified 

efforts to reduce improper payments in major Federal programs. The Do Not Pay Initiative, and 

the Treasury Bureau of the Fiscal Service’s (Fiscal Service) Do Not Pay Business Center, are 

chief components of efforts designed to prevent and detect improper payments to individuals and 

entities.

The Do Not Pay Business Center provides two services to agencies: the Do Not Pay Portal and 

the Do Not Pay Data Analytics Service. The Do Not Pay Portal is intended to provide users with 

a single entry point to search data sources such as the Social Security Administration’s (SSA) 

publicly available Death Master File, the Department of Health and Human Service Office of 

Inspector General’s List of Excluded Individuals/Entities, the General Services Administration’s 

System for Award Management, and Treasury’s Debt Check Database. However, as we reported 

in November 2014, the 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, among other 

things, SSA’s full death data.

4

With its potential to reduce improper payments, the Do Not Pay Program is a major and 

important undertaking by Fiscal Service and Treasury. As part of our ongoing audit work in this 

area, we will continue to monitor the steps taken by Fiscal Service to improve the effectiveness 

of the Do Not Pay Business Center. We are also planning to review the Do Not Pay Program’s 

data analytic capabilities during the coming fiscal year.

Challenge 4: Anti-Money Laundering and Terrorist Financing/Bank Secrecy Act

Enforcement

As we reported in the past, preventing criminals and terrorists from using our financial networks 

to sustain their operations and/or launch attacks against the U.S. continues to be a challenge. 

Treasury’s Office of Terrorism and Financial Intelligence (TFI) is dedicated to disrupting the 

ability of terrorist organizations to fund their operations. TFI brings together intelligence 

gathering and analysis, economic sanctions, international cooperation, and private-sector

3 Our first audit, completed in May 2015, reported on Treasury’s efforts as of October 31, 2014 (Office of 

Inspector General (OIG), Treasury Is Making Progress in Implementing the DATA Act But Needs Stronger 

Project Management (OIG-15-034; issued May 19, 2015)). As of this writing, we have three audits in progress: 

(1) a continued review of Treasury’s government-wide DATA Act efforts, covering efforts through May 31,

2015; (2) a review of Treasury’s establishment of a Data Transparency Office and enhancement of the

USASpending.gov website; and (3) a “readiness” review of Treasury as a reporting entity under the DATA Act.

4 OIG, Fiscal Service Successfully Established the Do Not Pay Business Center But Challenges Remain

(OIG-15-006; Nov. 6, 2014)
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cooperation to identify donors, financiers, and facilitators supporting terrorist organizations, and 

disrupt their ability to fund such organizations. Enhancing the transparency of the financial 

system is one of the cornerstones of this effort. Treasury carries out its responsibilities to 

enhance financial transparency through the laws collectively known as the Bank Secrecy Act 

(BSA). The Financial Crimes Enforcement Network (FinCEN) is the Treasury bureau 

responsible for administering BSA, while Treasury’s Office of Foreign Assets Control (OFAC) 

administers U.S. foreign sanction programs.

With respect to FinCEN, it faces continuing challenges to enhance financial transparency as a 

way to strengthen efforts to combat financial crime and collect, analyze, and report data on 

national threats. FinCEN has focused on enhancing its enforcement efforts to promote 

compliance with the BSA in partnership with Federal banking regulators and law enforcement. It

continues to improve its enforcement processes and systems after its 2013 reorganization. To this 

end, FinCEN has been working on clarifying and strengthening customer due diligence 

requirements. This includes requirements for institutions to identify beneficial ownership of their 

accountholders so that their true identities are not hidden. FinCEN issued a notice of proposed 

rulemaking to that effect in July 2014, “Customer Due Diligence Requirements for Financial 

Institutions.” In August 2015, pursuant to BSA, FinCEN issued a notice of proposed rulemaking 

to prescribe minimum standards for anti-money laundering programs to be established by certain 

investment advisers and to require such investment advisers to report suspicious activity.

More recently, FinCEN was challenged with providing clarifying guidance to the financial 

community who may be reluctant to do business with State-legalized marijuana dispensaries. 

While these dispensaries remain illegal under Federal law, FinCEN’s February 2014 guidance 

for financial institutions clarified reporting obligations with respect to services to marijuanarelated businesses consistent with BSA obligations. This guidance includes conducting due 

diligence on prospective customers. Prepaid cards also present money laundering and terrorist 

financing risks. In October 2011, FinCEN published a notice of proposed rule-making which 

requires those carrying prepaid cards with values over $10,000 to declare them at the border

(cross-border transactions). In 2015, OMB postponed the issuance of the final rule because it has 

not completed a budgetary review of the expected final rule.

Other matters of concern on the horizon include the increasing use of (1) mobile devices for 

banking, internet banking, internet gaming, and peer-to-peer transactions; and (2) virtual 

currencies.

5 FinCEN and other regulatory agencies will need to make sure that providers of these 

services who are covered by BSA understand their obligations under the statute. Monitoring the 

transactions of tomorrow may prove to be increasingly difficult for Treasury. In this regard, in

2013, FinCEN issued guidance on virtual currencies and regulatory responsibilities in order to 

provide clarity for businesses and individuals engaged in this expanding field of financial 

activity. FinCEN’s rules defined certain businesses or individuals which use convertible virtual

currencies or make a business of exchanging, accepting, and transmitting them as Money Service

5 Bitcoins are an example of a virtual currency. These consist of a series of numbers created automatically on a set 

schedule and traded anonymously between digital addresses or "wallets." Certain exchange firms buy or sell 

Bitcoins for legal tender at a rate that fluctuates with the market. Congress and regulators continue their efforts to 

determine the legality, legitimacy, and regulatory framework for virtual currencies such as Bitcoins.
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Businesses (MSBs). MSBs have registration requirements and a range of anti-money laundering, 

recordkeeping, and reporting responsibilities under FinCEN’s regulations.

Given the criticality of this challenge to the Department’s mission, and notwithstanding the 

efforts described above, we continue to consider anti-money laundering and combating terrorist 

financing programs and operations as inherently high-risk.

Challenge 5: Gulf Coast Restoration Trust Fund Administration

In response to the Deepwater Horizon oil spill, Congress enacted the Resources and Ecosystems

Sustainability, Tourist Opportunities, and Revived Economies of the Gulf Coast States Act of

2012 (RESTORE Act). This law established within Treasury the Gulf Coast Restoration Trust 

Fund (Trust Fund) and requires Treasury to deposit into the Trust Fund 80 percent of 

administrative and civil penalties paid by responsible parties pursuant to the Federal Water 

Pollution Control Act (Clean Water Act). The funds are to be distributed for environmental and 

economic restoration activities affecting the Gulf Coast States (Alabama, Florida, Louisiana, 

Mississippi, and Texas). To date, the Trust Fund received approximately $816 million from the 

Federal Government’s settlement with the Transocean defendants. In July 2015, BP Exploration

& Production Inc. (BPXP), agreed to settle with the Federal Government and the Gulf Coast 

States resulting in approximately $4.4 billion plus interest expected to be deposited into the Trust 

Fund over a 15-year period.

Under the RESTORE Act, money from the Trust Fund is allocated to five components:

• Direct Component (35 percent) – administered by Treasury for allocation in equal shares 

to the Gulf Coast States for ecological and economic restoration of the Gulf Coast region;

• Council-Selected Restoration Component (30 percent) – administered by the Gulf Coast 

Ecosystem Restoration Council (the Council)

6

for allocation to Gulf Coast States and 

Federal agencies, pursuant to a comprehensive plan approved by the Council, to 

undertake projects and programs using the best available science that would restore and 

protect the Gulf Coast region’s natural resources, ecosystems, fisheries, marine and 

wildlife habitats, beaches, and coastal wetlands;

• Spill Impact Component (30 percent) – administered by the Council for allocation to the 

Gulf Coast States for eligible oil spill restoration activities, pursuant to the Council’s 

approval of the States’ plans to improve the ecosystems or economy of the Gulf Coast 

region, using a regulatory formula;

• Science Program Component (2.5 percent) – administered by the National Oceanic and 

Atmospheric Administration for its Gulf Coast Ecosystem Restoration Science, 

Observation, Monitoring, and Technology Program. This program is to carry out 

research, observation, and monitoring to support the long-term sustainability of the

6 The Gulf Coast Ecosystem Restoration Council consists of the following members, or designees: (1) at the 

Federal level, the Secretaries of the Interior, Army, Commerce, Agriculture, the head of the department in which 

the Coast Guard is operating (currently the Secretary of Homeland Security), and the Administrator of the 

Environmental Protection Agency; and (2) at the State level, the Governors of Alabama, Florida, Louisiana, 

Mississippi, and Texas.
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ecosystem, fish stocks, fish habitat, and the recreational, commercial, and charter fishing 

industry in the Gulf of Mexico; and

• Centers of Excellence Research Grants Program Component (2.5 percent) – administered 

by Treasury for allocation in equal shares to the Gulf Coast States for competitive grant 

awards to nongovernmental entities and consortia in the Gulf Coast region, including 

public and private institutions of higher education, to establish centers for excellence to 

conduct Gulf Coast region research.

The RESTORE Act prescribes how funds will be distributed and gives Treasury the 

administrative oversight of the Direct Component and Centers of Excellence Research Grants 

Program Component. Further, the Act provides the Secretary authority to withhold funds to the 

Council-Selected Restoration and Spill Impact Components if certain conditions in the Act are 

not met, including compliance with procurement rules and regulations.

Treasury made significant progress in establishing a grants program with the stand-up of the 

Office of Gulf Coast Restoration. However, challenges remain. The foremost challenge is the 

demand on Treasury to provide technical assistance to grant applicants as they seek 

interpretation of regulations and application guidelines and develop multiyear implementation 

plans. Furthermore, many local governments seeking technical assistance are not experienced as 

direct recipients of Federal financial assistance.

Going forward, Treasury needs to consider the impact of the proposed settlement with BPXP. 

Now that a more definitive amount and timing of the money that will flow into the Trust Fund 

has been determined, Treasury, the Gulf Coast States, and impacted local governments are 

challenged with ensuring existing plans meet the expected funding levels as well as timing of 

payments.

We continue to meet with Treasury staff and to provide our perspectives on controls as 

procedures to administer the Trust Fund are developed. Our audit work to date has focused 

mainly on Treasury’s progress in establishing a grants program to administer the Direct 

Component and Centers of Excellence Component. Additionally, we reviewed internal controls

at Gulf Coast State and local government entities applying for Direct Component planning grants 

as well as reviewed the selection process by the Gulf Coast States to establish Centers of 

Excellence. The appropriate disbursement and use of RESTORE Act grants will be a focus of

our work going forward.

Other Matters of Concern

Although we are not reporting these as management and performance challenges, we want to 

highlight two areas of concern: (1) currency and coin production and (2) documenting key 

activities and decisions.

Currency and Coin Production

In January 2012, we reported on deficiencies with the Bureau of Engraving and Printing’s

(BEP) production process, which led to 1.4 billion finished NexGen $100 notes being printed
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(in 2010) but not accepted by FRB because creasing was detected in some of the finished 

notes. Although the production problems were identified and sufficiently resolved and FRB 

began supplying financial institutions with the redesigned NexGen $100 notes in October

2013, BEP and FRB still need to decide on the disposition of the 1.4 billion finished notes 

that have not been accepted by FRB.

Another matter related to currency redesign that should be kept in mind is meaningful access 

to U.S. currency for blind and visually impaired individuals. In response to a court ruling on 

that matter, in 2011 Treasury submitted a three-element approach to provide such access. 

Two elements of this approach—raised tactile features and large, high-contrast numerals—

require changes to the design of currency. The third element is a three-phased program 

started in 2014 to provide currency readers. The lessons learned from the NexGen $100 note

production process underscore the need for sound and comprehensive project management as

BEP undertakes this redesign effort.

Challenges continue to exist with coin production at the United States Mint. For example, the 

cost of producing penny and nickel coins were double their face value because rising metal 

prices have resulted in higher production costs. In addition to rising production costs, it is 

imperative that BEP and the Mint consider the effect of alternative payment methods and 

other technological advances (such as stored value cards, the Internet, smartphones, and 

virtual currencies) as well as consumer demand on their respective business models,

practices, future planning and interactions with their customer, and FRB. 

Documenting Key Activities and Decisions

In prior years, I have cited several audits by my office that highlighted lapses by the 

Department in maintaining a complete and concurrent record of key activities and decisions. 

These audits reported on the selection of financial agents for Treasury’s investment in Fannie 

Mae and Freddie Mac mortgage-backed securities, Treasury’s consultative role with the 

Department of Energy’s Solyndra loan guarantee, and the Office of the Comptroller of the 

Currency’s oversight of foreclosure-related consent orders. In 2014, we reported that Fiscal 

Service’s decisions to establish the Direct Express® Debit MasterCard

® program and select 

the program’s financial agent were reasonable. However, its analyses and documentation of 

those decisions should have been more complete. More recently, we reported a similar 

situation with two financial agents selected by Fiscal Service to provide banking services to 

the Federal Bureau of Prisons. In response to this audit, Fiscal Service stated that it was 

refining and updating its policies and procedures for selection of financial agents, as well as 

maintaining related documentation. We believe the corrective actions undertaken by Fiscal 

Service are important to promote transparency and confidence in Treasury’s use of financial 

agents.

7

In another audit however, when we reported that OFAC lacked policies and procedures for a 

critical mission function—the implementation of a sanctions program—OFAC’s response

7 OIG, Former Federal Inmate Debit Card Fees Were Comparable with Other Card Programs, but

Documentation Supporting Financial Agent Agreements Was Lacking (OIG-15-048; Sep. 17, 2015)
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was that its current practices were sufficient. We were disappointed with OFAC’s response and are 

presently pursuing this issue through the Department’s audit resolution process.8

Maintaining proper documentation is a fundamental tenet of government accountability and 

transparency. Maintaining proper documentation is also in the best long-term interest of Treasury 

and its component offices and bureaus if actions are later questioned, as they have been. In this 

regard, appropriate documentation can be as simple as contemporaneous notes providing a record of 

why decisions were made, the way they were made, and how the Government satisfied itself that the 

decisions were the best course of action. Also adding to the documentation challenge is the increase 

in Federal retirements along with the resulting loss of institutional knowledge. We do note that 

Treasury has issued policy that addresses documentation requirements, such as Treasury Directive 

80-05, “Records and Information Management Program.” We also believe that policies and 

procedures are essential to ensure critical functions (1) continue when personnel change and (2) are 

carried out in a consistent manner in accordance with management’s direction. In our view, issues 

with maintaining documentation and policies and procedures are a matter of Treasury management 

and personnel needing to remain aware and vigilant. 

We would be pleased to discuss our views on the management and performance challenges and the 

other matters expressed in this memorandum in more detail. 

cc: Brodi Fontenot 

Assistant Secretary for Management 
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INSPECTOR GENERAL 

FOR TAX

ADMINISTRATION

D E P A RTMEN T OF THE TR E A SURY 

WASHINGTON, D.C. 20005

October 15, 2015

MEMORANDUM FOR SECRETARY LEW

FROM: J. Russell George

Inspector General

SUBJECT: Management and Performance Challenges Facing the Internal

Revenue Service for Fiscal Year 2016

The Reports Consolidation Act of 20001 requires that the Treasury Inspector General for 

Tax Administration (TIGTA) summarize, for inclusion in the annual Department of the 

Treasury Agency Financial Report, its perspective on the most serious management

and performance challenges confronting the Internal Revenue Service (IRS).

Each year, TIGTA evaluates IRS programs, operations, and management functions to 

identify the areas of highest vulnerabilities to the Nation’s tax system. For Fiscal Year 

(FY) 2016, the top management and performance challenges, in order of priority, are:

1. Security for Taxpayer Data and IRS Employees;

2. Implementing the Affordable Care Act and Other Tax Law Changes;

3. Tax Compliance Initiatives;

4. Fraudulent Claims and Improper Payments;

5. Achieving Program Efficiencies and Cost Savings;

6. Improving Tax Systems and Online Services;

7. Providing Quality Taxpayer Service Operations;

8. Globalization;

9. Taxpayer Protection and Rights; and

10.Human Capital.

In FY 2014, the IRS collected nearly $3.1 trillion in tax revenue, processed more than

242 million tax returns and other forms, and issued approximately $374 billion in tax 

refunds. Between FYs 2010 and 2014, the IRS budget declined by $850 million to 

approximately $11.3 billion and the IRS lost approximately 13,000 full-time employees. 

In FY 2015, the IRS’s budget was further reduced to $10.9 billion, a cut of

approximately $346 million from the FY 2014 level and more than one billion dollars less 

than the 2010 level.

1 31 U.S.C. § 3516(d) (2006).
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2

TIGTA and other independent oversight bodies2 have highlighted the serious challenges 

that declining budgets pose to the IRS as it tries to meet its statutory obligations and 

effectively administer the Nation’s tax system. TIGTA has reported how this trend of 

lower budgets, reduced staffing, and the loss of supplementary funding for the 

implementation of the Patient Protection and Affordable Care Act (Affordable Care Act)

3 

has affected the IRS’s ability to deliver its priority program areas, including customer 

service and enforcement activities.4

In FY 2016, it appears that the IRS may once again face substantial budgetary 

pressure. Both the House and Senate Committees on Appropriations recommended 

budgets below the FY 2015 enacted level of $10.9 billion. As the IRS faces new or 

growing challenges with a reduced budget and smaller staff, it must attempt to identify 

and implement innovative and cost-saving strategies. However, with staffing costs 

making up approximately 75 percent of its budget, the IRS will undoubtedly be 

challenged to find areas of savings that will allow it to balance quality customer service, 

strong tax enforcement, and protection of taxpayer information.

The following information detailing the management and performance challenges is 

provided to promote economy, efficiency, and effectiveness in the IRS’s administration 

of the Nation’s tax laws.

SECURITY FOR TAXPAYER DATA AND IRS EMPLOYEES

Cybersecurity threats against the Federal Government continue to grow. According to 

the Department of Homeland Security’s U.S. Computer Emergency Readiness Team, 

Federal agencies reported 69,851 cyberattacks in FY 2014, an increase of about

15 percent from FY 2013.

5

The IRS relies extensively on its computer systems to support both its financial and 

mission-related operations. These computer systems collect and process extensive 

amounts of taxpayer data, which includes Personally Identifiable Information. Based on 

the increased number and sophistication of threats to taxpayer information and the need 

for the IRS to better protect taxpayer data and improve its enterprise security program, 

securing IRS systems and protecting the confidentiality of taxpayer information

continues to be a top concern facing the IRS.

2 Examples include the Government Accountability Office, the IRS National Taxpayer Advocate, and the

Internal Revenue Service Advisory Council.

3 Pub. L. No. 111-148, 124 Stat. 119 (2010) (codified as amended in scattered sections of the U.S. Code), 

as amended by the Heath Care and Education Reconciliation Act of 2010, Pub. L. No. 111-152, 124 Stat.

1029.

4 TIGTA, Ref. No. 2014-10-025, Implementation of Fiscal Year 2013 Sequestration Budget Reductions

(June 2014) and Ref. No. 2015-30-035, Reduced Budgets and Collection Resources Have Resulted in

Declines in Taxpayer Service, Case Closures, and Dollars Collected (May 2015).

5 Office of Management and Budget, Annual Report to Congress: Federal Information Security

Management Act (Feb. 2015).
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3

In May 2015, the IRS announced that criminals had used taxpayer-specific data 

acquired from non-IRS sources to gain unauthorized access to tax account information 

through the IRS’s “Get Transcript”

6 application. As of August 17, 2015, the IRS 

indicated that unauthorized users were successful in obtaining access to information for 

more than 350,000 taxpayer accounts. However, the actual number of individuals 

whose personal information was available to criminals accessing these tax accounts is

significantly larger, in that these tax accounts include information on all of the individuals 

claimed on a tax return (e.g., spouses and dependents). According to the IRS, an 

individual or individuals succeeded in clearing an authentication process that required 

knowledge of the taxpayer’s information, including Social Security information, date of 

birth, tax filing status, and street address. In addition, it appears that these third parties 

had access to private personal information that allowed them to correctly answer 

questions that typically only the taxpayer would know. TIGTA’s Office of Investigations, 

in conjunction with the IRS and other Federal law enforcement partners, continues to 

investigate this incident.

The risk for unauthorized access to tax accounts will continue to grow as the IRS 

focuses its efforts on delivering self-assisted online tools to taxpayers. The IRS’s vision 

is to provide taxpayers and tax professionals with the electronic products and services 

that they desire to enable them to interact and communicate with the IRS.7 This

includes expanded online services, based on the idea of accessing Government 

services anywhere, any time, on any device, in three to five years.

TIGTA has identified a number of areas in which the IRS could better protect taxpayer 

data and improve its overall security position. The IRS shares Federal tax information 

and other IRS records with many Federal, State, and local agencies as well as private 

agencies and contractors through system interconnections.

During our most recent Federal Information Security Modernization Act8 evaluation of

the IRS’s information security programs and practices,9 we found three security program 

areas, Continuous Monitoring Management, Identity and Access Management, and 

Configuration Management, that did not meet the level of performance specified by the 

Department of Homeland Security.10

6 Information available on the Get Transcript application can include account transactions, line-by-line tax 

return information, and income reported to the IRS. 7 Internal Revenue Service Strategic Plan – FY 2014-2017 (IRS Publication 3744) (Rev. June 2014). 8 Pub. L. No. 113-283. This law amends chapter 35 of title 44 of the United States Code to provide for 

reform to Federal information security. 9 TIGTA, Ref. No. 2015-20-092, Treasury Inspector General for Tax Administration – Federal Information

Security Modernization Act Report for Fiscal Year 2015 (Sept. 2015). 10 To assist the Inspectors General in evaluating compliance with the Federal Information Security 

Modernization Act, the Department of Homeland Security issued the Fiscal Year 2015 Inspector General 

Federal Information Security Modernization Act Reporting Metrics, which specified 10 information security

program areas and listed specific attributes within each area for evaluation.
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4

Continuous Monitoring Management ensures ongoing, real-time awareness of 

information security, vulnerabilities, and threats to IRS systems and the environments in 

which those systems operate. We found that the IRS is still in the process of 

implementing its Information Security Continuous Monitoring program required by the 

Office of Management and Budget to automate asset management and maintain secure 

configuration of assets in real time.

Identity and Access Management ensures that only those with a business need are able 

to access IRS systems and data. We found that the IRS did not achieve 

Governmentwide goals for implementing access to systems and physical access to 

facilities in compliance with Homeland Security Presidential Directive-12, which requires 

Federal agencies to issue personal identity verification cards to employees and 

contractors for accessing agency systems and facilities.

