DEPARTMENT OF THE TREASURY

AGENCY 

FINANCIAL REPORT 

FISCAL YEAR 2020
CONNECT WITH US

Twitter

www.twitter.com/ustreasury

Facebook 

www.facebook.com/ustreasury

WEBSITE INFORMATION

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

Alcohol and Tobacco Tax and Trade Bureau........................................................................www.ttb.gov

Bureau of Engraving & Printing........................................................................................... www.bep.gov

Fiscal Service.......................................................................................................www.fiscal.treasury.gov

Community Development Financial Institutions Fund.................................................www.cdfifund.gov

Financial Crimes Enforcement Network..........................................................................www.fincen.gov

Internal Revenue Service.......................................................................................................www.irs.gov

Office of the Comptroller of the Currency...........................................................................www.occ.gov

U.S. Mint..........................................................................................................................www.usmint.gov

The Financial Stability Plan..............................................................................www.financialstability.gov

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

Office of Inspector General.................................................................................... www.treasury.gov/oig

Treasury Inspector General for Tax Administration...........................................................www.tigta.gov

Special Inspector General for the Troubled Asset Relief Program............................... www.sigtarp.gov

Special Inspector General for Pandemic Recovery......................................................... www.sigpr.gov

Instagram 

www.instagram.com/treasurydept

YouTube 

www.youtube.com/ustreasgov
DEPARTMENT OF THE TREASURY

AGENCY 

FINANCIAL REPORT 

FISCAL YEAR 2020
FY 2020 AGENCY FINANCIAL REPORT

ABOUT THIS REPORT

Our Agency Financial Report

(AFR) for Fiscal Year (FY) 2020

presents the Department of the

Treasury’s (Treasury, 

Department, or our) financial

information in relation to our

mission and the resources 

entrusted to us. The AFR also

highlights our priorities,

accomplishments, and challenges implementing programs

that promote conditions for sustaining economic growth

and stability at home and abroad, protecting the integrity

of our nation’s financial system, and effectively managing

the United States (U.S.) government’s finances and

resources. In accordance with the Office of Management

and Budget’s (OMB) Circular A-136, Financial Reporting

Requirements, we produce the following reports: (i) an

AFR issued on December 30, 2020, and (ii) an Annual

Performance Report (APR) submitted with Treasury’s

congressional budget justification, to be issued by

February 1, 2021. The AFR will be available online at

https://home.treasury.gov/about/budget-financial-reportingplanning-and-performance/agency-financial-report. The APR

will be available online at

https://www.treasury.gov/about/budget-performance/Pages/cjindex.aspx.

HOW THIS REPORT IS ORGANIZED

Our AFR provides financial and performance information

for the FY beginning October 1, 2019, and ending on

September 30, 2020, with comparative prior year data,

where appropriate. The AFR demonstrates our 

commitment to our mission and accountability to

Congress and the American people. This report presents 

Treasury’s operations, accomplishments, and challenges. 

The AFR begins with a message from the Secretary of the

Treasury, Steven T. Mnuchin. This introduction is

followed by three main sections.

Part 1: Management’s 

Discussion and Analysis

Provides a high-level overview of 

our organizational structure,

strategic framework, 

programmatic and financial

performance, and management

assurances related to Treasury’s

internal controls.

Part 2: Financial Section

Begins with a message from the

Assistant Secretary for 

Management and Deputy Chief

Financial Officer, followed by

the Independent Auditors’

Report, audited financial

statements and notes, and

supplementary information.

Part 3: Other Information

Contains various information

including Management and

Performance Challenges

identified by the Inspectors

General and Management’s

response, along with

information related to tax gap

and tax burden, improper

payments, and other relevant 

information.
FY 2018 AGENCY FINANCIAL REPORT

FY 2018 AGENCY FINANCIAL REPORT

FY 2020 AGENCY FINANCIAL REPORT

TABLE OF CONTENTS

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

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

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

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

TREASURY STRATEGIC MANAGEMENT.......................................................................................................................................14

PERFORMANCE OVERVIEW...........................................................................................................................................................17

ENTERPRISE RISK MANAGEMENT............................................................................................................................................... 34 

FY 2021 OUTLOOK....................................................................................................................................................................... 35 

FINANCIALHIGHLIGHTS – FINANCIAL OVERVIEW................................................................................................................... 36 

MANAGEMENT ASSURANCES........................................................................................................................................................ 43 

SYSTEMS, CONTROLS AND LEGAL COMPLIANCE ....................................................................................................................... 44 

PART 2: FINANCIAL SECTION

MESSAGE FROM THE ASSISTANT SECRETARY FOR MANAGEMENT AND DEPUTY CHIEF FINANCIAL OFFICER...............51

INSPECTOR GENERAL’S TRANSMITTAL LETTER ....................................................................................................................... 53

INDEPENDENT AUDITORS’ REPORT ............................................................................................................................................ 55 

MANAGEMENT’S RESPONSE TO INDEPENDENT AUDITORS’ REPORT.....................................................................................61

FINANCIAL STATEMENTS.............................................................................................................................................................. 62 

NOTES TO THE FINANCIAL STATEMENTS................................................................................................................................... 69 

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) ...............................................................................................179 

PART 3: OTHER INFORMATION (UNAUDITED) 

SECTION A: TAX GAP AND TAX BURDEN ...............................................................................................................................189

SECTION B: MANAGEMENT CHALLENGES AND TREASURY RESPONSE..............................................................................199

SECTION C: SUMMARY OF FINANCIAL STATEMENT AUDIT AND MANAGEMENT ASSURANCES..................................... 242

SECTION D: PAYMENT INTEGRITY........................................................................................................................................... 244 

SECTION E: FRAUD REDUCTION REPORT............................................................................................................................... 255 

SECTION F: REAL PROPERTY ...................................................................................................................................................259

SECTION G: CIVIL MONETARY PENALTIES INFLATION ADJUSTMENT............................................................................... 260

SECTION H: GRANTS PROGRAMS............................................................................................................................................. 266

APPENDIX: GLOSSARY OF ACRONYMS..................................................................................................................................... 267
4 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | MESSAGE FROM THE SECRETARY OF THE TREASURY

MESSAGE FROM THE SECRETARY OF THE TREASURY

M ISSION 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.

The Treasury annual Agency Financial Report provides

an opportunity to reflect on our priorities and

accomplishments of the past year. We have continued to

advance our mission of creating economic and job

opportunities, supporting American businesses,

strengthening national security, and responsibly

managing the resources of the government. I am

especially proud of Treasury’s central role in negotiating

and executing so much of the Nation’s pandemic recovery. 

We are committed to ensuring that every worker who lost

their job as a result of Coronavirus Disease 2019 (COVID19) returns to the workforce.

COVID-19 RECOVERY

In response to the COVID-19 pandemic, Treasury swiftly

implemented numerous measures to provide Americans

key economic relief from the impacts of the pandemic,

including the bipartisan Coronavirus Aid, Relief, and

Economic Security Act (CARES Act). The over $2 trillion

economic package provisioned by the CARES Act delivers

on the Administration’s commitment to safeguard the

American people from the economic challenges of COVID19. Treasury worked with the Small Business

Administration to launch the Paycheck Protection 

Program, which provided small businesses with the

resources to maintain their payroll, hire back employees 

who may have been laid off, and cover applicable

overhead. The program provided over $525 billion worth

of forgivable loans to over 5 million small businesses and

supported an estimated $51 million jobs. The Internal

Revenue Service (IRS), in coordination with the Bureau of 

the Fiscal Service (Fiscal Service), quickly issued

Economic Impact Payments (EIP) to more than

160 million American families, totaling $275 billion in

financial support. Treasury launched the Payroll Support

Program (PSP), which provided $28 billion in critical

financial assistance to air carriers and contractors to

preserve jobs for tens of thousands of aviation industry

workers. Under the $150 billion Coronavirus Relief Fund,

Treasury provided significant aid to states, local,

territorial, and tribal governments. Treasury also
DEPARTMENT OF THE TREASURY 5 

MESSAGE FROM THE SECRETARY OF THE TREASURY | FY 2020 AGENCY FINANCIAL REPORT

launched a loan program for air carriers and related

businesses, as well as businesses critical to national

security. Treasury also funded multiple Federal Reserve 

facilities that provided liquidity and stability to financial

markets.

TAX CUTS AND JOBS ACT

The Treasury Department continues to implement the

historic Tax Cuts and Jobs Act (TCJA), P.L. 115-097,

which significantly lowered the amount of taxes American

families are required to pay, while enhancing American

business competitiveness. As a result, companies

continue to invest in American labor, contributing to the

success of our economy. During the last fiscal year, the

IRS published 45 final and proposed regulations

implementing the TCJA.

In 2020, taxpayers visited IRS.gov over 1.6 billion times. 

The IRS answered over 50 million phone calls from 

taxpayers, and also hosted more than 80 events for the

American public and businesses. These events provided

guidance to individuals and businesses regarding

essential information needed to complete their tax year

2019 filings. The TCJA has been extremely effective, but

more work must be done to support taxpayers and

businesses in meeting their tax obligations efficiently and

accurately. The Treasury’s Office of Tax Policy and the

IRS are committed to implementing sustainable reforms 

to better serve Americans through the taxpaying process.

NATIONAL SECURITY

As a member of the Intelligence Community, Treasury

provides important benefits to our country’s national

security by implementing economic sanctions, targeting

terrorist financial networks, and improving safeguards for 

financial systems. Over the past three years, the Office of

Terrorism and Financial Intelligence (TFI) has cut off 

billions of dollars from flowing to Iran, the world’s largest

state sponsor of terror. TFI has also targeted Hizballah,

disrupted North Korean shipping and export networks, 

and responded to the malign activity of many Russian

oligarchs. Treasury continues to sanction members of the

Maduro regime in Venezuela for human rights violations

and corruption. This year, the Financial Crimes

Enforcement Network (FinCEN), one of five TFI 

components, issued new rules to ensure that financial

institutions take action to report and block money 

laundering attempts. The Office of Terrorism and

Financial Intelligence is dedicated to pursuing the world’s

worst terrorists, criminals, and dictators and actively

disrupting numerous illicit finance schemes around the

world. 

Treasury also chairs the Committee on Foreign 

Investment in the United States (CFIUS). CFIUS is

authorized to review and take action to address any

national security concerns arising from certain

investments and real estate transactions involving foreign 

persons. In 2020, Treasury released final regulations to

implement the changes required by the Foreign 

Investment Risk Review Modernization Act of 2018

(FIRRMA) to strengthen and modernize CFIUS to

address national security concerns more effectively.

FAIR TRADE

The President’s economic agenda has always focused on 

fair and reciprocal trade. Treasury’s important role in

negotiations with trading partners helped secure trade

deals that benefit American workers and businesses. 

Discussions with Chinese leadership have been 

productive in addressing issues regarding intellectual

property rights and making China’s market more

accessible to American businesses. The U.S. – Mexico – 

Canada agreement (USMCA) took effect this year. The

renegotiated agreement provides a more even playing

field for our nation’s workers, farmers, ranchers,

fishermen, and businesses. This agreement promotes a 

more balanced system of trade between the three 

countries while also bolstering the North American

economy. 

INTERNATIONAL COOPERATION

Treasury is committed to maintaining and developing 

economic relations with other countries, which includes

involvement in international organizations that promote

interdependence. Earlier this year, the U.S. facilitated
6 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | MESSAGE FROM THE SECRETARY OF THE TREASURY

the preparation of a draft agreement on the filling and

operation of the Grand Ethiopian Renaissance Dam

(GERD). Under such an agreement, GERD would

generate electricity and deliver appropriate mitigation

measures for Egypt and Sudan during prolonged periods 

of drought.

Since COVID-19, Treasury met with other G7 Finance

Ministers to discuss economic responses to the pandemic,

such as the implementation of the G20-Paris Club Debt

Service Suspension Initiative, an effort to provide relief to

the world’s poorest countries by suspending official 

bilateral debt payments through the end of 2020. 

Treasury has also worked with the European Union to

discuss topics such as the pandemic, the regulation and

supervision of digital finance and financial innovation,

and measures taken to ensure that banks can help

support economic recovery.

BUSINESS PROTECTION

Treasury protects the financial sector from the growing

threat of cyber-attacks, issuing advisories that provide

information on the role of financial intermediaries in

payments, ransomware trends and typologies, and related

financial red flags. Specifically, the Office of

Cybersecurity and Critical Infrastructure Protection is

tasked with enhancing financial security in order to

reduce cybersecurity threats. CFIUS’s robust review 

process identifies transactions that pose a national

security risk and therefore should be suspended or 

blocked. CFIUS preserves national economic security by

responding to major shifts in technology within the

context of a changing global economic order and an open 

and rules-based international economic system. 

GENERAL ECONOMY

President Trump has always focused on delivering a 

strong economy that provides greater prosperity for all

Americans. In addition to tax cuts, Treasury has helped 

achieve fairer and more reciprocal trade deals and

unleashed economic growth by promoting pro-growth

policies.

Prior to the COVID-19 pandemic, the unemployment rate

reached historic lows and wages rose for manufacturing

and low-income workers. In February 2020, there were 

7 million job openings, outnumbering job seekers by

1.2 million. Jobless claims in early 2020 hit their lowest 

level in half a century and the unemployment rate for 

women reached its lowest rate in 66 years. Similarly, the

unemployment rate for African Americans, HispanicAmericans, Asian-Americans, veterans, individuals with

disabilities, and those without a high school diploma all

reached record lows.

This historic success is due to Treasury’s important role

in formulating and enacting economic policies that

provide benefit to all Americans. Treasury is committed

to helping American workers and families achieve

financial freedom. 

I am pleased to report that Treasury received an

unmodified audit opinion of its consolidated financial

statements and validated its financial and performance

data as complete and reliable. Treasury strengthened

management controls and made progress toward

achieving all U.S. financial systems and control

objectives. We provide this report as a comprehensive

review of the Department’s important work and finances.

Treasury’s workforce is part of a historic and important

agency that supports economic growth, protects national

security, and represents the United States on the world

stage. This report highlights the hard work of these

public servants and details how Treasury policies are

improving the economic well-being of families across our 

nation. I look forward to a durable and sustained

recovery and a more prosperous future for all Americans.

Steven T. Mnuchin

Secretary of the Treasury

December 30, 2020
PART 1: 

MANAGEMENT’S DISCUSSION

AND ANALYSIS 

(UNAUDITED)

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

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

TREASURY STRATEGIC MANAGEMENT ...................................14

PERFORMANCE OVERVIEW..................................................17

ENTERPRISE RISK MANAGEMENT..........................................34

FY 2020 OUTLOOK............................................................35

FINANCIAL HIGHLIGHTS – FINANCIAL OVERVIEW.....................36

MANAGEMENT ASSURANCES...............................................43

SYSTEMS, CONTROLS AND LEGAL COMPLIANCE.......................44

DEPARTMENT OF THE TREASURY 9 

MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2020 AGENCY FINANCIAL REPORT

TREASURY AT A GLANCE

FOUNDATION

After the American Revolution, Congress realized that

funding a war without proper infrastructure and financial

discipline presented an enormous challenge to our 

country’s economic stability. Out of the necessity to levy

and collect taxes and manage the U.S. government’s

finances, Congress established the Department of the

Treasury on September 2, 1789. President George 

Washington appointed Alexander Hamilton as Treasury’s

first Secretary. Since then, over 70 Secretaries have led

the Department.

Throughout its history, Treasury served as the foundation 

for other federal agencies. For example, the U.S. Postal

Service, U.S. Customs Service, Secret Service, Federal 

Law Enforcement Training Center, and U.S. Coast Guard

were all, at one time, under our jurisdiction.

The Treasury building in the late 1800s. The Treasury

building colonnade from the southeast side shows the bustle

of pedestrian traffic on 15th Street as they passed in front of 

the Treasury building.

U.S. Department of the Treasury building, Washington, D.C. 

TODAY’S TREASURY AND HOW WE SERVE THE

NATION

Treasury remains one of the nation’s premier financial

institutions, responsible for the nation’s debt

management, cash production, disbursement of Social

Security benefit payments, tax collection, and federal 

agency financing. We are a trusted policy advisor to the

President, formulating and recommending domestic and

international financial, economic, and tax policies. Our

contributions to policy development shape America’s

economic health and security.

The Department also performs a critical and far-reaching

role in enhancing national security, while reducing our

exposure to international terrorism. We employ the

Department’s national security tools and authorities—

including sanctions—to identify, disrupt, and dismantle

national security and foreign policy threats.
10 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS

In addition, we identify and reduce vulnerabilities in the

U.S. and international financial systems to prevent abuse

by illicit actors. We also leverage our relationships with

our federal partners and the private sector to identify

cutting-edge technologies to identify, detect, and prevent

threats to our economic stability.

Furthermore, we work to increase opportunities for small

businesses, which are the backbone of our economy. We

create jobs to improve the well-being of U.S. citizens and

to safeguard and grow our national economy. We also

continue to play a key and influential role in the

government’s service to the American people, adapting to

meet the nation’s needs.

Globally, Treasury represents the U.S. in important

economic forums and international financial institutions,

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

Twenty (G-20), which hold annual summits with heads of 

state to discuss global foreign policy issues. We hold

significant responsibility promoting stability and growth

in the global economy via our leadership roles in the

International Monetary Fund, the World Bank, regional

development banks, and other multilateral organizations,

such as the Financial Stability Board and the Financial

Action Task Force.

Although Treasury evolves to meet the nation’s needs, our

core mission has remained the same since 1789. Today, 

with approximately 100,000 employees, we remain

steadfast in our commitment to promote conditions that

enable economic growth and stability at home and abroad,

protect the integrity of the financial system, and

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

resources. We remain the principal steward of the U.S.

economy—collecting revenue, meeting financial

obligations, and financing government operations. 
DEPARTMENT OF THE TREASURY 11 

MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2020 AGENCY FINANCIAL REPORT

ORGANIZATION

Treasury is organized into the Departmental Offices, seven bureaus, and four offices of Inspector General. The 

Departmental Offices are primarily responsible for headquarters operations and policy formulation, while the bureaus are

the operating units of the organization.
12 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS

DEPARTMENTAL OFFICES

Domestic Finance works to preserve confidence in the U.S.

Treasury securities market, strengthen financial

institutions and markets, and promote access to credit, in

service to long-term economic strength and stability.

Terrorism and Financial Intelligence (TFI) uses unique

policy, intelligence, enforcement and regulatory tools and

authorities to disrupt and disable terrorists, criminals,

and other national security threats while also

safeguarding the financial system against abuse by illicit

actors.

International Affairs protects economic prosperity and

national security by working to foster a most favorable

external environment for sustained jobs and economic 

growth.

Tax Policy develops and implements tax policies and

programs, reviews regulations and rulings to administer

the Internal Revenue Code, provides revenue estimates

for proposals, and receipt estimates for the President’s 

Budget.

Economic Policy reports on economic developments and

assists in the determination of appropriate economic 

policies. It also reviews and analyzes domestic economic 

issues and financial market developments.

The Treasurer of the United States serves as a principal

advisor to the Secretary and leads the Office of Consumer

Policy, which provides policy leadership, research, and

analysis to foster economic growth and financial security

for American families in a robust consumer marketplace. 

The Treasurer also oversees the U.S. Mint, including

advising the Secretary on coinage matters and liaising

with the Federal Reserve.

The Office of Management and Chief Financial Officer, 

manages the Department’s financial resources and

oversees Treasury-wide programs, including human

capital, organizational performance, enterprise risk

management, information technology, acquisition, 

diversity issues, and CARES Act operations.

Other offices within Departmental Offices include

General Counsel, Legislative Affairs, and Public Affairs.
DEPARTMENT OF THE TREASURY 13 

MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2020 AGENCY FINANCIAL REPORT

INSPECTORS GENERAL

Four Inspectors General – the Office of Inspector General

(OIG), the Treasury Inspector General for Tax Administration 

(TIGTA), the Special Inspector General for the Troubled Asset

Relief Program (SIGTARP), and the Special Inspector General

for Pandemic Recovery – provide independent audits,

investigations, and oversight of Treasury and our 

programs.

BUREAUS

The Alcohol and Tobacco Tax and Trade Bureau (TTB)

collects federal excise taxes on alcohol, tobacco, firearms,

and ammunition, while enforcing and administering laws

covering the production, use, and distribution of alcohol 

and tobacco products. 

The Bureau of Engraving and Printing (BEP) develops and

produces U.S. currency notes, as well as secure

documents for government use.

The Financial Crimes Enforcement Network (FinCEN)

safeguards the financial system from illicit use, combats

money laundering and its related crimes including

terrorism; promoting national security through the

strategic use of financial authorities and the collection,

analysis, and dissemination of financial intelligence. 

The Bureau of the Fiscal Service (Fiscal Service) promotes 

financial integrity and operational efficiency by operating

the U.S. government’s collections and deposit systems,

and providing central payment services to the American

public on behalf of federal agencies. It also manages the

collection of delinquent debt, borrows funds needed to

operate the U.S. government through the sale of 

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

and accounts for the resulting debt. Additionally, it

delivers administrative shared services to federal agencies

and conducts government-wide accounting and reporting. 

The Internal Revenue Service (IRS) determines, assesses,

and collects U.S. tax revenue and helps taxpayers

understand their tax responsibilities, while aiming to

prevent tax-related fraud.

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

issues U.S. circulating coins, as well as numismatic and

bullion coins; in addition to striking Congressional gold

medals and other medals of national significance. It

maintains physical custody and protection of most of the

nation’s gold and silver assets.

The Office of the Comptroller of the Currency (OCC)

charters, regulates, and supervises national banks and

federal savings associations, as well as federal branches

and agencies of foreign banks, 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.
14 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS

TREASURY STRATEGIC MANAGEMENT

FRAMEWORK

The Government Performance and Results Act (GPRA)

and the GPRA Modernization Act of 2010 require

agencies to identify goals, report progress against targets,

and conduct data-driven reviews. These practices allow

stakeholders within and outside the organization to

assess the organization’s health and impact, while

promoting effective decision-making, and improved

strategy execution and resource allocations. In this spirit,

Treasury developed a strategic framework using best-inclass organizational performance practices to help achieve

our strategic goals and objectives. 

ORGANIZATIONAL PERFORMANCE REVIEW CYCLE

Our organizational performance reviews provide a regular

forum for open dialogue and coordination between the

bureaus and the Departmental Offices’ management and

leadership. We bring together different perspectives to

set and align priorities, identify and solve problems,

review agency performance, and drive results. The 

performance review cycle integrates statutory

requirements to conduct quarterly reviews of agency

results toward goals, with an annual exercise to validate

our supporting objectives, executed through our Strategic

Objective Annual Review (SOAR) process. We also

integrate portfolio reviews of programs within our

performance review cycle activities, as required by the

Program Management Improvement Accountability Act

(PMIAA). The SOAR process includes analyzing crosscutting performance and identifying a set of strategic

objectives as priority focus areas. In 2019, the

Foundation for Evidence-Based Policy Act was signed into

law to further advance the U.S. government’s evidencebuilding functions. In this fiscal year, Treasury

approached the implementation of the evidence-building

requirements by leveraging Treasury’s strategic

management framework, including the SOAR, to initiate

an agency learning agenda.

At designated points throughout the fiscal year, we set

annual priorities, evaluate progress against goals and

objectives, discuss new strategies to improve program

outcomes, and align our available funding to maximize

results for the agency. Treasury’s process and framework 

for managing to our strategic objectives and performance

outcomes are described in Table 1 on the following page. 
DEPARTMENT OF THE TREASURY 15 

MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2020 AGENCY FINANCIAL REPORT

TABLE 1: TREASURY ANNUAL ORGANIZATIONAL PERFORMANCE REVIEW CYCLE Sessions

Fall

(October – November)

Winter

(February – March)

Spring

(April – May)

Summer

(June – July)

Focus

Organizational Performance SOAR Organizational Performance Budget

Chair

Assistant Secretary for

Management/Performance

Improvement Officer

(ASM/PIO)

ASM/PIO and Deputy PIO ASM/PIO ASM/PIO and Budget

Officer

Goals/Outcomes

• Review prior year’s

performance at the

bureau/office level

• Recognize successes

• Set priorities for year

ahead

• Identify shortfalls/risks;

accountability; assess

organizational health

• Deep dives on select

critical

programs/projects

• Evaluate cross-agency

progress toward

strategic objectives

• Identify strategic

shift/validate Treasury

priorities [note: this year

is the “close-out year”

for the 2021 plan, so

may result in identifying

potential new strategic

objectives]

• Outline potential topics

for annual review with

OMB

• Confirm list of critical

programs and projects/

check status

• Issue-based sessions: Dive

deep on cross-cutting

issues identified in the

SOAR with relevant

leadership; surface

problems and needed

assistance, identify nearterm improvement

strategies

• Program-based sessions:

check in on critical

programs/projects

identified in the SOAR as

needing a deep dive with

Treasury leadership;

identify assistance needed

• Connect priorities

to future funding

• Align funding to

performance

impacts and risk

mitigation

• Strengthen IT

acquisition,

budgeting, and

accountability

• Identify

efficiencies and

redundancies in

request

• Update list of

critical

programs/projects

based on budget

requests
16 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS

FY 2018 – 2022 STRATEGIC FRAMEWORK

The strategic framework provides the foundation for the Department’s FY 2018 – 2022 strategic goals and objectives and

FY 2020 – 2021 Agency Priority Goals (APGs), which align to specific objectives. All bureaus and offices align their

programs and performance within this framework. In FY 2020, after Treasury’s annual review to assess progress towards

the Department’s strategic objectives, Treasury leadership identified three key updates. First, we added a new strategy for 

Strategic Objective 1.2 (Strong Economic Fundamentals) to reflect Treasury’s central role in the administration’s economic 

recovery efforts, including the implementation of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). 

Second, we sunset a strategy under Strategic Objective 2.1 (Housing Finance Reform) to recognize the publication of the

Treasury Housing Reform Plan in September 2019, although important work continues as we partner with stakeholders to

implement reforms according to the plan. Lastly, we updated Strategic Objective 1.1 (Tax Law Implementation) to

emphasize the Taxpayer First Act’s (TFA’s) implementation and the IRS’s modernization efforts in their strategies to

support this overall Strategic Objective. Our updated goals and objectives are reflected below.

Strategic Goals Strategic Objectives/APGs

Contributing

Bureaus/Offices

Economic

Goal 1: Boost U.S.

Economic Growth

1.1: Tax Law Implementation

 Aligned APG: Reducing Refund Fraud

1.2: Strong Economic Fundamentals

1.3: Trusted Currency and Services

1.4: Free and Fair Trade

Domestic Finance

International Affairs

Tax Policy

Treasurer

Economic Policy

IRS

BEP

U.S. Mint

TTB

OCC

Goal 2: Promote

Financial Stability

2.1: Housing Finance Reform

2.2: (Incorporated into Strategic Objective 1.4) 

2.3: Foreign Technical Assistance

2.4: Financial Sector Critical Infrastructure and Cybersecurity

Domestic Finance

International Affairs

Management

OCC

Security

Goal 3: Enhance

National Security

3.1: Strategic Threat Disruption

3.2: Anti-Money Laundering and Combating Financing of Terrorism Framework

3.3: Economic Strength and National Security

 Aligned APG: CFIUS

TFI

FinCEN

International Affairs

Economic Policy

OCC

Financial

Goal 4: Transform

Government-wide

Financial

Stewardship

4.1: Financial Data Access and Use

4.2: Debt Management

4.3: Federal Financial Performance

 Aligned APG: Paper Check Reduction

Domestic Finance

International Affairs

IRS

Fiscal Service

Management 

Goal 5: Achieve

Operational

Excellence

5.1: Workforce Management

5.2: Treasury Infrastructure 

5.3: Customer Value and Experience

All Offices and

Bureaus, led by the

Office of

Management
DEPARTMENT OF THE TREASURY 17 

MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2020 AGENCY FINANCIAL REPORT

PERFORMANCE OVERVIEW

Treasury carries great responsibility for fostering prosperity and security for the American people. We play a critical role in

U.S. and global economies and continue to progress in our mission to meet the needs of the nation. The Treasury Strategic

Plan 2018 – 2022 charts a course to guide our responsibilities to taxpayers. The following performance overview reflects our 

accomplishments and challenges in achieving the goals of economic growth, financial stability, national security, financial

stewardship, and operational excellence in service to our country. 

Goal 1: Boost U.S. Economic Growth 

The Administration set forth a bold agenda to bolster

economic growth, with Treasury playing a central role in

fostering prosperity for the American people. The 

Department has four strategic objectives aligned with the

goal of achieving economic growth. Our first strategic

objective—assessed as a focus area for improvement in

our FY 2020 SOAR process—concentrates on 

administering the tax law to better enable its

implementation and protecting the integrity of the tax

system. Our second strategic objective under this goal—

also assessed a focus area of improvement in our FY 2020

SOAR process—relates to strong economic fundamentals. 

This objective aims to spur faster economic growth by

right-sizing regulations and advancing domestic economic 

policies that boost investment, employment, and

innovation. Our third strategic objective—assessed as an

area of noteworthy progress in our FY 2020 SOAR

process—pushes Treasury to deliver trusted currency and

services that enable citizens and businesses to participate

in the economy. Lastly, our fourth strategic objective

under this goal, advances free and fair trade for U.S.

businesses through the successful negotiation of trade

agreements and implementation of investment policies. 

We made noteworthy progress in two of the four strategic

objectives and noted two strategic objectives as focus 

areas for improvement in our FY 2020 SOAR.

TAX LAW IMPLEMENTATION

During the last fiscal year, we published 45 final and

proposed regulations implementing the Tax Cuts and

Jobs Act (TCJA), P.L. 115-097. In addition, we

streamlined regulatory coordination between the Office of 

Tax Policy, the IRS, and OMB’s Office of Information and

Regulatory Affairs. As a result, we anticipate publishing

regulations implementing all of the TCJA provisions by

the end of 2020. 

Congress passed the Taxpayer First Act, P.L. 116-25, on 

July 1, 2019, to redesign the IRS’s organization and

workforce to better support American taxpayers and

exempt organizations. The last major reorganization

effort of this magnitude was the IRS Restructuring and

Reform Act of 1998, which also required the IRS to modify

its organization substantially. The IRS plans on 

transmitting a consolidated report to Congress in

December 2020 that encompasses three major redesign 

efforts covered in the Act: a comprehensive taxpayer

service strategy, a proposal to update the IRS

organizational structure, and a comprehensive training

strategy.

In addition, the Taxpayer First Act retains provisions

related to improving the management of IRS information

technology, directing the IRS to develop and implement a 

multiyear strategic plan. In FY 2020, the IRS made

significant improvements in the area of information

technology in accordance with the existing Integrated

Modernization Business Plan, published in April 2019. 

The plan describes a six-year modernization roadmap

across four pillars: Modernized Operations, Taxpayer

Experience, Core Taxpayer Services and Enforcement, 

and Cybersecurity and Data Protection. To drive value

for taxpayers and innovation within the IRS, each pillar

is supported by focus areas, such as: digital services,

overhauling core tax systems, implementing emerging

technologies (such as robotics process automation), and

protecting taxpayer information against cyber threats. In

FY 2020, the IRS delivered 40 new or expanded

capabilities in the area of information technology. Some
18 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS

examples of the IRS successfully delivering new 

capabilities include: establishing a contract for a new 

enterprise case management platform on the cloud;

adding customer callback services to more IRS phone

lines; introducing robotics to automate manual processes;

and cybersecurity enhancements. These successes

provide a solid foundation to continue accelerating our 

modernization efforts in the service of taxpayers.

PANDEMIC RECOVERY

On March 13, 2020, the President declared the

coronavirus disease 2019 (COVID-19) pandemic a 

national emergency. President Trump signed the

Coronavirus Aid, Relief and Economic Security Act

(CARES Act), the largest economic recovery package in

our history, into law on March 27, 2020. Treasury’s

leadership and rapid response provided direct economic

assistance to American workers, families, and small

businesses, and helped preserve large numbers of jobs in

critical American industries. Treasury’s efforts included

issuing $275 billion of Economic Impact Payments (EIPs) 

to over 160 million families in record time, providing over

$28 billion in critical payroll support and $15.4 billion in

direct loans to save hundreds of thousands of jobs in the

airline and related industries, and disbursing nearly

$150 billion to state, local, territorial, and tribal

governments to assist with COVID-related expenses. 

Treasury, through its partnership with the Federal 

Reserve, disbursed $114 billion in liquidity to capital

markets, money markets, and the municipal bond market

to sustain businesses and financial markets. For further

information on our COVID-19 programs and their

financial statement impact, refer to Note 10 in Part 2 of 

the AFR. In conjunction with Treasury, the Small

Business Administration (SBA) launched the Paycheck

Protection Program (PPP), which disbursed $525 billion

in loans to provide a critical lifeline to over 5 million

small businesses thereby preserving approximately 51

million jobs.

Beginning in mid-March, IRS employees worked around

the clock to implement major provisions of the CARES

Act, which included delivering EIPs. Within 10 days of 

enactment of the CARES Act, the IRS and Fiscal Service

worked together to issue the first 81 million EIPs totaling

almost $150 billion. The IRS accomplished delivery of 

EIPs while simultaneously delivering individual income

tax refunds and implementing changes in response to the

People First Initiative, all while supporting the IRS

workforce through the COVID-19 pandemic. The

initiative provided taxpayers relief on a variety of tax

issues, including the suspension of all in-person contacts

and some compliance actions through July 15, 2020. By

September 30, 2020, more than 160 million Americans

were issued EIPs totaling almost $275 billion.

Along with EIPs for individuals, the IRS made sure

businesses knew about important tax relief programs and

provided guidance about business tax relief provisions in

the CARES Act and other pandemic relief legislation. 

The legislative relief measures included:

• Credit for Sick and Family Leave: Eligible employers

may receive a credit in the full amount of the

required sick leave and family leave that the law

provides to employees dealing with health and family

issues related to the COVID-19 pandemic between

April 1, 2020 and December 31, 2020.

• Employee Retention Credit: Designed to encourage

businesses to keep employees on their payroll. The

refundable tax credit is 50 percent of up to $10,000 of

qualified wages paid by employers financially affected

by COVID-19. Qualifying wages, including health

plan expenses, are those paid after March 12, 2020

and before January 1, 2021.

• Social Security Tax Deferral: Employers may defer

payment of the employer’s share of the Social

Security portion of Federal Insurance Contributions

Act (FICA), and their share and the employee

representative’s share of the same portion of Railroad

Retirement Tax (RRTA). The deferred amount is due

in two installments with 50 percent due by December

31, 2021, and the remaining amount due by

December 31, 2022.

Treasury and SBA launched the PPP in less than a week 

after the CARES Act was passed. Within the first

14 days of the program, SBA processed more loans than it

processes in 14 years. The program’s focus on getting

money to workers quickly supported millions of jobs and

provided immediate economic relief to businesses who
DEPARTMENT OF THE TREASURY 19 

MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2020 AGENCY FINANCIAL REPORT

needed it most. The scale of this economic relief effort 

was unprecedented. By August 8, 2020, loans totaling

$525 billion were approved for more than 5.2 million

small businesses, nonprofits, veterans’ organizations,

tribal businesses, sole proprietors, and independent

contractors.

TTB also acted swiftly in response to the pandemic by

lifting restrictions and prioritizing applications to enable

the alcohol beverage industry to quickly shift to producing

hand sanitizer to replenish the nation’s supply. As a 

result of TTB’s response, these applications were 

generally approved within one day. Further, to support

thousands of U.S. breweries, wineries, distilleries, and

importers through the pandemic, TTB also significantly

reduced wait times for product formula and label

approvals. Since March, TTB processed the vast majority

of applications in 10 days or less and achieved its FY 2020

target to process these applications within the 15-day

standard for 85 percent of applicants.