Configuration Management ensures that settings on IRS systems are maintained in an 

organized, secure, and approved manner, including timely installing patches to resolve 

known security vulnerabilities. We found that the IRS has not fully implemented 

enterprise-wide automated processes to identify computer assets, evaluate compliance 

with configuration policies, and deploy security patches.

TIGTA also found that many interconnections11 in use at the IRS do not have proper 

authorization or security agreements. Although the IRS has established an office to 

provide oversight and guidance for the development of security agreements, that office 

is not responsible for managing or monitoring agreements for all external 

interconnections in use in the IRS environment. TIGTA believes the lack of a 

centralized inventory and an enterprise-level approach to ensure that all external 

interconnections are monitored has contributed to interconnections that are currently 

active but lack proper approvals and assurances that the interconnections meet current 

security requirements.12

Besides safeguarding a vast amount of sensitive data, the IRS must work to protect 

taxpayers by educating them on the numerous schemes currently employed by 

criminals posing as IRS employees intent on deceiving taxpayers into providing their 

personal financial information or coercing them into paying money on phony tax 

obligations. To date, TIGTA’s Office of Investigations has logged more than 676,000 

contacts from taxpayers who reported that they had received telephone calls from 

individuals who claimed to be IRS employees. These criminal impersonators told the 

victims that they owed taxes that if not immediately paid would result in arrest, loss of 

their driver’s license, or other consequences. More than 4,300 victims have reported

11 The National Institute of Standards and Technology defines a system interconnection as the direct 

connection of two or more information technology systems for the purpose of sharing data and other 

information resources.

12 TIGTA, Ref. No. 2015-20-087, Improvements Are Needed to Ensure That External Interconnections

Are Identified, Authorized, and Secured (Sept. 2015).
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5

that they paid the criminal impersonators more than $22 million since October 2013. 

Scams such as these are not typically resolved quickly because of their complexity. 

TIGTA is diligently working to identify these criminals so they can be referred to the 

U.S. Department of Justice for prosecution.

IMPLEMENTING THE AFFORDABLE CARE ACT AND OTHER TAX LAW CHANGES

The Affordable Care Act represents the largest set of tax law changes in more than

20 years and presents a continuing challenge for the IRS as provisions take effect. The 

Affordable Care Act provisions provide incentives and tax breaks to individuals and 

small businesses to offset health care expenses. The provisions also impose penalties, 

administered through the tax code, for individuals and businesses that do not obtain 

health care coverage for themselves or their employees. The IRS was responsible for 

implementing two primary provisions of the Affordable Care Act during the 2015 Filing 

Season: Minimum Essential Coverage and the Shared Responsibility Payment,

13 and 

the Premium Tax Credit.

14

TIGTA found that the IRS has not developed processes and procedures to ensure 

taxpayer compliance with the Minimum Essential Coverage and Shared Responsibility 

Payment requirements during the 2015 Filing Season.

15 IRS management indicated 

that a business decision was made to not develop processes and procedures because

the receipt of required insurer and employer information reports had been delayed. The

IRS plans to use information obtained during the 2015 Filing Season to develop

post-processing compliance strategies to be used in future years to evaluate taxpayers’ 

compliance with these provisions. TIGTA will continue to evaluate the IRS’s efforts to 

verify taxpayers’ compliance in this area.

The Affordable Care Act also created the refundable Premium Tax Credit to assist 

eligible taxpayers with paying their health insurance premiums. Individuals may elect to 

have the credit paid directly to their health insurance providers to cover the cost of their 

premiums (referred to as Advance Premium Tax Credit) or receive it as a lump sum 

credit on their Federal income tax return. As of January 2015, individuals who received 

an Advance Premium Tax Credit were required to reconcile the amount paid on their 

behalf to the allowable amount of their Premium Tax Credit when the Tax Year 2014 

return was filed. However, the IRS did not receive the required Exchange Periodic

13 Minimum Essential Coverage is health insurance coverage that contains essential health benefits such 

as emergency services, maternity and newborn care, and preventive and wellness services. If an 

individual does not have Minimum Essential Coverage and does not qualify for a coverage exemption, the 

individual will need to make a shared responsibility payment when filing his or her Federal income tax 

return.

14 A Premium Tax Credit is a refundable tax credit to assist individuals and families in purchasing health 

insurance coverage through an Exchange. 15 TIGTA, Ref. No. 2015-43-030, Affordable Care Act: Assessment of Internal Revenue Service

Preparations to Ensure Compliance With Minimum Essential Coverage and Shared Responsibility

Payment Requirements (Mar. 2015).
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6

Data16 from all Exchanges17 at the start of the filing season. Because of the incomplete 

or unreported data from the Exchanges, the IRS was unable to ensure that taxpayers 

claiming the Premium Tax Credit met the key eligibility requirement of purchasing 

insurance through an Exchange and taxpayers who received the Advance Premium Tax 

Credit properly reconciled the credit on their tax returns.

18

In addition to implementing the Affordable Care Act, the IRS faces the challenge each 

year of implementing tax law changes from new, renewed, or expiring tax law 

provisions. Correctly implementing tax law changes remains a significant challenge 

because the legislative actions generating these changes typically occur late in the 

year, shortly before the filing season begins. As a result, the IRS must revise various 

forms, instructions, and publications, and reprogram its computer systems to ensure 

that tax returns are accurately processed. Errors in the IRS’s tax return processing 

systems may delay tax refunds, affect the accuracy of taxpayer accounts, and result in 

incorrect taxpayer notices.

TAX COMPLIANCE INITIATIVES

The underreporting of individual and corporate income, employment, and estate taxes, 

at $376 billion a year, accounts for the largest portion of the $450 billion Tax Gap. The 

Tax Gap is defined as the difference between the estimated amount taxpayers owe and 

the amount they voluntarily and timely pay for a tax year. The IRS addresses the Tax 

Gap by attempting to identify questionable tax returns when they are received and 

processed and by conducting examinations of tax returns filed to determine if any 

adjustments to the information reported on the tax returns are needed. In addition, the 

IRS issues notices and contacts taxpayers to collect the delinquent taxes. If necessary, 

the IRS takes enforcement action, such as filing liens and seizing assets, to collect the 

taxes.

Between FYs 2010 and 2015, the IRS’s budget has been reduced by approximately

$1.2 billion. The IRS has seen a reduction of 21 percent of Automated Collection 

System contact representatives and 28 percent of Field Collection revenue officers. 

This has resulted in the Automated Collection System answering 25 percent fewer 

taxpayer calls since FY 2011 and taxpayers whose calls were answered spent an 

average of eight minutes (97 percent) longer waiting for a contact representative.

16 The Affordable Care Act requires the Exchanges to provide the IRS with information regarding 

individuals who are enrolled by the Exchange on a monthly basis. These data are referred to as 

Exchange Periodic Data.

17 An Exchange is where taxpayers find information about health insurance options, purchase qualified 

health plans, and, if eligible, obtain help paying premiums.

18 TIGTA, Ref. No. 2015-43-057, Affordable Care Act: Interim Results of the Internal Revenue Service

Verification of Premium Tax Credit Claims (May 2015).
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Additionally, in FY 2014, revenue officers collected $222 million (7 percent) less than in

FY 2011.

19

We expect that the increasing budgetary constraints will continue to impact IRS efforts 

to enforce tax compliance. The IRS Commissioner testified in March 2015 that the IRS 

will lose 1,800 key enforcement personnel during FY 2015 that it will be unable to 

replace. As a result, the IRS anticipates that fewer audits and fewer resources will be 

focused on collection, and estimates that as a result of these enforcement cuts, the 

Federal Government will lose at least $2 billion in revenue.

20

TIGTA continues to audit the efficiency and effectiveness of the IRS’s efforts to reduce 

the Tax Gap and improve voluntary compliance. In the area of partnership compliance, 

for example, the IRS initiated a Partnership Strategy in July 2012 to improve the 

partnership audit process in light of the significant increase in partnership filings and 

complexities associated with auditing partnership returns. TIGTA reviewed the 

partnership audit process and found that the IRS has no effective way to assess the 

productivity of its partnership audits because many complex partnerships have multiple 

layers of flow-through entities.21 In order to track partnership audits, the IRS uses a 

decades old system that is unable to provide information on the total amount of taxes 

that are ultimately assessed to the taxable partners as a result of adjustments made to 

partnership returns. Therefore, the IRS is unable to assess the full impact of its 

partnership compliance activities.

Additionally, Congress enacted legislation in an effort to narrow the Tax Gap and 

increase voluntary compliance of businesses through information reporting. The 

legislation required information returns to be filed for reportable payment card 

transactions22 starting in Calendar Year 2012. The IRS committed to a multiyear pilot 

initiative leveraging Form 1099-K, Payment Card and Third Party Network Transactions, 

information to reduce the Tax Gap. Included were backup withholding provisions that 

require payers to withhold 28 percent of the amounts reported on Forms 1099-K for 

payees that failed to provide a valid Taxpayer Identification Number. However, TIGTA 

found that payers are not in compliance with these withholding requirements. 23 For

19 TIGTA, Ref. No. 2015-30-035, Reduced Budgets and Collection Resources Have Resulted in Declines 

in Taxpayer Service, Case Closures, and Dollars Collected (May 2015). 20 Written Testimony of John A. Koskinen, Commissioner of the IRS, before the Senate Appropriations

Committee, Subcommittee on Financial Services and General Government, dated March 3, 2015.

21 TIGTA, Ref. No. 2015-30-004, Additional Improvements Are Needed to Measure the Success and

Productivity of the Partnership Audit Process (Mar. 2015). 22 A reportable payment card transaction involves a bank or other entity that makes a payment to a 

merchant or other business, in settlement of reportable payment card transactions, which includes credit 

cards, debit cards, and store-valued cards. The entity that transfers funds to the merchant’s account is

responsible for preparing and furnishing Form 1099-K, Payment Card and Third Party Network

Transactions, to the merchant and to the IRS.

23 TIGTA, Ref. No. 2015-40-089, Additional Actions to Enforce Payment Card Reporting Requirements

Could Reduce the Tax Gap (Sept. 2015).
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example, our review of Calendar Year 2013 Forms 1099-K identified 10,216 Forms

1099-K with a missing Taxpayer Identification Number. These Forms 1099-K reported 

gross transactions totaling more than $10.6 billion. As such, payers were required to 

withhold almost $3 billion from these payees, yet no withholding was taken.

FRAUDULENT CLAIMS AND IMPROPER PAYMENTS

The Office of Management and Budget describes an improper payment as any payment 

that should not have been made, was made in an incorrect amount, or was made to an 

ineligible recipient. The Improper Payment Information Act (IPIA) of 200224 requires 

Federal agencies, including the IRS, to estimate the amount of improper payments and 

report to Congress annually on the causes of and the steps taken to reduce improper

payments. The Improper Payment Elimination and Recovery Act of 201025 amended 

the IPIA by strengthening agency reporting requirements and redefining significant 

improper payments.

The Improper Payment Elimination and Recovery Act requires agencies to report an 

annual improper payment rate below 10 percent. The IRS provided all required 

improper payment information for inclusion in the Department of the Treasury Agency 

Financial Report Fiscal Year 2014, with the exception of reporting an overall Earned 

Income Tax Credit improper payment rate below 10 percent.

26 The IRS has made little 

improvement in reducing Earned Income Tax Credit improper payments since it has 

been required by the IPIA to provide an estimate of these payments to Congress. The 

Earned Income Tax Credit is the largest refundable credit

27 based on total claims paid, 

and it continues to be vulnerable to a high rate of noncompliance, including incorrect or 

erroneous claims caused by taxpayer error or resulting from fraud.

Additionally, IRS processes for assessing the risk of improper payments do not 

accurately reflect the risk associated with the Additional Child Tax Credit.

28 Each year 

since FY 2011, the IRS has continually rated the risk of improper payments associated 

with the Additional Child Tax Credit as low. However, our review of the IRS’s own 

enforcement data indicates that the Additional Child Tax Credit improper payment rate

is similar to that of the Earned Income Tax Credit. We estimate that the Additional Child

Tax Credit improper payment rate for FY 2013 is between 25.2 percent and

30.5 percent, with potential improper payments totaling between $5.9 billion and

$7.1 billion.

24 Pub. L. No. 107-300, 116 Stat. 2350.

25 Pub. L. No. 111-204, 124 Stat. 2224.

26 TIGTA, Ref. No. 2015-40-044, Assessment of Internal Revenue Service Compliance With the Improper

Payment Reporting Requirements in Fiscal Year 2014 (Apr. 2015). 27 A refundable credit allows taxpayers to reduce their tax liability to below zero and thus receive a tax 

refund, even if no income tax was withheld or paid.

28 TIGTA, Ref. No. 2014-40-093, Existing Compliance Processes Will Not Reduce the Billions of Dollars in

Improper Earned Income Tax Credit and Additional Child Tax Credit Payments (Sept. 2014).
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Further, the IRS does not have effective processes to identify erroneous claims for 

education credits.

29 The Taxpayer Relief Act of 199730 created two permanent 

education tax credits, the Hope Credit and the Lifetime Learning Credit. The American 

Recovery and Reinvestment Act of 200931 temporarily replaced the Hope Credit with a 

refundable tax credit known as the American Opportunity Tax Credit. This credit was 

initially set to expire at the end of the Calendar Year 2010, but has been extended 

through Calendar Year 2017. Based on our analysis of education credits claimed and 

received on Tax Year 2012 tax returns, we estimate that more than 3.6 million 

taxpayers received more than $5.6 billion ($2.5 billion in refundable credits and

$3.1 billion in nonrefundable credits) in potentially erroneous education credits.

Another problem with a significant impact on tax administration is identity theft. The IRS 

has described identity theft as one of its “Dirty Dozen” scams.

32 Because new identity 

theft patterns are constantly evolving, the IRS recognizes that it needs to adapt its 

detection and prevention processes. While TIGTA found that efforts continue to result

in increased detection and prevention of identity theft returns, the IRS’s ability to stop 

this problem is still limited.33 Further, the IRS still does not have timely access to

third-party income and withholding information. Most of the third-party income and 

withholding information is not received by the IRS until well after the tax return filing 

season begins. The IRS continues to propose legislation to accelerate and expand its 

access to data that would further improve its detection efforts.

ACHIEVING PROGRAM EFFICIENCIES AND COST SAVINGS

Achieving program efficiencies and cost savings is imperative, as the IRS must continue 

to carry out its mission with a significantly reduced budget. The IRS must continue to 

identify and implement innovative cost-saving strategies to enforce the law with integrity 

and fairness and provide America’s taxpayers with top quality service by helping them 

understand and meet their tax responsibilities. TIGTA has identified a number of areas 

in which the IRS can achieve cost savings, more efficiently use its limited resources,

and make more informed business decisions.

TIGTA recently completed an audit to determine whether there was duplication in risk 

assessment services performed by the IRS and the Department of Homeland Security’s 

Federal Protective Service (FPS).34 The FPS has the responsibility to conduct risk

29 TIGTA, Ref. No. 2015-40-027, Billions of Dollars in Potentially Erroneous Education Credits Continue to

Be Claimed for Ineligible Students and Institutions (Mar. 2015). 30 Pub. L. No. 105-34, 111 Stat. 788 (codified as amended in scattered sections of the U.S. Code).

31 Pub. L. No. 111-5, 123 Stat. 115, *306, subsequently amended by the Tax Relief Unemployment

Insurance Reauthorization and Job Creation Act of 2010, Pub. L. No. 111-312, 124 Stat. 3296. 32 Compiled annually, the “Dirty Dozen” lists a variety of common scams that taxpayers may encounter.

33 TIGTA, Ref. No. 2015-40-026, Efforts Are Resulting in the Improved Identification of Fraudulent Tax

Returns Involving Identity Theft (Apr. 2015).

34 TIGTA, Ref. No. 2015-10-077, To Avoid Duplication, the Internal Revenue Service Should Make Use of

Federal Protective Service Risk Assessments (Sept. 2015).
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assessments for all the facilities under its purview, including more than 600 IRS facilities 

throughout the country. TIGTA found that while the IRS is required to pay the FPS for 

risk assessments, the IRS does not fully benefit from the information provided in these 

risk assessments. Specifically, the IRS does not use FPS risk assessments or evaluate 

recommendations that FPS inspectors made to improve the security at IRS facilities. In 

addition, the IRS does not consider when a facility last received a risk assessment from 

the FPS when scheduling its own risk assessments. As a result, the IRS conducted

57 risk assessments at facilities that had already received an FPS risk assessment 

within the last two years. The IRS paid almost $100 million in basic security fees to the 

FPS for FYs 2010 through 2014, which included charges for FPS-prepared risk 

assessments; however, the IRS also incurred additional costs to perform its own risk 

assessments of the same facilities.

TIGTA identified two ways in which the Federal Employee/Retiree Delinquency 

Initiative35 program (Initiative program) can be improved.

36 The first involves the Federal 

Payment Levy Program (FPLP), which allows the IRS to levy up to 15 percent of certain 

Federal payments, including wages, to delinquent taxpayers. Federal payments for 

certain Federal employees are excluded from the FPLP due to legal or policy 

constraints, e.g., bankruptcy or military service men and women in combat zones, but 

the IRS excludes certain other Federal payments from the FPLP without a legal or 

articulated policy basis. TIGTA forecasts that expanding the FPLP to include more 

Federal payments could potentially increase revenue by approximately $18.3 million 

over the next five years. The second improvement opportunity involves the IRS’s policy 

to handle many Initiative program cases manually. Initiative program cases bypass the 

IRS’s other Automated Collection System tools that can systemically identify taxpayer 

assets for levy in favor of manual handling. With its reduced budget, it is even more 

important for the IRS to maximize the use of its automated systems whenever possible 

because manual processes can prove to be inefficient and more costly.

TIGTA also determined that the IRS paid monthly service fees for almost 6,800 wireless 

devices that were not captured in inventory records.37 Because these devices are not 

tracked in inventory, the IRS does not have assurance that the employees using them 

have a valid business need. While service fees associated with almost 6,800 devices 

may be justifiable, the IRS is not in a position to determine which fees are valid because 

inventory and billing records cannot be reconciled. The annualized cost equates to 

nearly $2 million in service fees for devices that were not inventoried in FY 2013.

35 A program that promotes Federal tax compliance among current and retired Federal employees.

36 TIGTA, Ref. No. 2015-30-051, Most Federal Employee/Retiree Delinquency Initiative Cases Are

Resolved With the Collection of Revenue; However, Some Program Improvements Can Be Made

(June 2015). 37 TIGTA, Ref. No. 2014-10-075, Wireless Telecommunication Device Inventory Control Weaknesses

Resulted in Inaccurate Inventory Records and Unsupported Service Fees (Sept. 2014).
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IMPROVING TAX SYSTEMS AND ONLINE SERVICES

Successful modernization of IRS systems and the development and implementation of 

new information technology applications are critical to meet the IRS’s evolving business 

needs and to enhance services provided to taxpayers.

38 The IRS has acknowledged 

that the current technology environment has raised taxpayers’ expectations for online 

customer service interactions and it needs to meet these expectations. This is 

particularly important because as the IRS has absorbed budget cuts, it has directed 

more taxpayers to technology-based self-assistance options such as its IRS2Go app; 

YouTube channels; interactive self-help tools on IRS.gov; and Twitter, Tumblr, and 

Facebook accounts.

However, earlier this year, the IRS Commissioner testified that the IRS expected to 

absorb budget cuts of more than $200 million by delaying critical information technology 

investments. This includes delaying replacement of aging information technology 

systems and not investing upfront money to develop future capabilities, such as 

improved web services that would enable taxpayers to more easily obtain information 

and improve their interaction with the IRS.

The IRS Restructuring and Reform Act of 199839 mandated that the IRS, not later than 

December 31, 2006, develop procedures for taxpayers and their designees to review 

taxpayers’ accounts electronically. The Service on Demand Initiative is the IRS’s latest 

attempt to deliver such capability and contains specific projects that will provide online 

account access options. However, the projects intended to provide these online options 

ultimately cannot be delivered until the IRS commits to fully completing three key “pillar” 

information technology projects. The completion of these projects is needed to provide 

the account features to enable taxpayers to view their accounts online, to accurately 

authenticate their identities online, and to enable the IRS and taxpayers to communicate 

with secure electronic messages. The recent breach of the IRS’s Get Transcript 

application highlights the importance of accurately authenticating taxpayers’ identities 

online because criminals used taxpayer-specific data acquired from non-IRS sources to 

gain access to information for more than 330,000 taxpayer accounts.

40

With its limited resources, the IRS needs to prioritize projects to ensure enhanced 

service to taxpayers. TIGTA determined that three IRS-developed projects, which 

would provide taxpayers with dynamic online account access capabilities, were not 

ranked among the top 20 projects the IRS recommended for development.

41 These

38 For Fiscal Year 2016, we have replaced the Modernization challenge and incorporated it within the 

Improving Tax Systems and Online Services challenge to reflect the IRS’s expanded use of technology to 

provide taxpayers online services. 39 Pub. L. No. 105-206, 112 Stat. 685 (codified as amended in scattered sections of 2 U.S.C., 5 U.S.C. 

app., 16 U.S.C., 19 U.S.C., 22 U.S.C., 23 U.S.C., 26 U.S.C., 31 U.S.C., 38 U.S.C., and 49 U.S.C.). 40 IRS, Additional IRS Statement on the "Get Transcript" Incident, dated August 17, 2015.

41 TIGTA, Ref. No. 2015-40-053, Taxpayer Online Account Access Is Contingent on the Completion of

Key Information Technology Projects (May 2015).
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three projects focused on providing taxpayers with online account capabilities that 

would establish self-service options for taxpayers to report identity theft and lock their 

online tax account from potential abuse by identity thieves. However, despite the

impact identity theft has on tax administration and taxpayers, the IRS ranked projects to 

establish IRS workload management practices and a unified case management system 

higher.

PROVIDING QUALITY TAXPAYER SERVICE OPERATIONS

Providing taxpayers with quality customer service is a key component in the IRS’s 

mission. Ensuring that taxpayers understand and meet their tax responsibilities is 

crucial for the IRS in its effort to encourage voluntary compliance with the tax laws. 

Resolving taxpayer questions before tax returns are filed helps avoid unintentional 

errors and also reduces taxpayer burden that results from the issuance of post-filing 

notices and correspondence. Further, successfully addressing and resolving taxpayer 

inquiries through a quality customer service process allows the IRS to direct its limited 

resources more efficiently.

In the past, TIGTA has evaluated the IRS’s efforts to provide quality customer service 

and made recommendations for areas of improvement. Although the IRS has 

implemented certain procedures to better assist taxpayers, budget reductions pose a 

significant challenge and continue to force the IRS to cut service to taxpayers. As 

demand for taxpayer services continues to increase, resources devoted to customer 

service have decreased, thereby affecting the quality of customer service that the IRS is 

able to provide.