Additionally, through leading the interagency Financial

Literacy and Education Commission, Treasury

coordinated a government-wide approach to improving

financial education for all Americans, while also playing a 

vital role in supporting ongoing measures to help provide

relief to American consumers overcoming the economic

challenges wrought by the pandemic.

TRUSTED CURRENCY AND SERVICES

Circulating coins were collectively produced at higher

volumes than at any time during the last 19 years, and

100 percent of Federal Reserve Bank orders were met. 

During FY 2020, bullion revenue for the U.S. Mint nearly

tripled from FY 2019. This increase was primarily due to

increased demand for gold bullion products, as a result of 

uncertainty in the stock market caused by the COVID-19

pandemic.

Treasury also made significant progress toward

improving service levels for new and existing U.S. alcohol

beverage businesses, with focused efforts resulting in

reduced wait times for Federal permits, as well as product

formula and label approvals for the alcohol beverage

industry. Treasury filled an important role as these

industries adapted their operations in response to the

pandemic. TTB reduced permit approval times in

FY 2020 to an average of 42 days across various permit

types, and nearly achieved its target of processing

85 percent of permit applications in the 75-day standard,

an improvement of 26 percent since last year. 

As authorized by Congress, Treasury negotiated the

transfer of 104 acres of property from the USDA for the

construction of a new currency printing facility. A new 

currency printing facility will enable BEP to support

future currency security redesign efforts in a smaller,

more efficient, and more environmentally sustainable

facility when compared to BEP’s existing 100-plus yearold facilities in Washington, D.C. In accordance with the

National Environmental Protection Act, BEP hosted a 

public townhall in late 2019, to solicit stakeholder 

comments pertaining to the construction of the new 

facility. As a result, Treasury determined the proposed 

facility will require preparation of an Environmental

Impact Statement (EIS), which is currently in

development with a completion date projected for 

July 2021. Completion of the EIS will permit preconstruction site activities to occur on the proposed 

property. We achieved all major project schedule

milestones despite the current in-person work limitations.

FREE AND FAIR TRADE

Treasury played an important role ensuring that China

followed through on its Phase One trade agreement 

commitments, particularly with regards to financial

services and currency matters. Treasury also worked 

with the Office of the U.S. Trade Representative in

finalizing two trade agreements—the U.S.-MexicoCanada Agreement (USMCA) and the U.S.-Japan Trade

Agreement. Treasury played a critical role in negotiating

financial services commitments in the USMCA and the

U.S.-Japan Digital Trade Agreement, including

prohibiting data localization in financial services to

support regulatory and oversight efforts. In the USMCA,

Treasury also negotiated the chapter on Macroeconomic 

Policies and Exchange Rate Matters, with new policy and

transparency commitments on currency issues. Treasury

continues to support implementation of these trade

agreements, while securing protective status of certain

distinctive U.S. products, such as U.S. alcohol beverages 
20 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS

in major export markets like Mexico, Canada, and Japan. 

Similarly, in coordination with Japan, TTB is engaging in

rulemaking on standards related to wine and distilled

spirits that could increase U.S. consumer choices and

ensure Japan treats U.S. products fairly. Outside of 

formal trade negotiations, we continue to promote market

access for U.S. financial services firms and cross-border 

data flows in financial services, as indicated with the

issuance of the U.S.-Singapore joint statement on 

financial services data connectivity.

GOAL 1: KEY PERFORMANCE DATA HIGHLIGHTS

Measure

(Responsible Bureau/Office)

FY 17 FY 18 FY 19 FY 20 FY 20 

Target Result vs Target

Customer Service Representative Level of

Service (IRS)1 77.1% 75.9% 65.4% 53.1% 60.0% Unmet

Enterprise Self-Assistance Participation Rate

(IRS)2 79.0% 82.0% 85.4% 90.6% 82.0% Exceeded

Timeliness of Critical Individual Filing Season

Tax Products (IRS)3 93.1% 59.6% 92.6% 78.4% 89.0% Unmet

Percentage of Permit Applications Processed

within Service Standards (TTB)4 48.1% 71.2% 57.6% 84.1% 85.0% Unmet

Currency Notes Delivered Returned Due to

Defects – Parts per Million (BEP)5 <0.008 0.0031 .09 .02 <1 Met

Explanation of Results 1This measure represents 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 2020, this measure ended the fiscal year below

target due primarily to the effects of COVID-19. Sites incrementally began closing on March 16, with all sites and toll-free lines

closing on March 31. Account management phone lines began a phased approach for reopening in the months of May and June

based on resources available for telework. Taxpayer Assistance Center phone lines reopened on June 26. 

2This indicator represents the percent of instances where a taxpayer uses one of the IRS’s self-assistance service channels (e.g.,

automated calls, web services) versus needing support from an IRS employee (e.g., face-to-face, over the phone, or via paper

correspondence). The rate of 90.6 percent was 6 percent higher from the prior year of 85.4 percent. Compared to FY 2019, total

services increased by 26.8 percent, self-assisted services increased by 34.5 percent and assisted services fell 18.5 percent.

3This measure represents the percentage of Critical Individual Filing Season (CIFS) tax products available to the public in a timely

fashion. CIFS tax products include tax forms, schedules, instructions, publications, tax packages, and certain notices required by

numerous filers to prepare a complete and accurate tax return. The timeliness of CIFS tax products ended the fiscal year below

target at 78.4 percent compared to the FY 2020 target of 89.0 percent. The December 20, 2019, enactment of Public Law 116-94 

did not allow enough time to incorporate the new laws into the tax products by January 20, 2020. The legislation impacted over

160 tax products, 34 (40 percent) of which were CIFS and many of which had already been released to the public. Despite

prioritization, workload planning, and additional work hours performed by IRS employees, the results fell 11.9 percent short of

the annual target. 4This measure represents the overall rate at which TTB is meeting its annual service standard (75 days for FYs 2017 – 2020) for all

original permit applications and registrations. The measure reflects the efficiency and consistency of TTB’s permitting process

and supports effective communication with industry members as to level of service. In FY 2020, TTB issued 84 percent of

applications within its 75-day service standard, nearly achieving its 85 percent target. To meet the target, TTB is undertaking

process and system improvements, including an effort to streamline permit application requirements.

5This measure incentivizes continuous product quality improvement and reduces defect-driven returns of currency notes by the

Federal Reserve back to BEP. BEP collects and tracks the number of notes by denomination that are returned from the Federal

Reserve Banks. The target for this measure aligns with manufacturing industry quality standards. 
DEPARTMENT OF THE TREASURY 21 

MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2020 AGENCY FINANCIAL REPORT

Goal 2: Promote Financial Stability

U.S. economic growth must be achieved in a stable and

sustainable way, which is why Treasury works to promote

financial stability around the world. Under this goal, our

first strategic objective centers on resolving the

conservatorships of the Federal National Mortgage

Association (Fannie Mae) and the Federal Home Loan 

Mortgage Corporation (Freddie Mac), known as the

Government-Sponsored Enterprises (GSEs), as a means

to prevent taxpayer bailouts of public and private

mortgage finance entities. Our second strategic objective

is to provide technical assistance to enable foreign 

partner countries to better raise and manage financial

resources to protect their financial sectors. Finally, our

third strategic objective emphasizes enhancing security,

improving resiliency, and reducing the risk of significant

cybersecurity and other incidents to the financial sector’s 

critical infrastructure (domestically and internationally).

HOUSING FINANCE REFORM

The Department released the Treasury Housing Finance

Reform Plan in September 2019, pursuant to a March

2019 Presidential Memorandum. Treasury proposed 

49 legislative and administrative reforms designed to

protect American taxpayers against future bailouts,

preserve the 30-year fixed-rate mortgage, and help

hardworking Americans fulfill their goal of buying a 

home. On September 30, 2019, consistent with the plan,

Treasury and the Federal Housing Finance Agency

(FHFA) announced that they had agreed to permit the

GSEs to retain additional capital—up to $25 billion for 

Fannie Mae and $20 billion for Freddie Mac. During

FY 2020, Treasury continued to support congressional

action to enact comprehensive housing finance reform 

legislation. Pending legislation, Treasury continues to

support FHFA’s administrative actions to enhance the

regulation of the GSEs, promote private‐sector 

competition, and satisfy the preconditions set forth in our

plan for ending the GSEs’ conservatorships.

FOREIGN TECHNICAL ASSISTANCE

In FY 2020, Treasury continued delivering technical

support to developing countries in the interest of the U.S.

government and our partner countries. Developing

countries that generate more domestic revenue and

manage their resources effectively are less dependent on 

foreign aid, contributing to stronger financial sectors and

more opportunities for economic growth. In FY 2020,

Treasury executed 92 projects in approximately

50 developing and transitional countries, strengthening

public financial management and financial sector 

oversight in core areas.

We also implemented new tools and approaches to

maintain a significant level of technical assistance to

partner countries despite the challenges of delivering

assistance remotely, as a result of the COVID-19

pandemic. Examples of how Treasury adapted to the new 

environment included:

• Implementing collaborative tools, such as video

conferencing and other software to facilitate

communication between the Office of Technical

Assistance (OTA) and foreign counterparts and

stakeholders. This enabled OTA to facilitate a

seminar via videoconference for its counterparts in

Ecuador on the subject of banking and pension

reform that was attended by nearly 200 government

officials and other stakeholders from eight countries

(US, Canada, Ecuador, Honduras, Finland, Colombia,

Peru and Chile).

• Conducting virtual missions to facilitate the

initiation of new engagements (e.g., a new economic

crimes project with the government of Latvia).

At the international level, we continued to focus on key 

priorities, which included: (i) combating terrorist

financing and economic crimes; (ii) advocating for sound

approaches to capital market development and

infrastructure finance; (iii) supporting our Energy and

Infrastructure Frameworks initiative; (iv) bolstering

information systems security efforts; (v) engaging

strategically with countries in Latin America; and (vi)

promoting the transparency of national debt for our 

partner countries.

In FY 2020, Treasury assisted partner countries in

addressing economic and fiscal challenges created by the
22 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS

pandemic. Some examples of our projects that focused on 

the pandemic include restructuring sovereign debt in

Ecuador; assessing the sovereign liabilities of state-owned 

enterprises in Kenya; facilitating capabilities for 

virtual/remote taxpayer audits in Rwanda; and

implementing pandemic appropriate human resource

practices regarding tax administration in Sierra Leone.

FINANCIAL SECTOR CYBERSECURITY AND

CRITICAL INFRASTRUCTURE PROTECTION

Treasury works with financial sector stakeholders to

improve information sharing and reduce risks to U.S.

financial services critical infrastructure. Treasury

functions as the sole agency responsible for the overall

stability of the U.S. financial system. The Office of 

Cybersecurity and Critical Infrastructure Protection

(OCCIP) leads Treasury’s engagement with the private

sector. In FY 2020, OCCIP introduced the SECURE

Program, aimed at enhancing risk management through

improved analysis of critical operations and processes 

that support the U.S. financial system.

OCCIP also manages the Hamilton Series Exercise

Program, a voluntary public-private initiative that brings

together incident management practitioners and policy

leaders from across the financial services sector to

identify risks to the sector’s resilience and recommends 

steps to address those risks. The program is divided into

two distinct categories of exercises: (i) those that target

the systemic financial sector participants, and (ii) those

that target smaller firms that do not typically have

response plans as robust as larger firms. In FY 2020,

while many in-person exercises were put on hold due to

restrictions on travel and physical meetings, the program

continued to hold virtual exercises with financial sector 

firms of all sizes. These exercises focused on the highest

cybersecurity risks to the financial services sector today

and helped the sector identify various response

capabilities to combat these risks.

OCCIP, along with the Bank of England, co-chairs the

G-7 Cyber Expert Group (CEG). The CEG is Treasury’s

focal point for international cyber engagement across the

G-7 public financial authorities and the private sector to

build cyber policy and response capabilities. In FY 2020, 

Treasury contributed its expertise to the CEG’s

Statement on Digital Payments and a forthcoming

Fundamental Elements of Cyber Exercise

Program. During the COVID-19 pandemic, OCCIP

engaged bilaterally with the CEG members, as well as

other select international partners, to share information

to assist senior Treasury decision makers in

understanding the impacts of potential operational 

disruptions to the critical infrastructure of the

international financial system. This assistance included

information related to the increased cybersecurity threats

from hostile actors who sought to take advantage of 

pandemic-related government programs.
DEPARTMENT OF THE TREASURY 23 

MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2020 AGENCY FINANCIAL REPORT

GOAL 2: KEY PERFORMANCE DATA HIGHLIGHTS 

Measure

(Responsible Bureau/Office)

FY 17 FY 18 FY 19 FY 20 FY 20 

Target Result vs Target

Engagement of Partner Countries in

Programs – 5 point scale (International

Affairs)1

4.0 3.8 3.6 3.3 3.6 Unmet

Explanation of Results

1Measures the degree to which foreign counterparts are engaging proactively and constructively with OTA advisors, at the

working and policy levels. Counterpart engagement is both a key outcome of OTA efforts to structure and execute effective

technical assistance projects that support host country ownership. The result for FY 2020 is 3.3, a reduction of 0.3 from the

FY 2019 result and the FY 2020 target of 3.6. This result reflects the challenges of achieving and maintaining traction with foreign

counterparts during the COVID-19 pandemic, which forced OTA to provide assistance remotely, instead of engaging with

counterparts in-person per OTA’s typical approach for providing technical assistance.
24 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS

Goal 3: Enhance National Security

Through its national security mission and statutory

authority, Treasury’s Office of Terrorism and Financial

Intelligence (TFI), which includes the Financial Crimes

Enforcement Network (FinCEN), has broad tools and

authorities to address activity that threatens national

security in the interest of protecting the U.S. and

international financial system from abuse by illicit actors. 

Additionally, Treasury is the chair of the Committee on 

Foreign Investment in the United States (CFIUS) and

leads CFIUS in fulfilling its national security mission and

statutory mandate to allow foreign investment into the

U.S. consistent with the protection of national security.

There are three strategic objectives for achieving these

goals, the first two of which are under TFI’s purview. The

first strategic objective focuses on identifying, disrupting,

and dismantling priority threats to the U.S. and

international financial systems. The second objective—

identified as an area of noteworthy progress in the

FY 2020 SOAR process—is to identify and reduce

vulnerabilities in the U.S. and international financial

system to prevent abuse by illicit actors. The third

strategic objective, led by our Office of International

Affairs (which includes the CFIUS process under the

Office of Investment Security) is also identified as an area

of noteworthy progress, as well as a focus area for 

improvement in our FY 2020 SOAR. This objective is to

advance American prosperity and security through

economic growth, investment, trade, and expansion of the

American industrial base, while protecting national

security.

STRATEGIC THREAT DISRUPTION

TFI strategically applies Treasury’s powerful tools and

authorities against bad actors that include rogue regimes,

terrorist financiers, human rights abusers, proliferators of 

weapons of mass destruction, drug kingpins, and others. 

In response to Iran, Treasury used its tools and

authorities to deter Iran’s nuclear and ballistic missile

program, hinder their support of global terrorism, and

offset efforts to destabilize the Middle East and countries

beyond. Treasury targeted endemic terrorist financing

and money laundering activity in response to Iran. 

Specifically, TFI led the Administration’s maximum

economic pressure campaign to deprive Iran of the

resources it uses to finance its malign activity. Since

February 2017, TFI targeted and sanctioned over 

1,100 individuals and entities. Most recently, in

September 2020, Treasury, along with the Department of 

State, imposed a series of sanctions designed to disrupt

Iran’s nuclear program and its ability to acquire and sell

conventional arms. And then in October 2020, Treasury

imposed sanctions on the Iranian ambassador to Iraq who

is responsible for coordinating the activity of Iran’s

Islamic Revolutionary Guard Corps-(IRGC) Quds Force 

throughout Iraq.

Additionally, in October 2019, FinCEN found Iran to be a 

jurisdiction of primary money laundering concern

pursuant to Section 311 of the Uniting and Strengthening

America by Providing Appropriate Tools Required to

Intercept and Obstruct Terrorism Act of 2001 (USA

PATRIOT Act). 

TFI also applies its powerful tools and authorities against

organizations and networks that support terrorist

activity, such as those aiding Hizballah, Hamas, Islamic

State of Iraq and Syria (ISIS), and Al-Qaeda, among

others. In December 2019, TFI’s Office of Foreign Assets

Control (OFAC) took action against two prominent

Lebanon and the Democratic Republic of the Congo-based

money launderers and their affiliated companies,

including those that have generated tens of millions of 

dollars for Hizballah, its financiers, and their malign

activities. These designations underscore the extent to

which Hizballah, and its affiliates engage in illicit

economic activity that prioritizes the terrorist group’s own

economic interests over those of the Lebanese people. In

addition, TFI’s continued leadership of the Terrorist 

Financing Targeting Center partnership with seven Gulf

nations resulted in joint sanctions actions against ISIS,

Hizballah, and Iran’s IRGC.

On Russia, TFI has developed a tailored approach that

leverages all Treasury tools and authorities, including

engagement with foreign partners, to impose costs upon

those acting on Russia’s behalf against U.S. interests,
DEPARTMENT OF THE TREASURY 25 

MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2020 AGENCY FINANCIAL REPORT

while mitigating potential unintended economic

consequences on partners and allies. In response to

foreign interference and influence threats to the

American electoral system, TFI formed an Election

Security team to identify financial vulnerabilities that

could be exploited, which has led to actions against

Russian targets.

Treasury continues to use sanctions to place pressure on 

North Korea including its unlawful supply of labor to

overseas markets, which is used to generate income in

contravention of United Nations (UN) sanctions. 

Additionally, Treasury applied its tools and authorities

against Venezuela’s corrupt Maduro regime, in an effort 

to deny the regime revenue pursuant to our U.S. foreign 

policy goals.

Through its Office of Intelligence and Analysis (OIA), TFI 

also expanded its role in cybersecurity. Specifically, OIA’s

Cyber Analysis Office worked with Treasury’s Office of 

Cybersecurity and Critical Infrastructure Protection and

major financial institutions to gather intelligence aimed

at disrupting global cyber theft operations. The Cyber

Analysis Office also augmented resources to detect and

analyze emerging trends in state and non-state use of 

virtual currencies to undermine U.S. national security.

Finally, in FY 2020, TFI built a tailored financial

intelligence data platform that aggregates and overlays

TFI data holdings. This platform hosts foreign 

government information, open source corporate registry

information, and Financial Action Task Force 

publications, among other resources, to help TFI 

personnel make more effective national security decisions. 

TFI also realigned analytic resources to more thoroughly

anticipate and analyze the security threats posed by

China, a posture which will continue through FY 2021.

ANTI-MONEY LAUNDERING (AML)/COMBATING

FINANCING OF TERRORISM (CFT) FRAMEWORK

In FY 2020, Treasury continued to build upon the

programs established during the U.S. presidency of the

Financial Action Task Force (FATF) the previous year. 

TFI led efforts focused on virtual currencies and the

combating of terrorist financing and the financing of 

weapons of mass destruction, in order to strengthen the

U.S. and international financial system. Under U.S.

leadership, the FATF revised its standards to also apply

to virtual assets and virtual asset service providers. This

revision means that 205 countries around the world

committed to complying with FATF standards must

effectively regulate and supervise these providers for antimoney laundering and counter the financing of terrorism. 

In addition, the FATF assisted countries in combating

terrorist financing, which included training prosecutors

and judges from around the world on how to conduct

terrorist financing investigations and prosecute terrorist

financers. Under our leadership the FATF also published

a guide for countries on how to conduct national terrorist

financing risk assessments and provided updates on ISIS

and Al-Qaeda financing. With Treasury leading the

FATF, we initiated work on expanding the scope of 

standards to further incorporate proliferation financing,

supported the accession of two key U.S. allies into FATF, 

Israel and Saudi Arabia, and modernized the FATF’s 

budget model.

In addition, TFI, including FinCEN took regulatory

rulemaking actions and published multiple guidance

documents and advisories to strengthen the AML/CFT

framework in efforts to safeguard the U.S. financial

system. We addressed several topic areas including

minimum requirements for bank AML programs without

a federal regulator; regulatory amendments under the

Bank Secrecy Act (BSA); enforcement of BSA rules and

regulations; virtual currency; and COVID-19 pandemic

relief-related financial crimes, among others. 

ECONOMIC STRENGTH THROUGH NATIONAL

SECURITY

In February 2020, Treasury published final regulations

implementing the Foreign Investment Risk Review

Modernization Act (FIRRMA). These regulations

effectuated FIRRMA's expansion of the jurisdiction of 

CFIUS to review certain non-controlling, non-passive

investments by foreign persons into certain types of U.S.

businesses, as well as certain transactions by foreign 

persons involving real estate in the U.S. The regulations

also implemented mandatory declarations for two types of 

transactions—where a foreign government is acquiring a 

“substantial interest” in certain U.S. businesses, and
26 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS

transactions involving certain U.S. businesses that

produce, design, test, manufacture, fabricate, or develop 

one or more critical technologies. Additionally, the

regulations created an exception to the mandatory

declaration provision for non-controlling investments by

certain foreign persons defined as “excepted investors”

based on their ties to certain countries identified as

“excepted foreign states,” and their compliance with

certain laws, orders, and regulations.

In May 2020, Treasury initiated the collection of filing

fees for notices filed with CFIUS and also launched a 

secure web-based portal for parties to submit notices and

declarations. In FY 2021, a final new rule will go into

effect to reorient mandatory declarations for certain

transactions involving U.S. businesses that produce,

design, test, manufacture, fabricate, or develop one or 

more critical technologies. Similarly, Treasury expects to

publish guidelines for public notice and comment

regarding how CFIUS intends to exercise its enforcement 

authority to address instances of non-compliance with

these types of regulations.

GOAL 3: KEY PERFORMANCE DATA HIGHLIGHTS

Measure

(Responsible Bureau/Office)

FY 17 FY 18 FY 19 FY 20 FY 20 

Target Result vs Target

Percentage of CFIUS Cases Reviewed within

Statutory Timeframes, reported by calendar

year (International Affairs)1

100% 100% 100% TBD 100% TBD

Number of New or Modified Sanctions

Programs Established by Executive Order or

Congressional Mandate (TFI)2

5 5 7 7 N/A N/A 

Percentage of Domestic Law Enforcement

and Foreign Financial Intelligence Units

finding FinCEN’s Analytic Products Valuable

to the detection and deterrence of illicit

activity (FinCEN)3

92% 95% 92% 97% 90% Met

Explanation of Results

1This measure tracks compliance with statutory deadlines for completing national security reviews of transactions notified to the

CFIUS to ensure that the CFIUS process is timely and efficient. Results are reported on a calendar year basis.

2This indicator tracks the number of new or modified sanctions programs that must be implemented and enforced. However, the

indicator does not capture the levels of relative complexity for each sanction program or the complexity of individual national

security objectives that sanctions attempt to achieve. We do not set targets for new or modified sanctions programs, since the

existence of a sanctions program is not itself a measure of success. 

3This performance measure tracks what the analytics products are intended to do (e.g. to be useful to a wide range of customers

and have impact, such as identify new leads or provide previously unknown information). In FY 2020, 97 percent found that the

analytic products and research had impact on investigations, meeting the target of 90 percent or above. FinCEN was able to

achieve this high level of performance by continuously improving processes to increase and more rapidly disseminate intelligence

reports to a wider audience, by maintaining the high quality of its reporting through stringent review processes, and by covering

issues and topics that meet the operational and intelligence demands of its domestic and international stakeholders. 
DEPARTMENT OF THE TREASURY 27 

MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2020 AGENCY FINANCIAL REPORT

Goal 4: Transform Government-wide Financial Stewardship

As the financial manager of the U.S. government,

Treasury plays a central role in managing taxpayer funds

responsibly. Of the three strategic objectives for 

achieving this goal, the first is to increase access to and

use of federal financial data to strengthen governmentwide decision-making, transparency, and accountability. 

The second strategic objective is to fund the federal 

government with the least cost over time. The third

strategic objective—assessed as an area of noteworthy 

progress, as well as a focus area for improvement in our 

FY 2020 SOAR process—aims to improve federal financial

management performance, using innovative practices to

support effective government.

FINANCIAL DATA ACCESS AND USE

Treasury’s key accomplishments in the area of financial

data access and use include launching the

FiscalData.Treasury.gov website in July 2020, which

provides citizens with centralized access to Fiscal

Service’s financial data through a modern user 

experience. Treasury also collaborated with OMB and

other federal agencies to issue guidance on supplemental

funding provided in response to COVID-19 and worked 

with federal agencies to report this information to the

public on USAspending.gov. 

GAO’s Bureau of the Fiscal Service's Fiscal Year 2018

Schedules of the General Fund report was published on 

May 19, 2019, and it identified opportunities to advance

the auditability of the Schedules of the General Fund. In

response, Fiscal Service implemented a comprehensive

remediation plan to address these issues, which includes:

(i) implementing processes for validating the integrity of

certain beginning balances; (ii) developing an automated

reconciliation to readily trace payment transactions; and

(iii) working diligently with the federal agency community

to provide guidance on improving the accuracy of the

Schedules.

Federal agencies (and other entities) use the Governmentwide Treasury Account Symbol Adjusted Trial Balance

System to provide proprietary financial reporting

information about budget execution to the Treasury. This

information was used to compile the Financial Report of 

the U.S. Government. FY 2020 key enhancements

include data automation to support the elimination of 

40 agency closing packages for the U.S. Consolidated

Financial Statements and progress in standardizing the

Balance Sheet between the financial statement lines

presented by agencies.

DEBT MANAGEMENT

In FY 2020, the federal government’s response to the

COVID-19 pandemic resulted in unprecedented Treasury

borrowing needs. Treasury successfully raised more than

$4 trillion in FY 2020 at historically low costs and without

disrupting financial markets. Treasury launched a new 

product, a 20-year nominal coupon bond, which helped

increase financing capacity during this critical period. 

The Office of Debt Management also conducted

substantial market outreach to a broad range of market

participants to gather information on market conditions

and to help inform Treasury’s policy decisions. Similarly,

Treasury worked to improve its internal data and

analytics platform for debt management to handle

growing data sets and facilitate additional analyses. 

Furthermore, Treasury continued efforts to modernize our

securities auction system. In FY 2020, we implemented

an improved operations and maintenance program to

ensure the resiliency, reliability, and high-performance of

our existing technology; developed a roadmap for 

additional system enhancements; and initiated additional

discovery activities for the modernization effort.

FEDERAL FINANCIAL PERFORMANCE

Treasury created the Payment Integrity Center of 

Excellence (PICOE) in FY 2019 to provide actionable

business insights and solutions that transform how 

agencies approach identification, prevention, and recovery

of improper payments. PICOE’s initiatives are executed 

in a complementary fashion to OMB Cross Agency

Priority Goal 9: Getting Payments Right. Key 

accomplishments in FY 2020, include: (i) analyzing over

2.1 million potential IRS payments against Governmentwide data to provide actionable payment integrity and

fraud risk management solutions—data which will help
28 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS

strengthen IRS’s risk profiles and fraud filters for future

payments; (ii) conducting a Payment Recovery Project 

that identified a fraud scheme impacting an agency

partner and led to immediate action in intercepting

erroneously generated U.S. Treasury checks; and (iii)

increasing the number of data sharing agreements and

federal agency partnership engagements. 

Treasury’s Do Not Pay (DNP) program, which helps in the

identification and prevention of improper payments,

continues to expand analytical projects with states and

agencies. As of September 30, 2020, DNP identified and

prevented payments totaling $43.5 million, as part of 

normal operations. 

Treasury also added an Agency Priority Goal to reduce

paper check payments by creating a more modern, secure,

and cost-effective federal payment experience. This

initiative supports the OMB’s Cross Agency Priority Goal

4: Improving Customer Experience, and Goal 9: Getting

Payments Right, and is part of an overall effort to

improve federal financial performance throughout the

federal government. FY 2020 accomplishments include

disbursing 3.7 million fewer checks compared to FY 2019,

while increasing the electronic payment rate for the same

period from 95.6 percent to 96.0 percent for all Treasurydisbursed payments, excluding certain payments related

to pandemic relief. Fiscal Service also continues to

identify and implement efforts that will further reduce

paper checks in future years through collaboration and

initiatives with other federal agencies including the U.S.

Courts, the Social Security Administration, the U.S.

Department of Veterans Affairs, and other groups that

support taxpayers and benefit recipients. For FY 2021,

Treasury will continue to reduce the number of paper

checks printed by Treasury’s Bureau of the Fiscal Service

and will work to further increase the electronic payment

rate. 

Treasury continues its efforts to streamline lockbox 

networks, which process paper-based payments and

forms. In FY 2020, we streamlined the General Lockbox 

Network (GLN) that provides services to a variety of 

agencies. This effort streamlined 65 cash flows and

reduced the GLN lockbox footprint from four sites

managed by three financial agents to two sites managed

by a single financial agent. In FY 2021, the Fiscal Service

is planning to streamline the IRS Lockbox Network.

In June 2020, the OMB designated Treasury as the

Quality Service Management Office for core financial

management (FM QSMO). The FM QSMO will create a 

marketplace of solutions and services to help agencies

meet their financial management needs and accomplish

shared government-wide goals.
DEPARTMENT OF THE TREASURY 29 

MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2020 AGENCY FINANCIAL REPORT

GOAL 4: KEY PERFORMANCE DATA HIGHLIGHTS

Measure

(Responsible Bureau/Office)

FY 17 FY 18 FY 19 FY 20 FY 20 

Target Result vs Target

Dollar Amount (in millions) of Improper

Payments Identified and Prevented through

the Do Not Pay (DNP) program (Fiscal

Service)1

$36.58 $ 35.53 $41.10 $43.5 $35.3 Exceeded

Dollar Amount (in billions) of Delinquent

Debt Collected through All Tools (Fiscal

Service)2

$7.61 $7.44 $9.65 $10.68 $8.88 Exceeded

Percentage of Treasury Payments Made

Electronically (Fiscal Service)3 95.1% 95.4% 95.6% 96.0% 95.8% Exceeded

Percentage of Total Federal Government

Receipts Settled Electronically (Fiscal

Service)4

98.3% 98.0% 98.4% 99.0% 98.0% Exceeded

Number of paper checks printed FYTD

(millions) (Fiscal Service)5 59.0 56.0 54.2 50.5 51.3 Exceeded

Explanation of Results

1This measure provides the dollar amount, in millions, of payments identified as improper plus the payments that were prevented

through the DNP program. The $43.5 million value represents normal operations and does not include identification and

prevention of improper payments related to economic impact payments.

2This measure provides the total amount of delinquent debt collected, in billions, through debt collection tools operated by Fiscal

Service. FY 2020 totals include collection of $3.4 billion from EIPs to satisfy delinquent child support. Several federal and state

creditor agencies suspended collection activity beginning in April 2020 due to economic concerns around COVID-19.

3This measure provides the portion of the total volume of payments that is made electronically. The FY 2020 EFT percentage of

96.0 percent excludes 37.6 million of EIPs and 2.1 million of Department of Education checks related to the pandemic.

4This measure provides the percentage of total federal government revenue collection dollars settled electronically. In FY 2020, 

the 99 percent resulted from our continuing efforts to move paper-based transactions to electronic alternatives (e.g., pay.gov and

eCommerce alternatives such as digital wallets), and a decline in non-electronic collections due to the pandemic.

5This measure provides the number of payments made via paper checks. For FY 2020, check volume totaled 90.3 million

including EIPs, and 50.5 million excluding 37.6 million EIPs and 2.1 million Department of Education checks related to the

pandemic. The 50.5 million check volume includes other CARES Act and coronavirus-related disbursements that generally cannot

be separately identified.
30 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS

Goal 5: Achieve Operational Excellence

The federal government strives to emulate successful

businesses that provide exceptional value by improving

internal operations wherever and whenever possible. 

There are three strategic objectives for achieving this goal

of operational excellence. Our first strategic objective

under this goal intends to foster a culture of innovation

for hiring, engaging, developing, and optimizing a diverse

workforce with the competencies necessary to accomplish

our mission. Our second strategic objective—assessed as

an area of noteworthy progress in our FY 2020 SOAR

process—targets mission delivery by improving the

reliability, security, and resiliency of Treasury’s

infrastructure. Lastly, in our third strategic objective, we

aim to improve customer value and experience by

increasing product and service quality, while lowering

costs.

WORKFORCE MANAGEMENT

This year, Treasury removed Strategic Objective 5.1

related to workforce management from its list of areas

requiring additional focus based on the results of the

FY 2020 SOAR. Improvements in workforce management

were driven by dedicating a Quarterly Performance

Review (QPR) to examining challenges in strategic

human capital management and reviewing all

performance data sets that align to this objective. The

QPR resulted in a commitment by owners under this

strategic objective to meet twice a year with their

bureau's Human Resources (HR) Officer to review 

relevant data, develop strategies and tactics, and monitor

progress toward mitigating human capital risks and

challenges. Treasury’s HRStat Program, implemented in

FY 2013 and chaired by the Chief Human Capital Officer 

and Director of the Office of Civil Rights and Diversity as

data-driven review of the progress on HR strategies and

initiatives as required by 5 C.F.R. Part 250 was fully

integrated into the regular QPR format in FY 2020,

providing bureau HR Officers, Learning Officers, Equal

Employment Opportunity Officers, and Diversity and

Inclusion leadership a shared forum to discuss workforcerelated issues directly with Treasury senior management

in the context of monitoring progress toward front-line

mission success. Treasury-wide workforce planning

remains a Human Capital risk. Treasury updated its

Human Capital Planning Policy to provide bureaus

additional detailed guidance and annual reporting

requirements for their progress in conducting Strategic

Planning and Workforce Analyses to be effective in early

FY 2021. Treasury also developed a roadmap to

modernize talent acquisition and approved the selection

of a new staffing and recruitment technology platform,

which will help streamline hiring processes and enable

the use of competency-based assessments starting in

FY 2021. Treasury saw broad improvements on the

Federal Employee Viewpoint results, as a result of 

workforce management being a continued priority for 

leadership, improving from 13th to 9th place amongst

Large Agencies in the Partnership for Public Service’s

Best Places to Work index.

TREASURY INFRASTRUCTURE

The arrival of the global COVID-19 pandemic within the

United States presented a significant challenge to

Treasury’s mission, including sustainment of our

essential operational functions. In response, the Office of 

the Assistant Secretary for Management led a 

coordinated effort to establish safe operations to protect 

the workforce and ensure mission capability by

developing, communicating, and implementing safety and

return-to-work guidelines. Throughout the pandemic,

Treasury management closely monitored

recommendations by the Centers for Disease Control,

World Health Organization, General Services

Administration (GSA), Occupational Safety and Health

Administration, and other authorities, to quickly acquire

much needed Personal Protective Equipment, leading to

improved strategic sourcing capabilities. Treasury

bureaus also closely coordinated to share best practices

for facility operations and cleaning protocols, in order to

maximize the health and safety of employees. As the

pandemic situation continues to unfold in FY 2021,

Treasury management will work closely with both our 

federal and private sector partners to monitor, formulate,

and implement recommendations and guidelines in order 

to follow GSA’s Return To Workplace Strategy for federal 

facilities. 
DEPARTMENT OF THE TREASURY 31 

MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2020 AGENCY FINANCIAL REPORT

While operating in a pandemic environment, Treasury

remains focused on improving cyber and organizational

preparedness despite ongoing resource limitations. 

Information technology is a key enabler for many of the

essential services Treasury provides. Treasury continued

IT infrastructure modernization efforts in FY 2020,

helping to ensure the Department’s continued ability to

safely meet the expectations of the customers it serves. 

In FY 2020, Treasury accomplished the following

modernization initiatives:

• Prevented $6 million in technical refresh costs by

successfully migrating Treasury’s human capital

shared service application supporting over

200,000 federal employees (HR Connect), from legacy

data centers to Oracle’s Cloud Infrastructure

environment.

• Decommissioned and retired the Office of Tax Policy’s

legacy statistical analysis system (originally

established in 1981).

• Made progress on awarding the Treasury Enterprise

Infrastructure Solutions (TEIS) acquisition, which is

on target for an award in early FY 2021. When

awarded, TEIS will provide a modernized enterprisewide network for telecommunications and other 

infrastructure components. 

• Released a Request-for-Information, as part of 

Treasury’s plans to establish an enterprise-wide

acquisition vehicle for facilitating Treasury’s access

to cloud products, services, and associated labor.

• Established the Enterprise Cyber Risk Management

Program (ECRM) to manage vulnerabilities and

threats to Treasury assets that can be exploited and

that can cause disruption in the delivery of services.

• Launched the Supply Chain Risk Management

Program (SCRM) to identify supply chain related

risks within Treasury’s portfolio of IT vendors and

products. The SCRM Program also supports Federal 

Acquisition Regulation (FAR) Section 889, which

prohibits executive agencies from entering into,

extending, or renewing a contract with any entity

that uses certain technology or services produced by

five statutorily designated Chinese entities. The FAR

requires agencies to ensure compromised products,

vendors, and suppliers are prohibited from being

used or operated in Treasury’s IT infrastructure.

• Integrated Continuous Diagnostic Monitoring (CDM)

Identity Access Management (IAM) data into

Treasury’s CDM dashboard and transmitted IAM

data to the federal dashboard to further control and

secure Treasury’s assets.

• OCIO partnered with bureau IT leadership to ensure

Treasury shared infrastructure met pandemic and

telework requirements for bureau missions and

successfully met increased demand for bandwidth

while achieving 100 percent availability for the

Department’s Trusted Internet Connection.

• Departmental Offices’ remote access was redesigned 

to enable unplanned expansion in utilization (over 

610 thousand access sessions) since March. 

Collaboration tools were also extended to provide

tools necessary for the continuation of critical

operations, such as its Video Teleconference support

for the G7, G20, and other important events totaling

109 events over 163 hours. WebEx usage increased

by over 500 percent over the prior fiscal year. 

Additionally, OCIO has added 862 additional

conference bridge subscriptions and has supported

over 19.7 million minutes of conference calls.

• OCIO seamlessly deployed four web application

intake channels and a backend case management

system to process over 3200 applications across three

CARES Act scope areas (Sections 4003, 4112, and

5001). A CARES Act sub-site on Treasury.gov was

launched to assist general public and industry

regarding federal stimulus efforts and address

Treasury administration FAQs.

• A COVID-19 response collaboration site on MyTreas

has been established to centralize documentation and

messaging for DO employees. 
32 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS

• OCIO modernized over a dozen legacy applications

within Departmental Offices, substantially reducing

the organization’s technology footprint, consolidating

platform adoption efforts and enhancing the user

experience. OCIO prioritized business process

automation, application integration, and Software as

a Service (SaaS) configuration as general drivers to

simplify management support systems to better

enable mission accomplishment.

• OCIO deployed dual classified and unclassified case

management systems for CFIUS. Both systems are

SaaS solutions designed to improve legacy processing

efforts, enhance reporting, and support

administration priorities tied to financial markets

and domestic interests.

CUSTOMER VALUE AND EXPERIENCE

Positive customer experiences have an outsized positive

impact on citizens’ trust in government. The imperative

of providing positive customer experiences is reflected by

the inclusion of customer service in the President’s

Management Agenda, OMB Circular A-11, and the

Department of the Treasury’s 2018 – 2022 Strategic Plan. 

In 2020, Treasury developed a department-wide customer

experience (CX) strategy; this strategy focuses on two

types of initiatives: those that target improved

experiences for internal customers (employees within the

Department), and those that target improvements for 

external customers (the public, other agencies, industry

members, or international partners). Several bureaus

have already made progress mapping customer journeys

to pinpoint improvements that can be made.

Several Treasury bureau and policy offices have also

begun to measure and more closely track CX data. For 

example, Treasury Operations has implemented a 

Customer Experience Transformation project establishing

a framework for improving CX and value within

Departmental Offices. Initial efforts are focused on 

specific projects related to customer service support for 

onboarding, offboarding, and moving personnel within

Treasury Headquarters, and as other organizations

pursue CX initiatives, transformation efforts will be

expanded as the new framework is implemented across

the Departmental Office’s Treasury Operations

organization. 

In FY 2020, Treasury made significant progress in

implementing the Foundations of Evidence-based Policymaking Act, which was signed into law by President 

Trump in January 2019. As required by the law,

Treasury designated the required new senior accountable

officials – a Chief Data Officer, Evaluation Officer, and

Statistical Official, who have begun identifying research

and data-sharing priorities to increase the evidence

available to Treasury decision-makers. This increased

use of evidence in decision-making will enable Treasury

to improve programming, adding greater value to our 

customers.

Treasury worked to increase the use of Best-in-Class

vehicles to 50.6 percent from 41.3 percent through

acquisition planning, which allows the Department to

better leverage buying power and improve value to the

customer.
DEPARTMENT OF THE TREASURY 33 

MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2020 AGENCY FINANCIAL REPORT

GOAL 5: KEY PERFORMANCE DATA HIGHLIGHTS

Measure

(Responsible Bureau/Office)

FY 17 FY 18 FY 19 FY 20 FY 20 

Target Result vs Target

Percentage of Aged Hardware (IRS)1 52.3% 45.5% 31.0% 16.0% 30.0% Exceeded

Seigniorage per Dollar Issued (U.S. Mint)2 0.45 0.37 0.40 0.47 0.36 Exceeded

Manufacturing Costs – Dollar Costs per

Thousand Notes Produced (BEP)3 $43.58 $47.41 $51.01 $56.19 $59.65 Exceeded

Treasury-wide EVS Satisfaction Index

(Management)4 65% 63% 66% N/A 67% N/A 

Percent of High or Critical Findings closed for

Treasury’s High Valued Assets (HVAs)

(Management)5

N/A N/A 86% 74% 70% Exceeded

Explanation of Results 1The measure shows the percentage of IT hardware in operation past its useful life. The IRS has made considerable progress

reducing the percentage of aged hardware within the IT environment from 31 percent at the end of FY 2019 to 16 percent at the

end of FY 2020. The major driver in meeting this goal was the large volume of refreshed workstations. For FY 2021, IT will use an

Enterprise Demand Management (EDM) tool to improve processing efficiency by increasing the visibility of overall IT demand for

aged infrastructure refresh.

2Seigniorage per dollar issued is the seigniorage generated from each dollar of circulating coinage face-value shipped to the

Federal Reserve Banks. FY 2020 results exceeded the target as a result of a 24.2 percent increase in circulating units shipped.

3Manufacturing Costs for Currency (dollar cost per 1,000 notes produced) is an indicator of manufacturing efficiency and

effectiveness of program management. The measure is based on contracted price factors, productivity improvements, as well as

the mix of denominations ordered. Actual performance against standard costs depends on BEP’s ability to meet spoilage,

efficiency, and capacity utilization goals. 4The Federal Employee Viewpoint Survey (FEVS) is the primary tool that agencies use to measure employee sentiment. Each

year, we track and report on the FEVS Overall Satisfaction Index which comprises three FEVS satisfaction questions. Due to the

timing of this year’s survey the FY 2020 FEVS results will not be available until mid-January 2021.

5This measure is the percentage of High or Critical findings against Treasury’s HVAs that were closed in FY 2020. These findings

are typically discovered during reviews of Treasury’s key assets/systems. 
34 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS

ENTERPRISE RISK MANAGEMENT

FRAMEWORK

OMB Circular No. A-123, Management’s Responsibility

for Enterprise Risk Management and Internal Control, 

provides guidance to federal managers to effectively 

manage risks to achieve strategic objectives. 

Management, together with the Chief Risk Officer (CRO),

is responsible for establishing a governance structure to

implement a robust process of risk management and

internal control, as well as an enterprise-wide risk profile. 

Successful implementation requires us to establish and

foster an open and transparent culture that encourages

people to communicate information about potential risks

and other concerns that impact our programs and

operations. 

The CRO meets regularly with senior leaders to discuss

top risks to critical programs, systems, projects, and

priorities, including response strategies. The Office of 

Risk Management (ORM) also established an Enterprise

Risk Management (ERM) Council, chaired by the Deputy

CRO, which brings together risk managers from each of 

our bureaus and policy offices on a bi-monthly basis to

share best practices and discuss risks. ORM works with

the bureaus and policy offices across Treasury to monitor

and annually update our risk profile. 

Beyond its work at Treasury, ORM leads an interagency

ERM community of practice including officials from 

approximately 50 federal agencies. This group grew from

ORM’s efforts to support agencies in their implementation

of ERM, including the July 2016 publication of the

Playbook: Enterprise Risk Management (ERM) for the

U.S. Federal Government. This government-wide

working group meets on a bi-monthly basis to discuss

common risks and various methods of implementing the

guidelines of the Circular.

ENTERPRISE RISKS AND CHALLENGES

Through the FY 2020 SOAR and enterprise risk

management process, we identified the following crosscutting operational risks. 

Evolving Cyber Climate: Treasury, the U.S. government,

and the financial sector face growing complexities rooted 

in technology and the increased use of attacks from cyber

criminals and state actors that threaten the

confidentiality, integrity, or availability of sensitive

information housed within our information systems.

These malign efforts also challenge the effective 

operations of our financial sector firms. On

December 11, 2020, Treasury was notified by a service

provider of malicious activity related to services provided

to the Department. Treasury is still assessing the overall 

impact, if any, of this breach to its financial management

and other systems. Based on assessments performed thus

far, we are not aware of any evidence that the breach

impacted the accuracy of our financial information

presented herein.

Significant Disruptions to Operations: Treasury could

face significant disruptions to operations due to natural

disasters, terrorist events, pandemics, or lapses in

appropriations, resulting in the inability to successfully

deliver on mission. These potential disruptions may

impose challenges for employees, contractors, and

taxpayers, and may constrain progress in critical areas.

Workforce Management: Treasury’s mission capability

may be eroded due to operational challenges in human

resources, such as: recruitment, training and

development, personnel security, and diversity and

inclusion. These challenges may be intensified when 

paired with changing mission and skill requirements.

Data Analytics Capabilities, Sharing, and Infrastructure: 

Treasury’s ability to support critical decisions with data

may be negatively affected by a lack of data accessibility

and reliability, inability to successfully use and interpret

the data, or inability to process or analyze data due to

insufficient or aging infrastructure.

Procurement, Acquisition, and Vendors: Treasury may be

unable to acquire necessary products and services,

initiate work under contracts, and effectively monitor

contract execution due to supply chain vulnerabilities

such as supplier risk, single vendors, lost time, and
DEPARTMENT OF THE TREASURY 35 

MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2020 AGENCY FINANCIAL REPORT

inefficient contracts. This may result in a failure to

deliver on mission needs.

Prioritizing Objectives to Effectively Leverage Limited 

Resources: Treasury maintains a variety of important

programs and services, while being at the forefront of new

and evolving initiatives to improve our economy and keep

it on a stable footing. Due to uncertain funding amounts

and timing, new or changing legislative requirements,

and reduced capacity, Treasury may not be agile enough 

to sufficiently balance new initiatives with existing

requirements or projects.

FY 2021 OUTLOOK

Our FY 2020 SOAR outlined several critical leadership

actions for the coming year: (1) implementing the tax law;

(2) pandemic recovery; (3) issuing CFIUS regulations; (4)

ensuring federal financial performance, and (5) improving

Treasury’s cyber and organizational preparedness

resiliency. These critical leadership actions reflect what

was designated as a focus area in the SOAR.

Looking ahead, we will make progress in these areas and

other key priorities through several targeted initiatives: 

• Work diligently to implement the Taxpayer First Act

of 2019, which Congress intended to improve

taxpayer service and ensure that the IRS continues to

enforce the tax laws in a fair, impartial manner. The

Act also authorizes modernization of the

organizational structure of the IRS.

• Update, with the Secretary’s approval, Treasury’s

FY 2018-2022 Strategic Plan to add a new strategy

that reflects Treasury’s leadership role in

implementing new programs including the CARES

Act.

• Issue public CFIUS enforcement guidelines, and

conduct an assessment of whether excepted foreign

states have established and are effectively utilizing a

robust process to analyze foreign investments for

national security risks and to facilitate coordination

with the U.S. on matters relating to investment

security.

• Support legislative proposals advancing the

prevention, identification, and recovery of improper

payments. Treasury will also work with key

stakeholders to explore legislative proposals to

resolve debts owed by insolvent Agency Funds.

• Advocate for and plan to execute (if supported)

Cybersecurity Enhancement Account Operations and

Maintenance FY 2021 budget requests.
36 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS

FINANCIAL HIGHLIGHTS – FINANCIAL OVERVIEW

The financial highlights below are an analysis of the

information included in our consolidated financial

statements that appear within Part 2, “Financial Section” 

of this report. Our principal financial statements have

been prepared to report 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 our records in

accordance with federal generally accepted accounting

principles (GAAP) and the formats prescribed by OMB. 

The consolidated financial statements are in addition to

the financial reports used to monitor and control 

budgetary resources, which are prepared from the same

books and records. The financial statements are for a 

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

The chart below presents changes in key financial

statement line items as of and for the fiscal year ended 

September 30, 2020 compared to September 30, 2019.

Summary Financial Information (dollars in billions) 

2020 2019 $ Change % Change

Total Assets $ 32,200.1 $ 25,614.5 $ 6,585.6 25.7 %

Total Liabilities $ 31,152.8 $ 25,125.0 $ 6,027.8 24.0 %

Total Net Position $ 1,047.3 $ 489.5 $ 557.8 114.0 %

Total Net Cost of Treasury Operations $ 128.5 $ 16.6 $ 111.9 674.0 %

Net Federal Debt Interest Costs $ 473.4 $ 528.9 $ (55.5) (10.5)% 

Other Federal Costs, Net $ 32.7 $ 12.0 $ 20.7 172.5% 

GSEs Non-Entity Cost (Revenue), Net $ 3.2 $ (14.2) $ 17.4 (122.5)% 

COVID-19 Non-Entity Revenue, Net $ (5.8) $ - $ (5.8) 100.0% 

Total Net Cost of Treasury Operations and Non-Entity Costs $ 631.2 $ 542.6 $ 88.6 16.3 %

Total Budgetary Resources $ 1,805.8 $ 930.3 $ 875.5 94.1 %

Agency Outlays, Net $ 718.3 $ 538.1 $ 180.2 33.5 %

Net Revenue Received (Custodial) $ 2,863.6 $ 3,190.2 $ (326.6) (10.2)% 

Financial Overview. Our financial performance as of and

for the fiscal year ended September 30, 2020, reflects the

impact of the global spread of COVID-19 in early spring of 

2020 on the U.S. economic systems. In March of 2020, the

Federal Reserve Board of Governors (Board) and

Congress took steps to limit the damage caused by the

pandemic in the U.S. by helping to reduce the financial

burden on individuals and their families, minimize

business and employment losses, and enhance the

liquidity of the U.S. financial system. We played a critical

role in the implementation and support of these actions

by the Board and Congress primarily through our

execution of CARES Act appropriations used to support

various programs in support of the COVID-19 pandemic

recovery. 

The outstanding federal debt, including interest, rose by

$4.2 trillion to $27.1 trillion to finance the U.S.

government’s operations that included support of the

COVID-19 response efforts. 

Our “Total Net Cost of Treasury Operations and NonEntity Costs” for FY 2020 increased by $88.6 billion. This

increase primarily stems from the financial assistance we

provided in support of the COVID-19 pandemic recovery

efforts, partially offset by lower federal debt interest

costs, as discussed further below. 
DEPARTMENT OF THE TREASURY 37 

MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2020 AGENCY FINANCIAL REPORT

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

Total Assets of $32.2 trillion at September 30, 2020

consist of a receivable due from the General Fund of the

U.S. government (General Fund) of $27.1 trillion, cash,

foreign currency, and other monetary assets of 

$1.8 trillion, intra-governmental loans and interest

receivable of $1.7 trillion, and fund balance and various

other assets, which totaled $1.6 trillion (Figure 2). 

Figure 2: FY 2020 Total Assets (Composition)

The $6.6 trillion (or 25.7 percent) increase in total assets

at the end of FY 2020 over the prior year is primarily due

to a $4.2 trillion increase in our receivable, “Due from the

General Fund of the U.S. Government,” which

corresponds to the $4.2 trillion increase in federal debt

and interest payable. The “Due from the General Fund of 

the U.S. Government” asset represents future funds

required from the General Fund to pay borrowings from

the public and other federal agencies. 

“Cash, Foreign Currency, and Other Monetary Assets”

represents, among other things, operating cash balances

(held on behalf of the U.S. government) from tax

collections, federal debt, and other receipts. These cash

receipts grew by $1.4 trillion to $1.8 trillion at the end of 

FY 2020 due to increased receipts from the issuance of 

federal debt.

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 $153.9 billion (or 9.7 percent) to $1.7 trillion at

the end of FY 2020 due to increased borrowings by

various federal agencies—such as Small Business

Administration and Housing and Urban Development—to

fund their new and expanded programs supporting the

COVID-19 pandemic recovery. 

Other assets include, among other things, “Fund

Balance,” “Taxes, Interest, and Other Receivables, Net,”

as well our newly added “COVID-19 Investments,

Advances, Receivables, and Other” related to our effort to

stabilize financial markets during the COVID-19

pandemic. Other assets totaling $1.6 trillion increased by

$796.1 billion over the prior year, largely reflecting a 

$481.1 billion increase in Fund Balance and new COVID-
38 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS

19 investments, direct loans, and other assets totaling

$184.3 billion. The increase in fund balance is due to

$500.0 billion of appropriations provided by Section 4027

of the CARES Act to finance, in accordance with Federal 

Credit Reform Act of 1990 (FCRA), the subsidy portion of 

investments in Special Purpose Vehicles (SPVs) 

established by the Board and direct loans primarily to the

U.S. airline industry. As required by FCRA, we financed 

the remainder of these COVID-19 investments and direct

loans with borrowings from Fiscal Service. As of 

September 30, 2020, we had $468.1 billion of the CARES

Act appropriation remaining, of which $395.7 billion is

available for future investments and loans (refer to the

section below entitled “Subsequent Events” as well as the

same section of Note 10 to the Consolidated Financial

Statements in Part 2 of this report). The “Taxes, Interest,

and Other Receivables, Net”, primarily comprised of 

federal taxes receivable, increased by $91.7 billion

principally due to increased unpaid transition taxes on 

foreign earnings pursuant to Internal Revenue Code

Section 965(h), coupled with the effect of a two-year

deferral on employers’ portion of FICA Social Security

taxes due to the U.S. government as provided by CARES

Act Section 2302 (refer to Note 8 to the Consolidated

Financial Statements entitled Taxes, Interest, and Other

Receivables, Net). 

Total assets also increased as a result of the new COVID19 related assets acquired or recognized in support of the

pandemic relief. The “COVID-19 Investments, Advances,

Receivables and Other” line item totaling $184.3 billion

includes, among other things, investments in SPVs and

direct loans primarily to the U.S. airline industry valued

at $107.9 billion and $1.6 billion, respectively, as of 

September 30, 2020. Additionally, we provided

Coronavirus Relief Fund financial assistance payments

totaling $149.5 billion to states, local, territorial, and

tribal governments, of which $80.6 billion is estimated to

have been used for eligible expenses by these

governments and the remaining amount of $68.9 billion is

reported as an advance as of September 30, 2020 until

such payments are either used by the recipients on or 

before December 30, 2020 (refer to Note 10 “Subsequent

Events” section in Part 2 of this report), or returned

unused to Treasury. Our financial support of the COVID19 pandemic was authorized under the CARES Act, as 

well as other recovery legislation (refer to Note 10 to the

Consolidated Financial Statements entitled COVID-19

Investments, Advances, Receivables, and Other). 

Figure 3: FY 2020 Total Liabilities (Composition)

Total Liabilities of $31.2 trillion at September 30, 2020

principally consist of the federal debt held by the public,

including interest, of $21.1 trillion (Figure 3), which was

mainly issued as Treasury Notes and Bills. Liabilities

also include intra-governmental liabilities totaling

$10.0 trillion (of which $6.0 trillion represent principal

and interest of federal debt in the form of Treasury

securities held by other federal agencies), and various

other liabilities totaling $84.8 billion. 

The $6.0 trillion (or 24.0 percent) increase in total

liabilities over the prior year is attributable to a 

$4.2 trillion increase in federal debt, including interest,

held by the public and other federal agencies that was

needed to finance the U.S. government’s operations, 

including our financial support of the COVID-19 response

efforts. 

The increase in total liabilities is also attributable to a 

$1.8 trillion increase in our payable “Due to the General

Fund,” which corresponds primarily to the increases in

the operating cash balance, intra-governmental “Loans

and Interest Receivable”, and “Taxes, Interest, and Other

Receivables, Net”, as discussed above.

Total Net Position of $1.0 trillion at September 30, 2020

represents the combined total of our cumulative results of

operations and unexpended appropriations at the end of 
DEPARTMENT OF THE TREASURY 39 

MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2020 AGENCY FINANCIAL REPORT

the fiscal year. The $557.8 billion increase in the net 

position at the end of FY 2020 was principally

attributable to our receipt of $500.0 billion of CARES Act

appropriations used to fund various programs in support

of the COVID-19 pandemic recovery, as discussed above

(also refer to Note 10 to the Consolidated Financial

Statements entitled COVID-19 Investments, Advances,

Receivables, and Other).

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

Total Net Cost of Treasury Operations and Non-Entity 

Costs is presented on our Consolidated Statements of Net

Cost (Figure 4). “Net Cost of Treasury Operations” 

represents the gross costs, net of earned revenues, we

incurred related to our own entity activities comprising

both operating bureaus and Departmental Offices that

are consolidated with the Department. “Net Non-Entity

Costs” represent the gross costs, net of earned revenues,

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

Fund), and primarily include “Net Federal Debt Interest”

(net of interest revenue from loans), “Other Federal Costs,

Net,” “GSE Non-Entity Costs, Net,” “COVID-19 NonEntity Revenue, Net,” and other federal costs and

revenues. 

“Total Net Cost of Treasury Operations and Non-Entity

Costs” totaled $631.2 billion and $542.6 billion for 

FY 2020 and 2019, respectively, an increase of 

$88.6 billion (or 16.3 percent) over the prior year. Net

costs associated with our entity operations (“Net Cost of 

Treasury Operations”) increased by $111.9 billion yearover-year. As further discussed below, net cost associated

with our non-entity operations (“Net Non-Entity Costs”)

decreased by $23.3 billion year-over-year, driven by lower 

federal debt interest costs, partially offset by increased

other federal costs and reduced GSE non-entity revenue.

Figure 5 : Net Cost of Treasury Operations by Strategic

Program (in billions)

Net Cost of Treasury Operations is presented on our

Consolidated Statements of Net Cost by strategic

program. There are three main categories of strategic

programs presented—financial, economic, and security—

as well as a management strategic program which is

combined with the financial program due to the

immateriality of the management program (Figure 5). 

Our “Net Cost of Treasury Operations” totaled

$128.5 billion for FY 2020 compared to $16.6 billion for 

FY 2019, an increase of $111.9 billion. This increase
40 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS

primarily stems from Coronavirus Relief Fund payments

made to affected states, local, territorial, and tribal

governments, of which $80.6 billion of the $149.5 billion of 

such payments made was recognized as net costs in FY 

2020 (see earlier discussion). Net costs also reflect 

$28.2 billion of financial assistance payments to

passenger air carriers, air cargo carriers, and contractors

to provide payroll support to aviation workers during the

pandemic (refer to Note 10 to the Consolidated Financial

Statements entitled COVID-19 Investments, Advances,

Receivables, and Other).

Net Federal Debt Interest Costs (a non-entity cost) 

totaling $473.4 billion for FY 2020 primarily reflect 

interest expense on the federal debt, net of interest

income on loans. This net cost decreased $55.5 billion (or 

10.5 percent) from the prior year. The lower cost was

primarily attributable to a decrease in average interest

rates on outstanding debt held by the public.

Other Federal Costs, Net (a non-entity cost) of 

$32.7 billion in FY 2020 increased by $20.7 billion

primarily due to an increase in interest expense incurred

on uninvested credit program funds held on behalf of 

other federal agencies, which increased $14.0 billion in

FY 2020. The higher cost was primarily attributable to

an increase in federal agency credit programs across the

U.S. government in response to the COVID-19 pandemic.

GSEs Non-Entity Cost (Revenue), Net is reported as a net 

cost totaling $3.2 billion for FY 2020 compared to net 

revenue of $14.2 billion reported for FY 2019. GSE nonentity cost is driven by fair value changes to our GSE

investments, changes to the liquidation preference of our

GSE senior preferred stock, and cash dividends received 

from the GSEs pursuant to the Senior Preferred Stock

Purchase Agreements (SPSPAs). The $17.4 billion yearover-year change in this line item was driven by a 

$14.3 billion decrease in the estimated fair value of our

GSE investments, a decrease of $15.3 billion in preferred

stock dividends received, partially offset by an increase of 

$12.2 billion associated with our senior preferred stock

liquidation preference year-over-year. 

Our GSE investments are comprised of the estimated fair

value of our senior preferred stock and our warrants to

purchase GSE common stock. The fair value of our GSE

investment decreased year-over-year, reflecting a decline

in the fair value of our warrants due to a decrease in the

market value of the GSE common stock. This was

significantly offset by an increase in our senior preferred 

stock fair value primarily as a result of Fannie Mae’s

higher projected cash flows and a decrease in the market

value of Fannie Mae’s other equity securities that

comprise its total equity. 

Pursuant to amendments to the SPSPAs that increased

the GSEs’ capital reserve amounts, the GSEs will not pay

a quarterly dividend if their positive net worth is below 

their capital reserve threshold. We received no cash

dividends for the fiscal year ended September 30, 2020 as

the GSEs’ positive net worth was below their permitted

capital reserve amounts as of September 30, 2020. For 

the fiscal year ended September 30, 2019, we received

cash dividends totaling $15.3 billion (refer to Note 11 to

the Consolidated Financial Statements entitled

Investments in Government Sponsored Enterprises). 

The liquidation preference of our senior preferred stock

increased in value by $17.4 billion in FY 2020 compared 

to $5.2 billion in FY 2019. We increased the value of this

liquidation preference by $17.4 billion and $5.2 billion for 

FY 2020 and 2019, respectively, pursuant to the amended 

SPSPAs. 

COVID-19 Non-Entity Revenue, Net (a non-entity 

revenue) of $5.8 billion reflects revenue recognized in

FY 2020 for financial instruments received from U.S.

airlines as appropriate compensation to the U.S.

government for the financial support provided to preserve 

aviation jobs during the pandemic. As a provision of the

CARES Act, the U.S. government received promissory

notes and common stock warrants valued at $5.8 billion

as of September 30, 2020, for providing $28.2 billion of 

financial support to the aviation industry.
DEPARTMENT OF THE TREASURY 41 

MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2020 AGENCY FINANCIAL REPORT

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

Total Budgetary Resources of $1.8 trillion in FY 2020

(Figure 6) increased by $875.5 billion (or 94.1 percent)

primarily due to an increase in appropriations received 

and borrowing authority to implement various CARES

Act programs. In FY 2020, we received $500.0 billion of 

CARES Act appropriations, to make loans or investments

through December 31, 2020 to assist eligible businesses,

states and municipalities which incurred losses as a 

result of COVID-19. As discussed above, we also received 

$150.0 billion and $32.0 billion of CARES Act

appropriations for the Coronavirus Relief Fund and U.S.

air carrier industry financial assistance, respectively. We

additionally received $292.0 billion of CARES Act

appropriations to finance tax provisions provided to U.S.

individuals and employers. We received an additional

$1.0 billion of CARES Act appropriations for other 

various program support and oversight activities.

Of the total $975.0 billion of CARES Act appropriations

received, $472.4 billion remained unobligated as of 

September 30, 2020. Refer to Note 10 to the Consolidated

Financial Statements entitled COVID-19 Investments,

Advances, Receivables, and Other for additional

discussion of the financial impact of the COVID-19

pandemic. Section 4003 also stipulated that Treasury

could make direct loans, loan guarantees and other 

investments that do not, in the aggregate, exceed 

$500.0 billion. Treasury disbursed $104.3 billion in

FY 2020 in making investments and direct loans. After

taking into consideration the $104.3 billion disbursed,

$395.7 billion was available as of September 30, 2020 for 

making new investments and direct loans to eligible

businesses, states, and municipalities. 

Subsequent Events: On December 27, 2020, the

President signed into law the Consolidated

Appropriations Act, 2021, which, as of the date of 

enactment, rescinded $429.0 billion of the $500.0 billion

appropriation provided to Treasury under Section 4027 of 

the CARES Act and provided that the remaining

unobligated appropriation as of January 9, 2021 will be

rescinded as of that date other than with respect to those

funds made available for administrative expenses 

pursuant to Section 4003(f), for the Special Inspector

General for Pandemic Recovery pursuant to Section

4018(g), and for the Congressional Oversight Commission

pursuant to Section 4020. Effective January 9, 2021, the

statute eliminates Treasury’s ability to make new loans

and investments under Section 4003 of the CARES Act. 

In addition, the statute prohibits the Federal Reserve 

from engaging in further lending or extensions of credit, 

after December 31, 2020, through facilities established by

the Federal Reserve under Section 13(3) of the Federal 

Reserve Act in which Treasury made investments under

Section 4003 of the CARES Act other than a loan

submitted on or before December 14, 2020, to the Main

Street facilities (discussed in Note 10 in Part 2 of this

report) for the sale of a participation interest in such loan,

provided that the Main Street facilities purchase a 

participation interest in such loan on or before 

January 8, 2021. After December 31, 2020, the Federal 

Reserve is also prohibited from modifying the terms and

conditions of any of the facilities in which Treasury made

investments under the CARES Act. 

Consistent with the Consolidated Appropriations Act,

2021, on December 29, 2020, Treasury and the Federal 

Reserve amended the SPV LLC Agreements for each of 
42 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS

the SPVs funded under the CARES Act. The amended 

agreements provide that Treasury’s investment in excess 

of the amount equivalent to the purchased asset amount

within the SPV will be returned to Treasury between 

December 31, 2020 and January 8, 2021, and cancels

Treasury’s additional commitments to those SPVs. Refer 

to the section entitled “Subsequent Events” of Note 10 to

the Consolidated Financial Statements in Part 2 of this

report. 

Agency Outlays, Net of $718.3 billion were higher in

FY 2020 (Figure 6) by $180.2 billion (or 33.5 percent) 

primarily due to an increase in outlays for the

Coronavirus Relief Fund, SPV investments, and loans

and other financial assistance to U.S. air carrier industry,

as discussed above.

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

Net Revenue Received (Custodial), representing the net 

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

includes various taxes, primarily income taxes, as well as

user fees, fines and penalties, and other revenue

(Figure 7). Over 90 percent of these revenues (before 

refunds) are related to income and social security taxes. 

Net revenue received was $2.9 trillion for FY 2020, a 

decrease of $326.6 billion (or 10.2 percent) over the prior

fiscal year. This decrease is attributable mainly to an

overall growth in refunds and other payments issued to

individuals pursuant to the CARES Act to help stimulate

the economy through recovery rebates for individuals

(also referred to as the “Economic Impact Payments”). In 

FY 2020, the IRS disbursed $274.7 billion of Economic

Impact Payments to eligible recipients in every state and

territory and at foreign addresses (refer to Note 10 to the

Consolidated Financial Statements entitled COVID-19

Investments, Advances, Receivables, and Other).
DEPARTMENT OF THE TREASURY 43 

MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2020 AGENCY FINANCIAL REPORT

MANAGEMENT ASSURANCES

THE SECRETARY’S ASSURANCE STATEMENT

The Department of the Treasury’s management is

responsible for managing risks and maintaining effective 

internal control and financial management systems to

meet the objectives of the Federal Managers’ Financial

Integrity Act (FMFIA). We conducted our assessment of 

risk and internal controls in accordance with OMB

Circular A-123, Management’s Responsibility for 

Enterprise Risk Management and Internal Control. 

Based on our assessment, we can provide reasonable

assurance that, in accordance with Section 2 of the

FMFIA, Treasury’s internal control over operations, 

reporting, and compliance with laws and regulations were 

operating effectively as of September 30, 2020. In

addition, we can provide reasonable assurance that, as of 

September 30, 2020, we are in substantial conformance

with the federal financial management systems

requirements of Section 4 of the FMFIA, with the

exception of the significant deficiencies related to the

financial management systems at the IRS and Fiscal

Service. 

As a result of the significant deficiencies at the IRS and

Fiscal Service, our financial management systems are not 

in substantial compliance with the Federal Financial

Management Improvement Act (FFMIA) as of September 

30, 2020. We continue to make progress in remediating

these deficiencies and remain committed to focusing

management’s attention and resources on appropriate

corrective actions. Overall, we continue our efforts to

ensure high standards, minimize internal control

weaknesses, and meet federal financial management

requirements. Additional information on the lack of 

compliance can be found in Part 3, Section C, of this

report. 

Steven T. Mnuchin

Secretary of the Treasury

December 30, 2020
44 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS

SYSTEMS, CONTROLS AND LEGAL COMPLIANCE

FMFIA

Background

The FMFIA requires executive branch agencies to

establish and maintain internal control and financial

systems to provide reasonable assurance that:

• Obligations and costs comply with applicable laws;

• Funds, property, and other assets are safeguarded

against waste, loss, unauthorized use, or

misappropriation; and

• Revenues and expenditures applicable to agency

operations are properly recorded and accounted for to

permit the preparation of accounts and reliable

financial and statistical reports, and to maintain

accountability over the assets.

OMB Circular A-123 provides the implementing guidance

for FMFIA and defines management’s responsibility for 

establishing and assessing internal controls. The 

Circular also requires federal agencies to adhere to the

Government Accountability Office’s (GAO) Standards for 

Internal Control in the Federal Government, and to 

evaluate and report on the effectiveness of the

organization’s internal controls to achieve: (1) the

objectives of effective and efficient operations, (2) reliable

reporting for internal and external use, and (3)

compliance with applicable laws and regulations (FMFIA 

Section 2). Additionally, agencies are required to assess

whether financial management systems comply with

federal financial management systems requirements

(FMFIA Section 4).

Analysis of Controls

The Secretary relies on the annual assurances of 

Treasury’s principal bureaus and offices (components), 

which are supported by a comprehensive risk-based

internal control evaluation plan. This plan includes a 

methodology that identifies and documents key controls

and provides for the assessment and testing of those

controls to provide reasonable assurance that the controls

are designed, implemented, and operating effectively. As

part of the evaluation process, we considered results of 

this extensive testing and assessment across the

Department, as well as independent audits conducted by

the OIG and GAO. 

Internal Control over Financial Reporting

In accordance with Appendix A to OMB Circular A-123,

Management of Reporting and Data Integrity Risk, we

also conducted an assessment of Treasury’s internal

controls over financial reporting. Our components 

assessed the effectiveness of their internal controls to

support reliable financial reporting through the testing of

the design and operating effectiveness of key internal

controls for material transactions. Based on the results of

this assessment we can provide reasonable assurance

regarding the effectiveness of our internal control over

financial reporting as of September 30, 2020. 

FFMIA AND FINANCIAL MANAGEMENT SYSTEMS

FFMIA

The FFMIA requires federal agencies to implement and

maintain financial management systems that

substantially comply with federal financial management

systems requirements, applicable federal accounting

standards, and the U.S. Standard General Ledger at the

transaction level. A financial management system

includes an agency’s overall financial operation, reflecting

the people, processes, and technology to capture, classify,

summarize, and report data in a meaningful manner to

support business decisions.