There has been a decline in the IRS’s ability to provide a sufficient level of customer 

service in each of the channels that taxpayers use, including telephone, face-to-face 

assistance at Taxpayer Assistance Centers, and correspondence. Despite the various 

options, most taxpayers continue to use the telephone as the primary method to make 

contact with the IRS. The IRS continues to struggle in providing high-quality customer 

service over the telephone.

As a result of the budget cuts, the IRS forecasted a 37.1 percent Level of Service for the

2015 Filing Season. As of May 2, 2015, there were approximately 83.2 million attempts 

by taxpayers to contact the IRS by calling the various customer service toll-free 

telephone assistance lines seeking help to understand the tax law and meet their tax 

obligations.

42 IRS assistors answered approximately 8.3 million calls and provided a

37.6 percent Level of Service with a 23.5 minute Average Speed of Answer. In 

comparison, the Level of Service for the 2014 Filing Season was 70.8 percent, with the

42 The IRS refers to the suite of 29 telephone lines to which taxpayers can make calls as “Customer

Account Services Toll-Free.”
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IRS answering more than 11 million telephone calls with a 14.4 minute Average Speed 

of Answer.43

Each year, many taxpayers also seek assistance from one of the IRS’s 380 walk-in 

offices, called Taxpayer Assistance Centers. However, the IRS estimates that the 

number of taxpayers it will assist at its Taxpayer Assistance Centers will decrease this 

fiscal year. The IRS assisted more than 5.5 million taxpayers in FY 2014 and plans to 

assist 5.3 million taxpayers in FY 2015 (a 4 percent decrease). Further, the IRS’s ability 

to process taxpayer correspondence in a timely manner has also declined. The backlog 

of paper correspondence inventories remains high. The over-age inventory44 rose from

32.7 percent of inventory in 2014 to 36.1 percent in 2015.

In an effort to continue to redirect taxpayers to online services, the IRS has expanded its 

online tools available on IRS.gov and offers more self-assistance options that taxpayers 

can access 24 hours a day, seven days a week. The IRS reported more than

327 million visits to IRS.gov this filing season as of May 9, 2015. Taxpayers continue to 

desire electronic products and services that enable them to interact and communicate 

with the IRS. In response, the IRS continues to expand the information and tools 

available online to assist taxpayers. The IRS’s goal is to provide taxpayers with

dynamic online account access that includes viewing their recent payments, making 

minor changes and adjustments to their accounts in real time, and corresponding 

digitally with the IRS to respond to notices or complete required forms.

Although the IRS Commissioner noted that the IRS expects to deliver dynamic online 

account access capability in three to five years, funding needs to be committed to fully 

complete the key information technology projects. Failure to dedicate funding to this 

effort will cause the IRS to miss opportunities to fully benefit from the cost savings and 

improved customer service that can be achieved by providing online account access, 

including reducing the reliance on traditional service channels such as telephones, 

paper correspondence, and face-to-face contact that are currently experiencing heavy 

traffic.

45

We also determined that victims of identity theft experienced long delays in having their 

tax accounts resolved.

46 Our review of a statistically valid sample of 100 identity theft 

tax accounts resolved in the Accounts Management function between October 1, 2012, 

and September 30, 2013, identified that the IRS took an average 278 days to resolve 

the tax accounts. In addition, our review identified that the IRS made errors on the tax 

accounts of victims of identity theft, resulting in the delay of refunds or the victim

43 TIGTA, Ref. No. 2015-40-080, Results of the 2015 Filing Season (Aug. 2015). 44 Correspondence is generally considered over-age when it has been in inventory for more than

45 calendar days.

45 TIGTA, Ref. No. 2015-40-053, Taxpayer Online Account Access Is Contingent on the Completion of

Key Information Technology Projects (May 2015).

46 TIGTA, Ref. No. 2015-40-024, Victims of Identity Theft Continue to Experience Delays and Errors in

Receiving Refunds (Mar. 2015).
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receiving an incorrect refund amount. For example, of the 100 tax accounts that TIGTA 

reviewed, the IRS did not correctly resolve 17 (17 percent) accounts. Errors result in 

delayed refunds and require the IRS to reopen cases and take additional actions to 

resolve the errors. Based on the results of the review of the 100 identity theft tax 

accounts, we estimate that 25,565 (10 percent) of the 267,692 taxpayers whose 

accounts were resolved during the period October 1, 2012, to September 30, 2013, may 

have been resolved incorrectly, resulting in the issuance of delayed or incorrect refunds. 

This wastes additional resources needed to resolve the errors and further burdens 

victims of tax-related identity theft.

GLOBALIZATION

The scope, complexity, and magnitude of international financial transactions continue to 

present significant enforcement challenges for the IRS. As the IRS noted in its most 

recent strategic plan, the evolution and proliferation of virtual commerce has expanded 

the exchange of goods, services, and currencies – real and virtual – across jurisdictions, 

further complicating tax administration. In addition, businesses with U.S. tax obligations 

are increasingly adopting more complex incorporation structures, shifting away from

C corporations and moving towards flow-through entities, such as partnerships and

S corporations.

47

The IRS has encouraged taxpayers to voluntarily disclose their foreign accounts and

pay the amount they owe through the Offshore Voluntary Disclosure Program. Since its 

establishment in 2009, this Program has resulted in more than 50,000 disclosures of 

underpaid or unpaid taxes and the collection of more than $7 billion in back taxes, 

interest, and penalties. Another tool that the IRS expects will help improve offshore tax 

compliance is the Foreign Account Tax Compliance Act (FATCA).48 This law requires 

foreign financial institutions to report information to the IRS about financial accounts

held by U.S. taxpayers or by foreign entities in which U.S. taxpayers hold a substantial 

ownership interest. More than 160,000 foreign financial institutions have registered 

under the FATCA and recently, in March 2015, began providing the IRS with 

information.

In an audit assessing the IRS’s progress in implementing the FATCA, TIGTA found that 

the IRS has taken steps to provide information to affected stakeholders that explain the 

FATCA requirements and expectations.

49 However, TIGTA identified that improvements 

are required to ensure compliance with the FATCA. If compliance plans are not

properly documented, implementation and performance of compliance activities could 

experience unnecessary delays. TIGTA also identified some limitations with the IRS’s

47 Internal Revenue Service Strategic Plan – FY 2014-2017 (IRS Publication 3744) (Rev. June 2014).

48 Pub. L. No. 111-147, Subtitle A, 124 Stat 71, *96-116 (2010)(codified in scattered sections of

26 U.S.C.).

49 TIGTA, Ref. No. 2015-30-085, The Internal Revenue Service Has Made Progress in Implementing the

Foreign Account Tax Compliance Act (Sept. 2015).
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processing of paper Forms 8938, Statement of Specified Foreign Financial Assets, that 

if not properly addressed could limit the IRS’s ability to make informed decisions and 

achieve its compliance objectives related to the FATCA.

The United States generally taxes U.S. citizens and resident aliens50 on their worldwide 

income and foreign persons on their U.S. source income. The Foreign Tax Credit (FTC) 

is intended to reduce the double taxation burden that would otherwise occur when 

foreign source income is taxed by both the United States and the foreign country from 

which the income is derived. The FTC can significantly affect the amount of taxes paid 

by individuals on U.S. tax returns. In Tax Year 2013, nearly 7.4 million individual tax 

returns were filed claiming approximately $16.7 billion in FTCs.

TIGTA determined that the IRS does not have sufficient controls and processes in place 

to identify erroneous FTC claims.

51 TIGTA’s analysis of paper and electronically filed 

individual tax returns for Tax Years 2010 through 2012 identified that the IRS

potentially: improperly allowed $94.9 million in FTCs on 65,499 tax returns; allowed 

taxpayers to file 16,058 tax returns that claimed nearly $2.9 million in FTCs as a 

deduction, as well as a credit on the same foreign taxes paid; and allowed nearly

$40 million in erroneous FTCs on 188,102 tax returns when third-party information 

return documents did not support the FTCs claimed.

TAXPAYER PROTECTION AND RIGHTS

The IRS must ensure that tax compliance activities are balanced against the rights of 

the taxpayers to receive fair and equitable treatment. In June 2014, the IRS updated 

Publication 1, Your Rights as a Taxpayer. Also referred to as the Taxpayer Bill of 

Rights, this publication outlines the rights of the taxpayer and the processes for 

examination, appeal, collection, and refunds. The IRS continues to dedicate significant 

resources and attention to implementing the taxpayer rights provisions of the IRS 

Restructuring and Reform Act of 1998. The following audits related to taxpayer rights 

provisions are mandated to be completed annually by TIGTA: Notices of Levies; 

Restrictions on the Use of Enforcement Statistics to Evaluate Employees; Fair Debt 

Collection Practices Act

52 Violations; Notices of Liens; Seizures; Illegal Tax Protestor 

Designations; Statute of Limitations for the Assessment of Additional Taxes and 

Penalties; Collection Due Process Appeals; Denial of Requests for Information; 

Restrictions on Directly Contacting Taxpayers Instead of Authorized Representatives; 

and Separated or Divorced Joint Filer Requests.

50 An individual who is not a U.S. citizen who meets either the “green card” test of holding an immigrant 

visa or the physical presence of being in the United States for at least 31 days during the current calendar 

year and a total of 183 days during the three-year period that includes the current year and the two 

preceding years.

51 TIGTA, Ref. No. 2015-30-052, Improvement Is Needed in Compliance Efforts to Identify Unsupported

Claims for Foreign Tax Credits (July 2015).

52 15 U.S.C. §§1601 note, 1692-1692o (2006).
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In general, the IRS has improved its compliance with these statutory taxpayer rights 

provisions and is documenting its protection of taxpayer rights. However, during the 

review of the IRS’s compliance with Notice of Federal Tax Lien due process 

procedures, TIGTA found that the IRS did not notify the taxpayers’ representatives of 

the Notice of Federal Tax Lien filings as required.

53 Based on the sample results,

TIGTA estimated that 24,237 taxpayers may have been adversely affected because the 

IRS did not follow requirements to notify the taxpayers’ representatives of the taxpayers’ 

rights related to the Notices of Federal Tax Lien.

During the review of the IRS Office of Appeals Collection Due Process Program, TIGTA 

identified errors relating to the determination of the Collection Statute Expiration Date 

(CSED) on taxpayer accounts.54 The CSED is the expiration of the time period 

established by law to collect taxes. From a statistically valid sample, TIGTA identified 

instances in which the IRS incorrectly extended the CSED, allowing the IRS additional 

time it should not have had to collect the delinquent taxes. Based on the sample 

results, TIGTA projected that 1,464 of the 34,155 Collection Due Process taxpayer 

cases closed in FY 2014 may have an incorrect CSED with time extended in error.

During the review of the IRS’s compliance with legal guidelines when conducting 

seizures of taxpayers’ property, TIGTA found that the IRS generally followed the 

guidelines. However, we identified 24 instances, involving 21 seizures, in which the IRS 

did not comply with a particular Internal Revenue Code section and the related Internal 

Revenue Manual requirement or the IRS Restructuring and Reform Act of 1998.55

Failure to adhere to legal and internal guidelines could result in the abuse of taxpayers’

rights or inequitable treatment of taxpayers.

The IRS is continuously under attack by criminals using the tax administration system 

for personal gain in various ways. These scams, and the methods used to perpetrate 

them, are constantly changing, require constant monitoring by the IRS, and adversely 

impact taxpayers. For at least the last decade, the IRS has provided the public with 

information about what it sees as the “Dirty Dozen” tax scams on its website. These 

scams range from offshore tax avoidance to fake charities and inflated refund claims. 

Compiled annually, the “Dirty Dozen” lists a variety of common scams that taxpayers 

may encounter.

The phone impersonation scam has proven to be so large that it is one of TIGTA’s

Office of Investigation’s top priorities, and it has also landed at the top of the IRS’s “Dirty

Dozen” tax scams this year. It is a surprisingly effective and fast way to steal taxpayers’

53 TIGTA, Ref. No. 2015-30-055, Fiscal Year 2015 Statutory Review of Compliance With Notice of

Federal Tax Lien Due Process Procedures (June 2015).

54 TIGTA, Ref No. 2015-10-068, Review of the Office of Appeals Collection Due Process Program

(Aug. 2015).

55 TIGTA, Ref. No. 2015-30-048, Fiscal Year 2015 Review of Compliance With Legal Guidelines When

Conducting Seizures of Taxpayers’ Property (June 2015).
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money, and in this fast-paced electronic environment, the money can be gone before 

the victims ever realize that they have been scammed. The hundreds of thousands of 

complaints we have received about this scam makes it the largest, most pervasive 

impersonation scam in the history of our agency. It has claimed thousands of victims 

with reported losses totaling more than $22 million as of August 2015.

HUMAN CAPITAL

People are the Federal Government’s most critical asset because they play such a vital 

role in achieving agencies’ missions and delivering services to stakeholders. The 

Government Accountability Office has designated Strategic Human Capital

Management as a high risk since 2001. In its most recent High-Risk report, it noted that 

current budget and long-term fiscal pressures, declining levels of employee satisfaction, 

the changing nature of Federal work, and a potential wave of employee retirements 

threaten the Government’s capacity to address many evolving, national issues.

56

At most Federal agencies, personnel costs account for the large majority of operating 

costs. The IRS is no exception, with approximately 75 percent of its budget going 

toward personnel costs. Between FYs 2010 and 2014, the IRS lost approximately

13,000 full-time employees and expects to lose an additional 3,000 employees through 

attrition in FY 2015.

57 Additionally, by the end of FY 2017, approximately 69 percent of 

all IRS executives and 48 percent of the IRS’s non-executive managers are projected to 

be eligible for retirement.

58

Although the IRS faces pressure to fill staffing vacancies when the budget permits, the 

IRS must ensure that it hires and retains only well-qualified individuals. TIGTA found 

that between January 2010 and September 2013, the IRS hired hundreds of former 

employees with prior substantiated conduct or performance issues, including tax 

issues.

59 Although these individuals may meet Office of Personnel Management 

suitability standards, rehiring prior employees with known conduct and performance 

issues presents an increased risk to the IRS and taxpayers.

Further, TIGTA found that the IRS’s process to address tax violations by its employees 

could be improved.

60 TIGTA reviewed records for cases closed in FYs 2004 through

2013 and found that 1,580 employees were found to be willfully tax noncompliant.

While the IRS Restructuring and Reform Act of 1998 states that the IRS shall terminate

56 Government Accountability Office, GAO-15-290, High Risk Series – An Update (Feb. 2015).

57 Written Testimony of John A. Koskinen, Commissioner of the IRS, before the House Ways and Means

Committee, Subcommittee on Oversight, dated April 22, 2015.

58 TIGTA, Ref. No. 2013-10-017, Improvements Have Been Made to Address Human Capital Issues, but

Continued Focus Is Needed (Jan. 2013).

59 TIGTA, Ref. No. 2015-10-006, Additional Consideration of Prior Conduct and Performance Issues Is

Needed When Hiring Former Employees (Dec. 2014). 60 TIGTA, Ref. No. 2015-10-002, Review of the Internal Revenue Service’s Process to Address Violations 

of Tax Law by Its Own Employees (Apr. 2015).
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18

employees who willfully violate tax law, it also gives the IRS Commissioner the sole 

authority to mitigate cases to a lesser penalty. Over this 10-year period, 620 employees 

(39 percent) with willful tax noncompliance were terminated, resigned, or retired. For

the other 960 employees (61 percent) with willful tax noncompliance, the proposed 

terminations were mitigated to lesser penalties such as suspensions, reprimands, or 

counseling.

The anticipated retirements and reduction in employees possessing a very specialized 

skillset and institutional knowledge are particularly challenging as the IRS works to 

process an increasing number of tax returns, combat tax refund fraud and identity theft, 

and effectively manage new or enhanced responsibilities brought on by tax code 

changes. Faced with a shrinking workforce and continued budgetary pressure, the IRS 

will be challenged to successfully achieve its mission. Further, as the agency primarily 

responsible for administering Federal tax law, the IRS must ensure that its employees 

are held to the highest standards to maintain the public’s confidence.

CONCLUSION

This memorandum is provided as our annual summary of the most serious major 

management and performance challenges confronting the IRS in FY 2016. TIGTA’s 

Fiscal Year 2016 Annual Audit Plan contains our proposed reviews, which are 

organized by these challenges, in order of priority. If you have any questions or wish to 

discuss our views on the challenges in greater detail, please contact me at

(202) 622-6500.

cc: Deputy Secretary

Assistant Secretary for Management and Chief Financial Officer

Commissioner of Internal Revenue
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MANAGEMENT’S RESPONSE TO THE 

MANAGEMENT AND PERFORMANCE CHALLENGES IDENTIFIED BY THE 

TREASURY INSPECTOR GENERAL 

AND 

TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION

In their memoranda dated October 23 and October 15, 2015, the Treasury Inspector General (IG) and the Treasury Inspector 

General for Tax Administration (TIGTA), respectively, identified the major challenges facing management. The Special 

Inspector General for the Troubled Asset Relief Program (SIGTARP) did not report to the Department any management and 

performance challenges for inclusion in the financial report. The Department of the Treasury concurs with the IG and the 

TIGTA on these challenges. These challenges do not necessarily indicate deficiencies in performance; rather, some represent 

inherent risks that must be monitored continuously. Moving forward, Treasury will continue to address these issues 

proactively. The following tables summarize the major management and performance challenges facing the Department of the 

Treasury, and provide information on the actions taken by Treasury in fiscal year 2015 and planned for fiscal year 2016 and 

beyond. The IG’s matters of concern are also addressed below.

Jacob J. Lew

Secretary of the Treasury

 November 16, 2015
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RESPONSE TO OIG 

OIG CHALLENGE NO. 1 SUMMARY OF MAJOR ISSUES

Cyber Threats  Build on existing partnerships among financial 

institutions, regulators, and private entities in the 

financial sector

 Identify and respond to emerging cyber threats against 

financial institutions and the broader financial sector

Domestic Finance (Office of Critical Infrastructure Protection & Compliance Policy (OCIP))

Fiscal Year 2015 Accomplishments

 Improved public-private incident response coordination by refining mechanisms for financial sector 

companies to request technical assistance from government during major cybersecurity incidents

 Held dozens of threat briefings for financial regulators, financial sector companies, and executive branch 

agencies to explain the context behind certain malicious activity

 Promoted use of the National Institute of Standards and Technology’s (NIST) Cybersecurity Framework 

by actively engaging with senior executives at-large and small firms, third-party vendors, and financial 

regulators through public speeches and direct engagement with financial services sector companies

 Coordinated with financial regulators through the Financial and Banking Information Infrastructure 

Committee to promote shared approaches to cybersecurity risk management

 Completed three large-scale financial sector cybersecurity exercises (December 2014, March 2015, June 

2015) with DHS, DOD, DOJ, financial regulators, and private sector representatives; these exercises 

tested and refined communication and escalation processes for responding to and recovering from 

destructive malware attacks

 Implemented protocols to automate information sharing, which will allow companies to more quickly 

share and receive technical cybersecurity data 

 Created and disseminated a total of 19 circulars, through OCIP’s Cyber Intelligence Group, that informed 

network security specialists of cyber actors’ tactics, techniques, procedures and associated indicators to 

assist in network defense capabilities and planning

Actions Planned or Underway 

 Developing tabletop exercises based on the NIST Cybersecurity Framework’s five concurrent and 

continuous functions to aid small and medium sized financial institutions; the functions are protect, 

defend, identify, respond, and recovery from cybersecurity threats/events

 Planning to execute three cybersecurity exercises in 2016

 Coordinating regional meetings between financial institutions and local FBI and other law enforcement 

and financial institutions; to facilitate the establishment of knowing your local contacts before a critical n 

event occurs is critical

 Working closely with government partners in the United Kingdom to test communication and escalation 

processes for responding to cyber incidents impacting both countries

Management (Chief Information Officer)

Fiscal Year 2015 Accomplishments

 Achieved the following Fiscal Year 2015 Cybersecurity Cross-Agency Priority (CAP) goals:

o Reached or exceeded CAP targets for four of six Information Security Continuous Monitoring 

goals, two of three Anti-Phishing and Malware Defense goals, and both of the Secure 

Authentication goals

o Exceeded CAP goal for Secure Authentication during the Cyber Sprint; drove PIV-required 

authentication from 69 percent (July 1) to 96 percent (September 30) for unprivileged users and 

from 4 percent to 100 percent of privileged users; reduced the number of current privileged users 

below the target number

 Achieved compliance with federal incident reporting guidelines by transitioning to a new Treasury 

Computer Security Incident Response Center Reporting Portal
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 Issued the Treasury Department’s Information Security Continuous Monitoring Framework, which 

implements a risk-based approach to security control assessments and ongoing authorization of system 

operation, to provide increased visibility to the most important security functions and better targeting of 

limited resources

 Continued enhancing cybersecurity threat awareness among Treasury senior leaders and employees:

o Deployed a Cybersecurity Annual Awareness Training solution for the Department and all 

Bureaus, enabling 98 percent of users to complete the Cybersecurity Awareness Training. 

Additionally, 99 percent of users with significant security responsibilities completed role-based 

security training.

o Issued bi-weekly Cyber Checkpoints focusing on specific cyber threat issues to all Treasury 

employees

 Enhanced protections for sensitive information including:

o Began implementation of a Wireless Intrusion Prevention System (WIPS) for monitoring 

wireless activity at Treasury Department facilities

o Initiated data loss prevention (DLP) studies and expanded capabilities to secure data-at-rest

o Continued leadership role in outreach and collaboration; hosted two large inter-agency 

engagements, four inter-Bureau engagements, and published 15 cyber threat reports 

 Prevented major attacks by blocking sophisticated adversaries; shared techniques recognized as best 

practice within government with law enforcement and intelligence communities

 Developed Department-wide Cybersecurity Strategy for Fiscal Years 2016 – 2017 in collaboration with 

Bureaus

Actions Planned or Underway 

 Finalize and operationalize the Department’s Cybersecurity Strategy for Fiscal Years 2016 – 2017

 Enhance cybersecurity awareness by introducing a new, customable training solution designed to increase 

effectiveness of the annual training process

 Continue to deploy WIPS throughout Treasury Department facilities 

 Continue to plan and deploy Continuous Diagnostics and Mitigation activities in support of the 

Department’s Cybersecurity Strategy

 Continue to expand DLP capabilities

Office of the Comptroller of the Currency (OCC)

Fiscal Year 2015 Accomplishments

 The OCC, along with other members of the Federal Financial Institutions Examination Council (FFIEC) 

issued a Cybersecurity Assessment Tool (Assessment) that institutions may use at their option to evaluate 

their risks and cybersecurity preparedness. OCC examiners will gradually incorporate the Assessment 

into its procedures for examinations of national banks, federal savings associations, and federal branches 

and agencies (collectively, banks) of all sizes. The FFIEC has also made available Assessment resources 

institutions may find useful, including an executive overview, a user’s guide, an online presentation 

explaining the Assessment, and appendixes mapping the Assessment’s baseline items to the FFIEC 

Information Technology (IT) Examination Handbook and all items to the NIST Cybersecurity 

Framework

 FFIEC members issued a statement to notify financial institutions of the increasing threat of cyber attacks 

involving destructive malware and to describe risk mitigation techniques. In some cases, destructive

malware used in attacks successfully compromised large quantities of data and rendered supporting 

systems inoperable.