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

annual determination of the agency’s substantial

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

of relevant factors. We assess our financial management

systems annually for conformance with the requirements 

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

Federal Financial Management Improvement Act of 1996, 

and other federal financial management system

requirements. Our assessment process includes the use

of the FFMIA Compliance Determination Framework, 

(the “Compliance Framework”) in OMB Circular A-123,
DEPARTMENT OF THE TREASURY 45 

MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2020 AGENCY FINANCIAL REPORT

Appendix D, which is a risk and evidence based

assessment model that leverages existing audits,

evaluations, and reviews that auditors and agency

management already perform. The Compliance

Framework is an outcome-based approach to assessing

FFMIA compliance through a series of financial

management goals that are common to all agencies.

In applying the Compliance Framework, we assess

available information from audit reports and other 

relevant and appropriate sources, such as the Federal 

Information Security Modernization Act (FISMA) 

compliance activities, to determine whether our financial

management systems substantially comply with FFMIA. 

We also assess improvements and ongoing efforts to

strengthen financial management systems and the impact

of instances of noncompliance on overall financial

management system performance. Based on the results

of our overall assessment, we concluded that our financial

management systems were not substantially compliant

with federal financial management system requirements

as of September 30, 2020, due to significant deficiencies at

the IRS and Fiscal Service.

The IRS has a significant deficiency in internal control

over financial reporting related to its unpaid assessments

and financial reporting systems. Specifically, this

deficiency relates to the IRS’s information system

controls, business process application controls, and

general controls. The IRS worked diligently during FY

2020 to continue to enhance its Information Technology 

(IT) security. The IRS continues to implement a strategy

and assessment process to verify the effectiveness of 

internal controls for the financial systems that affect the

financial statements. This assessment supports the IRS’s

overall internal control framework and helps mitigate

deficiencies in the IT environment. 

The Fiscal Service has a significant deficiency in internal

control related to its cash management and debt

management systems. Fiscal Service is fully committed

to enhancing its corrective action plans and focusing its

efforts to meet federal financial management systems

requirements. 

Financial Management Systems

Our financial management systems framework consists of 

two foundational components: (1) financial and mixed

systems maintained by Treasury components, and (2) the

Treasury-wide Financial Analysis and Reporting System

(FARS). Bureaus 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 financial operational and

reporting needs of our reporting entities, as well as our 

internal and external reporting requirements. The FARS

framework plays a key role in the Department’s efforts to

obtain an unmodified audit opinion.

The FARS includes the following financial applications:

• Treasury Information Executive Repository (TIER) —

a financial data repository used to consolidate and

validate bureau financial data, and supporting

external financial reporting requirements

• TIER Financial Statements (TFS) — a reporting

application used to produce monthly and annual

financial statements, notes, and other supporting

reports

Our components submit summary-level financial data to

TIER on a monthly basis. The TFS application uses the

bureau data to produce financial statements and report 

on a Treasury-wide and component-level basis. 

Fifteen of our bureaus and offices use centralized

financial management, budget formulation and

performance management, and IT hosting 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 separate technical and system architectures. 

ARC also provides administrative services in the areas of 

financial management transaction processing, human

resources, procurement, and travel to our bureaus and

offices as well as to other federal entities to support core

business activities. Using shared services reduces the

need for Treasury to maintain duplicative financial

management systems, thereby promoting efficiency and
46 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | MANAGEMENT’S DISCUSSION AND ANALYSIS

cost savings while enhancing the quality, timeliness, and

accuracy of financial management processes. 

Goals and Supporting Strategies

Our financial system goals and supporting strategies

focus on improving, streamlining, and integrating current

bureau financial management systems, as well as the

current FARS applications, in order to support new 

financial management requirements and to support datadriven financial decision making by management. In

FY 2020, we continued refining TIER and TFS to meet 

evolving reporting requirements. Additionally, we

continued enhancing our business processes related to the

reporting of financial and non-financial award data in

accordance with the Digital Accountability and

Transparency Act (P.L. 113–101) (DATA Act). Treasury

implemented changes required by OMB Memorandum M20-21, Implementation Guidance for Supplemental

Funding Provided in Response to the Coronavirus Disease

2019 (April 10, 2020) to track and report COVID-19

related spending on a monthly basis. 

Additionally, we updated Treasury’s Data Quality Plan to

enhance the accuracy and integrity of our non-financial

award data presented on USAspending.gov as stipulated

by the OMB Circular A-123, Appendix A guidelines.

Treasury continues to focus on financial innovation and

transformation. In FY 2020, ARC implemented over 

60 Robotic Process Automations to improve efficiency, 

timeliness, and quality in its service operations and

business processes. Furthermore, the IRS implemented

several changes to its financial systems in FY 2020 to

improve internal controls, increase transparency,

streamline transaction reconciliation, and automate

processes for third party payments, invoicing, and tax

withholding postings. 

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 to reduce

operating costs; enable us to provide assurance over

financial data quality; and allow us to ensure that we can

provide timely, transparent, and well controlled financial

information. 

We maintain an information security program for our

financial systems consistent with applicable FISMA

requirements, OMB policy and guidance, and National

Institute of Standards and Technology standards and

guidelines. Our systems undergo annual security

reviews, and security weaknesses identified through those

reviews are remediated by developing and implementing

plans of action and milestones. We monitor bureau

conformance with government-wide information

technology security targets and provide roll-up reports 

quarterly to OMB. Our compliance with FISMA is

evaluated annually by representatives of the OIG. 

OTHER LAWS

We are not aware of any violations of the Anti-deficiency 

Act. We have received the GAO’s Legal Decision (B1331093) with the subject, U.S. Department of the

Treasury—Tax Return Activities during the Fiscal Year

2019 Lapse in Appropriations. In the Legal Decision,

GAO concluded that Treasury violated the Anti-deficiency 

Act when, during the lapse in appropriations, the

Department incurred obligations to process tax

remittances (payments submitted by individuals) and

issued tax refunds. The Department obtained approval

from the OMB in January 2019 to incur such obligations

during a lapse in appropriations. On June 8, 2020, OMB

formally advised Treasury of its conclusion that no ADA

violation occurred, and the Department therefore does not 

plan to report a violation.

IMPROPER PAYMENTS

Background

The Payment Integrity Information Act of 2019 (PIIA)

requires agencies to annually report on all programs and

activities, identify those that may be susceptible to

significant improper payments, estimate annual improper

payments in the susceptible programs and activities, and

report the results of their improper payment activities. 

An improper payment is any payment that should not 

have been made or that was made in an incorrect amount

(including both overpayments and underpayments). 
DEPARTMENT OF THE TREASURY 47 

MANAGEMENT’S DISCUSSION AND ANALYSIS | FY 2020 AGENCY FINANCIAL REPORT

Risk Assessments and Results 

In FY 2020, we completed a full program inventory and

performed risk assessments to identify programs that

have a significant risk of improper payments. We

performed our assessment of each program, excluding the

Earned Income Tax Credit (EITC), the American

Opportunity Tax Credit (AOTC), the Additional Child Tax 

Credit (ACTC) and the Premium Tax Credit (PTC), using

the seven qualitative risk factors identified in OMB

Circular A-123, Appendix C. We also performed 

quantitative risk assessments and assessed risks related

to the amounts of payments processed relative to the

OMB specified threshold amounts which define payment

programs susceptible to significant improper payments. 

As a result of prior risk assessments, we determined that

the EITC, the AOTC, the ACTC and the PTC were 

susceptible to significant improper payments.

The EITC, AOTC, ACTC and PTC are refundable tax

credits that offset income tax owed by taxpayers. If the

credit exceeds the amount of taxes due, the IRS provides

a refund payment to those who qualify. The IRS

estimates that for FY 2020, 24% ($16.0 billion) of the total

EITC payments of $68.2 billion were improper. For the

AOTC, the IRS estimates that for FY 2020, 26% 

($2.3 billion) of the total payments of $8.9 billion were 

improper. For the ACTC, the IRS estimates that for 

FY 2020, 12% ($4.5 billion) of the total payments of 

$39.1 billion were improper. The IRS is not reporting an

estimate for FY 2020 for PTC, as further analysis of the

related data is needed. The IRS has a robust enforcement 

program for all of its refundable tax credits which consists

of examinations and audits, math error notices, and

document matching. 

We are reporting improper payment estimates for these

three refundable tax credits in accordance with OMB

Circular A-123, Appendix C: Requirements for Payment 

Integrity Improvement. However, it is our position that

refundable tax credit refunds that result in overclaims

should not be reported under the improper payments

framework. Rather they are more appropriately

addressed in the Tax Gap (see Part 3, Section A: Tax Gap

and Tax Burden, of this report), which is how we manage

noncompliance. Additional information on refundable tax

credits and improper payment reporting can be found in

Part 3, Section D: Payment Integrity. 

Payment Recapture Audits

The Payment Integrity Information Act of 2019 (PIIA)

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. We

performed the payment recapture activities in accordance

with OMB Circular A-123, Appendix C. Details on our 

improper payments and results can be found in Part 3,

Section D, of this report. 

Do Not Pay Initiative 

Our Do Not Pay Working System (hereafter referred to as

“Working System”) is the legislatively mandated and

OMB designated source of centralized data and analytic

services to help agencies verify eligibility and to identify

and prevent potential fraud, waste, and abuse associated

with improper payments. The results of the checks

against these data sources provide information that an

agency should consider in pre-award or prepayment

assessments to help prevent improper payments. Our

shared service provider, the ARC within Fiscal Service,

compares our records in the financial system with payee

records in the Working System. We review potential

matches on an ongoing basis to prevent improper

payments and incorporate a pre-award check on potential

contractors against the Working System. Additional

information on the Do Not Pay initiative can be found in

Part 3, Section D, of this report.
[Page intentionally left blank]
PART 2: 

FINANCIAL SECTION

MESSAGE FROM THE ASSISTANT SECRETARY

FOR MANAGEMENT AND DEPUTY CHIEF

FINANCIAL OFFICER ...................................................... 51

INSPECTOR GENERAL’S TRANSMITTAL LETTER ........................53

INDEPENDENT AUDITORS’ REPORT ....................................... 55

MANAGEMENT’S RESPONSE TO INDEPENDENT

AUDITORS’ REPORT ...................................................... 61

FINANCIAL STATEMENTS..................................................... 62

NOTES TO THE FINANCIAL STATEMENTS ................................69

REQUIRED SUPPLEMENTARY INFORMATION

(UNAUDITED) ............................................................ 179
 

 
DEPARTMENT OF THE TREASURY 51 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

MESSAGE FROM THE ASSISTANT SECRETARY FOR MANAGEMENT AND

DEPUTY CHIEF FINANCIAL OFFICER

In fiscal year 2020, despite being faced by many challenges as a result of the

pandemic, and facing additional work to implement the CARES Act, Treasury

pursued an aggressive set of initiatives to manage the Department more

efficiently and responsibly. Treasury vigorously embraced the President’s 

Management Agenda, taking a leadership role in tackling some of the

government’s most persistent challenges – eliminating improper payments,

modernizing information technology, improving workforce performance, 

leveraging data as a strategic asset, and delivering excellent financial

management services.

In fiscal year 2020, Treasury also demonstrated effective fiscal and management

leadership by:

• Standing up complex accounting and internal controls in support of the CARES Act program and developing

formulation models to ensure funding; 

• Establishing the CARES Operations organization, responsible for reporting, asset management, compliance

monitoring, internal controls, and audit and risk management; 

• Making significant progress in implementing the Foundations of Evidence-based Policy-making Act by designating

the required new senior accountable officials – a Chief Data Officer, Evaluation Officer, and Statistical Official,

who have begun identifying research and data-sharing priorities to increase the evidence available to Treasury

decision-makers; 

• Preventing $6 million in technical refresh costs by successfully migrating Treasury’s human capital shared service

application supporting over 200,000 federal employees (HR Connect), from legacy data centers to Oracle’s Cloud

Infrastructure environment; 

• Quickly ensuring, in response to the pandemic, that all employees had the necessary infrastructure to effectively 

telework and providing personal protective equipment to our mission essential employees; and

• Receiving an A+ rating for small business programs compliance efforts that met all requirements pertaining to the

Small Business Act Section 15(k). 

The Department received an unmodified audit opinion on its consolidated financial statements for the 21st consecutive year. 

Despite the complexity of Treasury’s financial systems, we continue to make steady progress toward fully resolving all

remaining deficiencies associated with our internal controls.

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

mission effectively and efficiently and provide the best value to the American people. 

David F. Eisner Carole Y. Banks 

Assistant Secretary for Management Deputy Chief Financial Officer

December 30, 2020 December 30, 2020

David F. Eisner

Assistant Secretary 

for Management

Carole Y. Banks

Deputy Chief Financial

Officer 
 

 

[Page intentionally left blank]
DEPARTMENT OF THE TREASURY 53 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

OFFICE OF

INSPECTOR GENERAL

DEPARTMENT OF THE TREASURY

WASHINGTON, D.C. 20220

INSPECTOR GENERAL’S TRANSMITTAL LETTER

 

December 30, 2020 

INFORMATION MEMORANDUM FOR SECRETARY MNUCHIN

FROM: Richard K. Delmar /s/

Deputy Inspector General

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

Fiscal Years 2020 and 2019 

INTRODUCTION

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

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

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

KPMG LLP (KPMG) to audit the consolidated financial statements of Treasury as of September 30, 2020 

and 2019, and for the years then ended, to provide a report on internal control over financial reporting, to 

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

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

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

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

standards and Office of Management and Budget (OMB) Bulletin No. 19-03, 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 significant deficiency in internal control over cash management information systems and a 

significant deficiency in internal control over Federal debt information systems at the Bureau of the 

Fiscal Service, collectively representing a significant deficiency for Treasury as a whole; 
54 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

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

in internal control over financial reporting systems at the Internal Revenue Service, collectively 

representing a significant deficiency for Treasury as a whole; 

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

systems requirements; and

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

tested. 

EVALUATION OF AUDITORS’ PERFORMANCE

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

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

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

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

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

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

report dated December 30, 2020, 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. If you wish to 

discuss this report, please contact me at (202) 528-8997 or Deborah L. Harker, Assistant Inspector General 

for Audit, at (202) 486-1420. 

Attachment

cc: David F. Eisner 

Assistant Secretary for Management

Carole Y. Banks 

Deputy Chief Financial Officer 
Independent Auditors’ Report 

Deputy 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, 2020 and 2019, 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.

Management’s Responsibility for the Financial Statements 

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

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

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

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

Auditors’ Responsibility 

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

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

Department, which statements reflect total assets of $247.5 billion and $153.3 billion, net cost of operations of

$13.6 billion and $13.1 billion before applicable eliminating entries, budgetary resources of $14.1 billion and

$13.1 billion, and custodial activity of $3,585 billion and $3,651 billion, as of and for the years ended

September 30, 2020 and 2019, 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) – Troubled Asset Relief

Program (TARP), a component entity of the Department, which statements reflect total assets of $15.0 billion

and $15.8 billion, net cost of operations of $683 million and $1.4 billion before applicable eliminating entries,

and budgetary resources of $303 million and $262 million, as of and for the years ended September 30, 2020

and 2019, 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-TARP, is based solely on the report of

the other auditors.

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

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

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

Management and Budget (OMB) Bulletin No. 19-03, Audit Requirements for Federal Financial Statements.

Those standards and OMB Bulletin No. 19-03 require that we plan and perform the audit to obtain reasonable

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

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

KPMG LLP

Suite 12000

1801 K Street, NW

Washington, DC 20006

KPMG LLP, a Delaware limited liability partnership and a member firm of 

the KPMG global organization of independent member firms affiliated with 

KPMG International Limited, a private English company limited by guarantee. 

55
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 

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, 2020 and 2019, 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 11, the Department is a participant in transactions with certain entities as part of 

significant legislation whose purpose is to assist in stabilizing the financial markets. Also as discussed in Note 

1AB, the U.S. government’s interventions with regards to these entities are not expected to be permanent. 

Furthermore, as discussed in Notes 1V and 11, the value of certain investments 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. As such, there will likely be differences 

between the estimated value of these investments and commitments as of September 30, 2020 and 2019, and 

the amounts that may ultimately be realized from these investments or may be required to settle these 

commitments. Such differences may be material and will also affect the ultimate cost of these programs. Our

opinion is not modified with respect to these matters. 

Other Matters 

Interactive Data 

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

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

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

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

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

an opinion or provide any assurance on it. 

Required Supplementary Information 

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

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

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

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

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

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. 

56
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 Deputy Chief Financial Officer, and the Other Information are presented for purposes of 

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

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

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

Other Reporting Required by Government Auditing Standards

Internal Control Over Financial Reporting 

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

September 30, 2020, we considered the Department’s internal control over financial reporting (internal control) 

as a basis for designing 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 are reported separately by those other 

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. 

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. 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. 

Our consideration of internal control was for the limited purpose described in the first paragraph of this section 

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. Given these limitations, during our audit we did not identify any deficiencies in internal control 

that we consider to be material weaknesses. We did identify certain deficiencies in internal control, described 

below, that we consider to be significant deficiencies. 

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

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

protecting information resources in accordance with OMB Circular No. A-130, Managing Information as a 

Strategic Resource. The Bureau of the Fiscal Service (Fiscal Service) relies on many information systems 

to manage government-wide cash and the federal debt. Fiscal Service made progress towards remediating 

prior-year information system control deficiencies, including segregation of duties controls over Treasury’s 

Oracle Financials and progress toward resolving aspects of Fiscal Service’s mainframe security findings.

However, Fiscal Service had unresolved and newly identified control deficiencies related to its general 

information technology controls over the government-wide cash and the federal debt information systems 

as follows: 

1. Cash Management Information Systems

57
Fiscal Service had not fully implemented remediation relative to corrective action plans and, in 

situations where Fiscal Service accepted associated risks, did not design and implement compensating 

controls to reduce such risks to an acceptable level. Further, Fiscal Service had newly identified control 

deficiencies related to its general information technology controls over its cash management systems. 

The unresolved and newly identified control deficiencies did not provide reasonable assurance that: (1) 

the concept of least privilege is employed to prevent significant security exposures; (2) accounts were 

reviewed for compliance with account management requirements and that access to systems is 

protected against unauthorized modification, loss, or disclosure; (3) separated user accounts are 

disabled and removed in a timely manner; (4) security events are logged and monitored, and potential 

vulnerabilities are investigated and resolved; (5) changes to systems are authorized, properly 

configured, and secured as intended; (6) vulnerabilities identified by management were addressed 

timely; (7) inactive application user accounts are monitored and removed timely; (8) application 

backups are configured by management in accordance with policy; and (9) baseline policies and 

procedures for contingency planning and security configuration controls, including password and audit 

logging controls, were adequately documented and fully implemented for all platforms. These 

deficiencies resulted because Fiscal Service did not effectively verify and validate that its corrective 

actions remediated control deficiencies; identify and effectively confirm that the controls were properly 

designed, implemented, and operating effectively; identify all risks and implement controls to address 

such risks; establish clear responsibilities in its information technology plans, policies, and procedures; 

identify and evaluate sufficient compensating controls to reduce the risk of unauthorized access for instances 

where management accepted associated risks and focus sufficient resources to perform the controls for all 

platforms supporting financial systems. Until these control deficiencies are fully addressed, there is an 

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

of, or disclosure of sensitive financial data and programs; and unauthorized changes to financial 

systems. 

2. Federal Debt Information Systems

Fiscal Service continued to have information system control deficiencies—primarily unresolved control 

deficiencies from prior audits—related to its federal debt information systems. These control 

deficiencies relate to information system general controls in the areas of security management, access 

controls, configuration management, and segregation of duties. Fiscal Service made progress toward 

improving its procedures to reasonably assure that (1) corrective action plans fully address information 

system control deficiencies and (2) new or enhanced controls established as part of the corrective 

actions fully resolve the control deficiencies. However, Fiscal Service continued to have instances in 

which the corrective actions taken by the responsible officials were not sufficient to address the control 

deficiencies or identify shortcomings. Specifically, Fiscal Service did not identify technical inaccuracies, 

inconsistencies between the documented policies and procedures, and significant control gaps in the 

information included in finding closure packages. Fiscal Service continued to have deficiencies where 

known information system vulnerabilities and deviations from baseline security requirements were not 

remediated on a timely basis or adequately tracked for remediation. Additionally, Fiscal Service needs 

improvement in documentation describing the security architecture for the mainframe and continued to 

have instances in which mainframe security controls were not employed in accordance with the 

concept of least privilege. 

Recommendation 

Separate reports with additional details and recommendations for corrective action will be provided separately 

to Fiscal Service management. We recommend that the Assistant Secretary for Management (ASM) and 

Deputy Chief Financial Officer (DCFO) ensure that Fiscal Service implement requisite corrective actions to 

resolve control deficiencies over its cash management and debt information systems. 

B. Significant Deficiency in Internal Control Over Financial Reporting at the Internal Revenue Service

58
IRS continued to take steps to improve internal control over financial reporting to ensure reliable and timely 

financial information is obtained, maintained, and reported in accordance with OMB Circular A-123, 

Management’s Responsibility for Enterprise Risk Management and Internal Control. However, the other 

auditors reported significant deficiencies in internal control over unpaid tax assessments and internal 

control over financial reporting systems that we collectively considered as a significant deficiency at the 

Department level. IRS internal control deficiencies are summarized as follows: 

1. Unpaid Tax Assessments

IRS continued to have limitations in the financial systems it uses to account for federal taxes receivable 

and other unpaid assessment balances, as well as other control deficiencies that led to errors in the 

taxpayer accounts. As a result, IRS financial reporting systems did not provide timely, reliable, and 

complete transaction-level financial information necessary to enable IRS to appropriately classify and 

report unpaid assessment balances. IRS used a manually driven statistical estimation process to 

compensate for the effects of its system limitations and other deficiencies on a material portion of its 

federal taxes receivable balance to help ensure that this balance was free of material misstatement. 

During FY 2020, IRS recorded adjustments totaling about $13 billion to correct the effects of continued 

errors in its underlying data that IRS identified during its estimation process. While using this process to 

determine material portion of taxes receivable has enabled IRS to produce reliable related balance for 

year-end reporting, it does not provide IRS management with readily available, reliable unpaid 

assessment information on a daily basis throughout the year for effectively managing unpaid 

assessment balances. Further, errors in taxpayer accounts create a burden for those taxpayers whose 

accounts were affected.

2. Financial Reporting Systems

While IRS made progress addressing previously reported control deficiencies, IRS continued to have 

unresolved and newly identified control deficiencies related to its business process application controls 

and general controls in its information systems. Specifically, control deficiencies continue to exist 

concerning (1) unnecessary access rights granted to accounts, (2) inconsistent monitoring of systems 

and accounts, (3) inadequately enforced encryption to protect systems and data, (4) out-of-date and 

unsupported hardware and software, and (5) insufficient implementation and enforcement of effective 

policies and procedures as part of the IRS’s security management program. 

Recommendation 

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

recommendations to address the above significant deficiency. We recommend that the ASM and DCFO ensure 

that IRS implements corrective actions to resolve the control deficiencies at IRS. 

Compliance and Other Matters 

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

as of and for the year ended September 30, 2020 are free from material misstatement, we, and the other 

auditors, performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant 

agreements, noncompliance with which could have a direct and material effect on the financial statements. 

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 tests disclosed no instances of 

noncompliance or other matters that are required to be reported under Government Auditing Standards or OMB 

Bulletin No. 19-03. 

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

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

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

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

59
Department’s financial management systems did not substantially comply with the Federal financial 

management systems requirements. The results of our tests and those of the other auditors disclosed no 

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

applicable Federal accounting standards, and the United States Government Standard General Ledger at the 

transaction level. 

C. Noncompliance with Federal Financial Management Improvement Act of 1996

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

management systems requirements. As discussed in finding A and B, the Department had deficiencies in

Fiscal Service’s information systems and IRS’s financial reporting systems. Specifically, the Department did

not consistently design, implement, and operate information system controls and security programs over

these systems in accordance with the federal financial management system requirements.

Recommendation 

We, and the other auditors, separately provided IRS and Fiscal Service management with recommendations to 

address the above noncompliance with the federal financial management system requirements. We 

recommend that the ASM and DCFO ensure that IRS and Fiscal Service develop and implement remediation 

plans outlining actions to be taken to resolve noncompliance with the federal financial management system 

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. 

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 

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

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

Washington, DC

December 30, 2020

60
DEPARTMENT OF THE TREASURY 61 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

MANAGEMENT’S RESPONSE TO INDEPENDENT AUDITORS’ REPORT

December 30, 2020 

KPMG LLP

1801 K Street, NW

Washington, DC 20006 

Ladies and Gentlemen:

On behalf of Secretary Mnuchin, we are responding to your audit report on the Department of the

Treasury's fiscal year 2020 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 21st consecutive year.

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

conducting this year's audit contributed greatly to Treasury's successful fiscal year 2020 results. We

also appreciate the expertise and commitment demonstrated by the other organizations involved in the

audit process -the Office of Inspector General, Government Accountability Office, and the firms that

audited several of our bureaus.

We acknowledge the two significant deficiencies 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.

 

David F. Eisner Carole Y. Banks 

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

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

Consolidated Balance Sheets

As of September 30, 2020 and 2019

(in millions) 2020 2019 

ASSETS

Intra-governmental Assets

Fund Balance (Note 2) $ 896,385 $ 415,327 

Loans and Interest Receivable (Note 3) 1,734,916 1,581,019 

Advances to Trust Funds (Note 4) 37,166 3,152 

Due From the General Fund (Note 4) 27,093,930 22,855,331 

Other Intra-governmental Assets 1,218 1,011 

Total Intra-governmental Assets 29,763,615 24,855,840 

Cash, Foreign Currency, and Other Monetary Assets (Note 5) 1,838,365 441,365 

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

Reserve Position in the International Monetary Fund (Note 7) 31,211 22,955 

Taxes, Interest, and Other Receivables, Net (Note 8) 237,590 145,878 

Credit Program Receivables, Net (Note 9) 3,704 4,867 

Loans and Interest Receivable, Net (Note 7) 1,708 2,525 

COVID-19 Investments, Advances, Receivables, and Other (Note 10)

 Investments, Net 108,433 - 

 Advances, Net 68,889 - 

 Notes and Interest Receivable, Net 5,320 - 

 Credit Program Receivables, Net 1,580 - 

 Other Assets 1,619 - 

Investments in Government Sponsored Enterprises (GSEs) (Note 11) 108,910 112,070 

Investments in Multilateral Development Banks (Note 12) 8,205 7,773 

Other Investments and Related Interest (Note 13) 5,822 6,631 

Property, Plant, and Equipment, Net (Note 14) 2,958 2,870 

Other Assets 1,103 700 

Total Assets (Note 15) $ 32,200,094 $ 25,614,536 

Heritage Assets (Note 14)

The accompanying notes are an integral part of these financial statements.
DEPARTMENT OF THE TREASURY 63 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

Consolidated Balance Sheets

As of September 30, 2020 and 2019

(in millions) 2020 2019 

LIABILITIES 

Intra-governmental Liabilities

Federal Debt and Interest Payable (Notes 4 and 16) $ 6,005,252 $ 5,981,029 

Other Debt and Interest Payable (Note 17) 7,310 8,869 

Due To the General Fund (Note 4) 3,991,781 2,213,616 

Other Intra-governmental Liabilities (Note 19) 726 632 

Total Intra-governmental Liabilities 10,005,069 8,204,146 

Federal Debt and Interest Payable (Notes 4 and 16) 21,062,850 16,839,627 

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

Allocation of Special Drawing Rights (Note 5) 49,709 48,146 

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

Refunds Payable (Notes 4 and 23) 3,751 2,939 

D.C. Federal Pension and Judicial Retirement Actuarial Liability (Note 18) 8,272 8,398 

Other Liabilities (Note 19) 6,865 5,467 

Total Liabilities (Note 19) 31,152,753 25,124,960 

Commitments and Contingencies (Note 27)

NET POSITION

Unexpended Appropriations: 

 Funds from Dedicated Collections (Note 24) 200 200 

 Other Funds 903,758 419,396 

 Subtotal 903,958 419,596 

Cumulative Results of Operations:

 Funds from Dedicated Collections (Note 24) 48,844 46,351 

 Other Funds 94,539 23,629 

 Subtotal 143,383 69,980 

Total Net Position - Funds from Dedicated Collections (Combined Totals) (Note 24) 49,044 46,551 

Total Net Position - Other Funds (Combined Totals) 998,297 443,025 

Total Net Position (Note 20) 1,047,341 489,576 

Total Liabilities and Net Position $ 32,200,094 $ 25,614,536 

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

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

Consolidated Statements of Net Cost

For the Fiscal Years Ended September 30, 2020 and 2019

(in millions) 2020 2019 

Cost of Treasury Operations: 

Financial Program

Gross Cost $ 6,187 $ 6,214 

Less Earned Revenue (3,749) (3,446) 

Net Program Cost 2,438 2,768 

Economic Program

Gross Cost 137,590 22,423 

Less Earned Revenue (12,200) (9,488) 

Net Program Cost 125,390 12,935 

Security Program

Gross Cost 355 432 

Less Earned Revenue (7) (5) 

Net Program Cost 348 427 

Total Program Gross Costs 144,132 29,069 

Total Program Gross Earned Revenues (15,956) (12,939) 

Total Net Program Cost before Changes in Actuarial Assumptions 128,176 16,130 

(Gain)/Loss on Pension, ORB, or OPEB Assumption Changes 311 500 

Total Net Cost of Treasury Operations (Note 21) 128,487 16,630 

Non-Entity Costs:

Federal Debt Interest 526,814 570,948 

Restoration of Foregone Federal Debt Interest (Note 16) 116 2,371 

Less Interest Revenue from Loans (53,561) (44,385) 

Net Federal Debt Interest Costs 473,369 528,934 

Other Federal Costs, Net (Note 21) 32,749 12,016 

GSEs Non-Entity Cost (Revenue), Net (Note 11) 3,160 (14,199) 

COVID-19 Non-Entity Revenue, Net (Note 10) (5,832) - 

Other, Net (690) (761) 

Total Net Non-Entity Costs 502,756 525,990 

Total Net Cost of Treasury Operations and Non-Entity Costs $ 631,243 $ 542,620 

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

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

Consolidated Statements of Changes in Net Position

For the Fiscal Years Ended September 30, 2020 and 2019

(in millions) 2020 2019 

UNEXPENDED APPROPRIATIONS (Notes 20 and 24)

Beginning Balance $ 419,596 $ 425,992 

Budgetary Financing Sources

Appropriations Received (Notes 10 and 20) 1,273,854 600,585 

Appropriations Transferred In/Out 60 - 

Other Adjustments (Note 20) (12,802) (10,433) 

Appropriations Used (Note 10) (776,750) (596,548) 

Total Budgetary Financing Sources 484,362 (6,396) 

Total Unexpended Appropriations 903,958 419,596 

CUMULATIVE RESULTS OF OPERATIONS (Notes 20 and 24)

Beginning Balance 69,980 69,821 

Budgetary Financing Sources

Appropriations Used (Notes 10 and 20) 776,750 596,548 

Non-Exchange Revenue 481 427 

Donations and Forfeitures of Cash/Equivalent 239 600 

Transfers In/Out Without Reimbursement (187) (766) 

Other 105 233 

Other Financing Sources (Non-Exchange)

Donation/Forfeiture of Property 93 74 

Accrued Interest and Discount on Debt 1,505 8,030 

Imputed Financing Sources (Note 21) 666 807 

Transfers to the General Fund and Other (Note 20) (75,006) (63,174) 

Total Financing Sources 704,646 542,779 

Net Cost of Treasury Operations and Non-Entity Costs (631,243) (542,620) 

Net Change 73,403 159 

Cumulative Results of Operations 143,383 69,980 

Net Position $ 1,047,341 $ 489,576 

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

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

Combined Statement of Budgetary Resources

For the Fiscal Year Ended September 30, 2020

Non-Budgetary 2020 

(in millions) Budgetary Financing Total 

BUDGETARY RESOURCES

Unobligated balance from prior year budget authority, net

 (discretionary and mandatory) (Note 22) $ 319,493 $ 78 $ 319,571 

Appropriations (discretionary and mandatory) (Notes 10 and 20) 1,260,677 - 1,260,677 

Borrowing authority (discretionary and mandatory) (Note 22) - 188,664 188,664 

Spending authority from offsetting collections 

 (discretionary and mandatory) 10,466 26,403 36,869 

Total Budgetary Resources $ 1,590,636 $ 215,145 $ 1,805,781 

STATUS OF BUDGETARY RESOURCES

New obligations and upward adjustments (Note 10) $ 819,600 $ 215,000 $ 1,034,600 

Unobligated balance, end of year:

 Apportioned, unexpired accounts 747,266 29 747,295 

 Exempt from apportionment, unexpired accounts 1,754 - 1,754 

 Unapportioned, unexpired accounts 21,604 116 21,720 

 Unexpired unobligated balance, end of year 770,624 145 770,769 

 Expired unobligated balance, end of year 412 - 412 

Unobligated balance, end of year 771,036 145 771,181 

Total Status of Budgetary Resources $ 1,590,636 $ 215,145 $ 1,805,781 

OUTLAYS, NET, AND DISBURSEMENTS, NET

Outlays, net (discretionary and mandatory) $ 786,215 $ 786,215 

Distributed offsetting receipts (67,964) (67,964) 

Agency Outlays, Net (Discretionary and Mandatory) $ 718,251 - $ 718,251 

Disbursements, net (mandatory) $ 85,859 $ 85,859 

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

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

Combined Statement of Budgetary Resources

For the Fiscal Year Ended September 30, 2019 

Non-Budgetary 2019 

(in millions) Budgetary Financing Total 

BUDGETARY RESOURCES

Unobligated balance from prior year budget authority, net

 (discretionary and mandatory) (Note 22) $ 314,985 $ 19 $ 315,004 

Appropriations (discretionary and mandatory) (Note 20) 606,913 - 606,913 

Borrowing authority (discretionary and mandatory) (Note 22) - 125 125 

Spending authority from offsetting collections 

 (discretionary and mandatory) 7,830 425 8,255 

Total Budgetary Resources $ 929,728 $ 569 $ 930,297 

STATUS OF BUDGETARY RESOURCES

New obligations and upward adjustments $ 614,608 $ 340 $ 614,948 

Unobligated balance, end of year:

 Apportioned, unexpired accounts 272,845 12 272,857 

 Exempt from apportionment, unexpired accounts 1,752 - 1,752 

 Unapportioned, unexpired accounts 40,148 217 40,365 

 Unexpired unobligated balance, end of year 314,745 229 314,974 

 Expired unobligated balance, end of year 375 - 375 

Unobligated balance, end of year 315,120 229 315,349 

Total Status of Budgetary Resources $ 929,728 $ 569 $ 930,297 

OUTLAYS, NET, AND DISBURSEMENTS, NET

Outlays, net (discretionary and mandatory) $ 606,826 $ 606,826 

Distributed offsetting receipts (68,686) (68,686) 

Agency Outlays, Net (Discretionary and Mandatory) $ 538,140 - $ 538,140 

Disbursements, net (mandatory) $ (202) $ (202) 

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

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

Statements of Custodial Activity

For the Fiscal Years Ended September 30, 2020 and 2019

 

(in millions) 2020 2019 

Sources of Custodial Revenue (Note 23)

Individual Income and FICA Taxes $ 3,127,540 $ 3,176,406 

Corporate Income Taxes 263,563 277,058 

Estate and Gift Taxes 18,198 17,565 

Excise Taxes 92,058 100,566 

Railroad Retirement Taxes 5,173 6,219 

Unemployment Taxes 6,282 6,438 

Deposit of Earnings, Federal Reserve System 81,880 52,793 

Fines, Penalties, Interest and Other Revenue 5,453 5,591 

Total Revenue Received 3,600,147 3,642,636 

Less Refunds and Other Payments (Note 10) (736,532) (452,434) 

Net Revenue Received 2,863,615 3,190,202 

Non-Cash Accrual Adjustment 90,818 86,298 

Total Custodial Revenue 2,954,433 3,276,500 

Disposition of Custodial Revenue (Note 23)

Amounts Provided to Fund Non-Federal Entities 477 454 

Amounts Provided to Fund the Federal Government 2,863,138 3,189,748 

Non-Cash Accrual Adjustment 90,818 86,298 

Total Disposition of Custodial Revenue 2,954,433 3,276,500 

Net Custodial Revenue $ - $ - 

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

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

TABLE OF CONTENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES .........................................................................................................................70

2. FUND BALANCE.......................................................................................................................................................................................91

3. LOANS AND INTEREST RECEIVABLE – INTRA-GOVERNMENTAL..................................................................................................... 93 

4. DUE FROM THE GENERAL FUND AND DUE TO THE GENERAL FUND............................................................................................. 95 

5. CASH, FOREIGN CURRENCY, AND OTHER MONETARY ASSETS........................................................................................................ 97 

6. GOLD AND SILVER RESERVES, AND GOLD CERTIFICATES ISSUED TO THE FEDERAL RESERVE BANKS .................................... 99 

7. RESERVE POSITION IN THE INTERNATIONAL MONETARY FUND AND RELATED LOANS AND INTEREST RECEIVABLE.......100 

8. TAXES, INTEREST, AND OTHER RECEIVABLES, NET ......................................................................................................................101

9. CREDIT PROGRAM RECEIVABLES, NET ............................................................................................................................................103 

10. COVID-19 INVESTMENTS, ADVANCES, RECEIVABLES, AND OTHER..........................................................................................105 

11. INVESTMENTS IN GOVERNMENT SPONSORED ENTERPRISES........................................................................................................ 125 

12. INVESTMENTS IN MULTILATERAL DEVELOPMENT BANKS ...........................................................................................................129 

13. OTHER INVESTMENTS AND RELATED INTEREST............................................................................................................................ 130

14. PROPERTY, PLANT, AND EQUIPMENT, NET..................................................................................................................................... 131 

15. NON-ENTITY VS. ENTITY ASSETS...................................................................................................................................................... 133 

16. FEDERAL DEBT AND INTEREST PAYABLE........................................................................................................................................ 134 

17. OTHER DEBT AND INTEREST PAYABLE............................................................................................................................................137 

18. D.C. FEDERAL PENSION AND JUDICIAL RETIREMENT ACTUARIAL LIABILITY ...........................................................................138 

19. LIABILITIES ........................................................................................................................................................................................... 140

20. NET POSITION ...................................................................................................................................................................................... 141

21. CONSOLIDATED STATEMENTS OF NET COST AND NET COSTS OF TREASURY SUB-ORGANIZATIONS.................................... 142 

22. ADDITIONAL INFORMATION RELATED TO THE COMBINED STATEMENTS OF BUDGETARY RESOURCES...............................148 

23. SOURCES AND DISPOSITION OF CUSTODIAL REVENUE .................................................................................................................. 151

24. FUNDS FROM DEDICATED COLLECTIONS......................................................................................................................................... 153 

25. RECONCILIATION OF NET COST OF TREASURY OPERATIONS AND NON-ENTITY COSTS TO AGENCY OUTLAYS, NET.........158 

26. SCHEDULE OF FIDUCIARY ACTIVITY ................................................................................................................................................. 161

27. COMMITMENTS AND CONTINGENCIES .............................................................................................................................................. 162 

28. RECLASSIFICATION OF AGENCY FINANCIAL STATEMENTS TO FINANCIAL REPORT

OF THE U.S. GOVERNMENT FORMAT............................................................................................................................................167 

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED – SEE ACCOMPANYING AUDITORS’ REPORT) ...................................179 
70 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. REPORTING ENTITY

The accompanying financial statements include the operations of the Department of the Treasury, one of 24 Chief Financial

Officers (CFO) Act agencies of the Executive Branch of the United States (U.S.) government, and certain custodial activities

the Department manages on behalf of the entire U.S. government. Except where the content clearly indicates otherwise, the

use of the terms “Department,” “Treasury,” “we,” “us,” or “our” refers to the Department of the Treasury, including its

Departmental Offices (DO) and operating bureaus which are further discussed below. The following paragraphs describe the

activities of the reporting entity.