 FFIEC members issued a statement to notify financial institutions of the growing trend of cyber attacks 

for the purpose of obtaining online credentials for theft, fraud, or business disruption and to describe risk 

mitigation techniques

 FFIEC members issued a statement recommending that financial institutions of all sizes participate in the 

Financial Services Information Sharing and Analysis Center (FS-ISAC)

 The FFIEC released a new appendix, “Strengthening the Resilience of Outsourced Technology Services,” 
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to the “Business Continuity Planning” booklet of the FFIEC Information Technology Examination 

Handbook. The new appendix ensures that the booklet aligns with regulatory guidance on third-party 

relationship risk management and incorporates emerging risks, such as cyber resilience.

 The FFIEC, on behalf of its members, released the “FFIEC Cybersecurity Assessment General 

Observations” and the “Cybersecurity Threat and Vulnerability Monitoring and Sharing Statement.” 

These documents address findings from the 2014 Cybersecurity Assessment pilot examination work 

program. These documents also encourage regulated financial institutions to participate in the FS-ISAC.

 OCC hosted webinars for all examiners, national banks and federal savings associations to highlight the 

risks posed by cyber threats and vulnerabilities and inform them on the use of the Cybersecurity 

Assessment Tool

Actions Planned or Underway 

 The OCC will continue to assess the ability of the institutions under its supervision to respond to cyberattacks

 The OCC will be reviewing banks’ programs for assessing the evolving cyber threat environment and 

banks’ cyber resilience. Examiners will incorporate the Cybersecurity Assessment into its information 

security and operational risk supervisory activities

 OCC is training all midsize and community bank examiners and appropriate large bank examiners on 

cybersecurity issues and the Cybersecurity Assessment Tool

 The OCC as part of the FFIEC plans to update cybersecurity aspects of the FFIEC IT Examinations 

Handbook

 The OCC plans to conduct a variety of outreach activities to industry trade groups to raise awareness 

around cybersecurity preparedness

 FFIEC members plan to issue a statement to notify financial institutions of the increasing frequency and 

severity of cyber-attacks involving extortion

OIG CHALLENGE NO. 2 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

- Emergency Economic Stabilization Act of 2008

Continued Implementation of Dodd-Frank

Financial Stability Oversight Council (FSOC)

 Held 10 meetings of the FSOC to discuss and analyze market developments and financial regulatory issues

 Continued work to identify nonbank financial companies for designation for supervision by the Federal 

Reserve and enhanced prudential standards

 Completed annual reevaluations of three nonbank financial companies designated in 2013

 Monitored the eight financial market utilities designated in 2012 for enhanced risk-management 

standards and supervision

 Published its 2015 annual report to Congress, which addressed the FSOC’s activities, identified potential 

emerging threats to U.S. financial stability, and made recommendations to mitigate such threats

 Continued to implement operational improvements related to the work of the FSOC, including adopting 

formal charters governing the work of each of its committees 

 Implemented supplemental procedures relating to nonbank financial company determinations
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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 U.S. financial stability arising from asset management products 

and activities

 Continue monitoring for potential risks to U.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 CDFI Fund 

Fiscal Year 2015 Accomplishments

 The CDFI Bond Guarantee Program successfully secured $750 million in the FY 2015 appropriation

 An Alternative Finance Structure (AFS) was approved for the CDFI Bond Guarantee Program’s 2015 

round

 On September 29, 2015 Treasury announced that an additional nine bond loans, totaling $327 million, 

were guaranteed in FY 2015

Actions Planned or Underway

 In the 2015 CDFI Bond Guarantee Program outreach sessions, many potential applicants indicated an 

interest in the AFS; however, the two (2) month application cycle for the CDFI Bond Guarantee Program 

in FY 2015 was one of the key factors that impacted the demand for the AFS. For FY 2016, the CDFI Fund 

will open the application window earlier and for a longer period. In addition and based upon the 

recommendation of the Credit Review Board of the CDFI Bond Guarantee Program, the CDFI Fund will 

conduct more extensive outreach on the AFS and existing structure of the CDFI Bond Guarantee Program.

 The FY 2016 budget proposal for CDFI Bond Guarantee Program requests the following legislative 

changes:

o to extend the CDFI Bond Guarantee Program through FY 2017; and

o to reduce the minimum bond issue size from $100 million to $25 million; and

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; 

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)

Fiscal Year 2015 Accomplishments

 Collected $38.743 million quarterly dividends, interest and fees from SBLF participants

 Coordinated and processed full redemptions for 38 institutions and partial redemptions for 21 others 

totaling $822.6 million in proceeds. Redemptions as of 9-30-15 represented 41.33% of the original $4.027 

billion disbursed and 26.5% 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 $1.21 billion overall increase in qualified small business lending (June 30, 2015 vs 

June 30, 2014)

 Successfully managed asset management activities related to all required corporate actions and exchanges

 Complied with program requirements for the issuance of all reporting requirements (Transaction, 

Lending Growth (formerly Use of Funds), Lending Survey)
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 Complied with program requirements for all oversight audits

Actions Planned or Underway

 Outline long term strategy for the CDLF portfolio

 Determine the asset management strategy, including possible disposition options for banks that do not 

redeem by the step up rate increase

 Outline future needs for both asset managers and contractors once banks’ step-up rates have all kicked in 

and a large part of the banking portfolio has redeemed

 Continue to work with participants and regulators on the high volume of planned redemptions requests

State Small Business Credit Initiative (SSBCI)

Fiscal Year 2015 Accomplishments

 Received, tested, and transferred a cumulative $1,362,671,748 to states as they qualified for subsequent 

disbursements on their allocations ($216,304,667 in fiscal year 2015)

 Conducted on-site compliance reviews or training sessions with six states 

 Evaluated and approved 13 formal modifications to states’ approved SSBCI programs 

 Organized one national conference of state SSBCI officials hosted by the OCC

 Published Summary of States’ Quarterly Reports (Quarters ending September 2014, December 2014, 

March 2015, June 2015) 

 Published Summary of States’ 2014 Annual Reports 

 Published four practitioner authored “best practice” papers on Capital Access Programs, Collateral 

Support Programs, Loan Guarantee Programs, and Loan Participation Programs 

 Coordinated responses to one audit from the Office of Special Inspector General for the SBLF

 To date, SSBCI Compliance has performed transaction level testing of every active state program (approx. 

150) as a result of either a response to a disbursement request and/or on an annual basis, of which there 

have been three calendar years of activity.

Actions Planned or Underway

 Continue to receive, test, and process requests for subsequent disbursements 

 Continue to evaluate and respond to requests for modifications to approved SSBCI Programs 

 Organize a national conference of state officials

 Continue to publish Quarterly and Annual Reports 

 Continue to coordinate responses to audits of states conducted by the OIG

Management of Recovery Act Programs 

Fiscal Year 2015 Accomplishments

Office of the Fiscal Assistant Secretary

 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 
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property programs

 Continue to coordinate with IRS’s compliance initiative project regarding the energy program

 Continue assessment of staffing needs

Community Development Financial Institutions Fund

Fiscal Year 2015 Accomplishments

 Completed desk reviews for all Recovery Act awardees

Actions Planned or Underway

 Close out all Recovery Act awards

Housing and Economic Recovery Act and the Emergency Economic Stabilization Act (HERA 

and EESA)

Domestic Finance – Housing Finance Agencies Initiative (under HERA)

Fiscal Year 2015 Accomplishments 

 One of the two parts of the HFA Initiative, the Temporary Credit and Liquidity Program (TCLP), was 

successfully concluded in July 2015 when the last TCLP liquidity facilities were replaced by facilities 

provided by private sector banks. Treasury did not make any disbursements with respect to its TCLP 

obligations, and received over $123 million of exposure fees during the life of the TCLP. Going forward, 

Treasury has no obligations or risk with respect to the TCLP.

 The other part of the HFA Initiative, the New Issue Bond Program (NIBP), had an outstanding principal 

balance of approximately $7.8 billion as of September 30, 2015, down from an initial balance of $15.3 

billion in December 2009. During FY2015, Treasury received timely payment of all NIBP principal, 

interest and fees that were due. 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, result in a very high credit quality for the NIBP portfolio. Mortgage revenue bonds of the type 

collateralizing the NIBP portfolio have historically been an extremely safe long-term investment. This is 

consistent with the high credit ratings of bonds in the NIBP portfolio, in that all bonds are rated either in 

the AAA/Aaa or AA/Aa categories. There are no issues or concerns remaining to be resolved, and 

outstanding balances of the NIBP portfolio will continue to decline over time as Treasury holds these 

assets to their maturities.

Office of Financial Stability

Fiscal Year 2015 Accomplishments

 Continued to wind down the remaining TARP investments in a manner that balances the desire to exit as 

soon as practicable with maximizing returns for the taxpayers:

o Continued to wind down our remaining Capital Purchase Program (CPP) investments through 

repurchases by banks, asset sales, and restructurings

o Completed the wind down of the Automotive Industry Financing Program (AIFP) with the sale of 

all remaining common stock in Ally Financial 

o Cumulatively collected 98.8 percent of the $429.7 billion in program funds disbursed under 

TARP (102.9 percent when non-TARP AIG shares are included)

 EESA Housing Programs – Continued to implement the housing programs funded under the Troubled 

Assets Relief Program (TARP), which have helped 1.8 million people avoid foreclosure and indirectly 

helped millions more by setting new standards throughout the mortgage servicing industry

Actions Planned or Underway

 Continue to wind down our remaining CPP investments through repurchases by banks, asset sales, and 

restructurings

 Continue to implement the housing programs funded under TARP, which are designed to prevent 

avoidable foreclosures and provide a safety net for homeowners currently in the program
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Office of Financial Research (OFR)

Fiscal Year 2015 Accomplishments

 Provided analytical and data-related support to the Financial Stability Oversight Council (FSOC) and its 

member agencies for the FSOC’s annual report and non-bank financial company designations analysis

 Participated in inter-agency working groups on asset management, market microstructure, cash 

management vehicles, and insurance

 With the Federal Reserve, completed creation of bilateral data collection templates, began receiving pilot 

data, and published a primer on repo and securities lending markets

 Provided data management, aggregation and anonymization services to the Federal Reserve Board of New 

York in its update of its 2012 Intraday Liquidity Flows Report

 OFR’s Chief Counsel was re-elected to serve as chair of the Regulatory Oversight Committee (ROC) of the 

Global Legal Entity Identifier System (GLEIS) 

 Provided research and technical assistance in the development of a universal loan identifier (ULI) and its 

inclusion in the MISMO Reference Model to facilitate industry uptake and reporting

 Completed the first phase of the Data Harmonization project with the CFTC to identify areas to 

strengthen SDR data reporting and data quality, completing analysis and recommendations on data 

elements

 Co-chaired the International Workstream to Prioritize Harmonization of Other Derivative Data Elements 

with CPMI-IOSCO to identify swap data standards for harmonization

 Co-sponsored a workshop with the Bank of England and the European Central Bank to bring together 

central bankers and regulators from across the globe to discuss formulation of global data standards 

 Mapped regulatory identifiers across several public data sets, helping to link data for a more integrated 

view of markets and firms; mapped approximately a couple of thousand entities across a few identifiers 

 Issued the OFR’s third Annual Report to Congress, containing improved analysis and tools for monitoring 

threats to U.S. financial stability 

 Launched the public Financial Markets Monitor, a monthly review of themes and developments in 

financial markets; presented highlights at monthly meetings of FSOC’s Systemic Risk Committee

 Released the first 7 papers in the OFR Brief Series, which are designed to make the OFR’s work accessible 

to a broader audience than OFR working papers 

 Released an update to the Financial Stability Monitor (FSM) that was published on the OFR website and 

presented to FSOC Deputies. Enables users to examine macroprudential risks interactively 

 Published 24 Working Papers and 4 Staff Discussion Papers

 Developed a money market funds (MMF) data visualization tool expanding insight into MMF and other 

liquidity management vehicles

 Presented MMF data visualization tool to FSOC member agencies, OFR’s advisory committee, and 

international entities

 Launched a pilot project to collect data on securities lending transactions 

 Hosted the fourth annual joint conference with the Council, “Evaluating Macroprudential Tools: 

Complementarities and Conflicts,” on January 30, at the FDIC campus in Arlington, VA. 

 Hosted and chaired a workshop titled, “Understanding the Global Legal Entity Identifier System” for U.S. 

regulators to enhance their understanding of the LEI and the GLEIS 

 Co-hosted a conference, “Measurement Challenges in Macroprudential Policy Implementation: Essential 

Data Elements for Preserving Financial Stability,” with the Federal Reserve Bank of Cleveland 

 Deployed new website, new remote access and new internet access capabilities
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Actions Planned or Underway

 Provide support for the Council for its annual report and its nonbank designation process 

 Facilitate Council member agencies’ exploration of best practices in data sharing and reporting efficiency, 

per the Council’s 2015 recommendation published in its Annual Report 

 With the Federal Reserve, continue analyses of data collected from the pilot collection on bilateral repo 

and securities lending market 

 Engage stakeholders in the design and development of the financial instrument reference database 

through targeted outreach

 Compare data used in the FRB 2012 Intraday Liquidity Flows report to more recent reports to determine 

changes in the payments, clearing, and settlements services of the financial system over time, contributing 

to an understanding of linkages in the financial system 

 Continue to promote global adoption of the LEI in regulatory reporting and general market practice

 Work with agencies and industry participants to map mortgage loan lifecycle data collection and reporting 

to address overlaps and data gaps through data standardization 

 Work with data standards bodies to standardize mortgage data and create a business ontology

 Continue to work with the CFTC on SDR data harmonization assessment and alignment with global 

regulatory efforts, such as CPMI-IOSCO

 Work with Committee on Payments and Market Infrastructures and CPMI-IOSCO for OTC derivatives 

data harmonization for a universal transaction identifier (UTI) and universal product identifier (UPI)

 Focus our research on several core programs, including market liquidity and market microstructure, 

central counterparties, stress testing practices, shadow banking, and the regulation of financial 

institutions

 Publish additional OFR Briefs, Working Papers, Staff Discussion Papers, and Reports, including new 

products that express the views of the OFR

 Develop and publish additional monitoring products to the public

 Collaborate with the National Science Foundation on soliciting and funding proposals for grants to 

promote financial stability research

 Co-sponsor and host the second of two workshops with the Bank of England and the European Central

Bank to discuss how to formulate global standards for granular data 

 Co-chair the International Workstream to Prioritize Harmonization of Other Derivative Data Elements

 Host a third joint conference with the Federal Reserve Bank of Cleveland in December 2015 and the fifth 

annual OFR/FSOC Conference in January 2016

 Complete deployment of the feature-rich OFR desktop and collaboration environments

 Deploy a platform to analyze multiple types of trade data

 Expand internet presence to facilitate a more interactive and collaborative experience with OFR tools

 Begin planning to relocate OFR’s primary data center
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OIG CHALLENGE NO. 3 SUMMARY OF MAJOR ISSUES

Efforts to Promote Spending Transparency and 

to Prevent and Detect Improper Payments

 Spending Transparency

 Detect Improper Payments

Fiscal Year 2015 Major Accomplishments

Spending Transparency

 Established a Program Management Office (PMO) responsible for leading the government-wide 

implementation of the DATA Act. 

 Finalized data standards in collaboration with OMB as required

 Developed tools and processes that are intended to deliver low burden / high value experiences for 

agencies to provide quality data. These tools include the data models and guidance, DATA Act schema, 

and DATA Act playbook. 

 Conducted numerous workshops with agencies and has been providing them with weekly, bi-weekly as 

well as monthly communications on the implementation effort. 

 Continued to validate the data-centric approach via pilots using agile development methodology as 

recommended in the U.S. Digital Service Playbook. 

 Based on the pilots, developed technical designs for data extraction as well as prototype data broker for 

validations. 

 Conducted active outreach to external stakeholders including state and local government, nonprofit and 

the private sectors via in-person meetings and regular calls. In addition, Treasury is leveraging 

technology to engage stakeholders and adopting a new approach to deliver the digital services to public. 

We are exploring new methods of collecting public input to increase the use of the information by the 

federal spending data user communities.

Detect Improper Payments

 The Do Not Pay Business Center enhanced its ability to provide timely, accurate and actionable data to 

support the Federal government’s efforts to prevent and detect improper payments. The system now 

allows for real-time matching of payments against death and vendor data. Incorporation of Privacy Act 

restricted data additionally improved vendor data matching and reduced false positives by 99.82%. 

 Included Credit Alert Verification Reporting System data from the Small Business Administration and the 

Department of Veterans Affairs into the portal. 

 Acquired SSA prisoner data and provided it to the IRS to support their efforts to reduce improper 

payments in the Earned Income Tax Credit Program. 

 Improved its analytics capabilities and developed agency-specific reports that provide a particular agency 

or program within the agency a high level set of statistical observations that may contribute to improper 

payments. These reports provide a means to inform agency management about these observations and to 

determine whether or not the observations call for a more in-depth analytical project in partnership with 

the agency, to assess the issue, determine root cause, and develop internal control methodologies to 

eliminate the issue in the future. 

Actions Planned or Underway

 While we have made significant progress on the implementation of the DATA Act in the first 17 months, 

much work remain. We have about 19 months to bring the data from across government together and 

publish it online as required by the DATA Act. Treasury will be finalizing the data element guidance and 

the DATA Act Schema in the next few months. In addition, Treasury will be building out the data broker 

and technical infrastructure to support the collection as well as the publishing of the data. We will also 

continue to make outreach a priority to keep internal and external communities informed. As such, we 

will roll out an open beta site to engage the public to build the next generation spending website.

 In addition, challenges inhibiting eligibility verification remain for the Do Not Pay program, specifically in 

gaining access to SSA’s full death data. Legislation has been proposed to make SSA’s full death data 

available for the Do Not Pay Business Center.
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OIG CHALLENGE NO. 4 SUMMARY OF MAJOR ISSUES

Anti-Money Laundering and Terrorist 

Financing/Bank Secrecy Act (BSA) Enforcement

 Prevent and detect money laundering and 

terrorist financing

 Promote U.S. and international financial 

systems that are safe and transparent 

 Ensure continued cooperation and 

coordination of all organizations involved in 

anti-money laundering and combatting 

terrorist financial efforts

 Create safeguards over the use of BSA 

information

FinCEN

Fiscal Year 2015 Accomplishments

 Initiated Global Rapid Response Program, recovering or restraining $128.9 thousand in funds obtained 

through cyber-enabled crimes targeting financial institutions and their clients before such funds could be 

dissipated by criminals.

 Developed over 100 business rules to screen daily BSA filings and identify reports that merit further 

review for topics of national security concern, such as terrorist financing, cyber threats, and Ukraine 

kleptocracy.

 Initiated 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 four Geographic Targeting Orders (GTO) 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 secure advisories to financial institutions on red flag indicators of illicit financial activities 

associated with priority threats, including cybercrime and ISIL, resulting in additional reporting of 

suspicious activity.

• Proposed a rule requiring certain investment advisers to establish anti-money laundering programs and 

report suspicious activity pursuant to the BSA. 

• Issued 11 civil money penalties against financial institutions and/or owners for willful violations of the 

BSA, supporting compliance and outreach messages, in particular, those focused on the casino, virtual 

currency, and money remitter sectors. 

• Issued two actions under Section 311 of the USA PATRIOT Act against foreign financial institutions of 

primary money laundering concern seeking to protect the U.S. financial system from their criminal 

underworld customers. 

 Developed a multi-year strategic plan for the Bank Secrecy Act Advisory Group, a public-private advisory 

group comprised of domestic organizations involved in AML/CFT efforts. 

 Coordinated the multilateral efforts of 19 financial intelligence units around the world to support 

Ukraine's efforts to recover assets misappropriated by its former regime, resulting in the seizure of over 

$1.2 billion. 

 Coordinated the multilateral efforts of 27 financial intelligence units around the world to engage in an 

information sharing project on the financing of foreign terrorist fighters traveling to Iraq/Syria resulting 

in significant actionable intelligence and policy recommendations on improving global information 

sharing on terrorist financing. 

 Signed memorandums of understanding (MOUs) with 7 law enforcement and regulatory agencies 

granting them access to BSA information under specific terms on safeguarding its use and training them 

on such safeguards (total MOU holders now equal 381). 

 Inspected 378 MOU holders and instituted corrective actions, as necessary, to ensure compliance with 

safeguards on use of BSA information.

 Conducted civil/criminal investigations of unauthorized use of BSA information and provided criminal 

referrals to prosecuting authorities, as appropriate.

Actions Planned or Underway
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 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 Bank Secrecy Act 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

 The OCC and members of the Federal Financial Institutions Examination Council (FFIEC) released the 

revised Bank Secrecy Act/Anti-Money Laundering (BSA/AML) Examination Manual. The revised 

manual reflects the ongoing commitment of the federal and state banking agencies to provide current and 

consistent guidance on risk-based policies and procedures for institutions supervised by the Office of the 

Comptroller of the Currency (OCC) to comply with the BSA and safeguard operations from money 

laundering and terrorist financing. Banking organizations should familiarize themselves with these 

revisions and make the necessary updates to their BSA compliance programs.

 Issued a consent order to the New York, New York branch of Banco Bradesco (“Branch”), a Federal 

branch of Banco Bradesco, Cidade De Deus, Brazil, for identified deficiencies in the Branch’s internal 

controls, independent testing, and staffing in the area of Bank Secrecy Act and Anti-Money Laundering 

compliance.

 Issued a consent order to Capital One, N.A., Mclean, VA for identified deficiencies in the bank’s internal 

controls and independent testing in the area of BSA/AML compliance

 Issued a consent order to Cadence Bank, N.A, Birmingham, AL for identified deficiencies in the bank’s 

internal controls and independent testing in the area of BSA/AML compliance 

 Issued a $1 million civil money penalty against Lone Star National Bank, Pharr, TX for BSA/AML 

deficiencies with the bank’s internal controls, independent testing, suspicious activity reporting and 

foreign correspondent banking program

 Issued a $500,000 civil money penalty against First National Community Bank, Dunmore, PA for 

BSA/AML violations when it failed to file suspicious activity reports on a timely basis in connection with 

certain suspicious transactions. The OCC took this action in coordination with FinCEN, which took a 

separate enforcement action against the bank. 