We were established by an Act of Congress approved on September 2, 1789. Many subsequent acts affected our development, 

delegating new duties to our charge and establishing the numerous bureaus and divisions that now comprise the

Department. As a major policy advisor to the President, the Secretary of the Treasury (Secretary) has primary responsibility

for formulating and managing the domestic and international tax and financial policies of the U.S. government.

Further, the Secretary is responsible for recommending and implementing U.S. domestic and international economic and

fiscal policy; governing the fiscal operations of the U.S. government; maintaining foreign assets control; managing the

federal debt; collecting income and excise taxes; representing the U.S. on international monetary, trade, and investment

issues; overseeing our overseas operations; and directing the manufacture of coins, currency, and other products for customer

agencies and the public.

Our reporting entities include DO and seven operating bureaus. For financial reporting purposes, DO is composed of: 

Community Development Financial Institutions (CDFI) Fund, Office of D.C. Pensions (ODCP), Exchange Stabilization Fund

(ESF), Federal Financing Bank (FFB), Government Sponsored Enterprises (GSEs) Program, International Assistance

Programs (IAP), Office of Financial Research (OFR), Office of Financial Stability (OFS), Office of Inspector General (OIG), 

Small Business Lending Fund (SBLF), Special Inspector General for Pandemic Recovery (SIGPR), Special Inspector General

for the Troubled Asset Relief Program (SIGTARP), Treasury Forfeiture Fund (TFF), Treasury Inspector General for Tax

Administration (TIGTA), and the DO policy offices. 

Our seven operating bureaus are: Bureau of Engraving and Printing (BEP), Bureau of the Fiscal Service (Fiscal Service), 

Financial Crimes Enforcement Network (FinCEN), Internal Revenue Service (IRS), U.S. Mint (Mint), Office of the

Comptroller of the Currency (OCC), and Alcohol and Tobacco Tax and Trade Bureau (TTB). Our consolidated financial

statements reflect the reporting of our entity activities, comprising both our operating bureaus and DO. This includes

appropriations received to conduct our operations and revenue generated from those operations. They also reflect the

reporting of certain non-entity (custodial) functions we perform on behalf of the U.S. government and others. Non-entity

activities include collecting certain federal revenue, servicing the federal debt, disbursing certain federal funds, and

maintaining certain assets and liabilities for the U.S. government (refer to Notes 4 and 15), as well as for other federal 

entities. Our reporting entity does not include the General Fund of the U.S. Government (General Fund), which maintains

receipt, disbursement, and appropriation accounts for all federal agencies. 
DEPARTMENT OF THE TREASURY 71 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

Following U.S. Generally Accepted Accounting Principles (GAAP) for federal entities, we do not consolidate into our financial

statements the assets, liabilities, or results of operations of any financial organization or commercial entity in which we hold

either a direct or indirect majority equity investment, unless they meet the criteria for consolidation as described in

Statement of Federal Financial Accounting Standards (SFFAS) No. 47, Reporting Entity. We have determined that none of 

our significant equity investments meet such criteria for consolidation. SFFAS No. 47 also provides criteria for reporting

“disclosure entities” and “related party” relationships of such significance that it would be misleading to exclude information

about them. Refer to the accounting policy below entitled “Disclosure Entities and Related Parties” for additional

information on Treasury’s “disclosure entities” and “related parties” which are material to our consolidated financial

statements, of significance to the public, or required by SFFAS No. 47.

B. BASIS OF ACCOUNTING AND PRESENTATION

The financial statements have been prepared from our accounting records in conformity with GAAP, and 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). The American Institute of Certified Public Accountants recognizes FASAB as the official accounting standardssetting body for the U.S. government. Certain presentations and disclosures may be modified, if needed, to prevent the

disclosure of classified information. 

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 year

(FY) 2020 and 2019 information.

We have eliminated transactions and balances among our entities from the Consolidated Balance Sheets, Consolidated

Statements of Net Cost, and Consolidated Statements of Changes in Net Position. We present the Statements of Budgetary

Resources on a combined basis; therefore, intra-departmental transactions and balances have not been eliminated from these

statements. 

While these financial statements have been prepared from our accounting records in accordance with the formats prescribed

by OMB, these financial statements are in addition to the financial reports used to monitor and control budgetary resources 

which are prepared from the same accounting records. 

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 recognition that we are a component of the U.S. government, a sovereign 

entity and, accordingly, our liabilities not covered by budgetary resources cannot be liquidated without the legislative

enactment of an appropriation, and that the payment of all liabilities other than for contracts can be abrogated by the

sovereign entity. Liabilities represent the probable and measurable future outflow or other sacrifice of resources as a result

of past transactions or events. Liabilities covered by budgetary resources are those liabilities for which Congress has

appropriated funds or funding is otherwise available to pay amounts due. Liabilities not covered by budgetary resources

represent amounts owed in excess of available, congressionally appropriated funds or other amounts, and there is no

certainty that the appropriations will be enacted. Liabilities not requiring budgetary resources are liabilities that have not 
72 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

in the past required, nor will in the future, require budgetary resources, e.g., liabilities for clearing accounts, non-fiduciary

deposit funds, custodial collections, and unearned revenue. 

We have reclassified certain FY 2019 activity and balances presented on the financial statements 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

“Fund Balance” is the aggregate amount of our accounts with the U.S. government’s central accounts from which we are

authorized to make expenditures and pay liabilities. It is an asset because it represents our claim to the U.S. government’s

resources. “Fund Balance” is not equivalent to unexpended appropriations because it also includes non-appropriated

revolving and enterprise funds, suspense accounts, and custodial funds such as deposit funds, special funds, and trust funds.

D. LOANS AND INTEREST RECEIVABLE

Intra-Governmental

Intra-governmental entity loans and interest receivable from other federal agencies represent the principal and related

interest receivable on loans we issue through FFB. We do not record loan loss allowance for credit reform subsidy costs for 

loans purchased from federal agencies or for guaranteed loans made to non-federal borrowers because those agencies 

guarantee the outstanding balances (interest and principal). 

Intra-governmental non-entity loans and interest receivable from other federal agencies represent the principal and related

interest receivable on loans we issue, through the Fiscal Service. We act as an intermediary issuing these loans because the

agencies receiving these loans lend these funds to third parties to carry out various programs of the U.S. government. 

Because of our intermediary role in issuing these loans, we do not record a loan loss allowance related to these non-entity

intra-governmental loans. Instead, the ultimate lender, the federal agency that issued the loans to the public, recognizes

loan loss allowances and subsidy costs. We accrue interest revenue on intra-governmental loans when earned. 

Public 

Public loans and interest receivable primarily represent a supplemental borrowing arrangement between the U.S. and the

International Monetary Fund (IMF) (refer to Note 7). These loans are denominated in Special Drawing Rights (SDRs) and

recorded at the equivalent U.S. dollar amount (refer to the accounting policy below entitled “Special Drawing Rights”). We

periodically adjust the value of these loans, due to fluctuations in the value of the U.S. dollar with respect to the SDR, to

maintain the amount of these loans in dollar terms. We do not record a loan loss allowance for these loans as we do not 

anticipate any defaults on the repayment of these loans. 

The Coronavirus Disease 2019 (COVID-19) notes and interest receivable represent the principal and related interest

receivable on promissory notes received in connection with providing financial assistance to air carriers, cargo air carriers,

and airline contractors to support ongoing employment of their aviation workers under the Coronavirus Aid, Relief, and

Economic Security Act of 2020 (CARES Act) (refer to Note 10). Interest revenue on the promissory notes is accrued as
DEPARTMENT OF THE TREASURY 73 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

earned over the life of the notes. The notes include a Payment-In-Kind (PIK) option in which borrowers may elect to pay the

interest in-kind, capitalizing the interest due to the principal amount of the note, instead of paying the interest in cash. We

increase the principal balance of the note and reduce interest receivable by the amount of unpaid interest when this PIK

election is made by borrowers. 

This receivable is an asset of the U.S. government and we are precluded from using the cash proceeds realized from the

financial instruments received. We report the non-entity receivable net of an allowance for loss, which reflects our best

estimate of the amount of credit losses experienced within the existing portfolio of promissory notes, within the “COVID-19:

Notes and Interest Receivable, Net” line of the Consolidated Balance Sheets. We annually assess this estimated credit loss

amount by deriving the fair value of these notes and determining the extent to which credit factors (such as historical loss

experience, delinquencies, and note restructurings) reduced the value of these receivables from their face value to their lower 

net realizable value. The fair value of the notes portfolio was derived as the present value of the expected future cash flows 

of the notes (including disbursements, repayments, interest, defaults, and recoveries). We recognize the receivable and

related interest as a non-entity exchange transaction within the “COVID-19 Non-Entity Revenue, Net” line of the

Consolidated Statements of Net Cost. This receivable also results in a corresponding increase to “Due To the General Fund.”

E. ADVANCES TO TRUST FUNDS

Advances to the Unemployment Trust Fund

The General Fund issues advances to the Department of Labor’s (DOL) Unemployment Trust Fund for states to pay

unemployment benefits. The Fiscal Service accounts for the advances issued on behalf of the General Fund. As outlined in

42 United States Code (USC) 1323, Repayable Advances to Federal Unemployment Account, 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 U.S. that form the public debt, to the nearest lower 1/8 of 1.0 percent. 

Interest on the advances is due on September 30 of each year. DOL repays advances when the Secretary, in consultation

with the Secretary of the DOL, determines that the balance in the Unemployment Trust Fund is adequate to allow

repayment. 

Advances to the Federal Supplementary Medical Insurance Trust Fund

The General Fund issues advances to the Department of Health and Human Services’ (HHS) Federal Supplementary

Medical Insurance Trust Fund to temporarily replace the reduction in Medicare Part B participants’ premiums. The Fiscal

Service accounts for the advances issued on behalf of the General Fund. As outlined in 42 USC 1395, Prohibition Against

Any Federal Interference, these advances do not bear any interest. HHS repays advances over time from amounts collected

from certain participants’ increase in premiums until the balance due reaches zero. 

F. CASH, FOREIGN CURRENCY, AND OTHER MONETARY ASSETS

Substantially all of our operating cash is non-entity government-wide cash held in depository institutions and Federal 

Reserve Bank (FRB) accounts. Agencies deposit funds that are submitted to them directly into either a Federal Reserve

Treasury General Account (TGA) or a local TGA depositary. We transfer the balances in these TGA accounts into the

Federal Reserve Bank of New York’s (FRBNY) TGA throughout the day.
74 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

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 (FR System). 

The FRBNY maintains the TGA, which functions as the U.S. government’s checking account for deposits and disbursements

of public funds. Cash in the TGA is restricted for government-wide operations. 

We classify our foreign currency investments having original maturities of three months or less as cash equivalents. SDR

holdings comprise most of the other monetary assets (refer to the accounting policy below entitled “Special Drawing Rights”).

G. TAXES, INTEREST, AND OTHER RECEIVABLES, NET

We do not accrue federal taxes receivable, net, and the corresponding liability due to the General Fund, until related tax

returns are filed or assessments are made by the IRS and agreed to by either the taxpayer or the court. Additionally,

prepayments are netted against liabilities. We make accruals to reflect penalties and interest on taxes receivable through

the balance sheet date.

Taxes receivable consist of unpaid assessments (taxes and associated penalties and interest) due from taxpayers. The 

existence of a receivable is supported by a taxpayer agreement, such as filing of a tax return without sufficient payment, or a 

court ruling in favor of the IRS. We record an allowance for doubtful accounts to reflect an estimate of the portion of total

taxes receivable deemed to be uncollectible. Taxes receivable also consist of unpaid taxes related to Internal Revenue Code

(IRC) section 965 which requires taxpayers who are shareholders of certain specified foreign corporations to pay a transition

tax on foreign earnings as if those earnings had been repatriated to the United States. IRC 965(h) allows taxpayers to elect 

to pay their 965(h) tax on an eight-year installment schedule. Additionally, taxes receivable includes employer’s deferred 

share of the Social Security portion of the Federal Insurance Contributions Act (FICA), and the employer’s and employee 

representative’s share of the Railroad Retirement Tax (RRTA). Pursuant to Section 2302 of the CARES Act, employers are

allowed to defer payment, without penalty, of these portions of FICA and RRTA. 

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. Write-offs consist of unpaid assessments for which the IRS does not expect further collections due

to factors such as taxpayers’ bankruptcy, insolvency, or death. We do not report compliance assessments and write-offs on 

the balance sheet. Statutory provisions require the accounts to be maintained until the statute for collection expires. 

H. CREDIT PROGRAM RECEIVABLES, NET

We account for all of our credit program receivables under the provisions of credit reform accounting pursuant to the Federal 

Credit Reform Act (FCRA). Credit programs include loans or equity securities associated with our state and local Housing 

Finance Agency (HFA) initiative programs, SBLF program, CDFI Fund programs, and the Troubled Asset Relief Program

(TARP) (refer to Note 9). Our credit programs also include loans associated with emergency relief efforts in response to the

COVID-19 pandemic. These COVID-19 related loans are presented separately on the Consolidated Balance Sheets as

“COVID-19: Credit Program Receivables, Net” (refer to Note 10).
DEPARTMENT OF THE TREASURY 75 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

To account for our credit program receivables, we apply the accounting provisions of SFFAS No. 2, Accounting for Direct

Loans and Loan Guarantees, as amended. SFFAS No. 2 requires measurement of the asset or liability at the net present 

value of the estimated future cash flows. The cash flow estimates for each credit program transaction reflect the actual

structure of the instruments. For each of these instruments, we estimate cash inflows and outflows related to the program

over the estimated term of the instrument. Further, each cash-flow estimate reflects the specific terms and conditions of the

program, technical assumptions regarding the underlying assets, risk of default or other losses, and other factors as

appropriate. The measurement of assets within these programs is primarily derived from inputs which generally represent 

market data and, when such data is not available, management’s best estimate of how a market participant would assess the

asset’s inherent risk.

The primary purpose of the FCRA is to measure the cost of federal credit programs, and to place the cost of such credit

programs on a basis equivalent with other federal spending. FCRA requires that the ultimate costs of a credit program be

calculated and the budgetary resources be obtained before incurring the direct loan obligations. To accomplish this, we first

predict or estimate the future performance of direct and guaranteed loans when preparing our annual budget. We reestimate the data used for these budgetary estimates at the fiscal year-end to reflect changes in actual loan performance and

actual interest rates in effect when the loans were issued. The re-estimated data reflect adjustments for market risks, asset

performance, and other key variables and economic factors. We then use the re-estimated data to report the cost of the loans

disbursed under the direct or guaranteed loan program as a “Program Cost” in our Consolidated Statements of Net Cost.

Cash flows associated with our credit programs generally include disbursements, repayments, repurchases, fees, recoveries, 

interest, dividends, proceeds from sales of instruments, borrowings from Treasury, negative subsidy, and the subsidy cost

received from the program accounts. We draw security-level data and assumptions used as the basis for cash flow model 

forecasts and program performance from widely available market sources, as well as information published by investees. 

Key inputs and assumptions to the cash flow forecasts include, but are not limited to:

• Security characteristics such as unpaid principal balance, coupon rate, weighted-average loan age, issued bond balance,

credit rating, maturity date, sinking fund schedules, principal and interest payment schedules, and performance of 

underlying collateral; 

• Discount rate;

• Observed market prices;

• 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; 

• Modeled asset prices from third-party market sources.

The recorded subsidy cost associated with each of our credit programs represents the difference between disbursed amounts

and the net present value of future cash flows we anticipate receiving. The subsidy allowance takes into consideration

projected repayments and defaults, and the projected cost of borrowings. We amortize the allowance to reflect the difference 

between projected and actual financing costs. 
76 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

Our actions, as well as changes in legislation, may impact estimated future cash flows and related subsidy costs. We

recognize the cost or cost savings of a modification in subsidy costs when the terms of a program are modified. Workouts are

actions taken to maximize repayments of existing credit programs, and the expected effects on cash flows are included in the

original estimate and re-estimates of the subsidy cost. Subsidy costs are also impacted by re-estimates which may occur as a 

result of updates to the original program subsidy cost estimates to reflect actual cash flows experience, as well as changes in

forecasts of estimated future cash flows associated with the credit program.

I. INVESTMENTS

COVID-19: Investments, Net 

In response to the COVID-19 pandemic, we hold equity investments in Special Purpose Vehicles (SPVs) established by the

Federal Reserve Board of Governors (Federal Reserve Board or Board) through the Federal Reserve Bank of New York

(FRBNY) and Federal Reserve Bank of Boston (FRBB) for the purpose of enhancing the liquidity of the U.S. financial system

(refer to Note 10). We present these non-federal investment holdings at their fair value within the “COVID-19: Investments,

Net” line of the Consolidated Balance Sheets. We record changes in the valuation of these investments as entity exchange

transactions on the Consolidated Statements of Net Cost. 

COVID-19: Investments, Net also consists of warrants held for the purchase of common stock received as compensation from 

recipients of financial assistance provided to support ongoing employment of aviation workers during the pandemic under

Section 4117 of the CARES Act (refer to Note 10). The warrants are assets of the U.S. government and we are precluded

from using the cash proceeds realized from the financial instruments received. We present these non-entity, non-federal 

investment holdings at their fair value within the “COVID-19: Investments, Net” line of the Consolidated Balance Sheets. 

These investments and related fair valuation changes also result in a corresponding “Due To the General Fund” liability, as

we hold the investment on behalf of the General Fund. We report the investment revenue, as well as changes in valuation,

as non-entity, exchange transactions within the “COVID-19 Non-Entity Revenue, Net” line of the Consolidated Statements of 

Net Cost. 

Investments in GSEs

We hold senior preferred stock and warrants for the purchase of common stock of two GSEs: the Federal National Mortgage

Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). We present these non-federal 

investment holdings at their fair value. We record changes in the valuation of these investments as non-entity exchange

transactions on the Consolidated Statements of Net Cost. We also record dividends related to these investments as nonentity exchange transactions which are accrued when declared.

The GSE Senior Preferred Stock Purchase Agreements (SPSPAs), which we entered into with each GSE when the GSEs

were placed under conservatorship, require that we increase our investment in the GSEs’ senior preferred stock if, at the end 

of any quarter, the Federal Housing Finance Agency (FHFA), acting as the conservator, determines that the liabilities of 

either GSE exceed its respective assets. Since funding to the GSEs to pay their excess liabilities is appropriated directly to

us, we report such payments, as needed, as entity expenses within the “Economic Program” on the Consolidated Statements

of Net Cost, and in the line item, “Cumulative Results of Operations,” on the Consolidated Balance Sheets. These payments

also result in an increase to the non-entity investment in the GSEs’ senior preferred stock, with a corresponding increase to

“Due To the General Fund,” as we hold the investment on behalf of the General Fund.
DEPARTMENT OF THE TREASURY 77 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

Investments in Multilateral Development Banks

On behalf of the U.S., we invest in Multilateral Development Banks (MDBs) to support poverty reduction, private sector 

development, transitions to market economies, and sustainable economic growth and development, thereby advancing U.S.

economic, political, and commercial interests abroad. As a participating member country, we provide a portion of the capital

base of the MDBs, through subscriptions to capital, which allows the MDBs to issue loans at market-based rates to middleincome developing countries. These paid-in capital investments are non-marketable equity investments valued at cost on 

our Consolidated Balance Sheets.

In addition, on behalf of the U.S., we contribute funding to MDBs to finance grants and extend credit to poor countries at

below market-based interest rates. We report these U.S. contributions, also referred to as “concessional window”

contributions, as an expense within the “Financial Program” on our Consolidated Statements of Net Cost.

Other Investments and Related Interest

The ESF holds most of our foreign currency investments. We classify the ESF’s other foreign currency denominated assets

and investment securities as either available-for-sale or trading securities recorded at fair value. These holdings are

normally invested in interest-bearing securities issued or held through foreign governments or monetary authorities. We

recognize interest on investments, amortization of premiums, and accretion of discounts on an accrual basis, and amortize or 

accrete premiums and discounts over the life of the related investment security as an adjustment to yield using the effective 

interest method. 

J. PROPERTY, PLANT, AND EQUIPMENT, NET

General

Property, plant, and equipment (PP&E) is composed of capital assets used in providing goods or services. It also includes

assets acquired through capital leases, which are initially recorded at the amount recognized as a liability for the capital

lease at its inception. PP&E is stated at full cost, including costs related to acquisition, delivery, and installation, less

accumulated depreciation. Major alterations and renovations, including leasehold and land improvements, are capitalized,

while maintenance and repair costs are charged to expense as incurred. Costs for construction projects are recorded as

construction-in-progress until completed and are valued at actual (direct) cost plus applied overhead and other indirect costs.

Internal-use software encompasses software design, development, and testing of projects adding significant new 

functionality and long-term benefits. We accumulate costs for developing internal-use software in work-in-development until

we place a project into service and testing and final acceptances are successfully completed. Once completed, we transfer the

costs to depreciable property.

We lease land and buildings from the General Services Administration (GSA) to conduct most of our operations. We have no

material leases that meet capital lease requirements for financial reporting purposes. GSA charges a standard level user fee 

which approximates commercial rental rates for similar properties. 

Our bureaus are diverse both in size and in operating environment. Accordingly, our capitalization policy provides minimum

capitalization thresholds, which generally range from $25,000 to $50,000 for all property categories except for internal-use

software. Minimum capitalization thresholds for internal-use software generally range from $50,000 to $250,000 (except for 

the IRS, for which minimum capitalization thresholds generally range from $10 million to $50 million). We also use a 
78 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

capitalization threshold for bulk purchases, which generally ranges from $50,000 to $500,000 for non-manufacturing

bureaus, and $25,000 to $50,000 for manufacturing bureaus. Bureaus determine the individual items that comprise bulk

purchases based on our guidance. 

Depreciation is expensed on a straight-line basis over the estimated useful life of the asset with the exception of leasehold 

improvements and capital leases. We depreciate leasehold improvements over the term of the lease or the useful life of the

improvement, whichever is shorter. We depreciate capital leases over the estimated life of the asset or term of the lease,

whichever is shorter. Service life ranges (2 to 50 years) are wide due to the diversity of our PP&E. We do not depreciate

land, construction-in-progress, and internal-use software in development. We record impairment costs related to a 

significant and permanent decline in the service utility of general PP&E and construction-in-progress in the period incurred. 

Heritage Assets

Heritage assets are of historical significance. Multi-use heritage assets are those heritage assets for which the predominant

use is general government operations. We capitalize all acquisition, reconstruction, and betterment costs for our multi-use

heritage asset buildings as general PP&E, and depreciate these costs over their service life.

K. FEDERAL DEBT AND INTEREST PAYABLE

We issue federal debt in the form of Treasury securities. This debt relates to monies borrowed from the public and certain

other federal agencies to fund the operations of the U.S. government. We issue certain federal debt at a discount or 

premium. We amortize these discounts and premiums over the term of the security using an interest method for all longterm securities and the straight-line method for short-term securities. Interest costs accrue as an expense as incurred and

are reported on the Consolidated Statements of Net Cost as non-entity costs. 

L. COMMITMENTS AND CONTINGENCIES

Through FFB, we make loan commitments with federal agencies, or private sector borrowers with loans guaranteed by

federal agencies, to extend credit for their own use (refer to the accounting policy above entitled “Loans and Interest 

Receivable, Intra-Governmental”). We establish loan commitments when FFB and other parties fully execute agreements in

which we become obligated to issue loans pursuant to the terms and conditions within the agreements. We reduce loan

commitments when we issue the loans or when the commitments expire. 

On behalf of the U.S., we subscribe to shares of certain MDBs, of which some shares represent capital commitments that are

callable under certain limited circumstances to meet the obligations of the respective MDB. The callable capital

commitments become binding on the U.S. when we issue instruments of commitment subscribing to the U.S. portion of 

callable capital. 

Additionally, on behalf of the U.S., we have established financial commitments through our participation in the IMF through

a quota subscription and a borrowing arrangement that supplements IMF resources. U.S. financial commitments to the IMF

become binding when the U.S. consents to an increase in its participation as an IMF member country, and all other 

conditions to the increase have been met. The outstanding financial commitment in the U.S. quota decreases or increases

when the IMF draws upon or repays funding obtained pursuant to a letter of credit established by the U.S. to make domestic

currency available to the IMF as needed. The outstanding financial commitment in the supplemental borrowing

arrangement decrease or increase when the IMF borrows and repays loans under the related supplemental funding

arrangement (refer to Note 7).
DEPARTMENT OF THE TREASURY 79 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

We committed funds as credit support to the Federal Reserve Board who established emergency liquidity lending facilities to

enhance overall liquidity of the U.S. financial system. We satisfied a portion of our commitment by acquiring preferred 

equity interests in SPVs (or transferring funds into an FRBNY demand deposit account) and, as of September 30, 2020, may

be required to increase our SPV equity interest or FRBNY demand deposit account holdings up to our committed amounts as

stipulated by the liquidity lending facility agreements. We also entered into direct loan agreements with certain passenger

airlines and a national security business which are permitted to borrow in more than one installment up to their maximum

available borrowing amount. We are committed to disburse the amounts remaining available for future borrowing as of 

September 30, 2020 under these loan agreements. We only recognize a liability related to our liquidity lending facilities or 

passenger airlines and national security business loan commitments if, on or before September 30, an undisbursed

committed amount has been authorized and approved for disbursement subsequent to September 30 (refer to Note 10). 

Otherwise, we disclose the nature and amount of our existing commitments (refer to Note 27).

In accordance with SFFAS No. 5, Accounting for Liabilities of the Federal Government, we recognize material contingent

liabilities meeting the following criteria:

• A past event or exchange transaction has occurred; 

• A future cash outflow is probable; and

• A future cash outflow is measurable. 

The estimated liability we record is either a specific amount or within a range of amounts. If some amount within the range

is a better estimate than any other amount within the range, that amount is recognized. If no amount within the range is a 

better estimate than any other amount, we recognize the minimum amount in the range, and we disclose the range and a 

description of the nature of the contingency. We follow this policy in recording a contingent liability, if any, related to the

GSE SPSPA program (refer to Note 11), and loss contingencies that may arise from claims, assessments, litigations, fines, 

penalties, and other sources (refer to Note 27).

If one or more, but not all, of the above criteria for recognition are met, and there is a reasonable possibility of loss, we will

disclose, if material, the nature of the contingent liability, along with a range of possible loss, if estimable, and a description

of the nature of the contingency. 

M. SPECIAL DRAWING RIGHTS

The SDR is an international reserve asset created by the IMF to supplement its member countries’ official reserves. Under

its Articles of Agreement, the IMF may allocate SDRs to member countries in proportion to their IMF quotas. Pursuant to

the Special Drawing Rights Act of 1968, as amended, the ESF holds all SDRs allocated to or otherwise acquired by the U.S.

Allocations and Holdings

We record the SDR holdings that are permanent resources to the U.S. as part of “Cash, Foreign Currency, and Other

Monetary Assets,” and we record the SDR allocations as a liability entitled “Allocation of Special Drawing Rights” when the

IMF allocates SDRs to the U.S. The SDR allocations are permanent resources to the U.S. as well, but we account for these

allocations as a liability since the U.S. is obligated to repay the allocation amount to the IMF under the following

circumstances: withdrawal by the U.S. from IMF membership or termination of its position in the SDR Department of the

IMF, cancellation of the SDRs, or liquidation of the IMF or SDR Department of the IMF.
80 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

SDR holdings increase primarily as a result of IMF SDR allocations. We record SDR transactions as incurred, and include

acquisitions and sales of SDRs, interest received on SDR holdings, interest charges on SDRs allocations, and valuation

adjustments. The U.S. government also receives remuneration in SDRs from the IMF based on claims on the IMF as

represented by the U.S. Reserve Position in the IMF and loans receivable from the supplemental borrowing arrangement. 

We credit remuneration to the ESF, which transfers to the TGA account an equivalent amount of dollars plus nominal

interest. The allocations and holdings are revalued monthly based on the SDR valuation rate as calculated by the IMF,

resulting in the recognition of unrealized gains or losses on revaluation that are reported on the Consolidated Statements of 

Net Cost.

Certificates Issued to the Federal Reserve

The Special Drawing Rights Act of 1968, as amended, authorizes the Secretary to issue certificates, not to exceed the value of 

SDRs held against the certificates, to the FRBs in return for dollar amounts equal to the face value of certificates issued. We

issue certificates to finance the acquisition of SDRs from other countries or to provide U.S. dollar resources to finance other

ESF operations. Certificates issued are redeemed by us at such times and in such amounts as the Secretary may determine,

and do not bear interest. We report certificates issued to the FRBs at their face value which approximates their carrying

value since, under the terms of the arrangements with the Federal Reserve Board, there is no set repayment date and no

interest accrued while certificates remain outstanding.

N. REFUNDS PAYABLE

Refunds payable arise in the normal course of tax administration when it is determined that taxpayers have paid more than

the actual taxes they owe. We record amounts concluded to be valid refunds owed to taxpayers as a liability entitled

“Refunds Payable” on the Consolidated Balance Sheets, with a corresponding receivable from the General Fund included in

the line entitled “Due From the General Fund.”

O. FEDERAL EMPLOYEE BENEFITS PAYABLE – 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 us for these

paid claims. Generally, we reimburse the DOL within two to three years once funds are appropriated. The FECA liability

consists of two components. The first component is based on actual claims paid by the DOL but not yet reimbursed by us. 

The second component is the estimated liability for future workers compensation as a result of past events. We report both

components in “Other Liabilities” on the Consolidated Balance Sheets. These future workers’ compensation estimates are

generated by applying actuarial procedures developed to estimate the liability for FECA benefits. The actuarial liability

estimates for FECA benefits include the expected liability for death, disability, medical, and miscellaneous costs for approved

compensation cases.

P. ANNUAL, SICK, AND OTHER LEAVE

We report annual and compensatory leave earned by our employees, but not yet used, as an accrued liability. We adjust the

accrued balance annually to reflect current pay rates. Any portion of the accrued leave for which funding is not available is

recorded as an unfunded liability as reported in “Other Liabilities” on the Consolidated Balance Sheets. We expense sick

and other leave as taken and do not record a liability for such amounts, because employees do not vest in sick and other 

leave benefits. 
DEPARTMENT OF THE TREASURY 81 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

Q. PENSION COSTS, OTHER RETIREMENT BENEFITS, AND OTHER POST-EMPLOYMENT BENEFITS

Federal Pension Costs, Other Retirement Benefits, and Other Post-Employment Benefits

We recognize the full cost of our employees’ pension benefits, including recognizing imputed cost for the difference between 

the estimated service cost and the sum of participants’ pension benefit withholdings and agency contributions. However, the

Office of Personnel Management (OPM) rather than the Department recognizes the assets and liabilities associated with

these benefits. 

Most of our employees hired prior to January 1, 1984 participate in the Civil Service Retirement System (CSRS), and

employees hired between January 1, 1984 and December 31, 1986 are covered under the CSRS Offset System, to which we

contribute 7.0 percent and 7.5 percent of pay for regular and law enforcement employees, respectively. On January 1, 1987,

the Federal Employees’ Retirement System (FERS) went into effect pursuant to the Federal Employees’ Retirement System

Act of 1986, Public Law (P.L.) 99-335. FERS is a three-tiered retirement system consisting of a Basic Benefit Plan, Thrift 

Savings Plan (TSP), and Social Security Benefits. For the FERS Basic Benefit Plan, we contribute between 14.2 percent and

16.0 percent for regular employees, and between 31.6 percent and 33.4 percent for law enforcement officers. The TSP under

FERS is a 401(k)-type savings plan in which we automatically contribute one percent of base pay and match any employee

contributions up to an additional four percent of base pay. For most employees hired after December 31, 1983, we also

contribute the employer’s matching share for Social Security. 

Similar to federal retirement plans, OPM, rather than the Department, reports the assets and liability for future payments

to retired employees who participate in the Federal Employees Health Benefits Program (FEHBP) and Federal Employees

Group Life Insurance (FEGLI) Program. We report the full cost of providing other retirement benefits (ORB). We also

recognize an expense and a liability for other post-employment benefits (OPEB), which includes all types of benefits, 

provided to former or inactive (but not retired) employees, their beneficiaries, and covered dependents. Additionally, one of 

our bureaus, OCC, separately sponsors a postretirement life insurance benefit plan for current and future retired employees. 

OCC also is the administrator for a private defined benefit retirement plan which participates in the Pentegra Defined 

Benefit Plan for Financial Institutions, a multiple employer plan that provides retirement, disability, and death benefits for 

certain retired employees who meet eligibility requirements. In addition to the TSP, the OCC, sponsors a 401(k) plan, in

which the OFR also participates.

District of Columbia Federal Pension and Judicial Retirement Plans 

Pursuant to Title XI of the Balanced Budget Act of 1997, as amended, we became responsible for the District of Columbia

Judicial Retirement and Survivors Annuity Fund (the Judicial Retirement Fund) and the District of Columbia Teachers,

Police Officers, and Firefighters Federal Pension Fund (the D.C. Federal Pension Fund) retirement plans (refer to Note 18). 

The actuarial cost method used to determine costs and actuarial liability for the Judicial Retirement Fund is the Individual

Entry Age Normal Cost Method, which approximates the methodology specified by the Aggregate Entry Age Normal

Actuarial Cost Method. The actuarial cost method used to determine the cost and actuarial liability for the D.C. Federal 

Pension Fund is the Projected Unit Credit Cost Method, which recognizes that all service has been fully accrued by

participants and does not generate a normal cost. These methodologies base actuarial liabilities on long-term economic

assumptions. The pension benefit costs incurred by the plans are included on the Consolidated Statements of Net Cost.
82 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

The economic assumptions used for the valuation of the actuarial liability of the Judicial Retirement Fund and D.C. Federal 

Pension Fund 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 [CPI] and period of calculation); and (iii) for 

the discount rate assumption, OPM and the Judicial Retirement Fund and D.C. Federal Pension Fund use the same

underlying yield curve, but the averaging periods differ and, unlike the D.C. Federal Pension Fund, OPM converts to a single

equivalent rate.

R. REVENUE AND FINANCING SOURCES

Our activities are financed either through exchange revenue we receive from others or through non-exchange revenue and

financing sources (such as appropriations provided by the Congress and penalties, fines, and certain user fees collected). 

User fees primarily include collections from the public for the IRS costs to process installment agreements, letter ruling and

determinations, and income verification. We recognize exchange revenue when earned, i.e., goods are delivered or services

are rendered. We recognize revenue from reimbursable agreements when providing services. We record non-exchange

revenues when received or when accrued due to a legal claim. We recognize appropriations used as financing sources when

related expenses are incurred or assets are purchased. 

We also incur certain costs paid in total or in part by other federal entities, such as pension costs, the FEHBP, and any unreimbursed payments made from the Treasury Judgment Fund on our behalf. We recognize these subsidized costs on the

Consolidated Statements of Net Cost, and we recognize the imputed financing for these costs on the Consolidated

Statements of Changes in Net Position. As a result, there is no effect on net position. We also recognize other non-exchange

financing sources, such as donations and transfers of assets without reimbursements, for the period in which they occurred

on the Consolidated Statements of Changes in Net Position. 

We recognize revenue we receive from disposition of forfeited property as non-exchange revenue on the Consolidated

Statements of Changes in Net Position. We report costs related to the Forfeiture Fund program on the Consolidated

Statements of Net Cost. The TFF is the special fund account for depositing non-tax forfeiture proceeds received pursuant to

laws enforced or administered by law enforcement bureaus that participate in the TFF. We report forfeited property

balances in “Other Assets” on the Consolidated Balance Sheets. 

S. CUSTODIAL REVENUES

Non-entity revenue reported on our Statements of Custodial Activity includes cash we collected, primarily from taxes. It

does not include revenue collected by other federal agencies, such as user fees and other receipts, which are remitted for 

general operating purposes of the U.S. government or are dedicated for certain trust funds. We present the Statements of 

Custodial Activity on the “modified accrual basis.” We recognize revenues as cash is collected, and record a “non-cash

accrual adjustment” representing the net increase or decrease during the reporting period in net revenue-related assets and

liabilities, mainly taxes receivable. 
DEPARTMENT OF THE TREASURY 83 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

T. APPROPRIATIONS AND OTHER BUDGETARY ACTIVITY

Combined Statement of Budgetary Resources Activity

We record appropriations when authorized by legislation. Incurred obligations of appropriations are recorded when we place

orders or sign contracts for goods and services, award a grant, or take other actions that require us to make payments to the

public or another federal entity. Outlays are recorded when disbursements are made. 

Permanent and Indefinite Appropriations

We use permanent and indefinite appropriations to disburse tax refunds, refundable tax credits and related interest. We

recognize refund payment funding as appropriations are used. Permanent indefinite authority for refund activity is

available for an unlimited period of time in the amount necessary to cover the refund and/or credit. We report tax refunds

and credits as a custodial activity of the Department, since they are, in substance, a custodial revenue-related activity

resulting from taxpayer overpayments of their tax liabilities.

We have two permanent and indefinite appropriations related to debt activity. One permanent and indefinite appropriation

is used to pay interest on the public debt securities, and the other is used to redeem securities that are matured, called, or 

eligible for early redemption. These accounts are not annual appropriations and do not have refunds. We report debt

redemption appropriations related to our liability on our Consolidated Balance Sheets. We record interest appropriations at

the beginning of the fiscal year and again at mid-year, if necessary, and we return any unused authority to the General Fund

at the end of the fiscal year. Permanent indefinite authority for debt redemptions and related interest is available for an

unlimited period of time.

We also have permanent and indefinite appropriations to fund increases in the projected subsidy costs of credit programs as

determined by the re-estimation process required by the FCRA.

Additionally, we have other permanent and indefinite appropriations to make certain payments on behalf of the U.S.

government. We receive these appropriations to make payments to the FRB for fiscal services provided, and to the financial

institutions for services provided as financial agents of the U.S. government. They also include appropriations provided to

make other disbursements on behalf of the U.S. government, including payments made to various parties as a result of 

certain claims and judgments rendered against the U.S. 

U. INCOME TAXES

As an agency of the U.S. government, we are exempt from all income taxes imposed by any governing body, whether it is a 

federal, state, commonwealth, local, or foreign government.

V. USE OF ESTIMATES

We have made certain estimates and assumptions relating to the reporting of assets, liabilities, revenues, expenses, and the

disclosure of contingent liabilities to prepare our financial statements. Actual results may differ from these estimates. 

Adverse changes in the outlook for the key assumptions underlying management’s estimates may materially affect the

results of our operations, cash flows and/or our financial position in future periods. Transactions subject to estimates

principally include loan and credit program receivables, credit reform subsidy costs, COVID-19 related investments,

investments in GSEs and other non-federal securities and related impairment, tax receivables, loan guarantees,
84 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

depreciation, actuarial liabilities, cost and earned revenue allocations, as well as contingencies and any related recognized

liabilities. 

Estimation of such complex and long-duration receivables, investments, and contingencies is subject to uncertainty. It is

possible that new developments will adversely impact the value of receivables, investments, and contingencies, as well as

ultimate amounts we are required to fund. Except as expressly noted herein, we have not revalued or included in our 

estimates as of September 30, 2020 the effects of any new developments that may have occurred subsequent to

September 30, 2020. Refer to the accounting policy entitled “Pension Costs, Other Retirement Benefits, and Other PostEmployment Benefits” above and Note 8 for additional discussion related to the estimation of actuarial liabilities and tax

receivables, respectively. The following is a discussion of certain significant transactions subject to estimation.

Credit Program Receivables, Net 

We account for all our credit program receivables in accordance with credit reform accounting (refer to the accounting policy

above entitled “Credit Program Receivables, Net,” and Notes 9 and 10). These receivables are derived using credit reform 

modeling, which is subject to the use of estimates and forecasts that have inherent uncertainty. We recognize the sensitivity

of credit reform modeling to slight changes in certain model assumptions such as general economic conditions, specific stock

price volatility of the entities in which we have an equity interest, estimates of expected default, and prepayment rates. 

We use regular review of model factors, statistical modeling, and annual re-estimates to reflect the most accurate cost of the

credit programs to the U.S. government. The purpose of re-estimates is to update original program subsidy cost estimates to

reflect actual cash flow experience as well as changes in forecasts of future cash flows. We update forecasts of future cash

flows based on actual program performance to date, additional information about the portfolio, additional publicly available

relevant historical market data on securities performance, revised expectations for future economic conditions, and

enhancements to cash flow projection methods. 

Investments

The annual valuation as of September 30 of the SPV preferred equity investments and common stock warrants primarily

comprising the “COVID-19: Investments, Net” line item on the Consolidated Balance Sheets also incorporates various

forecasts, projections and cash flow analyses to develop an estimate of the assets’ fair value. The fair value of our SPV 

preferred equity investments and common stock warrants that are closely held are estimated based on a discounted cash

flow valuation methodology, whereby the primary input is the present value of the projected annual cash flows associated

with these investments. The primary input into our common stock warrants investments that are publicly held is the

market value of the underlying shares of common stock of those warrants. We evaluate the need for adjusting our marketbased valuation of these warrants for the effects, if any, of significant events occurring after the close of the market but

before the end of the measurement date. Note 10 includes a detailed discussion of the results of the asset valuation.

The annual valuation as of September 30 of 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 assets’ fair value. The value of the senior preferred stock is estimated by first

estimating the fair value of the total equity of each GSE (which, in addition to the senior preferred stock, is comprised of 

other equity instruments including common stock, common stock warrants, and junior preferred stock). The fair value of the

total equity is based on a discounted cash flow valuation methodology, whereby the primary input is the present value of the

projected quarterly cash flows to equity holders. The fair value of the GSEs’ other equity instruments is then deducted from 
DEPARTMENT OF THE TREASURY 85 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

its total equity, with the remainder representing the fair value of the senior preferred stock. The primary input into the

warrants valuation is the market value of the shares of common stock of the GSEs which, along with the junior preferred 

stock, are traded on the OTC Bulletin Board. We evaluate the need for adjusting our OTC market-based valuation of the

warrants for the effects, if any, of significant events occurring after the close of the market but before the end of the

measurement date. Note 11 includes a detailed discussion of the results of the asset valuation and estimated liability

assessment.

For both our COVID-19 and GSE investments, we record any changes in valuation, including impairment, and disclose

changes in accordance with SFFAS No. 7, Accounting for Revenue and Other Financing Sources and Concepts for 

Reconciling Budgetary and Financial Accounting, as amended. Since the valuation is an annual process, we deem changes 

in valuation of our equity investments as usual and recurring. 

Liabilities 

We perform annual calculations, as of September 30, to assess our need for recording an estimated liability in accordance

with SFFAS No. 5 related to certain liabilities of our CARES Act programs, as well as liabilities related to our funding

commitment to the GSEs under the SPSPAs. As stipulated by the CARES Act, excess residual proceeds realized from our 

SPV capital contributions and direct loans to air carriers and national security businesses must be remitted to the Federal 

Old-Age and Survivors Insurance Trust Fund (refer to Note 10). We estimate and record the net present value of this

potential liability, if any, based on the probable future occurrence of excess cash flows received above the full recovery of our 

costs associated with these programs. This calculation is subject to the same sensitivities as those related to our credit

reform modeling discussed above. 

Liability to the GSEs recognition is predicated on the probable future occurrence of an excess of liabilities and minimum

capital reserve amounts, as defined, over the assets of either GSE at the end of any reporting quarter. The occurrence of 

future GSE deficits, which ultimately determines our liability to the GSEs, is most sensitive to future changes in the housing

price index and, to a lesser extent, future changes in guarantee fees received by the GSEs on single-family mortgages and

interest rates (refer to Note 11). 

W. OTHER-THAN-TEMPORARY IMPAIRMENTS

A decline in the market value (either due to credit, price or currency) of any investment below cost that is deemed to be

other-than-temporary is accounted for as an impairment, and the carrying value is reduced to fair value for financial

reporting purposes. To determine whether an impairment is other-than-temporary, we consider whether we have the ability

and intent to hold the investment until a market price recovery, and consider whether evidence indicating that the cost of 

the investment is recoverable does outweigh 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. We take on possible credit risk when we make direct loans or 

guarantees to non-federal entities, provide credits to foreign entities, or become exposed to institutions which engage in

financial transactions with foreign countries (refer to Note 13). Our following programs entail credit risk: monetary assets

held; investments, direct loans and other receivables related to our COVID-19, CDFI, SBLF, and TARP programs, as well as

committed but undisbursed direct loans and/or funding commitments related to our COVID-19 and GSE programs; and GSE

obligations obtained under the HFA initiative (the New Issue Bond Program). 
86 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

Our activities generally focus on the underlying problems in the credit markets. We developed these programs, or provided

credit support to the pandemic emergency relief programs of the Federal Reserve Board, to provide credit where borrowers

are not able to get access to credit with reasonable terms and conditions. Because these programs attempt to correct for a 

market imperfection, it can expose us to potential costs and losses. Additional risk of costs and losses could result from 

terrorist attacks under the Terrorism Risk Insurance Program. The extent of the risk we assumed is described in more

detail in the notes to the financial statements and, where applicable, is factored into credit reform models and reflected in

fair value measurements (refer to Notes 9, 10, 11, and 27). 

We face certain risks and uncertainties as a result of holding securities denominated in foreign currency. The price of 

holdings of such securities may widely fluctuate as a result of volatility in foreign currency markets and changes in real and

perceived credit risk of our counterparties. 

Y. FUNDS FROM DEDICATED COLLECTIONS

We account for revenues and other financing sources for funds from dedicated collections (FDC) separately from other funds. 

Such funds are financed by specifically identified revenues provided to the U.S. government by non-federal sources, often 

supplemented by federal and other financing sources, which remain available over time. Statute requires use of these

specifically identified revenues and other financing sources for designated activities, benefits, or purposes. We apply the

following criteria for purposes of designating funds as dedicated collections: (i) a statute committing the U.S. government to

use specifically identified revenues and/or other financing sources that are originally provided to the U.S. government by a 

non-federal source only for designated activities, benefits, or purposes; (ii) explicit authority for the fund to retain revenues 

and/or other financing sources not used in the current period for future use to finance the designated activities, benefits, or 

purposes; (iii) a requirement to account for and report on the receipt, use, and retention of the revenues and/or other 

financing sources that distinguishes the fund from the U.S. government’s general revenues; and (iv) for funds comprised of 

both federal and non-federal sources, such funding is predominantly non-federal, or the non-federal funding is material to

our financial statements.

Z. ALLOCATION TRANSFERS

We are a party to allocation transfers with other federal agencies as both a transferring (parent) entity and/or a receiving

(child) entity. Allocation transfers are legal delegations by one department of its authority to obligate budget authority and

outlay funds to another department. A separate fund account (allocation account) is created in Treasury as a subset of the

parent fund account for tracking and reporting purposes. All allocation transfers of balances are credited to this account,

and subsequent obligations and outlays incurred by the child entity are charged to this allocation account as they execute the

delegated activity on behalf of the parent. Parent federal agencies report both the proprietary and budgetary activity and

the child agency does not report any financial activity related to budget authority allocated from the parent federal agency to

the child federal agency. However, OMB guidance requires Treasury to report the activity when we receive allocation

transfers, as the child, from the Executive Office of the President (See Circular No. A-136, II.3.1, Parent-Child Reporting for 

two exceptions). 

We allocate funds, as the parent, to the DOL, Department of Housing and Urban Development and HHS. Also, we receive

allocation transfers, as the child, from HHS, Department of Transportation, Department of Justice and the Executive Office 

of the President.
DEPARTMENT OF THE TREASURY 87 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

AA. FIDUCIARY ACTIVITIES

Fiduciary activities are the collection or receipt, and the management, protection, accounting, investment, and disposition by

the U.S. government of cash or other assets in which non-federal individuals or entities have an ownership interest that the

U.S. government must uphold. Fiduciary cash and other assets are not assets of the U.S. government. We do not report 

these activities in our consolidated financial statements, but instead report them in Note 26. 

AB. DISCLOSURE ENTITIES AND RELATED PARTIES

SFFAS No. 47, Reporting Entity, requires that our consolidated financial statements reflect the balances and activities of 

consolidation entities, including Treasury bureaus and other reporting entities, meeting the following “principles for 

inclusion” when considered as a whole: (1) the entity is included in the Budget of the United States (also known as the

President’s Budget); (2) the U.S. government holds “majority ownership interest”; (3) the U.S. government has “control with

risk of loss or expectation of benefit”; or (4) it would be misleading to exclude such entity. SFFAS No. 47 also provides

guidance for assessing whether an organization meeting the inclusion principles is reported as a disclosure entity or related

party. 

A disclosure entity exists when we determine that an entity meets any of the following SFFAS No. 47 “inclusion principles”

with respect to the U.S. government but does not meet the characteristics of a “consolidation entity.” Based on SFFAS 

No. 47 criteria, the Federal Reserve System is considered to be a disclosure entity. Additionally, entities owned and/or

controlled by the U.S. government as a result of regulatory actions—such as organizations in receivership or 

conservatorship—or other U.S. government intervention actions are generally classified as disclosure entities if the

relationship with such entities is not expected to be permanent. 

A related party exists when one party to an established relationship has the ability to exercise significant influence over

another party in making policy decisions. Related parties generally do not meet the SFFAS No. 47 inclusion principles;

however, we report on a relationship that is of such significance that it would be misleading to exclude information about

that entity. Disclosure entities and related parties are not considered components of the consolidated Treasury reporting

entity and, thus, are only disclosed in the notes to our consolidated financial statements. Using the principles prescribed in

SFFAS No. 47, we identified the following disclosure entities and related parties as of September 30, 2020. 

Disclosure Entities

Federal Reserve System 

Congress, under the Federal Reserve Act of 1913 (Federal Reserve Act), created the FR System. The FR System includes the

Federal Reserve Board, Federal Reserve Banks (FRB), and the Federal Open Market Committee (FOMC). Collectively, the

FR System serves as the nation’s central bank and is responsible for formulating and conducting monetary policy, issuing

and distributing currency (Federal Reserve Notes), supervising and regulating financial institutions, providing nationwide

payments systems (including large-dollar transfers of funds, automated clearinghouse 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. 
88 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

While we consult with the FR System on matters affecting the economy and certain financial stabilization activities it is

considered an independent central bank, and the executive branch of the U.S. government does not ratify its decisions. In

accordance with SFFAS No. 47 criteria, the FR Systems’ assets, liabilities, and operations are not consolidated into our 

consolidated financial statements; however, we account for and disclose our financial activities with the FR System within

our consolidated financial statements. 

Federal Reserve System Structure 

Federal Reserve Board of Governors 

The Board is an independent regulatory organization governed by seven members appointed by the President and confirmed 

by the Senate. The full term of a Board member is 14 years, and the appointments are staggered so that one term expires on 

January 31 of each even-numbered year. The Board has a number of supervisory and regulatory responsibilities for 

institutions including, among others, state-chartered banks that are members of the FR System, bank holding companies,

and savings and loan holding companies. In addition, the Board has general supervisory responsibilities for the 12 FRBs,

and issues currency (Federal Reserve Notes) to the FRBs for distribution. No government appropriation is required to

support the operation of the Board. The Board’s budget transactions are not included in the President’s Budget, nor are they

subject to the President’s review because of its unique role in conducting monetary policy. 

Federal Reserve Banks 

The 12 FRBs are chartered under the Federal Reserve Act, which requires each member bank to own the capital stock of its

FRB. Each FRB has a board of directors that exercises supervision and control of each FRB, with three members appointed

by the Board, and six board members elected by their member banks. The FRBs participate in formulating and conducting

monetary policy, distributing currency and coin, and serving as the government’s fiscal agent, as well as the fiscal agent for 

other fiscal principals (i.e. banks, credit unions, saving and loan institutions). 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 and the Secretary of the Treasury. 

We utilize the services of the FRBs to execute a variety of transactions on behalf of the Fiscal Service and the ESF. The 

following are examples of our interaction with the FRBs:

• The FRBs serve as our fiscal agent and depositary, executing banking and other financial transactions on our behalf

(refer to Note 5). We reimburse the FRBs for these services, the cost of which is included on the Consolidated

Statements of Net Costs. 

• The FRBs hold Treasury and other federal securities in the FRBs’ System Open Market Account (SOMA) for the purpose

of conducting monetary policy. 

• The FRBs hold gold certificates issued by the Department in which the certificates are collateralized by gold (refer to

Note 6). 

• The FRBs hold SDR certificates issued by the Department which are collateralized by SDRs (refer to Notes 5 and 7). 

• The FRBs are required by Board policy to transfer their excess earnings to us on behalf of the U.S. government (refer to

Notes 8 and 23). 

 
DEPARTMENT OF THE TREASURY 89 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

Federal Open Market Committee 

The FOMC is comprised of the seven Board members and five of the 12 FRB presidents. FOMC formulates and conducts 

monetary policy primarily through open market operations (the purchase and sale of certain securities in the open market),

the principal tool of national monetary policy. These operations affect the amount of reserve balances available to depository 

institutions, thereby influencing overall monetary and credit conditions. 

Federal Reserve System Assets and Liabilities

The FRBs hold Treasury and other securities in the SOMA for the purpose of conducting monetary policy. These assets are

generally subject to the same market conditions as other financial instruments. In the open market, the FR System

purchases and sells Treasury securities as a mechanism for controlling the money supply. 

The FRBs have deposit liabilities with Treasury and depository institutions. The FRBs issue Federal Reserve Notes, the

circulating currency of the U.S., which are collateralized by the Treasury securities and other assets held by the FRBs. 

FRB Residual Earnings Transferred to the Department 

FRBs generate income from interest earned on securities, reimbursable services provided to federal agencies, and the

provision of priced services to depository institutions as specified by the Monetary Control Act of 1980. Although the FRBs

generate earnings from carrying out open market operations, via the earnings on securities held in the SOMA account, their

execution of these operations is for the purpose of accomplishing monetary policy rather than generating earnings. Each

FRB is required by Board policy to transfer to us its residual (or excess) earnings after providing for the cost of operations,

payment of dividends, and surplus funds not to exceed an FRB’s allocated portion of an aggregate of $6.8 billion for all FRBs,

in accordance with the provisions of the Economic Growth, Regulatory Relief, and Consumer Protection Act (P.L. 115-174). 

FRBs’ residual earnings may vary due to, among other things, changes in the SOMA balance levels that may occur in

conducting monetary policy. Under P.L. 115-174, if an FRB’s earnings for the year are not sufficient to provide for the cost of 

operations, payment of dividends, or allocated portion of the $6.8 billion aggregate surplus funds limitation, an FRB will

suspend its payments to us until such earnings become sufficient. The FRB residual earnings of $81.9 billion and $52.8

billion for fiscal years ended September 30, 2020 and 2019, respectively, are reported as custodial revenues on our

Statements of Custodial Activity. They constituted 2.3 percent and 1.4 percent of our total custodial revenues collected in

FY 2020 and 2019, respectively. “Taxes, Interest and Other Receivables, Net” includes a receivable for FRB’s residual

earnings which represents the earnings due to us as of September 30, but not collected by us until after the end of the month

(refer to Note 8). 

FRB-Managed Special Purpose Vehicles – Liquidity Lending Facilities 

In response to the COVID-19 pandemic, we hold equity investments in SPVs established by the Federal Reserve Board

through the FRBNY and FRBB for the purpose of enhancing the liquidity of the U.S. financial system. Our involvement in

these programs represents non-permanent intervention activities designed to help mitigate the economic impacts of the

pandemic. Accordingly, our equity interests in these SPVs meet the SFFAS No. 47 criteria for classifying our SPV 

investments as disclosure entities. These entities are not consolidated as part of our consolidated financial statements;

however, the value of our investments in these entities is presented as equity investments on our Consolidated Balance

Sheets (refer to Note 10). 
90 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

Government Sponsored Enterprises – Fannie Mae and Freddie Mac 

During the FY 2008 financial crisis, the U.S. government placed Fannie Mae and Freddie Mac under conservatorship to help

ensure their financial stability. These entities meet the SFFAS No. 47 criteria for disclosure entities as organizations owned 

or controlled by the U.S. government as the result of regulatory actions (“such as conservatorship”). Additionally, the U.S.

government’s intervention actions with regards to these GSEs are not expected to be permanent. Accordingly, these entities

are not consolidated as part of our consolidated financial statements; however, the value of our investments in these entities

is presented as equity investments on our Consolidated Balance Sheets (refer to Note 11). 

Related Parties 

In accordance with SFFAS No. 47 determination principles, we currently maintain related party relationships with the IMF

and the MDBs. The IMF is an international organization of 190 member countries that works to foster global monetary

cooperation, secure financial stability, sustain economic growth, and reduce poverty around the world. The U.S. government

holds the largest quota subscription of any member. The U.S. quota subscription serves as the key determinant for our

16.5 percent share of voting rights in various IMF decisions for which the U.S. government has a substantial voice. The 

Secretary serves as the U.S. Governor to the IMF, and the U.S. Governor nominates and elects the U.S. Executive Director of 

the IMF, who is one of 24 directors responsible for exercising voting rights over the strategic direction of the institution. 

The U.S. commitment to the IMF is in the form of cash and interest-bearing instruments. Historically, the U.S. has not 

experienced a loss to its commitment in the IMF (refer to accounting policies above entitled “Loans and Interest Receivable,”

“Commitments and Contingencies,” “Special Drawing Rights,” and Notes 5, 7 and 27 for a further description of our

relationship, financial risk, and activities with the IMF). 

Additionally, on behalf of the U.S., we invest in and provide funding to the MDBs to support poverty reduction and promote

sustainable economic growth in developing countries. The MDBs provide financial and technical support by means of 

strengthening institutions, providing assistance that addresses the root causes of instability in fragile and conflict-affected 

states, responding to global crises, and fostering economic growth and entrepreneurship. U.S. participation in the MDBs is

in the form of financial contributions used to ensure the effectiveness and impact of the MDBs’ global development agenda. 

The U.S. has voting power in each of the MDBs to which we contribute, ranging from approximately 6 percent to 50 percent

(refer to accounting policies above entitled “Investments,” “Commitments and Contingencies,” and Notes 12 and 27 for a 

further description of our relationship, financial risk, and activities with the MDBs). 
DEPARTMENT OF THE TREASURY 91 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

2. FUND BALANCE 

Fund Balance is increased by receiving appropriations, reappropriations, continuing resolutions, appropriation restorations,

and allocations; and when transfers and reimbursements from other federal agencies are received. Fund Balance can also be

increased by amounts borrowed from the Fiscal Service, FFB, other federal entities, and by amounts collected and credited to

appropriation or fund accounts.

Likewise, Fund Balance is reduced when disbursements are made to pay liabilities or to purchase assets, goods, and services;

investments in U.S. securities (securities issued by Fiscal Service or other federal agencies); when expired appropriations are

cancelled, transfers and reimbursements to other federal entities or non-federal entities, to the General Fund; and due to

sequestration or rescission of appropriations.

STATUS OF FUND BALANCE 

As of September 30, 2020 and 2019, the status of the fund balance consisted of the following: 

(in millions) 2020 2019 

Unobligated Balance - Available $ 749,049 $ 274,609 

Unobligated Balance - Not Available 22,132 40,740 

Obligated Balance Not Yet Disbursed 176,989 62,132 

Subtotal 948,170 377,481 

Adjustment for Borrowing Authority (99,676) (6,248) 

Adjustment for ESF (84,518) (93,195) 

Adjustment for Intra-Treasury Investments (8,975) (8,697) 

Adjustment for IMF 120,688 127,304 

Adjustment for Authority Unavailable for Obligations 17,020 16,442 

Other Adjustments 3,676 2,240 

Total Status of Fund Balance $ 896,385 $ 415,327 

Portions of the Unobligated Balance Not Available, as shown on the Combined Statement of Budgetary Resources, include

amounts appropriated in prior fiscal years that are not available to fund new obligations. However, we may use such

amounts for upward and downward adjustments for existing obligations in future years. The Obligated Balance Not Yet 

Disbursed 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. The significant changes in Unobligated Balance Available and

Obligated Balance Not Yet Disbursed are due to the receipt of COVID-19 related appropriations provided by the CARES Act

during fiscal year 2020. Of the total appropriations of $975.0 billion obtained via the CARES Act, $472.4 billion and

$106.8 billion of appropriations were included in Unobligated Balance Available and Obligated Balance Not Yet Disbursed as

of September 30, 2020, respectively (refer to Note 10).

Since the following line items are either a component of Fund Balance or post to budgetary status accounts, the following

adjustments are required to reconcile the budgetary status to the non-budgetary Fund Balance as reported on the

Consolidated Balance Sheets:

• Adjustments for Borrowing Authority – Borrowing authority is in budgetary status reported on the Combined

Statements of Budgetary Resources but not in the Fund Balance because we have not received the amounts. The 

significant increase in borrowing authority is pursuant to the CARES Act in response to the COVID-19 pandemic (refer 

to Note 10); 
92 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

• 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. The change in Adjustments for ESF is primarily due

to ESF uninvesting overnight securities totaling $11.5 billion to support certain COVID-19 related programs (refer to

Note 10); 

• Adjustments for Intra-Treasury Investments – Budgetary resources include Treasury security investments; however, we

have moved the money from the Fund Balance to Investments, which we eliminate on the Consolidated Balance Sheets; 

• Adjustments for IMF – The funding received through appropriation warrants for IMF is reported as a component of

Fund Balance; however, the IMF transactions are not reported as budgetary resources and uses on the Combined

Statements of Budgetary Resources (refer to Note 7); and

• 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, 2020 and 2019, we had no budgetary authority in the Fund Balance that was specifically withheld from 

apportionment by the OMB. We hold balances in non-entity funds, such as certain deposit funds (e.g., seized cash), for the

public or for another federal entity, such as the General Fund. Such funds have an offsetting liability equal to the Fund

Balance. Refer to Note 7 regarding restrictions related to the letter of credit held for a portion of the U.S. quota in the IMF. 
DEPARTMENT OF THE TREASURY 93 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

3. LOANS AND INTEREST RECEIVABLE – INTRA-GOVERNMENTAL 

ENTITY INTRA-GOVERNMENTAL

Through FFB, we issue loans to federal agencies for the agencies’ own use or for the agencies to loan to private sector 

borrowers whose loans are guaranteed by the federal agencies. FFB is a wholly-owned Government corporation that

operates under the general supervision of the Secretary, and has its own broad statutory authority to finance any obligations

that are issued, sold, or guaranteed by federal agencies. For agencies that have the statutory authority to borrow in the

market, but not from Treasury through the Fiscal Service (refer to the Non-Entity Intra-Governmental section below), FFB 

uses its statutory authority to make these loans directly to federal agencies.

FFB also uses its statutory authority to finance direct or indirect federally-guaranteed obligations which, as a matter of longstanding federal credit policy, is the least expensive and most efficient method of financing these credit-risk obligations when 

compared to private sector lender financing. When a federal agency has to honor its guarantee because a private-sector 

borrower defaults, the federal agency that guaranteed the loan must obtain an appropriation or use other resources to repay

FFB. 

All principal and interest on FFB loans to federal agencies and private-sector borrowers are, or have a commitment to be,

backed by the full faith and credit of the U.S. government. Accordingly, we have not recognized any credit-related losses on 

its loans, nor have we recorded an allowance for uncollectible intra-governmental loans. 

As of September 30, 2020 and 2019, entity intra-governmental loans (issued by FFB) and interest receivable consisted of the

following: 

Loans Interest 2020 Loans Interest 2019 

(in millions) Receivable Receivable Total Receivable Receivable Total 

Department of Agriculture $ 46,652 $ 29 $ 46,681 $ 46,289 $ 525 $ 46,814 

Department of Energy 15,807 74 15,881 14,817 76 14,893 

United States Postal Service(1) 14,000 40 14,040 11,000 43 11,043 

Department of Housing & Urban

 Development 2,364 7 2,371 1,969 7 1,976 

Department of Education 1,503 13 1,516 1,482 13 1,495 

Other Agencies 330 1 331 4 - 4 

Total Entity Intra-governmental $ 80,656 $ 164 $ 80,820 $ 75,561 $ 664 $ 76,225 

(1) The United States Postal Service (USPS) experienced an operating deficit in both FY 2020 and FY 2019. 

We, along with Congress and other stakeholders, are aware of the current and long-term financial issues

of the USPS. Congress is considering legislative solutions for returning the USPS to financial stability. 
94 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

NON-ENTITY INTRA-GOVERNMENTAL 

Through the Fiscal Service, we account for and report on the principal borrowings from and repayments to the General Fund

for various funds managed by other federal agencies, as well as the related interest due to the General Fund. These federal 

agencies are statutorily authorized to borrow from the General Fund, through the Fiscal Service, to make loans for a broad

range of purposes, such as education, housing, farming, and small business support. The information below reflect amounts

borrowed under the federal agency’s statutory authorization, and does not include unused available borrowing authority.

As of September 30, 2020 and 2019, non-entity intra-governmental loans (issued by the Fiscal Service) and interest

receivable that were due to the General Fund consisted of the following:

Loans Interest 2020 Loans Interest 2019 

(in millions) Receivable Receivable Total Receivable Receivable Total 

Department of Education $ 1,249,870 $ - $ 1,249,870 $ 1,287,511 $ - $ 1,287,511 

Small Business Administration 176,174 - 176,174 11,810 - 11,810 

Department of Agriculture 96,450 - 96,450 90,753 - 90,753 

Department of Housing and Urban

 Development 51,852 - 51,852 30,409 - 30,409 

Department of Homeland Security 20,596 - 20,596 20,596 - 20,596 

Department of Transportation 16,682 - 16,682 20,756 - 20,756 

Export Import Bank of the U.S. 15,388 - 15,388 16,946 - 16,946 

Department of Energy 6,632 28 6,660 6,104 32 6,136 

Department of Labor 6,395 1 6,396 5,958 - 5,958 

US International Development Finance

 Corporation 4,678 - 4,678 3,829 - 3,829 

Railroad Retirement Board 4,384 39 4,423 3,934 48 3,982 

Executive Office of the President/

 Security Assistance Accounts 1,756 - 1,756 3,114 - 3,114 

Department of Defense 1,663 - 1,663 1,714 - 1,714 

Other Agencies 1,508 - 1,508 1,280 - 1,280 

Total Non-Entity Intra- 

 governmental $ 1,654,028 $ 68 $ 1,654,096 $ 1,504,714 $ 80 $ 1,504,794 

Total Intra-governmental Loans

 and Interest Receivable (Entity 

 and Non-Entity) $ 1,734,684 $ 232 $ 1,734,916 $ 1,580,275 $ 744 $ 1,581,019 
DEPARTMENT OF THE TREASURY 95 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

4. DUE FROM THE GENERAL FUND AND DUE TO THE GENERAL FUND

The General Fund consists of assets and liabilities used to finance the daily and long-term operations of the U.S government,

as a whole. It also includes accounts used in the management of the Budget of the U.S. Government. 

We hold and manage General Fund assets, such as loans and interest receivable, cash, and investments in the GSEs on 

behalf of the U.S. government. General Fund assets constitute resources available to meet the operating needs of the U.S.

government. We report these managed assets separately on the Consolidated Balance Sheets, with a corresponding amount

reported as Due To the General Fund that represents a liability to reflect assets we owed to the General Fund. 