 The OCC, and the other Federal banking agencies, were participants and provided expertise and 

consultation to Treasury’s Office of Terrorist Financing and Financial Crimes with regard to the 2015 

National Money Laundering Risk Assessment and the 2015 National Terrorist Financing Risk Assessment

Actions Planned or Underway

 Continue examination, enforcement activities, and cooperative efforts with FinCEN and other federal 

banking agencies

 The OCC will continue to monitor risk levels within banks that may be increasing because of bank 

portfolio de-risking 

 Coordinate BSA/AML regulatory guidance and issuances with Treasury, FinCEN and the other federal 

banking agencies
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OIG CHALLENGE NO. 5 SUMMARY OF MAJOR ISSUES

Gulf Coast Restoration Trust Fund 

Administration

 Monitor regulations and associated policies and 

procedures that need be established 

 Coordinate with many entities/councils that are to 

receive and further allocate funding, and need to 

establish policies and procedures

 Use Treasury’s existing resources to administer its 

responsibilities for the Trust Fund

Domestic Finance

Fiscal Year 2015 Accomplishments

“The foremost challenge is the demand on Treasury to provide technical assistance to grant applicants as they 

seek interpretation of regulations and application guidelines and develop multiyear implementation plans. 

Furthermore, many local governments seeking technical assistance are not experienced as direct recipients of 

Federal financial assistance.”

In FY15, the Office of Gulf Coast Restoration – within the Office of the Fiscal Assistant Secretary – undertook a 

robust outreach and training program intended to educate and support eligible entities seeking to apply for funds 

under the RESTORE Act of 2012. The goal of this effort was to establish good working relationships with eligible 

entities, to understand their capabilities and needs, and to provide technical assistance on the submission of 

multiyear plans and grant applications.

Fiscal Year 2015 Accomplishments

 Delivered nine in-person training sessions to eligible applicants and two Direct Component webinars; inperson trainings included Louisiana - Baton Rouge (October 1, 2014) and Chalmette (October 3, 2014); 

Florida - St. Petersburg (October 7, 2014), Naples (October 8, 2014), Pensacola (October 10, 2014) and 

Eastpoint, Florida (November 14, 2014); Austin, Texas (October 21, 2014), Mobile, Alabama (October 22, 

2014), and Jackson, Mississippi (October 24, 2014);

 Provided five update e-mails to all eligible applicants (100+ recipients) to inform them of new information, 

and training opportunities, including FAQs, revised allocations, funding opportunities announcements, and 

information on the Automated Standard Application for Payments (ASAP);

 Provided information and technical assistance for eligible applicants by providing FAQs on the RESTORE Act 

website, responding to questions, and reviewing draft applications and draft multiyear plans;

 Grants management staff traveled to the region (i.e., MS, LA, and FL) to meet with eligible applicants 

regarding their planning efforts and grant applications. 

 Completed a procurement for Grants Management Training for eligible applicants and recipients; classes will 

be delivered in Louisiana and Florida in FY16;

 Worked with Health and Human Services to provide five training webinars for applicants on the 

GrantsSolutions.gov grant application and management system;

 Worked with Financial Management Branch (FMB) of the Bureau of the Fiscal Service on ASAP.gov 

enrollments and facilitated ASAP training for applicants by the Kansas City Financial Management Center; 

and

 Initiated desk reviews of policies and procedures for 42 of 48 eligible applicants

Actions Planned or Underway

 Develop and sustain meaningful and collaborative relationships with applicants, provide guidance, training, 

and ongoing communications with eligible applicants

 Coordinate closely with recipients to provide training and guidance for submission of complete applications

 Receive and review recipients’ Multiyear Implementation Plans (MYPs) to provide insights regarding 

proposed projects, timing, and necessary expertise for best available science and technical reviews

 Develop a rigorous Compliance and Oversight regime in collaboration with Treasury stakeholders and 

RESTORE Council Staff

 Ongoing coordination with the Treasury Risk Working Group

 Use existing IT platforms: HHS’ GrantSolutions.gov, Treasury’s ASAP.gov & OMB’s MAX.gov
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 Collaborate closely with the Bureau of the Fiscal Service on management of the RESTORE Trust Fund via the 

Bureau's established policies & procedures

 Finalize Program and Compliance Policies & Procedures, and re-assess and revise procedures as the program 

matures

 Coordinate with the RESTORE Council on Grant Management and Program Oversight for consistency

 Coordinate with the RESTORE Council to scope out Treasury’s supplemental compliance role in accordance 

with Statute and Final Rule
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Matters of Concern No. 1 SUMMARY OF MAJOR ISSUES

Currency and Coin Production  Oversee the U.S. Mint’s costs associated with 

producing penny and nickel coins, and the 

suspended production of $1 coins 

 Oversee issues related to the Bureau of Engraving 

and Printing’s (BEP) redesign of NexGen $100 

note while engaging in sound and comprehensive 

project management 

Oversee the U.S. Mint’s costs associated with producing penny and nickel coins, and the suspended production of 

$1 coins

U.S. Mint Fiscal Year 2015 Accomplishments

 The cost of production decreased in fiscal year-to-date August 2015 for the penny to 1.41 cents and for the 

nickel to 7.48 cents, from 1.66 cents and 8.09 cents, respectively, in FY 2014, largely due to significant 

increases in shipment volumes as well as lower selling, general, and administrative (SG&A) costs. The Mint 

increased productivity, reducing overhead costs despite a 25 percent increase in total circulating coinage 

shipments. The Mint realized these reductions despite the cost of metal for pennies increasing by 3.1 percent, 

as well as the cost of metal for nickels increasing by 3.6 percent during FY 2015. This is the lowest per unit 

cost for the penny since FY 2008 and the nickel since FY 2009.

 The seigniorage (the difference between the cost of producing a coin and its face value) that will be returned 

to the general fund is estimated to be $550 million for FY 2015. This is a level not achieved by the Mint since 

FY 2008. 

 Since the first biennial report in December 2012, the Mint has conducted extensive testing of six different 

metal compositions, as well as initial testing of materials that show the potential to duplicate the existing 

weights and electro-magnetic signature of current U.S. coinage. The second biennial report to Congress on 

alternative coinage materials was delivered in December 2014.

 The Mint hosted a Coin Industry stakeholders’ meeting on March 18, 2015 to discuss several topics including 

a validation strategy for potential alternative metals. Feedback from coin industry stakeholders indicates a 

change to the metal composition for circulating coins would be disruptive to commerce. The cost to the 

private sector and public would far exceed the government savings associated with the use of an alternative 

metal for circulating coins.

U.S. Mint Actions Planned or Underway

Coin Production

 Continue efforts to increase efficiency control or reduce the cost to manufacture the nation’s coinage

 Continue the Mint’s R&D testing for a specific alloy before confirming the use of the material as a potential 

option for circulating coins (excluding the penny)

 Continue alternative metal discussions with all decision makers because changing the metal composition of 

circulating coins requires legislation as well as a coordinated policy through the Department of the Treasury 

and the Federal Reserve System that educates the public and minimizes disruptions to commerce

 Maintain open dialogue with the Federal Reserve System regarding the amount of new coins required to 

supplement its circulating coin inventory to meet the needs of commerce 

 Oversee issues related to the Bureau of Engraving and Printing’s (BEP) redesign of NexGen $100 note while 

engaging in sound and comprehensive project management:

BEP Fiscal Year 2015 Accomplishments

Reclaim $100 notes:

 Single note inspection (SNI) technology was successfully implemented in FY 2015: over 300 million $100 

notes that were held in finished goods inventory were inspected through SNI and delivered to the Federal 

Reserve to issue into circulation for a savings of $ 22.7 million

Currency Reader Program:

 The National Rollout launched Jan. 2, 2015, and more than 32,000 readers have been ordered as of 

September 18, 2015

 Order processing and shipping of currency readers by National Library Service for the Blind and Physically 

Handicapped (NLS) has improved significantly; most orders are processed within 4 to 6 weeks of receipt of 
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application

 Measurement Data to be collected – OMB cleared BEP’s Voice of the Customer (VOC) Questionnaire Dec. 

18, 2014; approximately 300 Voice of the Customer surveys were collected. About 90 percent of VOC 

respondents gave the reader favorable marks in all categories 

Banknote Design and Development Program:

 To date, the critical area of security feature development has successfully moved five new projects into the 

concept development phase (where early-stage activity is completed to develop a more robust plan and, if 

appropriate, initiate contract activities for detailed development)

 Advanced two projects into the test and optimize phase (where late-stage activities are completed to ensure 

technology is ready for inclusion in a future banknote)

 Six or more new contracts are to be awarded by the end of this calendar year moving projects into full 

development

 High-level requirements for the next family of notes have been completed and signed off by all internal and 

external stakeholders

 The initial release of the family-level technical requirements is expected to be completed this calendar year

 Series 2017 NXG$100 project has now formally moved into the Banknote Development Process (BDP)

 The first note of the new family of notes, currently known as the Catalyst $10, is expected to formally move 

into the BDP process in October. The initial work in the BDP process is comprised of activities to perform a 

detailed concept analysis to allow the stakeholders to determine which product features and functions will 

advance into the more detailed development activities

 BEP has entered into a contract with Mitre Corporation, a Federally Funded Research and Development 

Center (FFRDC) to help support banknote development activities

BEP Actions Planned or Underway

 In FY 2016, BEP plans to process about 600 million $100 notes through SNI for delivery to the Federal 

Reserve; expected savings of over $42 million; BEP anticipates that it will complete processing of the 1.4 

billion $100 notes by the end of FY17

 The first note of the new family of notes, currently known as the Catalyst $10, is expected to formally move 

into the BDP process in October. The initial work in the BDP process is comprised of activities to perform a 

detailed concept analysis to allow the stakeholders to determine which product features and functions will 

advance into the more detailed development activities. The new $10 note will be introduced in 2020.

 A new database system to capture customer order information is nearing completion at NLS. The updated 

system, expected to be on line by the end of December 2015, will improve efficiency of the U.S. Currency 

Reader Program order processing functions.

 Customer enhancements will be added to the U.S. Currency Reader Program Call Center system to allow 

customers calling about the status of their order to be transferred to NLS staff who have access to order 

fulfillment information and can directly assist callers with their query
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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

Fiscal Year 2015 Accomplishments

 The Treasury Office of Privacy, Transparency, and Records completed a drive to digitize records and 

incorporate them into the Treasury Enterprise Content Management structure, resulting in digitization of 

1357 cubic feet of paper records

 The Treasury Office of Privacy, Transparency, and Records, in conjunction with the Office of the General 

Counsel, and the Office of the Assistant Secretary for Management processed over 40 Treasury Orders and 

Directives that were due for review; that is twice the number that were processed during FY 2014

Actions Planned or Underway

 PTR will continue to prioritize updating Orders and Directives that are due for review in FY 2016

 PTR will be focusing on records management education for new and departing employees in FY 2016
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RESPONSE TO TIGTA 

TIGTA CHALLENGE NO. 1 SUMMARY OF MAJOR ISSUES

Security for Taxpayer Data and IRS Employees Promote measures for appropriate physical security 

and protection of financial, personal, and other 

information

Fiscal Year 2015 Accomplishments

 Engaged in a Security Summit - a joint effort among the IRS, states, and private industry intended to 

identify solutions for reducing identity theft and refund fraud by leveraging taxpayer data at the point of 

filing

 Attempts to obtain taxpayer information fraudulently through false IRS websites and other electronic 

methods continue; identified and quickly shut down 1,474 false websites to protect tax information and 

maintain public confidence; schemes are changing from sites used for credit card fraud to requests for taxrelated information such as the Social Security Number, Filing Status, Identity Protection Personal 

Identification Number (IP PIN), and e-File PIN 

 Identified, mitigated, and responded to 1,128 cyber incidents and produced 540 advisories and bulletins 

informing responsible parties through the Computer Security Incident Response Center (CSIRC ) 

 Conducting ianalysis to understand the scope, scale, and underlying patterns associated with the 

unauthorized eAuthentication access event; analysis will inform future analytic methodologies used in 

near-real time analytics and monitoring 

 Developed templates for Memoranda of Understanding (MOUs) and Interconnection Security Agreements 

(ISAs) that meet the National Institute of Standards and Technology (NIST) standards; the MOU 

establishes the management agreement between the IRS and the external partner regarding the 

development, management, operation, and security of the interconnection, and the ISA documents the 

technical and security requirements for the interconnection 

 Identified all external interconnections that IRS uses to share tax information with other entities and 

updated the centralized inventory accordingly 

 Took steps to improve document security and neutralize third party efforts to obtain data

o Added a two-dimensional (2D) barcode feature that masks SSNs and improves our ability to read data 

from the form to 35 individual nonpayment notices and 22 Automated Collection notices; this feature 

supports ongoing IRS efforts to balance the protection of taxpayers' identities in the short term and 

movement toward electronic and online correspondence in the long term

o Identified and shut down 588 malware sites; a 98 percent increase compared to last year

 Took steps to improve physical and personnel security

o Completed Security risk assessments at 155 facilities nationwide

o Delivered Active Shooter/Threat and Workplace Violence training to employees at 175 large posts of 

duty and Campuses

Actions Planned or Underway

 Update policy and develop procedures for monitoring IRS’s inventory of external interconnections and 

ensuring all appropriate agreements are approved and in place before interconnections are established 

 To improve the safety and security of IRS facilities and personnel, the Service will partner with Homeland 

Security and federal law enforcement entities to deliver site-specific in-person security briefings to staff 

 To protect and preserve critical data, the IRS will implement additional records management efforts to 

electronically archive email by January 2017 and, to the extent possible, all permanent records by January 

2020
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TIGTA CHALLENGE NO. 2 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)

Fiscal Year 2015 Accomplishments

 Created and deployed communication products related to ACA tax provisions, payments, credits, and

other subjects through various channels, including the http://www.irs.gov/aca site

 Consolidated taxpayer outreach activities within the Wage & Investment division, expanded customer

service options, and created new Volunteer Income Tax Assistance (VITA) program training on ACA

 Sent letters to approximately 710,000 Advanced Premium Tax Credit (APTC) taxpayers who had

premiums paid on their behalf but who have not filed a tax return or an extension, to remind them of the

requirement that they file to reconcile the APTC payment to their entitlement

 Updated IT systems to handle filing season 2015 activities, including reconciliation of the Advanced

Premium Tax Credit (APTC), calculation of the Premium Tax Credit (PTC), the shared responsibility

provision, and exemptions

 Piloted a tool to assist examiners in calculating the Shared Responsibility Payment (SRP) during the

course of adjusting a tax return. The IRS will assess the feasibility and cost to provide an online SRP

estimator tool

 Reserving lines on tax return forms in advance of anticipated legislation worked well. This approach

allowed IRS to analyze the law and revise the forms more quickly upon late passage than if the lines were

not reserved

Actions Planned or Underway 

 Coordinate with Federal and State Marketplaces to update requirements for submission of Exchange

Periodic Data (EPD), which is critical for reconciling claims

 Interview and survey taxpayers and preparers that made Premium Tax Credit errors to find causes, and

communicate cautions to taxpayers

 Conduct outreach to the estimated 300,000 low-income taxpayers who reported an individual shared

responsibility payment when they should have claimed a health care coverage exemption; this outreach

will include informing these taxpayers about available extensions and providing information about the

potential benefit of amending their return

 Implement information returns reporting by applicable large employers and insurance providers

TIGTA CHALLENGE NO. 3 SUMMARY OF MAJOR ISSUES

Tax Compliance Initiatives Improve compliance and fairness in the application of 

the tax laws

Fiscal Year 2015 Accomplishments

 Issued a memorandum reminding Field Collection group managers to ensure that their revenue officer

inventory levels are within current inventory levels and appropriate, taking into account the complexity of

the cases

 Established a team to research the extent and nature of partnership misreporting and the effectiveness of

examinations in detecting misreporting (TIGTA No. 2015-30-004) SBSE

 Piloted the use of Form 1099K, Payment Card and Third Party Network Transactions, data to identify

non-filed returns and, based on the findings, incorporated the information as part of the IRS’s nonfiler

program

 Deployed the Payment Mix Comparison Tool (PMCT) pilot, which allows tax professionals to use the same

analytics the IRS uses to identify potential underreported income and therefore improve voluntary

reporting of cash receipts by businesses
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Actions Planned or Underway 

 Evaluate whether the current inventory ranges for revenue officers are appropriate as part of the ongoing

study on the complexity of Field Collection cases

 Analyze partnership data for the purposes of understanding how many partnership structures will be

impacted by proposed tax law change and determine potential impact to the partnership examination

process Evaluate existing policies and procedures for backup withholding requirements on information

returns, determine if changes need to be made and develop next steps

TIGTA CHALLENGE NO. 4 SUMMARY OF MAJOR ISSUES

Fraudulent Claims and Improper Payments Effective use of taxpayer funds

Fiscal Year 2015 Accomplishments

 Expanded the use of Earned Income Tax Credit (EITC) Preparer Strategy interventions before and during

the 2015 filing season to include monitoring over 31,000 preparers; as a result IRS protected nearly $465

million in revenue as well as sent more than 15,000 warnings and nearly 800 e-file alerts to EITC Return

Preparers missing Form 8867, Paid Preparer’s Earned Income Credit Checklist

 Prepared a legislative proposal to obtain expanded access to the National Directory of New Hires database

to improve the verification of claims for other income-based refundable credits; prepared a legislative

proposal to move the required filing date for Forms- 1098-T, Tuition Statement, to January 31 so that this

information can be used at the time the tax return is processed to help identify improper education credit

claims (TIGTA No. 2015-40-027) W&I

 Activated improved identity theft filters for the 2015 filing season to consider fraud potential when

multiple returns are filed using the same addresses and/or refunds are requested for the same bank

accounts

 Developed and applied operational metrics and compliance treatments for the Premium Tax Credit using

both Automated Questionable Credit and identity theft filters to complete the risk scoring model for the

credit as required by the Improper Payments Elimination and Recovery Act (IPERA)

 Updated notices to taxpayers to provide better information on how the Identity Protection (IP) Personal

Identification Number (PIN) works in the filing process

Actions Planned or Underway

 Evaluate identity theft related refund fraud trends and use this information to improve fraud filter

performance

 Determine how to measure how paid return preparers respond to IRS efforts to curb erroneous and

fraudulent EITC claims in order to identify the most effective approaches for outreach and compliance

 Update filters on return processing and fraud detection systems in order to improve IRS’s ability to

identify and neutralize the misuse of EINs

 Develop a filing season 2016 pilot to verify Form W-2 data using an authentication code on e-filed Forms

1040
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TIGTA CHALLENGE NO. 5 SUMMARY OF MAJOR ISSUES

Achieving Program Efficiencies and Cost Savings Use resources to focus on producing the best 

value for stakeholders

Fiscal Year 2015 Accomplishments

 Evaluating whether IRS can rely on Federal Protective Service (FPS) risk assessments of some facilities

and eliminate the duplicate IRS risk assessments for those facilities

 Automated the Federal Employee/Retiree Delinquency Initiative (FERDI) processing, making it more

effective and efficient

 Evaluated the accuracy of the overhead rate applied to interagency reimbursable agreements, in order to

ensure that the IRS is recouping the full cost of services provided to other governmental entities

 Analyzed the potential resource impact of closing several international offices

 Continued to grow and develop the Enterprise Risk Management (ERM) program as a means for

employees to identify and prioritize Servicewide risks; deployed podcasts and Servicewide electronic

training; developed guidelines for creating key risk indicators; published an overview of mitigating

activities for 15 categories of enterprise risks; and created channels for employees to raise potential risks

they have identified

 Developed a communications outreach plan to promote e-filing for business returns

 Developed and implemented a process to ensure accuracy in matching monthly billing statements to

inventory records for wireless devices

Actions Planned or Underway 

 Develop and implement a process to obtain current and future FPS Facility Services Assessments for IRS

facilities upon completion; integrate FPS FSA findings in risk assessments and revalidation processes

performed by IRS

 Identify and expand the use of the Federal Payment Levy Program (FPLP) to other federal payments and

plan to work with the appropriate agencies to make the necessary changes to include military retirement

payments

 Develop an enterprise-wide approach to tracking and managing software licenses

 Develop cost-based performance measures for our Notice programs

 Identify non-financial data that could be used to create managerial cost accounting reports

 Deploy updated enterprise risk management training, including specific scenario planning/response

exercises focused on critical risks

TIGTA CHALLENGE NO. 6 SUMMARY OF MAJOR ISSUES

Improving Tax Systems and Online Services Improve taxpayer systems and efficiency of operations

Fiscal Year 2015 Accomplishments

 Deployed new capabilities associated with Online Bill Pay, IRS Direct Pay, Online Payment Agreement,

return preparer lookup, and the IRS2Go mobile application in time for the opening of the tax filing season

in spite of challenging IT budget reductions

 Created a business-driven Enterprise Case Management (ECM) Program Management Office to oversee

the development of an ECM system that will, over time, standardize case management functions,

implement an infrastructure platform, and provide common services that a case management application

will leverage

 Consolidated and migrated the Detroit Computing Center infrastructure to other sites in Memphis,

Martinsburg, and Ogden, and completed the backup of the itinerant data

 Deployed code changes to multiple IRS systems in order to ensure penalty and interest calculations are

performed consistently
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 Commenced installation of equipment in the Martinsburg and Memphis computing sites to ensure IRS 

networks meet "world class" standards; increasing network survivability with a new telecommunications 

main distribution frame; expanding data center usage to other agencies, including Treasury and TIGTA; 

developing a Radio Frequency Identification (RFID) system to improve hardware identification and 

inventory management in Martinsburg

 Developed CADE 2 Transition State 2 Release Plan to address core Individual Master File (IMF) Financial 

Material Weakness requirements for individual taxpayer accounts, leverage the CADE 2 database as the 

authoritative data source, and migrate core IMF functions to another code language

Actions Planned or Underway 

 Deliver several CADE 2 Transition State 2 projects that will allow downstream systems to pull CADE 2 

data, correct failure to pay penalty computations for adjusted refundable credits, provide financial data to 

the IRS general ledger and sub-ledger, and generate data necessary to build financial and legal transcripts

 Implement the Radio Frequency Identification (RFID) system developed for Martinsburg in order to 

enhance hardware identification and inventory management

 Perform data extracts to determine risk profiles for eAuthentication users

TIGTA CHALLENGE NO. 7 SUMMARY OF MAJOR ISSUES

Providing Quality Taxpayer Service Operations Improve taxpayer service

Fiscal Year 2015 Accomplishments

 Piloted appointment scheduling for taxpayers who have a need for face-to-face service at the Taxpayer 

Assistance Center locations 

 Provided taxpayers with more digital self-service options, including modernizing the IRS public website, 

improving web content and design, and optimizing search capabilities 

 Implemented the use of special processing codes to expedite assignment to identity theft (IDT) victim 

assistance units; deployed specialized teams to focus on older IDT cases 

 Continued to look for opportunities to optimize Virtual Service Delivery (VSD); during FY 2015 IRS used 

capacity data from five sites to help guide decision-making around potential taxpayer and support site 

locations, while at the same time conducting outreach with Low Income Taxpayer Clinics to market VSD 

in the nine sites where it is presently available 

 Promoted VITA as an alternative to the traditional face-to-face model for preparation of amended, prior, 

and current year returns 

 Developed a multi-year strategy to convert many tax publications and instructions into the user-friendly ePub electronic format; in FY 2015, there were 29 tax publications available as eBooks on IRS.gov, 

including Publication 17, Your Federal Income Tax (For Individuals); there were 84,213 e-pub downloads 

of which 41,715 were for Pub. 17

Actions Planned or Underway 

 Use the annual Service Approach process to ensure that the projects proposed for implementation align 

with the IRS Commissioner’s long-term vision for modernizing taxpayer service. Develop processes and 

procedures to calculate the average time it takes to resolve taxpayer accounts affected by an IDT.