General Fund liabilities, primarily federal debt and interest payable and liability for restoration of federal debt principal and

interest, are obligations of the U.S. government. We report these Department-managed liabilities separately on the

Consolidated Balance Sheets, with a corresponding amount reported as Due From the General Fund that represents a 

receivable, or future funds required of the General Fund to repay borrowings from the public and other federal agencies.

As of September 30, 2020 and 2019, the General Fund liabilities we owed exceeded the assets held on behalf of the General 

Fund by $23.1 trillion and $20.6 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, 2020 and 2019, Due From the General Fund included the following non-entity liabilities:

Liabilities Requiring Funding from the General Fund (in millions) 2020 2019 

Federal Debt and Interest Payable - Held by the Public (Note 16) $ 21,062,850 $ 16,839,627 

Federal Debt and Interest Payable - Intra-governmental (Note 16) 6,005,252 5,981,029 

Refunds Payable (Note 23) 3,751 2,939 

Adjustment for Eliminated Liabilities 22,077 31,736 

Total Due From the General Fund $ 27,093,930 $ 22,855,331 

The Adjustment for Eliminated Liabilities principally represents investments in U.S. government securities held by our

reporting entities that were eliminated against Federal Debt and Interest Payable Intra-governmental.

 
96 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

As of September 30, 2020 and 2019, Due To the General Fund included the following non-entity assets:

Assets to be Distributed to the General Fund (in millions) 2020 2019 

Fund Balance $ 2,539 $ 1,875 

Loans and Interest Receivable - Intra-governmental (Note 3) 1,654,096 1,504,794 

Advances to Trust Funds 37,166 3,152 

Cash Due To the General Fund (Held by the Department) (Note 5) 1,769,916 376,136 

Taxes and Other Non-Entity Receivables Due To the General Fund 237,346 145,717 

Credit Reform Downward Subsidy Re-estimates 13,025 106 

COVID-19 Investments, Credit Program Receivables, and Other (Note 10)

 Investments, Net 487 - 

 Notes and Interest Receivable, Net 5,320 - 

Investments in Government Sponsored Enterprises (Note 11) 108,910 112,070 

Adjustment for Eliminated Assets 161,647 68,646 

Other 1,329 1,120 

Total Due To the General Fund $ 3,991,781 $ 2,213,616 

The assets to be distributed to the General Fund do not represent all of the non-entity assets we manage. Refer to Note 15 for all 

of our non-entity assets held.

The Fund Balance reported above represents the non-entity funds we hold on behalf of the General Fund. It is used to

administer programs such as the Presidential Election Campaign and payments for Legal Services Corporation and thus not 

available for our general use.

The Advances to Trust Funds consists of Advances to the Unemployment Trust Fund and Advances to the Federal 

Supplementary Medical Insurance Trust Fund. The General Fund issues advances to the DOL’s Unemployment Trust Fund

to disburse to states for unemployment benefits. We transfer DOL’s repayment of these advances to the General Fund. 

Advances to the Unemployment Trust Fund grew by $36.0 billion largely due to an increase in unemployment claims due to

the COVID-19 pandemic. The Bipartisan Budget Act of 2015 (P.L. 114-74) authorized a transfer from the General Fund to

HHS’ Federal Supplementary Medical Insurance Trust Fund to temporarily replace the reduction in Medicare Part B 

participants’ premiums. We transfer HHS’s repayment of these advances to the General Fund. 

Taxes and Other Non-Entity Receivables Due To the General Fund primarily represents IRS-related federal taxes receivable

(refer to Note 8).

The Adjustment for Eliminated Assets principally represents loans and interest payable owed by our Treasury reporting

entities, which were eliminated against Loans and Interest Receivable Intra-governmental held by the Fiscal Service.
DEPARTMENT OF THE TREASURY 97 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

5. CASH, FOREIGN CURRENCY, AND OTHER MONETARY ASSETS

Cash, Foreign Currency, and Other Monetary Assets held as of September 30, 2020 and 2019 were as follows: 

(in millions) 2020 2019 

Entity: 

Cash $ 90 $ 74 

Foreign Currency and Foreign Currency Denominated Assets 15,867 14,032 

Other Monetary Assets:

 Special Drawing Right Holdings 51,740 50,054 

 U.S. Dollars Held in Cash by the IMF 365 304 

Total Entity 68,062 64,464 

Non-Entity: 

Operating Cash of the U.S. government 1,769,869 376,070 

Foreign Currency 134 100 

Miscellaneous Cash Held by All Treasury Reporting Entities 300 731 

Total Non-Entity 1,770,303 376,901 

Total Cash, Foreign Currency, and Other Monetary Assets $ 1,838,365 $ 441,365 

We hold non-entity operating and other miscellaneous cash due to the General Fund which consisted of the following as of 

September 30, 2020 and 2019: 

(in millions) 2020 2019 

Operating Cash - FRB Account $ 1,781,679 $ 382,483 

Outstanding Checks (11,810) (6,413) 

Total Operating Cash of the U.S. government 1,769,869 376,070 

Miscellaneous Cash 51 70 

Subtotal 1,769,920 376,140 

Amounts Due to the Public (4) (4) 

Total Cash Due to the General Fund (Note 4) $ 1,769,916 $ 376,136 

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, 2020 and 2019 using current exchange rates plus

accrued interest. 

Foreign Currency and Foreign Currency Denominated Assets 

Foreign currency and FCDAs represent foreign deposit accounts and securities with original maturities of three months or 

less which were valued at $15.9 billion and $14.0 billion as of September 30, 2020 and 2019, 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, we issued certificates to the Federal Reserve, valued at $5.2 billion which were reported as a liability on the
98 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

Consolidated Balance Sheets as of September 30, 2020 and 2019. The certificates were issued to finance the ESF’s

acquisition of SDRs from other countries or to provide U.S. dollar resources for financing other ESF operations. 

On a daily basis, the IMF calculates the value of the SDR using the currency exchange rate in terms of the U.S. dollar from 

weighted amounts of each of five freely usable currencies, as defined by the IMF. These currencies are the U.S. dollar, the

European euro, the Japanese yen, the British pound sterling, and the Chinese renminbi. We revalue the U.S. SDR holdings

and allocations from the IMF monthly based on the SDR valuation rate calculated by the IMF.

Pursuant to the IMF Articles of Agreement, SDR holdings and allocations acquired by the U.S. 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 U.S. 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 U.S., the payment of the U.S. commitment related

to SDR allocations is conditional on events listed above, in which the U.S. has a substantial or controlling voice. The U.S.

has received no SDR allocations since 2009.

As of September 30, 2020 and 2019, the total amount of SDR holdings of the U.S. (including interest receivable) was the

equivalent of $51.7 billion and $50.1 billion, respectively. As of September 30, 2020 and 2019, the total value of SDR

allocations to the U.S. was the equivalent of $49.7 billion and $48.1 billion, respectively.

NON-ENTITY

We manage the non-entity cash, foreign currency, and other monetary assets which principally included Operating Cash of 

the U.S. government. Also included is foreign currency maintained by various U.S. disbursing offices, miscellaneous cash

such as seized monetary instruments, undistributed cash, and offers in compromises which are maintained as a result of our 

tax collecting responsibilities. The Operating Cash of the U.S. government represents balances from tax collections, other 

revenues, federal debt receipts, and other receipts, net of checks outstanding, which are held in the FRBNY. The Operating

Cash of the U.S. government grew by $1.4 trillion largely due to an increase in federal debt cash proceeds received from the

increased issuance of Treasury Bills. 
DEPARTMENT OF THE TREASURY 99 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

6. GOLD AND SILVER RESERVES, AND GOLD CERTIFICATES ISSUED TO 

THE FEDERAL RESERVE BANKS

Through the Mint, we are responsible for safeguarding most of the U.S. government’s gold and all of the silver reserves in

accordance with 31 USC 5117; a smaller portion of the gold is in the custody of the FRBs.

The gold reserves we hold are partially offset by a liability for gold certificates issued by the Secretary to the FRBs at the

statutory rate, as provided in 31 USC 5117. Since 1934, Gold Certificates have been issued in non-definitive or book-entry

form to the FRBs. Our liability incurred by issuing the Gold Certificates, as reported on the Consolidated Balance Sheets, is

limited to the gold we hold at the statutory value. Upon issuance of Gold Certificates to the FRBs, we deposit the proceeds 

from the certificates into the operating cash of the U.S. government. All of our certificates issued are payable to the FRBs. 

The Mint also holds 100,000 fine troy ounces (FTO) ($4 million at the statutory carrying value) of gold reserves without

certificates.

The gold and silver bullion reserve (deep storage and working stock) are reported on the consolidated financial statements at

the values stated in 31 USC 5116 – 5117 (statutory rates) which are $42.2222 per FTO of gold and no less than

$1.292929292 per FTO of silver. Accordingly, the silver is valued at $1.292929292 per FTO. The market values of the gold

and silver reserves disclosed below are based on the London Gold Fixing. As of September 30, 2020 and 2019, the values of 

gold and silver reserves consisted of the following:

2020 

Statutory 2020 

Carrying Market Market 

Statutory Value Rate Per Value 

 FTOs Rate (in millions) FTO (in millions)

Gold 248,046,116 $ 42.2222 $ 10,473 $ 1,886.90 $ 468,038 

Gold Held by Federal Reserve Banks 13,452,811 $ 42.2222 568 $ 1,886.90 25,384 

Total Gold 261,498,927 11,041 493,422 

Silver 16,000,000 $ 1.2929 21 $ 23.73 380 

Total Gold and Silver Reserves $ 11,062 $ 493,802 

2019 

Statutory 2019 

Carrying Market Market 

Statutory Value Rate Per Value 

 FTOs Rate (in millions) FTO (in millions)

Gold 248,046,116 $ 42.2222 $ 10,473 $ 1,485.30 $ 368,423 

Gold Held by Federal Reserve Banks 13,452,811 $ 42.2222 568 $ 1,485.30 19,982 

Total Gold 261,498,927 11,041 388,405 

Silver 16,000,000 $ 1.2929 21 $ 17.26 276 

Total Gold and Silver Reserves $ 11,062 $ 388,681 
100 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

7. RESERVE POSITION IN THE INTERNATIONAL MONETARY FUND AND

RELATED LOANS AND INTEREST RECEIVABLE

The U.S. participates in the IMF through a quota subscription and a separate borrowing arrangement—the New

Arrangements to Borrow (NAB)—that supplements IMF resources. 

As a result of the Consolidated Appropriations Act, 2016 (P.L. 114-113) we obtained appropriation warrants to cover the full

amount of the commitment made to the IMF and received current indefinite authority to maintain the U.S. dollar equivalent

of the SDR funding commitment levels. The IMF transactions—other than related interest earnings and cost estimates for 

U.S. quota and NAB adjustments—are not reported as budgetary resources and uses on our Combined Statement of 

Budgetary Resources. 

RESERVE POSITION IN THE INTERNATIONAL MONETARY FUND

We pay quota subscriptions partly through the transfer of reserve assets, such as foreign currencies or SDRs, which are

international reserve assets created by the IMF, and partly by making domestic currency available as needed through a noninterest-bearing letter of credit. This letter of credit, issued by us and maintained by the FRBNY, represents our available

commitment to the IMF which may be drawn upon by the IMF. 

Transfers to the IMF under the U.S. quota do not result in net budgetary outlays as they constitute an exchange of monetary

assets in which the U.S. 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 U.S., 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 U.S., and is available at any time to meet U.S. funding needs.

The U.S. quota is denominated in SDRs. As of September 30, 2020 and 2019, the U.S. quota in the IMF was SDR

83.0 billion. The equivalent U.S. dollar value of the U.S. quota consisted of the following:

(in millions) 2020 2019 

Letter of Credit (1) $ 85,387 $ 90,033 

Reserve Position (2) 31,211 22,955 

Total U.S. Quota in the IMF $ 116,598 $ 112,988 

(1) Letter of Credit amounts are included as part of the “Fund Balance” as reported on the Consolidated Balance Sheets. Amounts also include

approximately 0.25 percent of the U.S. quota held in cash in an IMF account at the FRBNY. 

(2) The Reserve Position amounts are reported as “Reserve Position in the IMF” on the Consolidated Balance Sheets. 

Fluctuations in the value of the U.S. dollar with respect to the SDR result in valuation changes in dollar terms for the U.S.

quota. We periodically adjust this balance to maintain the SDR value of the U.S. quota as required by the IMF Articles of 

Agreement. As of September 30, 2020 and 2019, the U.S. quota reflects a net upward adjustment in value of $3.6 billion and

a net downward adjustment in value of $2.7 billion, respectively, due to the depreciation and appreciation of the U.S. dollar

against the SDR, respectively. 

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 U.S. has the
DEPARTMENT OF THE TREASURY 101 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

authority to participate in the NAB. When the U.S. transfers funds to the IMF under the NAB, the U.S. receives in

exchange a liquid and interest-bearing claim on the IMF. 

In accordance with P.L. 114-113, U.S. participation in the NAB as of September 30, 2020 and 2019 was SDR 28.2 billion,

which was equivalent to $39.7 billion and $38.4 billion respectively. As of September 30, 2020 and 2019, under the U.S.

NAB arrangement with the IMF, there was $1.7 billion and $2.5 billion, respectively, of U.S. loans outstanding which were

reported as “Loans and Interest Receivable” on the Consolidated Balance Sheets. 

In accordance with P.L. 116-136, the Secretary is authorized to make additional loans not to exceed the dollar equivalent of 

SDR 28.2 billion to carry out the purposes of a decision of the IMF to expand the resources of the NAB, provided that prior to

the activation of the NAB, the Secretary must have reported to Congress whether supplemental resources are needed to

forestall or cope with an impairment of the international monetary system and whether the IMF has fully explored other 

means of funding. The Managing Director of the IMF formally requested an increase of the NAB in January 2020, which

would increase U.S. participation in the NAB by an additional SDR 28.2 billion. The U.S. issued its consent to the NAB

increase in May 2020. The NAB increase is scheduled to take effect January 1, 2021.

8. TAXES, INTEREST, AND OTHER RECEIVABLES, NET

As of September 30, 2020 and 2019, Taxes, Interest, and Other Receivables, Net consisted of the following:

(in millions) 2020 2019 

Non-Entity

Federal Taxes Receivable, Gross $ 427,251 $ 369,257 

Less Allowance on Taxes Receivable (191,246) (225,251) 

Receivable on FRB Deposits of Earnings 162 603 

Other Receivables 1,324 1,247 

Less Allowance on Other Receivables (134) (127) 

Total Non-Entity (Note 15) 237,357 145,729 

Entity 

Miscellaneous Entity Receivables and Related Interest 233 149 

Total Taxes, Interest, and Other Receivables, Net $ 237,590 $ 145,878 

Federal taxes receivable constitutes the largest portion of these receivables, with IRS-related federal taxes receivable

representing the majority of the balance. IRS federal taxes receivable consists of delinquent 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. These 

receivables also include non-delinquent IRC 965(h) amounts and, in FY 2020, employers’ deferred share of the Social

Security portion of FICA and both the employers’ and employee representatives’ share of the RRTA, as provided by Section

2302 of the CARES Act. The growth in the Federal Taxes Receivable, Gross amount is largely due to the increase in nondelinquent IRC 965(h) amounts, and the inclusion in FY 2020 of the FICA and RRTA deferred amounts mentioned above for 

which employers may defer payment, without penalty, under the CARES Act. 

Federal taxes receivable is reduced by an allowance for doubtful accounts which we established to represent an estimate for 

uncollectible amounts. The decrease in IRS’s allowance on taxes receivable is primarily the result of a change in

collectability methodology for Section 965(h) taxes receivable. The portion of taxes receivable estimated to be collectible and

the allowance for doubtful accounts are based on projections of collectability from a statistical sample of taxes receivable
102 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

(refer to the section entitled Required Supplementary Information (unaudited) for additional discussion on IRS Federal 

Taxes Receivable, Net). 

Federal taxes receivable also includes amounts related to criminal restitution owed to the U.S. government. As of 

September 30, 2020 and 2019, respectively, gross receivables related to criminal restitution orders we monitored were 

$3.5 billion and $3.1 billion, of which we determined $0.4 billion and $0.4 billion were collectible.

In addition to amounts attributed to taxes, these receivables also include accrued interest income due on funds deposited in

FRBs. We do not establish an allowance for the receivable on deposits of FRB earnings because weekly deposits are required

by the Federal Reserve Act, as amended, and there has been no history of uncollectible accounts. 
DEPARTMENT OF THE TREASURY 103 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

9. CREDIT PROGRAM RECEIVABLES, NET

We administer a number of programs designed to stabilize the nation’s financial system and restore the flow of credit to

consumers, businesses, and homeowners. As of September 30, 2020 and 2019, Credit Program Receivables, Net consisted of 

the following:

(in millions) 2020 2019 

State and Local Housing Finance Agency Program (GSE sponsored) $ 2,395 $ 3,684 

Other (1) 1,309 1,183 

Total $ 3,704 $ 4,867 

(1) Includes CDFI, SBLF, and TARP credit program receivables valued at $1.2 billion, $46 million and $16 million, respectively, as of

September 30, 2020, and $1.1 billion, $48 million, and $23 million, respectively, as of September 30, 2019. 

STATE AND LOCAL HOUSING FINANCE AGENCY PROGRAM (GSE SPONSORED) 

Under the Housing and Economic Recovery Act of 2008 (HERA), (P.L. 110-289), we, together with the FHFA, Fannie Mae,

and Freddie Mac, created a program in October 2009 to provide support to HFAs. The HFA Program is comprised of the

New Issue Bond Program (NIBP) that is designed to support low mortgage rates and expand resources for low- and middleincome borrowers to purchase or rent homes, making them more affordable over the long term. Under the terms of the

NIBP, we purchased securities of Fannie Mae and Freddie Mac backed by new mortgage revenue bonds issued by HFAs. As

of September 30, 2020 and 2019, the HFA net credit program receivable of $2.4 billion and $3.7 billion, respectively, included

a positive subsidy allowance of $395 million and $582 million, respectively, which reflects our projection that the HFA 

program will result in a net cost to us after accounting for repayments, interest, and fees. 

We performed a financial statement re-estimate of the NIBP program’s cost as of September 30, 2020 and 2019. These reestimates resulted in a downward re-estimate, or a decrease in the cost of the program, of $174 million and $17 million as of 

September 30, 2020 and 2019, respectively. The downward re-estimates in FY 2020 and 2019 were primarily driven by

higher than estimated principal collections, and a higher prepayment curve used in the projection of future years’ cash flows 

as a result of improved economic conditions. 

SUMMARY TABLES

The following tables provide the net composition, subsidy cost, re-estimates, a reconciliation of subsidy cost allowances, and

the components of the subsidy for each of our credit programs for the fiscal years ended September 30, 2020 and 2019. 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 FY 2020 and 2019 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 we would expect to receive from selling these assets.
104 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

2020

(in millions) HFA Other(2) TOTAL

Credit Program Receivables, Net:

 Credit Program Receivables, Gross $ 2,790 $ 1,312 $ 4,102

 Subsidy Cost Allowance (395) (3) (398)

Net Credit Program Receivables $ 2,395 $ 1,309 $ 3,704

New Credit Program Loans Disbursed $ - $ 171 $ 171

Obligations for Loans Not Yet Disbursed $ - $ 451 $ 451

Reconciliation of Subsidy Cost Allowance: 

 Balance, Beginning $ 582 $ 18 $ 600

 Subsidy Cost for Disbursements - (4) (4)

 Fees, Interest and Dividend Revenue Received 104 34 138

 Net Proceeds from Sales and Repurchases of Assets 

 in Excess (Less than) Cost - (17) (17)

 Subsidy Allowance Amortized (1) (117) (37) (154)

Balance, Ending, Before Re-estimates 569 (6) 563

 Subsidy Re-estimates (174) 9 (165)

Balance, Ending $ 395 $ 3 $ 398

Re-estimates 

 Interest on Re-estimate $ (59) $ 17 $ (42)

 Technical/Default Re-estimate (115) (8) (123)

Total Re-estimates – Increase (Decrease) in 

 Subsidy Cost $ (174) $ 9 $ (165)

Reconciliation of Subsidy Costs:

 Subsidy Cost for Disbursements $ - $ (4) $ (4)

 Subsidy Re-estimates (174) 9 (165)

Total Credit Program Receivables Subsidy Costs $ (174) $ 5 $ (169)

Administrative Expense $ 1 $ 3 $ 4 

2019

(in millions) HFA Other(3) TOTAL

Credit Program Receivables, Net:

 Credit Program Receivables, Gross $ 4,266 $ 1,201 $ 5,467

 Subsidy Cost Allowance (582) (18) (600)

Net Credit Program Receivables $ 3,684 $ 1,183 $ 4,867

New Credit Program Loans Disbursed $ - $ 353 $ 353

Obligations for Loans Not Yet Disbursed $ - $ 537 $ 537

Reconciliation of Subsidy Cost Allowance:

 Balance, Beginning $ 630 $ 18 $ 648

 Subsidy Cost for Disbursements - (10) (10)

 Fees, Interest, and Dividend Revenue Received 118 38 156

 Net Proceeds from Sales and Repurchases of Assets

 in Excess of (Less than) Cost - 72 72

 Subsidy Allowance Amortized (1) (149) (34) (183)

Balance, Ending, Before Re-estimates 599 84 683

 Subsidy Re-estimates (17) (66) (83)

Balance, Ending $ 582 $ 18 $ 600

 Re-estimates

 Interest on Re-estimate $ (5) $ 8 $ 3 

 Technical/Default Re-estimate (12) (74) (86)

Total Re-estimates – Increase (Decrease) in 

 Subsidy Cost $ (17) $ (66) $ (83)

 Reconciliation of Subsidy Costs:

 Subsidy Cost for Disbursements $ - $ (10) $ (10)

 Subsidy Re-estimates (17) (66) (83)

Total Credit Program Receivables Subsidy Costs $ (17) $ (76) $ (93)

Administrative Expense $ 1 $ 5 $ 6 

(1) Amount includes net interest income (expense) on borrowings from the Fiscal Service and financing account balance.

(2) CDFI Financial Assistance Direct Loan Program budget subsidy rates for Interest Differential and for Defaults were 1.05% and 8.55%, respectively.

(3) CDFI Financial Assistance Direct Loan Program budget subsidy rates for Interest Differential and for Defaults were 1.00%, and 9.11%, respectively.
DEPARTMENT OF THE TREASURY 105 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

10. COVID-19 INVESTMENTS, ADVANCES, RECEIVABLES, AND OTHER

The global spread of the COVID-19 in early spring of 2020 has resulted in a severe global health and economic crisis. In

March of 2020, the Federal Reserve Board of Governors (Board) and Congress took steps to limit the damage caused by the

pandemic in the U.S. by helping to reduce the financial burden on individuals and their families, minimize business and

employment losses, and enhance the liquidity of the U.S. financial system. Treasury has played a critical role in the

implementation and support of these actions by the Federal Reserve and Congress.

Among other things, the Board used its emergency-lending authority under Section 13(3) of the Federal Reserve Act (Section 

13(3) hereafter) authorizing the FRBNY and the FRBB to establish liquidity lending facilities for the purpose of making

loans and purchasing debt and other commercial paper of eligible entities to support key U.S. financial markets. 

Additionally, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act or the “Act”), P.L. 116-

136, appropriating additional funds to Treasury to support the Board’s emergency efforts, as well as to provide financial aid

to U.S. individuals and businesses to counter losses. Our Exchange Stabilization Fund (ESF) utilized its core authority, the

Gold Reserve Act, as amended, to support two of the Board’s liquidity lending facilities. 

Section 4027 of the CARES Act appropriated $500.0 billion to our ESF to fund the credit subsidy costs associated with

making loans, loan guarantees, or investments through December 31, 2020 in support of eligible businesses, states and

municipalities that incurred losses as a result of COVID-19. CARES Act Section 4003 authorized Treasury to make such

loans, loan guarantees and other investments that did not, in the aggregate, exceed $500.0 billion, of which $46.0 billion was

available to make direct loans and loan guarantees to passenger air carriers and certain related businesses, air cargo

carriers, and businesses critical to maintaining national security, and $454.0 billion (together with any unused amounts

from the $46.0 billion) was available to make loans and loan guarantees to, and investments in, programs or facilities

established by the Board to provide liquidity to the financial system that supported lending to eligible businesses, states, or 

municipalities. 

On December 27, 2020, the President signed into law the Consolidated Appropriations Act, 2021, which, as of the date of 

enactment, rescinded $429.0 billion of the $500.0 billion appropriation provided to Treasury under Section 4027 of the

CARES Act and provided that the remaining unobligated appropriation as of January 9, 2021 will be rescinded as of that

date other than with respect to those funds made available for administrative expenses pursuant to Section 4003(f), for the

Special Inspector General for Pandemic Recovery pursuant to Section 4018(g), and for the Congressional Oversight

Commission pursuant to Section 4020. Effective January 9, 2021, the statute eliminates Treasury’s ability to make new 

loans and investments under Section 4003 of the CARES Act. In addition, the statute prohibits the Federal Reserve from 

engaging in further lending or extensions of credit, after December 31, 2020, through facilities established by the Federal 

Reserve under Section 13(3) of the Federal Reserve Act in which Treasury made investments under Section 4003 of the

CARES Act other than a loan submitted on or before December 14, 2020, to the Main Street facilities (discussed below) for 

the sale of a participation interest in such loan, provided that the Main Street facilities purchase a participation interest in

such loan on or before January 8, 2021. After December 31, 2020, the Federal Reserve is also prohibited from modifying the

terms and conditions of any of the facilities in which Treasury made investments under the CARES Act. 

Section 4112 of the CARES Act provided $32.0 billion of appropriated funds for us to make financial assistance payments to

passenger air carriers, air cargo carriers, and contractors to provide payroll support for the purpose of preserving aviation

jobs during the pandemic. 
106 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

Section 5001 provided $150.0 billion of appropriated funds for us to make COVID-19 relief direct payments for specified use

to affected states, local, territorial, and tribal governments. 

Treasury, through the IRS, obtained $282.0 billion of its permanent and indefinite authority to pay recovery rebates for 

individuals (or Economic Impact Payments) pursuant to Section 2201 of the CARES Act. The IRS also obtained $10.0 billion

of its permanent and indefinite authority pursuant to Section 2301 of the CARES Act and Sections 7001-7004 of the Families

First Coronavirus Response Act of 2020 (FFCRA) to fund tax credits associated with the Sick and Family Leave and

Employee Retention Tax Credits programs.
DEPARTMENT OF THE TREASURY 107 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

The table below summarizes key Treasury budgetary resources and the status of those resources by program, as of 

September 30, 2020, enacted in response to the COVID-19 pandemic:

(in millions)

Appropriation 

and 

Other 

Authority (1)

Borrowing 

Authority and 

Other 

Adjustments (2)

Less: 

Obligations 

Incurred

Remaining 

Available 

Budgetary 

Resources

CARES Act Authority Used in Response to COVID-19 

Section 13(3) Federal Reserve Programs - Liquidity Lending 

 Facilities (Section 4003) $ 454,000 $ 164,835 $ (195,000) $ 423,835 

Direct Loans to Air Carriers and National Security Business 

 (Section 4003) 46,000 13,656 (15,355) 44,301 

Total Investments and Direct Loans 500,000 178,491 (210,355) 468,136 

Payroll Support to Aviation Workers (Section 4112) 32,000 - (28,206) 3,794 

Coronavirus Relief Fund - Payments to States, Local, Territorial & 

 Tribal Governments (Section 5001) 150,000 - (150,000) - 

Total Relief Funding 182,000 - (178,206) 3,794 

Economic Impact Payments for Individuals (Section 2201) 282,000 (7,346) (274,654) - 

Sick and Family Leave (FFCRA Section 7001-7004) and 

 Employee Retention (CARES Act Section 2301) Tax Credits 10,000 (9,286) (714) - 

Total Tax Provision 292,000 (16,632) (275,368) - 

Other Program Support and Oversight (3) 1,045 25 (596) 474 

Total CARES Act Authority $ 975,045 $ 161,884 $ (664,525) $ 472,404 

Remaining Available Resources – Investments and Direct Loans(4)

Maximum Available Per Statute (Section 4003) $ 500,000 

Less: Disbursements Made (using Subsidy and Borrowings) (104,320) 

Total Availability $ 395,680 

ESF Core Authority Used in Response to COVID-19

Commercial Paper Funding Facility $ 10,000 $ - $ (10,000) $ - 

Money Market Mutual Fund Liquidity Facility 10,000 - (10,000) - 

Total ESF Authority $ 20,000 $ - $ (20,000) $ - 

(1) Appropriation and Other Authority includes the ESF’s authority provided by the CARES Act which, together with ESF’s core authority under

the Gold Reserve Act, were used to finance emergency programs in response to the COVID-19 pandemic. Appropriation authority provided

pursuant to the FFCRA is also included.

(2) Appropriation Authority is used to finance the subsidy costs associated with making the investments and direct loans in accordance with the

provisions of FCRA. Borrowing Authority is used to finance the remainder of the disbursed amounts via borrowings from Fiscal Service. Other

Adjustments primarily include a $16.6 billion withdrawal of unused indefinite appropriations for the tax provision programs.

(3) These primarily represent, among other things, the Department’s program support and oversight of the CARES Act programs. 

(4) Includes available resources for making new investments and direct loans to eligible businesses, states, and municipalities through

December 31, 2020. Refer to the section below entitled “Subsequent Events” for a discussion of events that transpired after September 30, 2020.

Section 4027 of the CARES Act provided for $500.0 billion in appropriations to finance the subsidy portion of investments

and loans in support of eligible businesses, states, and municipalities. During FY 2020, we disbursed an aggregate of 

$104.3 billion (comprised of $102.5 billion and $1.8 billion for investments and direct loans, respectively), which we financed

with $19.3 billion of the appropriation to fund the subsidy portion and $85.0 billion of Fiscal Service borrowings. As of 

September 30, 2020, $480.6 billion of the CARES Act appropriation remained and was reported in Fund Balance.
108 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

Section 4003 authorized Treasury to make direct loans, loan guarantees and other investments that do not, in the aggregate, 

exceed $500.0 billion. As previously mentioned above, Treasury disbursed $104.3 billion in FY 2020 in making investments 

and direct loans. After taking into consideration the $104.3 billion disbursed, $395.7 billion was available as of September 

30, 2020 for making new investments and direct loans in support of eligible businesses, states, and municipalities through 

December 31, 2020 (refer to the section below entitled “Subsequent Events” for events that transpired after 

September 30, 2020). 

In addition to the amounts already disbursed, we also had obligated but undisbursed amounts committed as of 

September 30, 2020 for future investment and loan disbursements totaling $106.0 billion (comprised of $92.5 billion and 

$13.5 billion, respectively). If disbursed, we would use $12.5 billion of the remaining $480.6 billion of the CARES Act 

appropriation to finance the subsidy portion of these disbursements, and finance the remaining $93.5 billion using Fiscal 

Service borrowings. Accordingly, when factoring in the obligated but undisbursed amounts committed, our unobligated 

budgetary resources available as of September 30, 2020 were $468.1 billion ($480.6 billion remaining appropriation less 

$12.5 billion of obligated but undisbursed subsidy). Please refer to the section below entitled “Subsequent Events”. 

SECTION 13(3) FEDERAL RESERVE PROGRAMS

In March through July 2020, the Board, pursuant to Section 13(3) and Regulation A of the Board, authorized the FRBNY

and FRBB to establish emergency liquidity lending facilities. Certain of the facilities were operationalized through Special

Purpose Vehicles (SPVs) governed by Limited Liability Company (LLC) agreements between Treasury and the applicable

Federal Reserve Bank (FRB). The FRBNY and FRBB established these facilities for the purpose of making loans and

purchasing debt and other commercial paper of eligible entities affected by COVID-19 in an effort to provide liquidity to the

U.S. financial system. As of September 30, 2020, the two FRBs had established the following LLCs: (i) Corporate Credit

Facilities LLC (CCF), (ii) Main Street Facilities LLC (MSF), (iii) Municipal Liquidity Facility LLC (MLF), (iv) Term AssetBacked Securities II LLC (TALF), and (v) Commercial Paper Funding Facility II LLC (CPFF). The FRBB also established

the Money Market Mutual Fund Liquidity Facility (MMLF) for similar purposes as the SPVs, but with a structure that

differs from that of the SPVs (as later discussed in the description of this program below). 

The SPVs purchase assets and offer loans collateralized by corporate bonds, commercial paper, asset-backed securities, and

municipal debt and loans to certain eligible states, municipalities, businesses and non-profit organizations affected by

COVID-19. The FRBNY and FRBB contributed $10.00 in cash to capitalize each SPV they established. Additionally, the

FRBNY and FRBB make loans to the SPVs, on a recourse basis, to fund the SPVs’ purchase of assets from, or loans made to,

eligible U.S. issuers and businesses with certain assets as collateral. As the managing member of each SPV, FRBNY or 

FRBB, as applicable, has the exclusive right to manage the business of the SPV and has all powers and rights necessary to

carry out the purposes and business of the SPV. The FRBNY and FRBB will continue to fund each SPV until the SPV’s

underlying assets mature or are sold or distributed. 

We provided equity to each SPV to protect the FRBNY and FRBB from potential losses from financing the facilities. We

provided this protection by committing and contributing capital in the form of cash to the SPVs in exchange for a preferred 

equity interest in the SPVs. To the extent the FRBNY and FRBB experience losses, our preferred equity accounts absorb

such losses up to the maximum amounts per the terms of the LLC agreements. As a preferred equity member, we have no

voting, consent, or control rights over the SPV. The managing member and preferred equity member are the sole members

of the SPVs.
DEPARTMENT OF THE TREASURY 109 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

(in millions) FRB Manager

Total Treasury 

Commitment 

Disbursed as of 

9/30/20 

Available for 

Future 

Disbursement 

Corporate Credit Facilities LLC (1) FRBNY $ 75,000 $ 37,500 $ 37,500 

Main Street Facilities LLC (1) FRBB 75,000 37,500 37,500 

Municipal Liquidity Facility LLC (1) FRBNY 35,000 17,500 17,500 

Term Asset-Backed Securities II LLC (1) FRBNY 10,000 10,000 - 

Commercial Paper Funding Facility II LLC FRBNY 10,000 10,000 - 

Money Market Mutual Fund Liquidity Facility FRBB 10,000 1,500 8,500 

Total 13(3) Facilities $ 215,000 $ 114,000 $ 101,000 

(1) Consistent with the enactment of the Consolidated Appropriations Act, 2021, on December 29, 2020, Treasury and the Federal 

Reserve amended the SPV LLC Agreements for each of the SPVs funded under the CARES Act to, among other things, change 

the terms of our commitments (refer to the section entitled “Subsequent Events”). 

We funded the disbursed amounts for both the CPFF and MMLF credit facilities using ESF core funds. These core funds are

exempt from apportionment, and were previously invested in overnight, nonmarketable U.S. Treasury securities (refer to

Note 2). For all other credit facilities, we funded the disbursed amounts utilizing, in part, the $454.0 billion of funds

appropriated under Section 4027 that the ESF, under Section 4003(a) of the CARES Act, is authorized to use to make loans,

loan guarantees and other investments in programs or facilities established by the Board. In accordance with Section

4003(a) of the CARES Act, these appropriated funds are to be used to provide the subsidy amounts necessary for such loans,

loan guarantees, and other investments in accordance with the provisions of FCRA. The remainder of the disbursed

amounts were funded by borrowings from Fiscal Service.

Each SPV maintains the proceeds of our equity investment within a preferred equity account. As mutually agreed to by the

applicable FRB and Treasury, 85 percent of the preferred equity cash proceeds of each SPV are permitted to be invested in

interest-bearing, special, non-marketable Treasury securities (refer to Note 16). The remaining 15 percent is retained in

cash or cash-equivalents by the SPV for its cash requirements. Any interest and other proceeds from these investments will

be deposited into the preferred equity account.