 Focus on development of additional web applications for taxpayers that will allow them to easily find 

answers to frequently asked questions

 Continue efforts to educate taxpayers on the availability of self-service channels, including online 

channels, to supplement face-to-face services in the Taxpayer Assistance Centers

 Develop electronic filing and processing capabilities for Form 1040X, Amended U.S. Individual Income 

Tax Return

 Enhance “Where's My Refund?” messaging on web and telephone automated applications to provide 

victims of identity theft the accurate status of their refund
U.S. Department of the Treasury | Fiscal Year 2015

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TIGTA CHALLENGE NO. 8 SUMMARY OF MAJOR ISSUES

Globalization Increase the outreach efforts to foreign governments 

on cross-border transactions

Fiscal Year 2015 Accomplishments

 Extended the Offshore Voluntary Disclosure Program to encourage taxpayers to voluntarily report their 

previously undisclosed foreign accounts and assets; IRS has collected over $6 billion since program 

inception. Achieved a major milestone by opening the first release of the International Data Exchange 

Service (IDES) Gateway. IDES enables both Financial Institutions and Host Country Tax Administrations 

to comply with their Foreign Account Tax Compliance Act (FATCA) obligations by safely and securely 

sending electronic FATCA reports to the IRS.

 Improved the Fraud Referral Program and the examinations of 501(c) tax exempt entities; identified 19 

entities suspected of being involved in illicit terrorist financing activities, refer five entities and their 

principals for investigation, and identify two tax-exempt organizations potentially warranting civil 

examination 

 Developed a formal International Collection training plan using cross-functional subject matter experts

Actions Planned or Underway 

 Updating the activities in the Foreign Account Tax Compliance Act (FATCA) Compliance Roadmap for 

identifying noncompliance by Foreign Financial Institutions (FFIs) 

 Establish controls to ensure Form 1116, Foreign Tax Credit (FTC), is attached to return when required; 

ensure that any training materials and additional guidance related to FTCs are updated, and that 

employees comply with the updated guidance; and improve educational, outreach and enforcement 

activities to correct the paid preparer issues related to the FTC 

 Enhance the FATCA registration system with additional capabilities such as permitting renewal of FFI 

agreements, allowing the bulk upload of sponsored entity and subsidiary branch information, improving 

search and download features, and adding features and documents to support the certification process

 Conduct civil examinations of tax exempt entities suspected of knowingly being involved in illicit financing 

of terrorist activity and initiate criminal investigations

 Train IRS employees to recognize potential violations of U.S. tax law with respect to tax-exempt 

organizations and the misuse of charities to fund terrorism

TIGTA CHALLENGE NO. 9 SUMMARY OF MAJOR ISSUES

Taxpayer Protection and Rights Apply the tax laws fairly

Fiscal Year 2015 Accomplishments

 Updated IRM procedures to reflect that the Lien Unit should verify all notice of federal tax lien (NFTL) 

requests in which the check box on the Form 12636, box 4 is blank 

 Reviewed and corrected the taxpayer accounts that were identified with Collection Statute Expiration Date 

errors 

 Worked through the State Suspicious Filers group to increase IRS collaboration with states on identity 

theft, fraudulent refunds, and the transmission of leads from the states to the IRS

 Collaborated with stakeholders of the Security Summit Information Sharing Team to increase datasharing to protect taxpayer identities and prevent identity theft

 Stopped more than 1.7 million fraudulent returns with associated refunds of more than $14 billion

Actions Planned or Underway 

 Establish IRM procedures to timely research taxpayer accounts when lien notices are returned with 

multiple reasons for return and ensure that the lien notice was mailed to the taxpayer’s last known 

address 

 Revise the guidelines for advertising the sale of seized property; issue a memorandum to remind 

employees of the requirements to be followed when revising fair market values affecting minimum bids 
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 Continue to collaborate with Federal, State and local agencies on best practices for authentication and 

identity protection

 Implement recommendations of the Security Summit Information Sharing Team

TIGTA CHALLENGE NO. 10 SUMMARY OF MAJOR ISSUES

Human Capital Enable the IRS to achieve its mission

Fiscal Year 2015 Accomplishments

 Determined, in conjunction with the Office of Personnel Management (OPM), whether and during what 

part of the hiring process the IRS can fully consider prior conduct and performance issues; IRS will use 

this information, in conjunction with OPM Suitability standards, in considering prior IRS employment 

history when rehiring former employees 

 Initiated an IRS-wide focus on Knowledge Management, which promotes an integrated approach to 

identifying, capturing, evaluating, retrieving, and sharing all of an enterprise's information assets

o Documented knowledge transfer plans and financial management training

o Created Knowledge Networks for four expertise areas in Employee Plans and Exempt Organizations 

o Leveraged 35 Geographic Leadership Communities (GLC) covering 76 percent of IRS executives and 

supervisors to create an environment focusing on career development, employee engagement, and 

support for emerging leaders

 Created a Leadership Engagement Action Plan (LEAP) combining planned IRS employee engagement 

efforts into a single, corporate engagement strategy based on the Four Pillars of Engagement: Lead, 

Listen, Develop and Support 

Actions Planned or Underway 

 Amend existing Section 1203 (b) policy to determine how cases are handled to include a requirement to 

document the analysis of evidence and the basis for the decision on whether or not to mitigate penalties to 

something less than termination 

 Implement the new recognition initiatives, the Leadership Engagement Action Plan (LEAP), and 

additional Knowledge Networks on other technical topics

 Assess the structure and operations of IRS functions, as well as their technical training and hiring needs, 

based on workload complexity, resource levels, geographical factors, and other considerations
U.S. Department of the Treasury | Fiscal Year 2015

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SECTION D: 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

SUMMARY OF MANAGEMENT ASSURANCES

Effectiveness of Internal Control over Financial Reporting (FMFIA § 2)

Statement of Assurance Qualified

Material Weakness

Beginning 

Balance New Resolved Consolidated Reassessed

Ending 

Balance

IRS – Unpaid Tax Assessments 

1 0 0 0 0 1

Effectiveness of Internal Control over Operations (FMFIA § 2)

Statement of Assurance Qualified

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 Government-wide Financial 

Statements

1 0 0 0 0 1

Total Material Weaknesses (FMFIA § 2) 2 0 0 0 0 2

Conformance with Financial Management System Requirements (FMFIA § 4)

Statement of Assurance Systems conform to financial management system requirements

Material Weaknesses

Beginning 

Balance New Resolved Consolidated Reassessed

Ending 

Balance

Total Non-conformances 0 0 0 0 0 0

Compliance with Federal Financial Management Improvement Act (FFMIA)

Agency Auditor

1. System Requirements Lack of substantial compliance noted

2. Accounting Standards Lack of substantial compliance noted

3. USSGL at the Transaction Level No lack of substantial compliance noted
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SECTION E: IMPROPER PAYMENTS DETAILED REPORT 

The Department’s Fiscal Year 2015 Improper Payments Information Act Report includes information required by the Improper 

Payments Information Act of 2002 (IPIA) as amended by the Improper Payments Elimination and Recovery Act of 2010

(IPERA), the Improper Payments Elimination and Recovery Improvement Act of 2012 (IPERIA), Executive Order 13520, 

Reducing Improper Payments and Eliminating Waste in the Federal Government, Office of Management and Budget (OMB) 

Circular No. A-123, Management’s Responsibility for Internal Control, Appendix C, Requirements for Effective Estimation and 

Remediation of Improper Payments (OMB Circular A-123, Appendix C) and OMB Circular A-136.

I. RISK ASSESSMENT

Each year, the Department develops a comprehensive inventory of the funding sources for all programs and activities and 

distributes it to the Treasury bureaus and offices. The bureaus and offices must perform risk assessments at the payment type 

level (e.g., payroll, contracts, vendors, travel, etc.). The Department’s risk assessment process follows the Committee of 

Sponsoring Organizations of the Treadway Commission (COSO) Internal Control Integrated Framework along with the seven 

risk factors outlined in OMB Circular A-123, Appendix C, Requirements for the Effective Estimation and Remediation of 

Improper Payments. The framework includes: 

 Internal Control Environment

 Risk Assessment

 Internal Control Activities

 Information and Communication

 Monitoring

The factors considered in the determination of risk levels include: 

 Operating Environment – Existence of factors which necessitate or allow for loosening of financial controls; any known

instances of fraud

 Payment Processing Controls – Management’s implementation of internal controls over payment processes including

existence of current documentation, the assessment of design and operating effectiveness of internal controls over

payments, the identification of deficiencies related to payment processes, and whether or not effective compensating

controls are present

 Internal Monitoring Activities – Periodic internal program reviews to determine if payments are made properly; strength of

documentation requirements and standards to support testing of design and operating effectiveness for key payment

controls

 Human Capital – Experience, training, and size of payment staff; ability of staff to handle peak payment requirements; level

of management oversight, and monitoring against fraudulent activity

 Whether the program or activity reviewed is new to the agency

 The complexity of the program or activity reviewed

 The volume of payments made annually

 Whether payments or payment eligibility decisions are made outside of the agency, for example, by a State or local

government, or a regional Federal office
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 Recent major changes in program funding, authorities, practices, or procedures

 The level, experience, and quality of training for personnel 

 Inherent risks of improper payments due to the nature of agency programs or operations

 Significant deficiencies in the audit reports of the agency

 Results from prior improper payment work

During fiscal year 2015, Treasury continued the use of its robust risk assessment process. 

For those payment types resulting in high-risk assessments 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 Corrective Action Plan

Medium Risk Review Payment Controls for Improvement Opportunity

Low Risk No Further Action Required

Below is a list of all of the Treasury Programs assessed for FY 2015: 

Bureau Program Name Susceptible to 

Significant IPs

Alcohol Tax and Trade 

Bureau

Salaries and Expenses N/A

Internal Revenue Collection PR N/A

Bureau of Engraving and 

Printing

Bureau of Engraving and Printing Fund N/A

Bureau of the Fiscal Service

Fiscal Service Administration Salaries and Expenses N/A

Reimbursements to Federal Reserve Banks N/A

Salaries & Expenses N/A

Financial Agent Services N/A

FRB reimbursements N/A

Debt Collection Special Fund N/A

Interest On The Public Debt N/A

Corporation for Public Broadcasting N/A

Payment to Legal Services Corporation N/A

Resident Tuition Support N/A

Judgments, Court Of Claims N/A

Judgments, US Courts N/A

Claims For Contract Disputes N/A

Fed. Pay- Emergency Planning & Security N/A

Fed. Pay- DC Water & Sewer N/A

Refund Money Erroneously Rec'd N/A

Fed. Pay-School Improvement N/A

Resolution Funds Corp N/A

Interest On Uninvested Funds N/A

Restitution of Foregone Interest, Financial 

Management

N/A

Check Forgery Insurance Fund N/A

D.C. Water and Sewage N/A

Travel Promotion Fund, Corporation for Travel N/A
U.S. Department of the Treasury | Fiscal Year 2015

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Promotion

Payments to Yankton Sioux Tribe Development 

Trust

N/A

Yankton Sioux Tribe Development Trust Fund N/A

Administrative Resource Center N/A

Community Development 

Financial Institutions Fund

CDFI Program N/A

CDFI Financing N/A

CDFI BGP Financing Fund N/A

N/A

District of Columbia 

Pensions

D.C. Federal Pension Fund N/A

DC Judicial Retirement & Sur. N/A

N/A

Departmental Offices

Salaries and Expenses N/A

Grants for Specified Energy Property in Lieu of Tax 

Credit

N/A

Small Business Lending Fund N/A

State Small Business Credit Initiative N/A

International Affairs Technical Assistance N/A

Treasury Asset Forfeiture Fund N/A

Working Capital Fund N/A

Financial Crimes 

Enforcement Network

Salaries and Expenses N/A

Internal Revenue Service

Refund Collection N/A

Refund Collection - Interest N/A

Additional Child Tax Credit N/A

Health Coverage Tax Credit N/A

Alternative Minimum Tax Credit Individuals N/A

Alternative Minimum Tax Credit Corporations N/A

American Opportunity Tax Credit N/A

Build America Bond Payments, Recovery Act N/A

Qualified Zone Academy Bonds N/A

Qualified School Construction Bonds N/A

New Clean Renewable Energy Bonds N/A

Qualified Energy Conservation Bond N/A

Premium Assistance Tax Credit N/A

Adoption Credit N/A

Small Business Health Insurance Tax Credit N/A

Informant Reimbursement N/A

Affordable Health Care Program N/A

Taxpayer services N/A

Tax Law Enforcement N/A

Information Systems N/A

Business Systems Modernization N/A

Earned Income Tax Credit Yes (see below)

International Monetary Fund

US Quota, IMF Executive N/A

Loans to IMF Direct Loan Financing Account N/A

Office of International 

Assistance

Global Environment Facility, Funds Appropriated to N/A

Contribution to the Asian Development Fund, Funds N/A

Contribution To Strategic Climate Fund N/A

Contribution to Inter-America Development N/A

Contribution International Develop Association N/A

Contribution To Asian Develop Bank N/A

Contribution to the International Bank for 

Reconstruction & Development

N/A

Contribution To Clean Technology Fund N/A

Contribution To African Develop Bk N/A
U.S. Department of the Treasury | Fiscal Year 2015

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Office of Financial Research

Financial Research Fund N/A

Office of Financial Stability

Salaries and Expenses N/A

Home Affordable Modification Program N/A

TARP Direct Loan Financing Account N/A

TARP Equity Purchase Financing Account N/A

Office of the Comptroller of 

the Currency

Assessment Funds N/A

Office of the Inspector 

General

Salaries and Expenses N/A

Special Inspector General for 

Troubled Asset Relief 

Program

Salaries and Expenses N/A

Mint

Public Enterprise Revolving Fund N/A

Treasury Inspector General 

For Tax Administration

Salaries and Expenses N/A

In fiscal year 2015, Treasury completed a full program inventory and performed risk assessments to identify programs that have 

a significant risk of improper payments, per the methodology in OMB Circular No. A-123, Appendix C. This included for the first 

time a qualitative risk assessment to determine areas that might affect payment accuracy related to premium tax credits (PTC) 

claimed on tax returns, including net PTC claimed after reconciling any advanced PTC (APTC) payments. As discussed in Part 1 

in the section entitled Management Assurances, Treasury also began to perform a risk assessment jointly with HHS, regarding 

APTC payments. The risk assessments performed on Treasury’s programs and activities in fiscal year 2015 found low and 

medium risk susceptibility for improper payments. However, the Earned Income Tax Credit (EITC) program is deemed a high 

risk, high priority program by the Department and OMB. 

II. STATISTICAL SAMPLING 

EITC Program

The EITC is a refundable federal tax credit that offsets income taxes owed by low-income workers and, if the credit exceeds the 

amount of taxes owed, provides a refund to those who qualify. 

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, Treasury updates the estimate of improper payments annually. The EITC 

improper payment rate is estimated using a statistically valid sample of about 2,600 returns audited through the IRS’s National 

Research Program (NRP), which is sufficient to estimate the improper payment rate with plus or minus 2.5 percentage point 

precision and 90 percent confidence. For tax year 2011 (the most recent study completed), the estimated gross amount of 

improper payments was $17.3 billion and the total amount of EITC claimed was $62.3 billion. The amount of erroneous EITC 
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payments prevented or recovered on tax year 2011 returns was $2.5 billion. This results in a net improper payment amount of 

$14.8 billion, or 23.8 percent of the total EITC claimed (or between 21.6 percent and 25.9 percent, accounting for sampling 

error). The current estimated error rate of 23.8 percent is consistent in magnitude with the five-year average error rate of about 

24 percent. 

Applying this rate estimated from data for tax year 2011 to the estimated FY 2015 level of EITC claims yields an estimated 

amount of improper payments for FY 2015 of $15.6 billion (or between $14.2 and $17.0 billion).

The following table provides the improper payment reduction outlook for the EITC:

Improper Payment (IP) Reduction Outlook 

(Dollars in Millions)

Program

2014 EITC Claims2014 IP%2014 IP$2015 EITC Claims2015 IP %2015 IP $2016 Est. EITC Claims2016 IP%2016 IP$2017 Est. EITC Claims2017 IP %2017 IP$2018 EITC Claims2018 IP %2018 IP$

Upper 

Bound of 

90% 

Confidence 

Interval

$65,200.0029.40%19,100.00$65,600.0025.90%$17,000.00$66,400.0025.90%$17,200.00$67,300.0025.90%$17,500.00$68,000.0025.90%$17,600.00

Lower 

Bound of 

90% 

Confidence 

Interval

$65,200.0024.90%$16,200.00$65,600.0021.60%$14,200.00$66,400.0021.60%$14,300.00$67,300.0021.60%$14,500.00$68,000.0021.60%$14,700.00

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 2014 was estimated using a statistically valid random sample of TY 2010 individual 

income tax returns that claimed the EITC. The FY 2015 – FY 2018 estimated net improper payment rates were estimated using a statistically valid 

random sample of TY 2011 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. 

This table presents the upper and lower bounds of the 90% confidence intervals in order to be consistent with the estimation approach used in 

prior years (through FY2009), which provided a range for the estimated net improper payment rate (IP %) and the estimated amount of net 

improper payments (IP $).

III. IMPROPER PAYMENTS REPORTING 

Treasury’s only high-risk susceptible program is the Earned Income Tax Credit (EITC). 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 Treasury. This is due to the complexity of the tax law around EITC and the significant annual turnover 

within the participating population. As an alternative, Treasury and OMB have collaborated on the development of a series of

supplemental measures. These measures should provide a more nuanced assessment of the EITC program and of Treasury’s 

efforts to limit improper payments than would be provided by standard reduction targets. Treasury has provided the following

supplemental measures to OMB: 

 The Annual Error Rate, which identifies the percentage of total EITC payments that are improper
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 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

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:

EITC Improper Payment Supplemental Measures

Measure FY 2015 Value FY 2014 Value FY 2013 Value

Annual Error Rate Total Payments (Outlays) $65.6 Billion $65.2 Billion $60.3 Billion

Improper Payments $15.6 Billion $17.7 Billion $14.5 Billion

Revenue Protected

(through compliance 

activities)

Dollars $ 7.3 Billion $6.4 Billion $5.6 Billion

Returns 2.9 Million 2.3 Million 2.0 Million

Revenue Protected from

Paid Preparer Treatments

Dollars $399 Million $365 Million $511 Million

Preparers 20,598 18,105 14,485

Preparer Due Diligence 

Penalties Proposed

Dollars $34.3 Million $39.1 Million $18 Million

Preparers 1,042 1,372 725

To help further address improper payments compliance and reporting, several legislative changes have been proposed for EITC. 

In the Fiscal Year 2016 Budget transmitted to Congress by the President, the following legislative authorities were proposed:

 Accelerating due dates for filing information returns, including Form W-2, to facilitate early detection of income 

misreporting and fraud, including identity theft. 

 Regulating return preparers to help reduce erroneous EITC claims by weeding out unscrupulous and incompetent 

preparers

 Providing more flexible correctable error authority to help IRS deny certain erroneous EITC claims before refunds are 

paid

 Increasing civil and criminal penalties for tax-related identity theft to prevent erroneous EITC claims

 Simplifying 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

These legislative proposals are intended to reduce improper payments under EITC and improve taxpayer and paid preparer 

compliance while minimizing taxpayer burden.
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IV. IMPROPER PAYMENT ROOT CAUSE CATEGORIES

Prior to FY 2015 reporting, agencies were required to categorize their improper payment estimates based on three categories of 

improper payments: documentation and administrative errors; authentication and medical necessity errors; and verification 

errors. However, for FY 2015 reporting and beyond, OMB encourages agencies with programs that are susceptible to significant 

improper payments to report information in their AFR or PAR based on the categories described in the chart below. 

EITC

Reason for Improper Payment

Overpayments Underpayments

Program Design or Structural Issue $900.00 -

Inability to Authenticate Eligibility $14,700.00 -

Death Data - -

Financial Data - -

Excluded Party Data - - Failure to Verify:

Prisoner Data - -

Other Eligibility Data (explain) - -

Federal Agency * *

State or Local Agency 

Administrative

or Process Other Party (e.g., participating lender, Error Made by: 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 $15,600.00 $0

*None identified in the statistically valid sample used to estimate the improper payment 

Inability to Authenticate Eligibility 

It is estimated that $14.7 billion or 94 percent of improper payments are from authentication errors. 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). There is a lack of internal or 

external databases with information that would help enable IRS to make a determination of eligibility in the absence of an audit. 

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. Data on marital status and living arrangements are not available in an internal or 

external database the IRS can access. 
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Finally, this category includes a small amount of error related to rules for all taxpayers claiming EITC related to valid SSNs, 

residency, and whether the taxpayer is the qualifying child of another taxpayer, none of which can be authenticated by IRS at 

time of filing.

Program Design or Structural Issues

It is estimated that $0.9 billion or 6 percent of improper payments are from program design errors. 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 until after the filing season; 

therefore IRS is unable to 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. 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 IRS cannot identify this situation until both returns are filed. 

IRS has implemented the following corrective actions to address the root causes identified:

Reason for Improper 

Payment

Examination ClosuresMath Error NoticesDocument MatchingAmended Returns1Two 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

V. CORRECTIVE ACTIONS 

This section describes the ongoing and planned corrective actions to reduce the improper payment rate for Treasury’s only highrisk susceptible program, the EITC.

The IRS’s strategy with respect to improper payments is to intervene early to ensure compliance with the rules and regulations. 

In FY 2015, IRS addressed improper payments through our compliance programs as well as through expansive outreach and 

education efforts to taxpayers and preparers. The IRS’s EITC-focused enforcement programs protected approximately $4.6 

billion (which does not include the EITC dollars stopped by IRS’s fraud and identify theft programs). The revenue includes EITC 

and also other credits and taxes recovered or prevented from being paid in error in FY 2015, on returns filed in 2015 or earlier 

years and selected for EITC enforcement. (In contrast, the $2.5 billion subtracted from gross improper payments to yield the net 
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improper payment amount for tax year 2011 above includes EITC amounts only on returns filed for tax year 2011, selected for 

examination or document matching.)

 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 Additional Child Tax Credit portion of the refund on these 

EITC examinations. 

 Math Error – Refers to an automated process in 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 significant results from 445,641 EITC-related examinations, 170,000 math error notices, and 

1,710,904 document matching reviews.

Compliance Activities

FY10 FY11 FY12 FY13 FY14* FY15** FY16***

FY10-FY16 

Total

Examination Closures 473,999 483,574 487,408 483,070 435,638 445,641 446,000 3,255,330

Math Error Notices 341,824 293,450 270,492 241,975 194,127 170,000 150,000 1,661,868

Document Matching 904,920 1,178,129 985,172 906,994 1,053,304 1,710,904 1,700,000 8,439,423

Amended Returns1 19,347 14,317 13,284 8,130 17,723 24,282 24,300 121,383

* Restated actual.

** Preliminary data.

*** Estimate based on fiscal year 2016 preliminary data.

1 Amended returns are a subset of Audit Closures.

These compliance activities had a significant effect, protecting revenue of $4.6 billion in FY 2015. Treasury projects that 

continued enforcement efforts will protect a total of approximately $28 billion in revenue through fiscal year 2016, as shown 

below.

 

Maximizing Current Business Processes

In addition to base compliance program efforts, the following efforts contributed to the IRS’s strategy of identifying and reducing 

improper EITC refund claims in FY 2015:

Base Enforcement Efforts: Delivered key compliance activities including 445,641 audits, 1,710,904 misreported income cases, 

and an estimated 170,000 math error adjustments, protecting revenue of over $4.6 billion. The revenue includes EITC and also 

other credits and taxes from returns selected for EITC enforcement.

(In Billions)

FY10 FY11 FY12 FY13 FY14* FY15** FY16***

FY10-FY16 

Total

Examination Closures 1.97 2.04 2.05 2.11 1.75 1.99 1.99 13.90

Math Error Notices 0.41 0.35 0.31 0.30 0.24 0.22 0.20 2.03

Document Matching 1.43 1.32 1.55 1.42 1.39 2.31 2.31 11.73

Amended Returns 0.06 0.04 0.04 0.03 0.05 0.08 0.08 0.38

TOTAL 3.87 3.75 3.95 3.86 3.43 4.60 4.58 28.04

* Restated actual.

** Preliminary data.

*** Estimate based on fiscal year 2016 preliminary data.
U.S. Department of the Treasury | Fiscal Year 2015

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Two and 10 Year Bans: Imposed 1,873 two-year bans and 87 ten-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 over 638,000 fraudulent returns through our fraud detection filters from being 

processed, preventing over $3 billion dollars in erroneous refunds, of which, nearly $1.6 billion were improper EITC payments.

Criminal Investigations: Continued to stop fraudulent EITC refund claims through our Criminal Investigation (CI) division 

indictments. Through September 2015, CI issued 284 EITC Questionable Refund Program (QRP) scheme indictments with 272 

convictions as well as 102 EITC Return Preparer indictments with 100 convictions. 

Soft Notices: Sent approximately 90,000 letters to alert taxpayers that a qualifying child for the EITC claimed on their returns 

had also been claimed by another person. 

Return Preparer Initiatives: As a part of the FY 2015 EITC Return Preparer Strategy, IRS completed activities associated with a 

suite of progressive EITC preparer treatments, addressing almost 21,000 preparers (up from 18,000 in FY 2014) selected 

through our risk-based scoring model, before and during the filing season.

 The IRS completed 665 pre-filing season Due Diligence Visits (DDVs) with a penalty rate of 87% and nearly $28 million 

in proposed penalties. Revenue and criminal investigation agents completed 94 educational Knock-and-Talk Visits 

(KTV) visits. The IRS also mailed over 21,000 educational notices and called over 1,300 preparers before the FY 2015 

filing season.

 The IRS closed 270 filing season DDVs with a penalty rate of 81% and over $3.5 million in proposed penalties. The IRS 

proposed penalties of $268,000 on 21 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 nearly 20,000 educational notices and called 

over 2,000 preparers during the 2015 filing season. Additionally, the IRS obtained two civil injunctions protecting 

revenue of $12.8 million.

 The analysis of the FY 2015 EITC Preparer Strategy revealed that, in addition to the penalties and injunction revenue 

protected above, the preparer treatments protected over $465 million ($386 million EITC and $79 million Child Tax 

Credit).

Return Preparer Penalties: Proposed almost $3 million in penalties to 225 TY 2013 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 Treas. Reg. §1.6695–2. The IRS also sent over 15,000 warning letters and 775 electronic alerts for TY 2014 to 

warn preparers that did not attach Form 8867 to taxpayer returns.

Return Preparer Outreach and Education: Focused outreach and education efforts on EITC returns preparers to educate them 

on EITC and due diligence requirements. Nearly 13,500 preparers received a certificate of completion for the English and 

Spanish interactive EITC Due Diligence Training module. Additionally, with almost 11,000 preparers attending IRS Tax 

Forums, 49% attended our seminar on EITC due diligence, and 27% attended our seminar on preventing and detecting identity 

theft.

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: Conducted annual EITC outreach campaign, including the ninth annual EITC Awareness 

Day, which centered on EITC underserved populations and included focused compliance messages. The IRS and its partners 

held more than 280 events to promote EITC. Various Spanish media outlets (i.e., print, internet, and radio) reached an audience 

of over five million. Over 1.4 million people were exposed to EITC Awareness Day information via Twitter. More than 16,000 
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viewers watched English and Spanish EITC YouTube videos on the IRS channel, and over 3,700 people visited the EITC website 

on IRS.gov. IRS believes social media engagement continues to be the preferred partner vehicle to increase the public awareness 

of EITC. Also, almost 577,000 taxpayers visited the EITC Assistant on IRS.gov, a tool that allows taxpayers to determine if they 

qualify for the credit.

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, many of which are known only to the taxpayer and 

cannot be independently confirmed using third-party corroborating data by IRS. The estimation 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 and paid. For example, the controls and filters in IRS's fraud and identity theft programs stop EITC 

returns submitted with billions of dollars in fraudulently claimed EITC. 

The IRS has internal controls in place to verify eligibility when data are available. For example, IRS may reject a return from 

processing or systemically adjust a return if a Social Security Number is incorrect, information on the return is not consistent 

with eligibility requirements, or the return contains a mathematical error. IRS cannot verify key EITC eligibility criteria in the 

absence of tax return examination. IRS's 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 IRS cannot examine all 

returns identified. For those that IRS does examine, 80 percent are audited in a pre-refund environment where IRS holds the 

EITC refund until eligibility is verified by taxpayers. 

IRS has a strong internal control environment based on a risk assessment around EITC and other programs administered 

involving tax returns submitted claiming refunds. IRS makes decisions based on overall cost-benefit considerations. IRS 

annually reviews and enhances its compliance plan that addresses erroneous returns, including those claiming EITC. 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 Service 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 refunds including refundable credits, such as EITC 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. 

The Service conducts routine reviews to ensure that EITC internal control processes are carried out in accordance with written 

procedures. 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. IRS shares ongoing program 

information with policy and decision-makers via monthly and quarterly briefings. 
U.S. Department of the Treasury | Fiscal Year 2015

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Status of Internal Control Matrix 

Listed below are the ratings for EITC Internal Control Standards. 

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. Treasury has 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. INFORMATION SYSTEMS AND OTHER INFRASTRUCTURE

Overall, Treasury has the internal controls, human capital, and information systems and other infrastructure it needs to reduce 

improper payments to the targeted levels. 

IX. LIMITING STATUTORY AND REGULATORY BARRIERS

A number of factors continue to serve as barriers to reducing overclaims in the EITC program. These include: 

• Complexity of the tax law (including the need for Congressional authorization of correctible error authority)

• Structure of the EITC with taxpayers submitting claims without IRS having information accessible at the time of return

filing to validate eligibility

• Confusion among taxpayers about their eligibility contributing to overclaims and underclaims

• High turnover of eligible claimants

• Unscrupulous and/or incompetent return preparers

• Fraud

No one of these factors can be considered the primary driver of program error. However, these barriers severely impede the 

IRS’s dual mission of issuing refunds to those who are entitled, while ensuring refunds are paid only to those who truly qualify 

for the credit. 
U.S. Department of the Treasury | Fiscal Year 2015

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Also, statutory requirements further constrain the IRS’s ability to ensure that EITC claims are valid before they are processed 

and paid. Since the EITC is administered through the Internal Revenue Code, it is claimed by taxpayers during the filing and

processing of their tax returns. The Internal Revenue Code (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.

IRS submitted legislative proposals in the FY2016 Budget to help address EITC improper payments.

X. RECAPTURE OF IMPROPER PAYMENTS REPORTING

In accordance with IPERA and OMB Circular No. A-123, Appendix C, Treasury performs and reports annually on its payment 

recapture program. During fiscal year 2015, Treasury 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.

Treasury’s annual risk assessment process includes a review of pre-payment controls that minimize the likelihood and 

occurrence of improper payments. Treasury requires 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 2015. Treasury employees performed this work.

Treasury considers both pre- and post-reviews to identify payment errors a sound management practice that should be included 

among basic payment controls. All Treasury bureaus have a process in place to identify improper payments during pre- and 

post-reviews. At times, bureaus may use the results of the Treasury IGs and GAO reviews to help identify payment anomalies 

and target areas for improvement. However, Treasury applies extensive payment controls at the time each payment is 

processed, making recapture activity minimal.
U.S. Department of the Treasury | Fiscal Year 2015

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Improper Payment Recaptures with and without Audit Programs 

($ in millions) 

Contracts Benefits Other Totals

Overpayments

Recaptured 

outside of 

Payment 

Recapture 

Audits

Program or ActivityAmount IdentifiedAmount Recaptured2015 Recapture Rate (%)2016 Recapture Rate Target (%)2017 Recapture Rate Target (%)Amount IdentifiedAmount Recaptured2015 Recapture Rate Target (%)2016 Recapture Rate (%)2017 Recapture Rate (%)Amount IdentifiedAmount Recaptured2015 Recapture Rate (%)2016 Recapture Rate Target (%)2017 Recapture Rate Target (%)Total Amount IdentifiedTotal Amount RecoveredAmount IdentifiedAmount Recaptured

BEP .084 0 0 80 100 0 0 0 0 0 0 0 0 0 0 .084 0 0 0

FSA .063 .066 10 100 100 0 0 0 0 0 .052 .014 27 80 85 .115 .081 0 0

ARC .001 .037 3206 100 100 0 0 0 0 .004 .003 75 85 90 .005 .041 0 0

CDFI .001 .001 100 100 100 0 0 0 0 0 0 0 0 0 0 .001 .001 0 0

DCP 0 0 0 0 0 1.34 1.31 98 99 100 0 0 0 0 0 1.34 1.31 1.35 1.23

DO .23 .20 87 90 95 0 0 0 0 0 .15 .07 46 80 85 .38 .26 0 0

FFB 0 0 NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA

FinCen .005 .005 100 100 100 0 0 0 0 0 .01 .01 100 100 100 .015 .015 0 0

IRS .011 .011 100 100 100 0 0 0 0 0 0 0 0 0 0 .011 .011 1.00 .15

Mint .016 .020 125 100 100 0 0 0 0 0 .11 .017 15 80 85 .126 .037 .004 .004

OFS .12 .12 100 100 100 0 0 0 0 0 1.25 1.24 99 100 100 1.37 1.36 0 0

OIG 0 0 0 0 0 0 0 0 0 0 0 NA NA NA NA 0 0 0 0

SIG .011 .011 100 100 100 0 0 0 0 0 .011 .002 18 80 85 .022 .013 0 0

TIGTA 0 0 0 0 0 0 0 0 0 0 .018 .01 56 80 85 .018 .011 0 0

TTB .002 .002 100 100 100 0 0 0 0 0 .005 .004 80 85 90 .007 .006 0 0

Totals .544 .473 92 97 99 1.34 1.31 98 99 100 1.61 1.37 85 90 95 3.49 3.15 2.35 1.38

During fiscal year 2015, Treasury determined that conducting a Payment Recapture Audit on the following six programs would 

not be cost-effective: 

 Fiscal Service (FS) Debt Activity Programs

 FS Treasury Managed Accounts

 FS 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

FS Debt Activity Programs continued to reflect a low level of risk in every group and payment type in fiscal year 2015. 

FS Treasury Managed Account disbursements are based on public law, adjudications, or payment certifications from federal 

agencies. Payments are made via the FS Secure Payment System (SPS). 
U.S. Department of the Treasury | Fiscal Year 2015

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FS Trust Funds Management program continued to reflect a low level of risk in nearly every group and payment type category 

assessed.

The Treasury Executive Office for Asset Forfeiture’s program payments to state and local law enforcement agencies are 

intergovernmental payments that represent a low risk of improper payment. In addition, the Treasury Executive Office of Asset 

Forfeiture staff reviews payments monthly for accuracy.

The Departmental Offices 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 FS Secure Payment System. These payments present a low level of improper payment risk based on the 

number of payments annually.

The Office of the Comptroller of the Currency assessment funds risk assessment has resulted in a low risk rating each of the last 

four years for all rating categories

Based on the above justifications payment recapture audits for these programs were not deemed cost effective. The Department

sent notifications on these justifications to OMB and the Treasury OIG in October 2015.

Disposition of Funds Recaptured Through Payment Recapture Audits

($ in millions)

Program or 

Activity

Amount 

Recovered

Type of 

Payment

Agency 

Expenses to 

Administer the 

Program

Payment 

Recapture 

Auditor Fees Original Purpose

Returned to 

Treasury Other

FSA .081 C/O - - .081 - -

ARC .041 C/O - - .041 - -

CDFI .001 C/O - - .001 - -

DCP 1.31 B - - 1.31

- -

DO .26 C/O - - .26 - -

FinCen .015 C/O - - .015 - -

IRS .011 C - - .011 - -

Mint .037 C/O - - .037

- -

OFS 1.36 C/O - - 1.36 - -

SIGTARP .013 C/O - - .013 - -

TIGTA .011 C/O - - .011 - -

TTB .006 C/O - - .006 - -

Key: C – Contract, B – Benefits, O - Other
U.S. Department of the Treasury | Fiscal Year 2015

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Aging of Outstanding Overpayments Identified in the Payment Recapture Audits

($ in millions) 

XI. ADDITIONAL COMMENTS

In fiscal year 2015, the OIG issued Report Number OIG-15-033, Treasury’s Improper Payment Reporting Needs Improvement, 

which covered the IPERA program as presented in Treasury’s fiscal year 2014 Agency Financial Report. During fiscal year 2015, 

the Department continued to implement corrective actions to address the findings and recommendations in the OIG report. 

XII. AGENCY REDUCTION OF IMPROPER PAYMENTS WITH THE DO NOT PAY INITIATIVE

Treasury has mandated that all bureaus use the Do Not Pay (DNP) system, with certain exemptions for particular payments 

within bureaus. Currently the Death Master File (DMF) of the Social Security Administration and System for Award 

Management (SAM) are two of the databases used for adjudication by the DNP system. Payment files produced by the bureaus 

are compared to the Do Not Pay system as part of normal processing to verify whether payments were proper. Certain bureaus 

within Treasury also have their own additional adjudication processes which help to verify Do Not Pay system generated hits. 

Numerous bureaus within Treasury have reported that they have not had to take any action as pre-screening requirements have 

also been implemented to eliminate expected findings via Do Not Pay. No corrections to original source agencies have been 

detected at this time. 

Results of the Do Not Pay Initiative in Preventing Improper Payments 

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 

determined 

accurate

Dollars ($) of 

potential 

improper 

payments 

reviewed and 

determined 

accurate

Reviews 

with IPERIA 

specified 

databases 2,986,934 $29,947,450,669 N/A N/A 2924 $38,682,234

Reviews 

with –

databases 

not listed in 

IPERIA 2,986,934 $29,947,450,669 N/A N/A 4654 $10,683,868

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 

not to be 

Collectible*

BEP C .085 - -

-

FSA O .033 - .003 .004

ARC O .001 - -

.001

DCP B .029 - .42 .388

DO C/O .10 .012 .007 .002

Mint C/O .039 - .035 .011

OFS O .009 - -

-

SIGTARP O .004 .005 -

.002

TIGTA O .007 - -

-

TTB O - - .001 -

Prior Year bureau 

combined balances** O -

-

-

.075

Key: C – Contract, B – Benefits, O – Other

*Cumulative balances from FY 2012

**Combined bureau cumulative balances prior to FY 2012 
U.S. Department of the Treasury | Fiscal Year 2015

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* Note: The period covering the data is October 2014 to August 2015

 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. The 

greater part of the payments reviewed were excluded from matching last year due to (1) a missing or invalid TIN or (2) 

an invalid name.

 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.
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SECTION F: MATERIAL WEAKNESSES AND AUDIT FOLLOW-UP

This section provides detailed descriptions of Treasury’s material weakness inventory, including summaries of actions taken and 

planned to resolve the weaknesses; tracking and follow-up activities related to Treasury’s GAO, OIG, TIGTA, and SIGTARP audit 

inventory; an analysis of potential monetary benefits arising from audits performed by Treasury’s three IGs; and an update on 

Treasury’s financial management systems framework.

Treasury’s Material Weaknesses

Management may declare audit findings or internal situations as a material weakness whenever a condition exists that may 

jeopardize the Treasury mission or continued operations. The FMFIA requires agency reporting on material weaknesses.

FMFIA and FFMIA 

The FMFIA requires agencies to establish and maintain internal controls. The Secretary must evaluate and report annually on 

the operational and financial reporting controls (FMFIA Section 2) and financial systems (FMFIA Section 4 and FFMIA) that 

protect the integrity of federal programs. 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, 2015, Treasury 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 2015 2 0 2

Closures/Downgrades during Fiscal Year 2015 0 0 0

Reassessed during Fiscal Year 2015 0 0 0

New Material Weakness Declared during Fiscal Year 2015 0 0 0

Balance at the End of Fiscal Year 2015 2 0 2
U.S. Department of the Treasury | Fiscal Year 2015

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Below are detailed descriptions of Treasury’s two material weaknesses:

Material Weakness Description

Internal Revenue Service – Unpaid Tax Assessments

The IRS needs to improve its internal control over Unpaid Assessments. Original key elements:

• Subsidiary ledger does not track and report one Trust Fund Recovery Penalty (TFRP) balance

• Untimely posting of TFRP assessments and untimely review of TFRP accounts

• General ledger cannot accurately report the Taxes Receivable balance without a statistical estimation process

An ongoing challenge is that the timely implementation of Customer Account Data Engine 2 (CADE2) Transition State 2 

(TS2) and other Financial Material Weakness changes are dependent upon funding and resource availability.

Actions Completed in FY 2015 What Remains to be Done

 Completed the fiscal year 2014 “After the Audit” 

report and issued the results to the Business Owners 

for follow-up and corrective action

 The IRS created a cross-walk document which 

provided the IRS’s interpretations of FASAB No. 7 as 

it related to accounting for unpaid tax assessments 

for the first time and received concurrence from its 

auditors that IRS’s interpretations of the appropriate 

sections of FASAB No. 7 are reasonable and were 

used as the basis for the FY 2015 audit

 The IRS developed a series of new long-term actions 

intended to address all issues impacting the material 

weakness and based on funding, will be integrated 

into the Unpaid Assessment Material Weakness 

action plan

 The IRS completed a penalty quality review and took 

the necessary actions to address the findings

Implement action items from the long-term action 

plan to close the Material Weakness

Implement CADE2 TS 2 Financial Material 

Weakness functionality by January 2018

Test for the downgrade of the Financial Material 

Weakness in fiscal year 2019 and request downgrade 

by GAO for fiscal year 2020 with a target completion 

date of November 30, 2020

Complete the downgrade and closure of the Material 

Weakness in fiscal year 2021

Material Weakness Description

Bureau of the Fiscal Service – Control Deficiencies in the Processes used to Prepare the Consolidated Government-wide 

Financial Statements

The government has control deficiencies in the processes used to prepare the Consolidated Government-wide Financial 

Statements. The control deficiencies contributed to the following material weaknesses:

 The federal government continues to be unable to adequately account for and reconcile intragovernmental activity and 

balances between federal entities

 The federal government continues to have inadequate systems, controls, and procedures to ensure that the consolidated 

financial statements are consistent with the underlying audited entity financial statements, properly balanced, and in 

accordance with U.S. generally accepted accounting principles

 Treasury and OMB continue to lack an effective process for ensuring the consistency of (1) information used by Treasury 

to compute the budget deficit reported in the consolidated financial statements, (2) Treasury’s records of cash 

transactions, and (3) information reported in federal entity financial statements and underlying financial information and 

records

Actions Completed in FY 2015 What Remains to be Done

 Treasury expanded application of its intragovernmental 

metrics and scorecard program

 Treasury continued to implement software and 

processes to automate and streamline Financial Report

compilation in order to improve accuracy and control

 Treasury identified reporting entities significant to the 

Financial Report

 Treasury requested additional budget information from 

agencies as well as explanations of, and support for any 

differences

Treasury has requested that federal agencies provide 

root cause information and corrective action plans to 

resolve systemic differences

Treasury will focus on collecting critical information 

from significant reporting entities, including the 

Legislative and Judicial branches

Treasury will continue to use the information 

maintained at Treasury to demonstrate consistency 

and reconcile the differences between agency reports 

and the Financial Report

Targeted Downgrade/Closure: fiscal year 2018
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II. Audit Follow-up Activities

During fiscal year 2015, Treasury continued to place emphasis on both the general administration of internal control issues 

throughout the Department and the timely resolution of findings and recommendations identified by GAO, OIG, TIGTA, 

SIGTARP, external auditors, and management. During the year, Treasury continued to implement enhancements to the tracking 

system called the “Joint Audit Management Enterprise System” (JAMES). JAMES is a Department-wide, interactive, web-based 

system accessible to management, OIG, TIGTA, SIGTARP, and others. The system tracks information on audit reports from 

issuance through completion of all corrective actions required to address findings and recommendations contained in an audit 

report. JAMES is the official system of record for Treasury’s audit follow-up program.

Potential Monetary Benefits

The Inspector General Act of 1978, as amended, Public Law 95-452, requires the IGs and secretaries of executive agencies and 

departments to submit semiannual reports to the Congress on actions taken on audit reports issued that identify potential 

monetary benefits. The Department consolidates and analyzes all relevant information for inclusion in this report. 

The information contained in this section represents a consolidation of information provided separately by OIG, TIGTA, 

SIGTARP, and Treasury management.

In the course of their audits, the IGs periodically identify “questioned costs”, recommend that funds be put to better use, 

enhancements to revenues of the federal government, and identify measures that demonstrate the value of audit 

recommendations to tax administration and business operations. 

“Questioned costs” include a:

(1) Cost that is questioned because of an alleged violation of a provision of a law, regulation, contract, or other requirement 

governing the expenditure of funds

(2) Finding, at the time of the audit, that such costs are not supported by adequate documentation (i.e., an unsupported 

cost)

(3) Finding that expenditure of funds for the intended purpose is unnecessary or unreasonable

The phrase “disallowed cost” means a questioned cost that management, in a management decision, has sustained or agreed 

should not be charged to the federal government.

“Funds Put to Better Use” includes:

 Reductions in outlays

 Deobligations of funds from programs or operations

 Costs not incurred by implementing recommended improvements related to operations

 Avoidance of unnecessary expenditures noted in pre-award reviews of contract agreements

 Prevention of erroneous payment of refundable credits (e.g., the Earned Income Tax Credit)

 Any other savings that are specifically identified

“Revenue Enhancements” include opportunities to increase revenue to the federal government.
U.S. Department of the Treasury | Fiscal Year 2015

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The Department regularly reviews progress made by the bureaus to realize potential monetary benefits identified in audit 

reports, and coordinates with the auditors as necessary to ensure the consistency and integrity of information on monetary 

benefit recommendations tracked in JAMES.

The statistical data in the following summary tables represent audit report activity for the period from October 1, 2014 through 

September 30, 2015. The data reflect information on OIG, TIGTA, and SIGTARP reports that identified potential monetary 

benefits.

Audit Report Activity With Potential Monetary Benefits for Which Management Has Identified Corrective 

Actions (OIG, TIGTA, and SIGTARP) October 1, 2014 through September 30, 2015 

(Dollars in Millions)

Disallowed Costs Funds Put to Better Use

Revenue 

Enhancements Total

Reports Dollars Reports Dollars Reports Dollars

Report 

Total Total Dollars

Beginning Balance 11 52.5 8 5,942.3 5 8,256.5 24 14,251.3

New Reports 5 3.2 4 9,190.5 8 1,784.3 17 10,978.0

Total 16 55.7 12 15,132.8 13 10,040.8 40 25,229.3

Reports Closed 5 8.7 10 9,337.2 5 1,309.5 18 10,655.4

a. Realized or 

Actual1 2 1.0 4 62.6 0 0 5 62.6

b. Unrealized or 

Written off1 3 8.62 6 9,274.73 4 1,309.54 12 10,592.8

Ending Balance 11 47.0 3 5,795.5 7 8,731.3 21 14,573.9

1Report numbers in categories a and b may not equal the Reports Closed. One report can be included in one or both categories.

2For written off Disallowed Costs: This figure includes one TIGTA report, with $0.4 million written off, for which the IRS disagreed with the 

reported finding.

3For written off Funds Put to Better Use: This figure includes three TIGTA reports, with $9.1 billion written off, for which IRS management 

disagreed with TIGTA’s recommendation or projected benefits; and two TIGTA reports with $86.2 million written off, for which TIGTA 

disagreed with the write off. TIGTA disagreed with the write offs because the IRS did not complete the corrective action or not enough time 

had passed for the IRS to realize the potential monetary benefit.

4For written off Revenue Enhancements: This figure includes four TIGTA reports, with $119.7 million written off, for which IRS management 

disagreed with TIGTA’s recommendation or projected benefits; and one TIGTA report, with $542.9 million written off, for which TIGTA 

disagreed with the write off. TIGTA disagreed with the write off because the corrective action has not been fully addressed.

The following table presents a summary of OIG, TIGTA, and SIGTARP audit reports with potential monetary benefits that were 

open for more than one year as of the end of fiscal years 2013, 2014, and 2015.

Number of Reports with Potential Monetary Benefits Open for More than One Year 

(Dollars In Millions)

AFR Report Year 9/30/2013 9/30/2014 9/30/2015

OIG No. of Reports 0 0 0

$ Projected Benefits $ 0 $ 0 $ 0

TIGTA No. of Reports 7 12 11 

$ Projected Benefits $ 39.2 $ 14,038.0 $ 13,427.09

SIGTARP No. of Reports 2 1 0

$ Projected Benefits $ 8.7 $ 8.1 $ 0
U.S. Department of the Treasury | Fiscal Year 2015

213

The following table presents a summary of the audit reports containing potential monetary benefits, broken out by year of report 

issuance, on which management decisions were made on or before September 30, 2014, but the final actions had not been taken 

as of September 30, 2015.

Details of the Audit Reports with Potential Monetary Benefits

on Which Management Decisions Were Made On or Before September 30, 2014,

But Final Actions Have Not Been Taken as of September 30, 2015

(Dollars In Millions)

Bureau

Report 

No.

Report Issue 

Date Brief Description

Disallowed 

Costs

Funds Put 

to Better 

Use

Revenue 

Enhancement Total Due Date

IRS 2011-1c1229/28/2011

The IRS should use the 

DCAA report in the 

administration of the 

contract and determine 

whether the questioned 

costs should be recovered.

28.57 - - 28.57 9/30/2016

FY 2011 1 $28.57 $0 $0 $28.57

IRS 2012-

1c-003

12/02/2011

The IRS should use the 

DCAA report in the 

administration of the 

contract and determine 

whether the questioned 

costs should be recovered.

0.02 - - 0.02 12/02/2016

IRS 2012-

1c-032

3/19/2012

The IRS should use the 

DCAA report in the 

administration of the 

contract to determine 

whether the questioned 

costs should be recovered.

7.42 - - 7.42 3/31/2017

IRS 2012-

1c-079

8/17/2012

The IRS should use the 

DCAA report in 

administering and closing 

out contracts.

1.48 - - 1.48 8/07 /2017

FY 2012 3 $8.92 $0 $0 $8.92
U.S. Department of the Treasury | Fiscal Year 2015

214

Bureau Report No.

Report Issue 

Date Brief Description

Disallowed 

Costs

Funds Put to 

Better Use

Revenue 

Enhancement Total Due Date

IRS 2013-1c-001 3/18/2013

The IRS should use the 

DCAA report in 

administering and 

closing out contracts.

0.33 - - 0.33 3/18/2018

IRS 2013-40-122 9/20/2013

To reduce the potential 

for tax filing fraud, the 

IRS should implement 

a process to deactivate 

ITINs assigned to 

individuals prior to 

January 1, 2013, who no 

longer have a tax filing 

requirement.

- 1,883.24 - 1,883.24 6/15/2017

IRS 2013-40-120 9/23/2013

The IRS should update 

fraud filters to include 

use of business tax 

return filing and 

withholding payment 

data to identify 

potentially fraudulent 

tax returns that use a 

falsely obtained 

employee identification 

number to report 

income and 

withholding.

- 3,894.10 - 3,894.10 1/15/2016

IRS 2013-40-123 9/26/2013

The IRS should develop 

processes and 

procedures to enable 

Campus Operations to 

assess the erroneous 

refund penalty for 

disallowed credit claims 

that are excessive and

do not have a 

reasonable basis.

- - 7,550.48 7,550.48 9/15/2015

FY 2013 4 $0.33 $5,777.34 $7,550.48 $13,328.15

Bureau Report No.

Report Issue 

Date Brief Description

Disallowed 

Costs

Funds Put to 

Better Use

Revenue 

Enhancement Total Due Date

IRS 2014-1c-018 3/21/2014

The contracting officer 

should use the DCAA 

report in administering 

and closing out 

contracts.

6.47 - - 6.47 12/19/2018

IRS 2014-1c-019 5/29/2014

The contracting officer 

should use the DCAA 

report in administering 

and closing out 

contracts.

.08 - - .08 5/29/2019
U.S. Department of the Treasury | Fiscal Year 2015

215

IRS 2014-20-088

The Chief Technology 

Officer should ensure 

that the requirements 

management processes 

for future IRDMCM 

System development 

activity are performed 

in accordance with 

established guidelines, 

to include using

business process 

modeling to specify 

well-defined 

requirements.

- - 54.90 54.90 10/25/2015

Total 3 $6.55 $54.90 $61.45

Total 11 $44.37 $5,777.34 $7,605.38 $13,427.09

The following table provides a snapshot of OIG and TIGTA audit reports with significant recommendations reported in previous 

semiannual reports for which corrective actions had not been completed as of September 30, 2014 and September 30, 2015, 

respectively. OIG and TIGTA define “significant” as any recommendation open for more than one year. There were no 

“Undecided Audit Recommendations” during the same periods. 

Audit Reports with Significant Unimplemented Recommendations

9/30/2014 9/30/2015

OIG TIGTA OIG TIGTA

No. of Reports 5 26 10 20

The following table provides a snapshot of the number of recommendations made in SIGTARP audit reports and quarterly 

reports in the fiscal years ended September 30, 2014, and September 30, 2015, respectively, for which corrective actions were 

“unimplemented” as of the end of the respective fiscal year. For the purposes of this report, SIGTARP defines a recommendation 

as “unimplemented” if it is listed as “Partial,” “In Process,” or “None” in SIGTARP’s quarterly report.

Unimplemented SIGTARP Recommendations

9/30/2014 9/30/2015

No. of Unimplemented 

Recommendations 19 35
U.S. Department of the Treasury | Fiscal Year 2015

216

SECTION G: FREEZE THE FOOTPRINT

One of the Department’s key goals is the efficient and effective acquisition, utilization, management, and disposal of 

Departmental real property assets. Under the direction of the Treasury’s Assistant Secretary for Management (ASM), the 

Department’s Senior Real Property Officer (SRPO) is responsible for ensuring that appropriate Departmental procedures, 

reviews, and reporting requirements are developed and maintained in accordance with Departmental directives, and applicable 

OMB and GSA regulations that pertain to the acquisition, utilization and disposal of real property. 

The SRPO is responsible for tracking the Department’s real property square footage footprint, and developing the annual agency 

evaluation of the Department’s 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 the Department’s existing space inventory and to achieve real property cost saving and footprint 

reductions, all bureaus are directed to pursue consolidation or co-location opportunities into existing inventory before pursuing 

any new space acquisitions. 

Additionally, the Department is 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

The Department’s 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 2014) compared to the Department’s fiscal year 

2012 “Freeze the Footprint” baseline (as assigned by GSA) were as follows (in millions): 

2012

(Baseline) 2014 Change

Square Footage (SF in millions) 30.0 28.4 (1.6)

Operation and Maintenance Costs ($ in millions) $ 80.9 $ 93.6 $ 12.7
U.S. Department of the Treasury | Fiscal Year 2015

217

SECTION H: CIVIL MONETARY PENALTIES INFLATION ADJUSTMENT

The Federal Civil Penalties Inflation Adjustment Act of 1990 (the Inflation Adjustment Act), as amended, requires agencies to 

make regular and consistent inflationary adjustments of civil monetary penalties (CMP) to maintain their deterrent effect. Four 

statutes are excluded under the Inflation Adjustment Act: the Internal Revenue Code of 1986, the Tariff Act of 1930, the 

Occupational Safety and Health Act of 1970, and the Social Security Act. The table below depicts the covered civil monetary 

penalties that are under the Department’s purview.

Penalty (Name of Penalty) Authority 

(Statute)

Date of 

Previous 

Adjustment

Date of Current 

Adjustment

Current Penalty 

Level ($ Amount)

Terrorism Risk Insurance Act (TRIA) Civil 

Penalties 

15 U.S.C. 6701 

note N/A N/A $1,000,000

Civil monetary penalty for Foreign 

Narcotics Kingpin Designation Act 

sanctions violation

21 U.S.C. 1906(b) N/A October 2003 $1,075,000

Civil monetary penalty for International 

Emergency Economic Powers Act (IEEPA) 

sanctions violation

50 U.S.C. 1705 N/A N/A $250,000

Civil monetary penalty for Trading with 

the Enemy Act (TWEA) sanctions violation 50 U.S.C. App. October 1996 October 2003 $65,000

Bank Secrecy Act Violation 31 U.S.C. 5321 N/A N/A(1)

$100,000 for a 

currency transaction 

or suspicious activity 

reporting 

violation. $25,000 

each day for each 

office, branch, or 

place of business 

where the violation 

occurs or continues 

for an Anti-Money 

Laundering (AML) 

program violation.

General CMP Authority (Title 92a)-Tier 1 12 U.S.C. 93(b) December 2008 December 2012(2) $7,500

General CMP Authority (Title 92a)-Tier 2 12 U.S.C. 93(b) December 2008 December 2012(2) $37,500

General CMP Authority (Title 92a)-Tier 3 12 U.S.C. 93(b) December 2008 December 2012 $1,425,000

Penalty for failure to make reports 

required by 12 U.S.C. 161-Tier 1 12 U.S.C. 164 December 2000 December 2012 $3,200

Penalty for failure to make reports 

required by 12 U.S.C. 161-Tier 2 12 U.S.C. 164 December 2008 December 2012(2) $32,000

Penalty for failure to make reports 

required by 12 U.S.C. 161-Tier 3 12 U.S.C. 164 December 2008 December 2012 $1,425,000

Civil money penalty for violations of 

sections 22, 23A, or 23B of the Federal 

Reserve Act-Tier 1

12 U.S.C. 504 December 2008 December 2012(2) $7,500

Civil money penalty for violations of 

sections 22, 23A, or 23B of the Federal 

Reserve Act-Tier 2

12 U.S.C. 504 December 2008 December 2012(2) $37,500

Civil money penalty for violations of 

sections 22, 23A, or 23B of the Federal 

Reserve Act-Tier 3

12 U.S.C. 504 December 2008 December 2012 $1,425,000

Reports of Condition - Savings 

Associations-Tier 1 12 U.S.C. 1464(v) December 2000 December 2012 $3,200

Reports of Condition - Savings 

Associations-Tier 2 12 U.S.C. 1464(v) December 2008 December 2012(2) $32,500

Reports of Condition - Savings 

Associations-Tier 3 12 U.S.C. 1464(v) December 2008 December 2012 $1,425,000
U.S. Department of the Treasury | Fiscal Year 2015

218

Penalty (Name of Penalty) Authority 

(Statute)

Date of 

Previous 

Adjustment

Date of Current 

Adjustment

Current Penalty 

Level ($ Amount)

Refusal to Cooperate in Exam - Savings 

Association Affiliates 12 U.S.C. 1467(d) December 2008 December 2012(2) $7,500

Late/Inaccurate Reports - Holding 

Companies (Savings and Loans)-Tier 1

12 U.S.C. 

1467a(r)(1) December 2000 December 2012 $3,200

Late/Inaccurate Reports - Holding 

Companies (Savings and Loans)-Tier 2

12 U.S.C. 

1467a(r)(2) October 2008 December 2012(2) $32,500

Late/Inaccurate Reports - Holding 

Companies (Savings and Loans)-Tier 3

12 U.S.C. 

1467a(r)(3) October 2008 December 2012 $1,425,000

Change in control violations-Tier 1 12 U.S.C. 

1817(j)(16) December 2008 December 2012(2) $7,500

Change in control violations-Tier 2 12 U.S.C. 

1817(j)(16) December 2008 December 2012(2) $37,500

Change in control violation-Tier 3 12 U.S.C. 

1817(j)(16) December 2008 December 2012 $1,425,000

General CMP Authority-Tier 1 12 U.S.C. 

1818(i)(2) December 2008 December 2012(2) $7,500

General CMP Authority-Tier 2 12 U.S.C. 

1818(i)(2) December 2008 December 2012(2) $37,500

General CMP Authority-Tier 3 12 U.S.C. 

1818(i)(2) December 2008 December 2012 $1,425,000

Violation of Post Employment Restrictions 12 U.S.C. 

1820(k)(6)(A)(ii) December 2008 December 2012(2) $275,000

Withdrawals by negotiable or transferable 

instruments for transfer to third parties 12 U.S.C. 1832(c ) January 1997 December 2012(2) $1,100

Violation of security rules 12 U.S.C. 1884 January 1997 December 2012(2) $110

Certain tying arrangements prohibited; 

correspondent accounts-Tier 1

12 U.S.C. 

1972(2)(F) December 2008 December 2012(2) $7,500

Certain tying arrangements prohibited; 

correspondent accounts-Tier 2

12 U.S.C. 

1972(2)(F) December 2008 December 2012(2) $37,500

Certain tying arrangements prohibited; 

correspondent accounts-Tier 3

12 U.S.C. 

1972(2)(F) December 2008 December 2012 $1,425,000

Civil money penalty authority - Foreign 

Banks 12 U.S.C. 3110(a) December 2008 December 2012(2) $37,500

Penalty for failure to make reports -

Foreign Banks-Tier 1 12 U.S.C. 3110(c) December 2000 December 2012 $3,200

Penalty for failure to make report - 

Foreign Banks-Tier 2 12 U.S.C. 3110(c) December 2008 December 2012(2) $32,000

Penalty for failure to make reports - 

Foreign Banks-Tier 3 12 U.S.C. 3110(c) December 2008 December 2012 $1,425,000

Violations of Appraisal Regulations-Tier 1 12 U.S.C. 3349(b) October 2008 December 2012(2) $7,500

Violations of Appraisal Regulations-Tier 2 12 U.S.C. 3349(b) October 2008 December 2012(2) $37,500

Violations of Appraisal Regulations-Tier 3 12 U.S.C. 3349(b) October 2008 December 2012 $1,425,000

General CMP Authority -International 

Lending

12 U.S.C. 

3909(d)(1) January 1997 December 2012(2) $1,100

Civil monetary penalty authority for 

securities law violations, (Natural person)-

Tier 1 

15 U.S.C. 78u-2(b) December 2008 December 2012(2) $7,500

Civil monetary penalty authority for 

securities law violations, (Other person)-

Tier 1

15 U.S.C. 78u-2(b) December 2008 December 2012(2) $70,000

Civil monetary penalty authority for 

securities law violations, (Natural 

person)- Tier 2

15 U.S.C. 78u-2(b) December 2008 December 2012(2) $70,000
U.S. Department of the Treasury | Fiscal Year 2015

219

Penalty (Name of Penalty) Authority 

(Statute)

Date of 

Previous 

Adjustment

Date of Current 

Adjustment

Current Penalty 

Level ($ Amount)

Civil monetary penalty authority for 

securities law violations, (Other person)-

Tier 2 

15 U.S.C. 78u-2(b) December 2008 December 2012(2) $350,000

Civil monetary penalty authority for 

securities law violations, (Natural person)-

Tier 3 

15 U.S.C. 78u-2(b) December 2008 December 2012(2) $140,000

Civil monetary penalty authority for 

securities law violations, (other person)-

Tier 3

15 U.S.C. 78u-2(b) December 2008 December 2012 $700,000

Flood Insurance 42 U.S.C. 

4012a(f)(5) N/A N/A(3) $2,000

Civil Penalty Assessment for Misuse of 

Department of Treasury Names, Symbols, 

etc.

31 U.S.C. § 333 N/A N/A

$5,000 for each 

misuse of Treasury 

name or symbol, or 

$25,000 for each 

misuse in broadcast 

or telecast

False Claims Act 31 U.S.C. § 3729 N/A August 1999(4)

$5,500 to $11,000 

plus 3 times the 

amount of damages 

which the 

Government sustains 

because of the act

Violation involving a false claim or false 

statement 31 U.S.C. § 3802 N/A N/A

Up to $5,000 for 

each claim plus 2 

times the amount of 

the claim

Civil Penalties Provision of the Alcoholic 

Beverage Labeling Act of 1988 27 U.S. C. 218 N/A October 1996(5) $11,000

(1) The authorized penalty for a currency transaction or suspicious activity reporting violation is the amount involved in the transaction, with a 

ceiling of $100,000 and a floor of $25,000. The authorized penalty for an AML program violation is $25,000 for each day that the violation 

continues and for each office, branch, or place of business where the violation occurs or continues. For reasons of enforcement policy, FinCEN 

imposes penalties that fall far below the statutory maximum. FinCEN considers culpability, the gravity of the violations, ability to pay, and the 

need to deter violations. There has been little need to seek an inflation-adjusted increase in authorized penalty amounts. 

(2) No inflation adjustment was made in 2012 because the preliminary calculated increase for the CMP maximum failed to reach the level warranting 

an actual increase under the Federal Civil Penalties Inflation Adjustment Act of 1990 rounding rules prescribed by the statute.

(3) The maximum CMP was amended in 2012 and is not subject to inflation adjustment at this time. 

(4) The Department is not responsible for issuing regulations updating the penalty amounts for the False Claims Act. 

(5) Regulations to update inflation adjustment are pending. 
U.S. Department of the Treasury | Fiscal Year 2015

220

APPENDIX: 

GLOSSARY OF ACRONYMS

Glossary of Acronyms

ACA Patient Protection and Affordable Care Act

ACH Automated Clearinghouse

ACS American Community Survey

AFR Agency Financial Report 

AFS Alternative Finance Structure 

AIG American International Group, Inc.

Ally Ally Financial, Inc. 

AML Anti-Money Laundering

APG Agency Priority Goals 

APTC Advanced Premium Tax Credit 

ARC Administrative Resource Center

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

CI Criminal Investigation

CIGFO Council of Inspectors General on Financial Oversight

Civil Service Fund Civil Service Retirement and Disability Trust Fund 

CMP Civil Monetary Penalties

CPI Consumer Price Index

CPP Capital Purchase Program

CSRS Civil Service Retirement System

CY Current Year

D.C. District of Columbia

DATA Act Digital Accountability and Transparency Act

DCAA Defense Contract Audit Agency

DHS Department of Homeland Security

DLP Data Loss Prevention 

DO Departmental Offices

Dodd-Frank Act Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010

DOL Department of Labor

EESA Emergency Economic Stabilization Act of 2008

EITC Earned Income Tax Credit

ESA Exchange Stabilization Agreement

ESF Exchange Stabilization Fund
U.S. Department of the Treasury | Fiscal Year 2015

221

Glossary of Acronyms

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

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

FMFIA Federal Managers’ Financial Integrity Act

FOMC Federal Open Market Committee

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

HERA Housing and Economic Recovery Act
U.S. Department of the Treasury | Fiscal Year 2015

222

Glossary of Acronyms

HFA Housing Finance Agency

HHS Department of Health and Human Services

HUD Department of Housing and Urban Development

IDT Identity Theft 

IG Inspector General

IMF International Monetary Fund

IP Improper Payment

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

Jobs Act Small Business Jobs Act of 2010 

MDB Multilateral Development Bank

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 

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
U.S. Department of the Treasury | Fiscal Year 2015

223

Glossary of Acronyms

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 Office of the Special Inspector General for the Troubled Asset Relief Program 

SNI Single Note Inspection 

SOAR Strategic Objective Annual Review

SOMA System Open Market Account

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

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

TRIA Terrorism Risk Insurance Act

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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