Under the current terms of the LLC agreements, membership interests will not receive periodic or other distributions during

the life of the SPV. Distribution of the SPV’s assets will be made only upon dissolution of the facility, after liabilities and

other interests are paid. Upon dissolution, we will be entitled to an amount equal to the cash balance of the preferred equity

account plus 90 percent of the cash balance in all of the other accounts of the SPV. The applicable FRB is entitled to

10 percent of the cash balance in all of the other accounts of the SPV. The final distribution amount we receive will be used

to repay all costs associated with our preferred equity investment in the SPV, including the initial subsidy amounts funded 

by appropriation and all amounts borrowed from Fiscal Service. In accordance with Section 4003(c) of the CARES Act, any

excess amount of the final distribution after repayment of the appropriations and debt will be deposited into the Federal OldAge and Survivors Insurance Trust Fund established under Section 201(a) of the Social Security Act. 

The following is a description of each liquidity lending facility. These descriptions include financial information about the

assets held in each SPV as of September 30, 2020 which we obtained from the FRB’s Combined Quarterly Financial Reports

(unaudited). Following these descriptions are sections entitled, “COVID 19: Investments, Net” and “COVID 19: Other

Assets” which discuss the accounting treatment for these facilities.
110 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

Corporate Credit Facilities LLC

On April 13, 2020, the FRBNY established the CCF as the SPV to facilitate both the Primary Market Corporate Credit

Facility (PMCCF) and the Secondary Market Corporate Credit Facility (SMCCF) programs in support of providing the flow 

of credit to employers through corporate bond and loan issuances. 

The FRBNY lends to the SPV on a recourse basis. The PMCCF purchases qualified bonds from eligible issuers, and

purchases portions of syndicated loans or bonds at issuance, giving issuers access to credit so that they are better able to

maintain business operations and capacity during the period of disruption caused by COVID-19. The FRBNY is secured by

all the assets of the SPV. The PMCCF buys bonds and loans of investment grade companies, as well as certain companies

that were investment grade as of March 22, 2020.

The SMCCF supports the flow of credit to employers by providing liquidity to the market for outstanding corporate bonds. 

The SMCCF purchases in the secondary market corporate bonds issued by investment grade U.S. companies or certain U.S.

companies that were investment grade as of March 22, 2020, as well as U.S. listed exchange-traded funds whose investment

objective is to provide broad exposure to the market for U.S. corporate bonds.

Treasury, through the ESF, has committed to contribute up to a combined total of $75.0 billion in capital in the single

common SPV supporting both programs. The nominal allocation of the equity is up to $50.0 billion toward the PMCCF and

up to $25.0 billion toward the SMCCF. On May 11, 2020, we acquired an equity interest in the SPV by transferring a 

combination of CARES Act appropriated and Treasury borrowed funds for an aggregate total of $37.5 billion to the CCF SPV 

to cover potential losses incurred by FRBNY in connection with this program. The combined funding commitment of the

FRBNY to the SPV for the PMCCF and SMCCF programs is up to $750.0 billion. As of September 30, 2020, the CCF held

total assets of $13.1 billion excluding our equity contribution of $37.5 billion (or $50.6 billion including our equity

contribution). The SPV will cease purchasing eligible notes on December 31, 2020. 

Main Street Facilities LLC

On May 18, 2020, the FRBB established the MSF to support lending to small and medium-sized businesses that were in

sound financial condition before the onset of the COVID-19 pandemic and have good post-pandemic prospects. The MSF

program operates through five facilities: (i) the Main Street New Loan Facility (MSNLF), (ii) the Main Street Priority Loan 

Facility (MSPLF),(iii) the Main Street Extended Loan Facility (MSELF), (iv) the Main Street Nonprofit Organization New

Loan Facility (NONLF), and (v) the Main Street Nonprofit Organization Expanded Loan Facilities (NOELF). Through loans

from the FRBB, the SPV purchases 95 percent participations in loans originated by eligible lenders, while the lender retains

five percent. To qualify for MSF loans, potential borrowers must meet certain specified eligibility criteria and pass normal

lender underwriting processes. Loans issued under the MSF program have a five-year maturity, principal payments are

deferred for two years, and interest payments are deferred for one year. All loans are amortized in years 3-5 according to the

following schedule: 15 percent, 15 percent, 70 percent. Eligible lenders may originate new loans (under MSNLF, MSPLF, 

and NONLF) or increase the size of (or “upsize”) existing loans (under MSELF and NOELF) made to eligible borrowers. 

Minimum loan sizes are $100,000 for the MSNLF, MSPLF, and NONLF, and $10 million for the MSELF and NOELF. 

Borrowers may qualify to borrow up to $35 million under the MSNLF and NONLF, $50 million under the MSPLF, and

$300 million under the MSELF and NOELF. Transaction fees are specified for all facilities and are structured to incentivize

lenders to make loans in the $100,000-$250,000 range under the MSNLF, MSPLF, and NONLF. Eligible lenders may not 

charge additional fees beyond those specified. 
DEPARTMENT OF THE TREASURY 111 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

We committed to contribute up to $75.0 billion in capital in the single common SPV in connection with the MSF. On

June 1, 2020, we acquired an equity interest in the SPV by transferring a combination of CARES Act appropriated and

Treasury borrowed funds for an aggregate total of $37.5 billion to the Main Street LLC to cover potential losses incurred by

the FRBB in connection with this program. The combined funding commitment of the FRBB to the MSF SPV is up to $600.0

billion. As of September 30, 2020, MSF held total assets of $2.1 billion excluding our equity contribution of $37.5 billion (or 

$39.6 billion including our equity contribution). The SPV will cease purchasing loan participations on December 31, 2020.

Municipal Liquidity Facility LLC

On May 1, 2020, the FRBNY established the MLF SPV to help state and local governments manage cash flow pressures

while continuing to serve households and businesses in their communities. The FRBNY lends to the MLF SPV, on a 

recourse basis, to allow the facility to purchase up to $500.0 billion of short-term notes directly from eligible U.S. states

(including the District of Columbia), U.S. counties with a population of at least 500,000 residents, and U.S. cities with a 

population of at least 250,000 residents. Issuers must have been rated at least BBB-/Baa3, as of April 8, 2020, by two or 

more nationally recognized statistical rating organizations. The SPV purchases eligible notes directly from issuers at the

time of issuance. The SPV charges an origination fee of 10 basis points. 

We committed to contribute up to $35.0 billion in capital in the MLF SPV. On May 26, 2020, we acquired an equity interest

in the SPV by transferring a combination of CARES Act appropriated and Treasury borrowed funds for an aggregate total of 

$17.5 billion to the MLF LLC to cover potential losses incurred by FRBNY in connection with this program. As of 

September 30, 2020, MLF held total assets of $1.7 billion excluding our equity contribution of $17.5 billion (or $19.2 billion 

including our equity contribution). The SPV will cease purchasing eligible notes on December 31, 2020.

Term Asset-Backed Securities Loan Facility II LLC

FRBNY established the TALF SPV on March 23, 2020, to support the flow of credit to consumers and businesses for 

purposes of stabilizing the U.S. financial system. The TALF facilitates the issuance of asset-backed securities (ABS) backed

by student loans, auto loans, credit card loans, loans guaranteed by the Small Business Administration, commercial

mortgages, and certain other assets. Through loans from the FRBNY, the TALF SPV lends to holders of eligible ABS, an

amount equal to the market value of the ABS less fees, and the loans will be secured at all times by the ABS. Eligible

borrowers are U.S.-organized or U.S.-based businesses that maintain banking relationships with a primary dealer. 

Collateral valuations are reduced by haircuts ranging from five percent on credit card loans to 20 percent on static leveraged 

loans.

On June 16, 2020, we acquired an equity interest in the SPV by committing to and transferring a combination of CARES Act

appropriated and Treasury borrowed funds for an aggregate total of $10.0 billion to the TALF LLC to cover potential losses 

incurred by the FRBNY in connection with this program. The funding commitment of the FRBNY to the TALF SPV is

initially up to $100.0 billion of loans. As of September 30, 2020, the TALF held total assets of $3.2 billion excluding our

equity contribution of $10.0 billion (or $13.2 billion including our equity contribution). No new credit extensions will be

made after December 31, 2020.

Commercial Paper Funding Facility II LLC

On March 30, 2020, the FRBNY established the CPFF LLC to provide liquidity to short-term funding markets by purchasing

three-month unsecured and asset-backed commercial paper directly from eligible issuers. The FRBNY makes loans to the
112 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

SPV, on a recourse basis, to fund the SPV’s purchase from eligible U.S. issuers of three-month U.S. dollar-denominated

commercial paper through the FRBNY’s primary dealers. 

On April 13, 2020, we made a capital contribution in the CPFF SPV by committing to and transferring $10.0 billion to the

SPV in exchange for a preferred equity interest in the SPV. This contribution is being used to cover potential losses incurred

by FRBNY in connection with this program. Unlike the other SPVs, which were funded by a combination of CARES Act

appropriated and Treasury borrowed funds, we funded the CPFF contribution with core ESF funds which were previously

invested in overnight federal investments. As of September 30, 2020, the CPFF held total assets of $59 million excluding our

equity contribution of $10.0 billion (or $10.1 billion including our equity contribution). In November 2020, the Board and

Treasury extended the operation of the CPFF, previously due to expire on March 17, 2021, to March 31, 2021. 

Money Market Mutual Fund Liquidity Facility (MMLF) 

The FRBB authorized the establishment of the MMLF on March 18, 2020 to broaden its program of support for the flow of 

credit to households and businesses. Launched on March 23, 2020, the MMLF makes loans available to eligible financial

institutions, on a non-recourse basis, secured by high-quality assets purchased by the financial institution from money 

mutual funds. Loans made by the MMLF are at a rate equal to the primary credit rate in effect at the FRBB that is offered 

to depository institutions at the time the advance is made, plus a spread of 0 to 100 bps depending on the type of collateral

that is securing the loan. Each loan made by the FRBB will have a maturity date not to exceed 12 months. In

November 2020, the Board and Treasury extended the operation of the MMLF, previously due to expire on 

December 31, 2020, to March 31, 2021.

Our participation in the MMLF is similar to the other SPVs in that its purpose is to provide credit protection to the FRBB in

the event of potential MMLF losses. The MMLF program differs from the other FRB programs in that, among other things,

it is not operated through an SPV. Pursuant to the terms of the MMLF Credit Support Agreement (CSA) dated

May 20, 2020 by and between FRBB and Treasury, we committed to provide $10.0 billion of credit support to the MMLF

under the ESF’s core authority, the Gold Reserve Act, as amended, which provides ESF with unappropriated core funds. As

of September 30, 2020, MMLF held loans outstanding to eligible financial institutions of $7.1 billion.

On May 20, 2020, we transferred an initial $1.5 billion of the $10.0 billion of committed funds from core ESF funds—which

were previously invested in overnight federal investments—to a separate deposit account maintained by the FRBNY in the

name of the FRBB as a secured party (MMLF Fund or MMLF Account, henceforth). On a quarterly basis beginning

September 30, 2020 and until the dissolution of the MMLF, we may be required to transfer a portion of the remaining

$8.5 billion of undisbursed credit support to restore the balance of the MMLF Account to $1.5 billion should the program

experience losses.

In accordance with the CSA, the FRBB agrees to pay us a “facility fee” for the use of the MMLF based on the amount of 

interest owed by the borrower on each MMLF loan. The facility fee for each MMLF loan is an amount equal to 90 percent of 

the difference between the interest rate charged to the related borrower on the MMLF loan and the primary credit rate

offered by the FRBB to depository institutions at the time the MMLF loan is advanced. To the extent the MMLF experiences 

credit losses, the MMLF will first utilize the accumulated facility fees and then the principal amount of our credit support

provided to the MMLF to reimburse FRBB for such losses experienced up to $10.0 billion.

The MMLF will be terminated when all extensions of credit have been discharged and released in full, and all final

deficiency amounts related to items of the MMLF collateral have been determined and paid. Before the MMLF is
DEPARTMENT OF THE TREASURY 113 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

terminated, the FRBB will pay any unpaid facility fees to the ESF. Within three business days following payment of all final

deficiency amounts, the FRBB will return all amounts of the MMLF Fund, plus any residual earnings (facility fee) of the

MMLF to the ESF. 

The following section entitled “COVID-19: Investments” is a discussion of our accounting for the credit support we provide to

the FRBs’ liquidity lending facilities, with the exception of the MMLF facility which is discussed under the section entitled

“COVID-19: Other Assets.” 

COVID-19: Investments, Net 

As of September 30, 2020, our preferred equity investments in the SPVs were valued as follows:

COVID-19 Investments in SPVs (in millions)

Gross 

Investments 

As of 9/30/20

Cumulative 

Valuation 

Gain (Loss)

9/30/20 

Fair Value

Corporate Credit Facilities $ 37,500 $ (96) $ 37,404 

Main Street Lending Programs 37,500 (4,254) 33,246 

Municipal Liquidity Facility 17,500 (177) 17,323 

Term Assets Lending Facility 10,000 (74) 9,926 

Commercial Paper Funding Facility 10,000 47 10,047 

Total COVID-19 Investments in SPVs (1) $ 112,500 $ (4,554) $ 107,946 

(1) This balance excludes $487 million related to our investment in common stock warrants received in connection with our financial

assistance that provided payroll support to aviation workers during the pandemic (refer to the section below entitled “Payroll 

Support to Aviation Workers”). Also, our $1.5 billion funded credit support to the MMLF is included in Other Assets rather than

as an investment (refer to the section below entitled “COVID-19: Other Assets”). 

Budgetary vs. Proprietary Accounting Treatment of SPVs. The Act stipulated that our SPV investment transactions, to the

extent they involved the use of the CARES Act appropriation, be funded in accordance with the provisions of FCRA. Section

4003 of the Act provided up to $454.0 billion of the $500.0 billion in appropriation to finance the subsidy portion of these

transactions, and to borrow from Treasury’s Fiscal Service for the remainder of the financing. The subsidy financing made

available pursuant to the Act is for current and future year subsidy costs, and is reported within the “Fund Balance” line of 

the Consolidated Balance Sheet (also refer to Note 2). As of September 30, 2020, we committed and obligated a total of 

$195.0 billion to acquire the preferred equity interests in the SPVs, funded using a combination of the CARES Act

appropriation of $30.2 billion to fund the subsidy portion of the investment programs, and an additional $164.8 billion of 

Fiscal Service borrowing authority utilized to fund the remainder. Of the total amount committed and obligated through the

combined funding of appropriation and borrowings, we actually disbursed an aggregate total of $102.5 billion to acquire

equity interests in the SPVs, of which $19.1 billion represented the subsidy portion funded by the CARES Act appropriation

and the remaining $83.4 billion was funded by Fiscal Service borrowings. For budgetary accounting purposes, the initial

investment financing and subsequent activity related to these investments are being accounted for pursuant to FCRA

guidelines in accordance with Section 185 of OMB Circular A-11, Preparation, Submission, and Execution of the Budget. We

also utilized the ESF’s unappropriated core funds to acquire a $10.0 billion equity interest in the CPFF SPV which is not 

subject to FCRA. 

For proprietary accounting purposes, all SPV investments, including the CPFF, are accounted for as equity investments at

fair value, rather than as direct loans, as these instruments do not meet the criteria of SFFAS No. 2, Accounting for Direct

Loans and Loan Guarantees. Accordingly, changes in the fair value of these investments are recorded as realized or 

unrealized fair value gains or losses within the “Economic Program Revenue (Cost)” line item of the Consolidated Statements

of Net Costs. The budgetary subsidy cost allowance is based on cash flows discounted using a Treasury rate to determine the
114 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

subsidy cost and the proprietary fair value adjustment is based on market interest rates to discount projected cash flows. 

For the fiscal year ended September 30, 2020, we recorded an unrealized fair value net loss of $4.6 billion related to these

investments.

Fair Value Estimation Factors. In determining the fair value of our SPV equity investments, we use available market pricing

data, risk-free discount rates, market pricing of floating interest-rate swaps, and contractual instrument terms to estimate

scenario-specific, risk-neutral cash flows for the SPVs. For market pricing data, we specifically use: (i) active market prices

for the CCF and TALF programs that own publicly traded securities, (ii) Bloomberg estimated prices for the MLF program

which owns securities that do not have active market prices but have estimated prices in Bloomberg, or (iii) market prices for

baskets of comparable publicly traded bonds for the MSF program, based on relevant bond attributes such as instrument credit

rating, time to maturity, issuer industry, coupon rate, and call provisions. We use contractual instrument terms and marketderived, risk-neutral loss rates and, where applicable, market pricing of floating interest-rate swaps to estimate scenariospecific, risk-neutral cash flows which are discounted using risk-free discount rates. 

In deriving the fair value of our SPV investments, we relied upon market observed prices for SPV purchased assets and

collateral, market prices for comparable assets, asset valuations performed by third parties, historical asset data, discussions

with subject matter experts within Treasury, and other information pertinent to the valuations. Because the instruments are

not publicly traded, there is no comparable trading information available. The fair valuations rely on significant

unobservable inputs that reflect assumptions about the expectations that market participants would use in pricing.

Transfer of Proceeds Upon Dissolution of SPVs. For those SPVs that were funded through a combination of CARES Act

appropriation and Fiscal Service borrowings in accordance with FCRA guidelines, all proceeds that we realize from these

investments upon the dissolution of the SPVs will be transferred to us to repay all borrowings and other funding costs incurred

from these investments. In accordance with the CARES Act, any remaining excess residual proceeds must then be transferred

to the Federal Old-Age and Survivors Insurance Trust Fund. To the extent that the fair value of the SPV equity investment

assets also incorporate anticipated realization of excess residual proceeds, we will record a corresponding liability due to the

Federal Old-Age and Survivors Insurance Trust Fund. We recorded no such liability as of September 30, 2020. For the CPFF

SPV that was funded utilizing the ESF’s core funds, all proceeds realized from this investment upon dissolution will be returned

fully to the ESF. 

Entity vs. Non-Entity Exchange Transactions. Our SPV preferred equity investments are treated as exchange transactions

in that we received a preferred equity interest in the SPVs in exchange for our capital funding of the liquidity facilities. All

SPV investment assets funded through a combination of CARES Act appropriation and Fiscal Service borrowings, along with

any related income or loss associated with these assets, are treated as entity transactions, with the exception of that portion

of the assets and related income or loss representing the excess residual proceeds that will be remitted to the Federal OldAge and Survivors Insurance Trust Fund which are treated as non-entity transactions. The SPV equity investment that was

funded utilizing the ESF’s core funds, and any related income or loss associated with these assets, are treated as entity

transactions.

Future Funding Commitments. Of the total $205.0 billion that we committed to capitalize the FRBs’ established SPVs

(utilizing $195.0 billion of both appropriated and Fiscal Service borrowings and $10.0 billion of ESF unappropriated core

funds), we funded $112.5 billion of this commitment as of September 30, 2020. As of September 30, 2020, we had a 

commitment to fund the remaining $92.5 billion as stipulated by the SPV LLC Agreements and, as of that date, there was no

requirement for any additional funding. However, as discussed in the section below entitled “Subsequent Events,” on 
DEPARTMENT OF THE TREASURY 115 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

December 29, 2020, Treasury and the Federal Reserve amended the terms of the SPV LLC Agreements for each of the SPVs

funded under the CARES Act to, among other things, change the terms of our commitment to the SPVs.

COVID-19: Other Assets 

Our participation in the MMLF program to provide credit protection to the FRBB differs from the other FRB programs in

that it is not structured and operated as an SPV. We transferred $1.5 billion of our $10.0 billion commitment (which were 

previously being invested by the ESF in overnight federal investments) to a separate deposit account maintained by the

FRBNY in the name of the FRBB (MMLF Account). The funds held in the MMLF Account can be legally used only for the

purpose of providing credit support of the MMLF program in accordance with the terms of the CSA between us and FRBB. 

Per the CSA, FRBB has exclusive control and dominion over the MMLF Account and can take all actions related to this

account without our consent. Based on the nature of the restrictions associated with the MMLF Account, we reclassified the

$1.5 billion from an overnight investment account to a restricted cash account as reported in the “COVID-19 – Other Assets” 

line of the Consolidated Balance Sheets. 

We remain committed to funding the remaining $8.5 billion should the FRBB require it, as stipulated by the CSA. As of 

September 30, 2020, there was no requirement for any additional funding.

In accordance with the CSA, the FRBB agrees to pay us a “facility fee” for the use of the MMLF based on the amount of 

interest owed by the borrower on each MMLF loan. To the extent the MMLF experiences credit losses, the MMLF will first

utilize the accumulated facility fees and then our principal amount invested in the MMLF to reimburse FRBB for such losses

experienced up to $10.0 billion. The accumulated facility fees, net of any amounts used to cover credit losses, will be accrued

over the life of the facility and payable to us upon the dissolution of the facility and liquidation of any remaining MMLF

investments. We accrued net facility fees totaling $119 million for the fiscal year ended September 30, 2020.

DIRECT LOANS TO AIR CARRIERS AND NATIONAL SECURITY BUSINESS

Section 4003 of the CARES Act authorized us to make direct loans and loan guarantees to eligible passenger and cargo air

carriers and national security businesses to provide them liquidity for losses incurred as a result of the COVID-19. As of

September 30, 2020, we chose to make only direct loans under this authorization. Up to $46.0 billion of the total $500.0 billion

in appropriations was provided for under Section 4003 to be used to fund the subsidy costs associated with making these loans. 

The Act stipulates that the direct loans and loan guarantees are to be made in accordance with the provisions of FCRA;

accordingly, we must fund the direct loans and loan guarantees using a combination of the $46.0 billion in authorized

appropriations and borrowings from Fiscal Service. 

Total authorized funding of $46.0 billion for making direct loans and loan guarantees is allocated as follows:

• Not more than $25.0 billion is available to passenger air carriers, eligible businesses that are certified under part 145 of

title 14, Code of Federal Regulations, and approved to perform inspection, repair, replace, or overhaul services, and ticket

agents (as defined in Section 40102 of Title 49, United States Code).

• Not more than $4.0 billion is available to cargo air carriers.

• Not more than $17.0 billion is available to businesses critical to maintaining national security.

The Act specifies that the Secretary will determine the terms and conditions of the loans. It also mandates that these loans

“shall be at a rate determined based on the risk and the current average yield on outstanding marketable obligations of the
116 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

United States of comparable maturity.” The Act also states that the duration of the loans will be no longer than five years.

For the “financial protection of the Government,” the Act mandates that we obtain a warrant, equity interest, or senior debt

instrument in the eligible business which serves to provide for a “reasonable participation by the Secretary, for the benefit of

taxpayers, in equity appreciation in the case of a warrant or other equity interest, or a reasonable interest rate premium, in the

case of a debt instrument.” The Act further states that we may sell, exercise, or surrender a warrant or any senior debt

instrument received, and may not exercise voting power with respect to any shares of common stock acquired.

Passenger and cargo air carrier borrowers were required to submit applications before April 27, 2020 and national security

borrowers before May 1, 2020. Loans to large airlines were partially disbursed by September 30, 2020, and these airlines will

have until March 26, 2021 (one year after the passage of the Act) to fully draw down their remaining available borrowings. 

Smaller airlines, air cargo, national security, and maintenance and ticket agent loans will have one or more disbursements,

with all disbursements to be completed by December 31, 2020. 

The Act specifies that loan repayments and other proceeds collected will be deposited in the following order of priority: (1) first,

into the financing accounts established under FCRA, up to an amount equal to the sum of: (i) the amount of the appropriations

transferred to the financing accounts and (ii) the amounts necessary to repay borrowings from Treasury; and (2) second, after

the deposits outlined in (1) above have fully recouped loan costs, into the Federal Old-Age and Survivors Insurance Trust Fund.

As of September 30, 2020, we had finalized loan agreements with seven passenger airlines and one national security business

under which an aggregate of $1.6 billion and $245 million, respectively, in direct loans had been disbursed. These loan

agreements provide for up to an aggregate total of $14.7 billion and $700 million, respectively, of available borrowings by these

passenger airlines and national security business, respectively, of which $13.1 billion and $455 million, respectively, remain

available for future disbursement as of September 30, 2020. Subsequent to September 30, 2020, the maximum amount 

available under the passenger airlines loan agreements increased by $6.1 billion to provide for up to an aggregate total of

$20.8 billion of available borrowings. Passenger airlines have until March 26, 2021 to draw the remaining available borrowing

amount. As financial protection, we received from these borrowers, warrants to purchase common stock equal to 10 percent of

the total loan amount drawn. From the one national security business, we received common shares equal to 29.6 percent of this

business’s common stock, on a fully diluted basis, to be held in a voting trust, as appropriate taxpayer compensation, with

specified terms of loan interest payable in cash and payment-in-kind. As of September 30, 2020, we also obtained senior debt

instruments from the national security business. 

From October 1, 2020 through December 10, 2020, we finalized and obligated additional loan commitments to 14 passenger

airlines for an aggregate total of $6.5 billion (including the six large passenger borrowers with existing commitments that

qualified for increases), and other air cargo carriers, national security business, ticket agents, and part suppliers for an

aggregate total of $78 million. Of the total $6.6 billion of additional loans obligated across all borrowers, $503 million was

disbursed as of December 10, 2020. During this period, the passenger airlines who initiated loans as of September 30, 2020 had

not made any additional draws from the remaining available borrowing amount. 

The following is a discussion of our accounting related to our direct loans. 
DEPARTMENT OF THE TREASURY 117 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

COVID-19: Credit Program Receivables, Net 

The direct loans are presented as credit program receivables on our Consolidated Balance Sheets. As of September 30, 2020,

the net credit program receivables of the passenger airlines and national security business program of $1.4 billion and

$163 million, included a positive subsidy allowance of $159 million and $85 million, respectively, which reflects our 

projection as of that date that both the passenger airlines and national security programs will result in a net cost to us after 

accounting for principal loan repayments, interest, and fees. Included in these receivables are the projected cash flows

associated with the common stock warrants and common stock shares we received in connection with making these direct

loans. 

We performed a financial statement re-estimate of the passenger airlines and national security program costs. This reestimate as of September 30, 2020 resulted in an upward re-estimate, or increase in the cost of the passenger airlines

program, of $12 million, and resulted in a downward re-estimate, or decrease in the cost of the national security program

cost, of $29 million. These re-estimate results stemmed primarily from the September 30, 2020 market prices which implied

higher or lower loss rates than those we initially estimated in the budget formulation estimate for these programs. 

As of September 30, 2020, there were no direct loans disbursed to cargo air carriers, ticket agents, or related businesses that

perform inspection, repair, replace, or overhaul services. As of September 30, 2020, there were no draws anticipated by

eligible recipients from their remaining available borrowing amount that we approved but were undisbursed on or before 

September 30, 2020. 

Our net credit program receivables, including loan principal repayments, interest, fees, and proceeds from common stock sales,

are treated as entity exchange transactions since all such future proceeds realized by Treasury from the net credit program

receivables will be used by Treasury to repay all of its borrowing and other funding costs incurred from these direct loans. In

accordance with the CARES Act, any remaining excess residual proceeds must be transferred to the Federal Old-Age and

Survivors Insurance Trust Fund. Accordingly, to the extent that our net credit program receivables also incorporate anticipated

realization of excess residual proceeds, we will record a corresponding liability due to the Federal Old-Age and Survivors

Insurance Trust Fund. Hence, our net credit program receivables, including loan principal repayments, interest, fees, and

proceeds from common stock sales are treated as entity transactions, with the exception of any excess residual amounts owed to

this trust fund which are treated as non-entity transactions. As of September 30, 2020, we did not record a liability as there

was a combined net positive subsidy cost of $244 million associated with the passenger airline and national security business

loans, indicating that we have not yet recovered our costs. 
118 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

The following table details the net composition, subsidy cost, re-estimates, a reconciliation of subsidy cost allowances, and

the components of the subsidy for each direct loan credit program for the fiscal year ended September 30, 2020. The tables

also include budget subsidy rates pertaining only to the cohorts of loans 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 

includes re-estimates. Amounts reported in the line item “COVID-19: Credit Program Receivables, Net” are not necessarily

the same as the proceeds that we would expect to receive from selling these loans.

(in millions)

Passenger Air 

Carriers

National 

Security

2020 

TOTAL

Credit Program Receivables, Net:

 Credit Program Receivables, Gross $ 1,576 $ 248 $ 1,824 

 Subsidy Cost Allowance (159) (85) (244) 

Net Credit Program Receivables $ 1,417 $ 163 $ 1,580 

New Credit Program Loans Disbursed $ 1,575 $ 245 $ 1,820 

Obligations for Loans Not Yet Disbursed $ 13,080 $ 455 $ 13,535 

Reconciliation of Subsidy Cost Allowance: 

 Balance, Beginning $ - $ - $ - 

 Subsidy Cost for Disbursements 148 112 260 

 Subsidy Cost for Modifications - - - 

 Fees, Interest and Dividend Revenue Received 1 3 4 

 Net Proceeds from Sales and Repurchases of Assets - 

 in Excess of Cost - - - 

 Loans Written Off - - - 

 Subsidy Allowance Amortized (2) (1) (3) 

 Other - - - 

Balance, Ending, Before Re-estimates 147 114 261 

 Subsidy Re-estimates 12 (29) (17) 

Balance, Ending $ 159 $ 85 $ 244 

Re-estimates 

 Interest Rate Re-estimate $ 1 $ 1 $ 2 

 Interest on Re-estimate $ - $ - $ - 

 Technical/Default Re-estimate 11 (30) (19) 

Total Re-estimates – Increase (Decrease) in 

 Subsidy Cost $ 12 $ (29) $ (17) 

Reconciliation of Subsidy Costs: 

 Subsidy Cost for Disbursements $ 148 $ 112 $ 260 

 Subsidy Cost for Modifications - - - 

 Subsidy Re-estimates 12 (29) (17) 

Total Credit Program Receivables Subsidy Costs $ 160 $ 83 $ 243 

Administrative Expense $ 5 $ - $ 5 

Subsidy Rates by Component:

Interest Differential 1.16% -2.94%

Defaults 13.66% 50.89%

Fees and Collections 0.00% 0.00%

Other -5.40% -2.39%

Total 9.42% 45.56% 
DEPARTMENT OF THE TREASURY 119 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

PAYROLL SUPPORT TO AVIATION WORKERS

Disruption to economic activity caused by the spread of COVID-19 in the early spring of 2020 placed significant pressure on 

U.S. airlines and the aviation industry as a whole. The dramatic reduction in the number of flyers resulted in airlines

cancelling a large portion of flights and preparing for the layoff of tens of thousands of workers. The CARES Act provided for 

relief to this industry by helping to preserve aviation jobs and compensate air carrier industry workers.

Section 4112 of the CARES Act directed us to provide financial assistance to passenger air carriers, cargo air carriers, and

airline contractors to be used exclusively for the continuation of payment of employee salaries, wages, and benefits. The Act

appropriated an aggregate total of up to $32.0 billion to be allocated to this program, the Payroll Support Program (PSP), as

follows:

• up to $25.0 billion for passenger air carriers, 

• up to $4.0 billion for cargo air carriers, and 

• up to $3.0 billion for aviation industry contractors. 

We entered into Payroll Support Program Agreements (PSPA) with passenger air carriers, cargo air carriers, and aviation

industry contractors. Each agreement specified that the recipient could receive up to a maximum awardable amount. This

amount was equal to the compensation paid by the recipient to its employees for the period from April 1, 2019 through

September 30, 2019. 

The Terms and Benefits Section of each PSPA specified, among other things, the following: (a) the payroll support must be

used exclusively for the continuation of payment of employee salaries, wages, and benefits, (b) the recipient may not conduct

an involuntary termination or furlough, with limited exceptions, of any employee through September 30, 2020, and (c) the

recipient may not reduce employee pay rates or benefits through September 30, 2020. Finally, in the case of air carriers, the

agreements mandate the continuation of scheduled service until March 1, 2022 to any point served by the recipient before 

March 1, 2020. Recipients are required to certify to us quarterly their compliance with these terms.

Section 4117 of the CARES Act further authorized the Secretary to receive warrants, options, preferred stock, debt

securities, or other financial instruments issued by recipients of the PSP which provide appropriate compensation to the

federal government for the provision of the financial assistance. 

Pursuant to agreements negotiated between us and PSP recipients, the terms and conditions associated with the financial

instruments received include, among other things, the following:

Promissory Notes

• For passenger air carriers, the amount of the promissory note is equal to 30 percent of the payroll support provided to

the recipient over $100.0 million. For cargo air carriers, the note is equal to 56 percent of the payroll support provided to

the recipient over $50.0 million. For contractors, the note is equal to 44 percent of the payroll support provided to the

recipient over $37.5 million. In the event of multiple disbursements to the same recipient, at the time of each

disbursement, the amount of the note and the warrant was increased to reflect the aggregate amount disbursed. We did

not receive a note or a warrant from those recipients who received an aggregate payroll support amount of less than or 

equal to the amounts above.
120 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

• Each note has a maturity date of 10 years from inception. For passenger air carriers, cargo air carriers, and contractors,

the cash interest rate on the note is one percent per year for the first five years, and converts to the Secured Overnight

Financing Rate plus two percent per year in the last five years. Cash interest on the notes is payable semi-annually on 

March 31 and September 30 of each year beginning on September 30, 2020.

• For contractors, the notes generally also include an option for payment-in-kind interest. The interest rate is three

percent per year for the first five years, with an increase of 100 basis points per year in years six through ten. 

Contractors may elect to pay the interest in cash or in-kind adding interest due to the principal amount of the note.

Common Stock Warrants

• The warrants provide us with the right to purchase shares of common stock or receive a cash payment. The number of 

warrants required is equal to 10 percent of the principal amount of the note issued by the participant, divided by an

exercise price. The exercise price for passenger air carriers is generally equal to the value of the shares as of market

close on April 9, 2020. The exercise price for cargo air carriers is equal to the market value of the shares as of market

close on May 1, 2020. The warrants are exercisable for a five-year term.

• In accordance with the warrant agreement between us and each recipient, we acknowledge the warrants are not 

registered under the Securities Act of 1933 and may not be sold without such registration or an exemption. 

Additionally, the warrants we receive do not entitle us to any voting rights or other rights of a shareholder before the

date of exercise. 

For the fiscal year ended September 30, 2020, we awarded $28.2 billion of financial assistance payments, of which

$25 billion, $845 million, and $2.4 billion was paid to passenger air carriers, cargo air carriers, and contractors, respectively. 

As compensation for the financial assistance paid, we received $7.5 billion and $0.4 billion of promissory notes and warrants,

respectively. We recorded the $28.2 billion of financial assistance disbursements as “Economic Program” costs within the

Consolidated Statements of Net Cost. The promissory notes and warrants received as compensation are reported as a notes 

receivable and an investment, respectively, on the Consolidated Balance Sheets. 

The following provides further discussion of our accounting for the promissory notes and common stock warrants.

COVID-19: Notes and Interest Receivable, Net 

Our promissory notes totaling $5.3 billion are presented net of an allowance for doubtful accounts estimated at $2.2 billion as

of September 30, 2020. Interest on the notes is payable semi-annually on March 31 and September 30 of each year

beginning on September 30, 2020. For the fiscal year ended September 30, 2020, we recognized interest revenue of 

$24.2 million.

The promissory notes are treated as exchange transactions as we received them as compensation for financial assistance

paid to air carriers to support ongoing employment of their aviation workers. The notes and related interest receivable also

represent assets of the U.S. government, or non-entity assets, as we are precluded from using any of the cash proceeds

realized from these promissory notes. Accordingly, the initial revenue recognized at the inception of the loans, and

subsequent recognition of related interest revenue, were reported within the “COVID-19 Non-Entity Revenue, Net” line item

of the Consolidated Statements of Net Cost. The recording of this receivable also resulted in a corresponding amount

recorded to the “Due To the General Fund” liability (refer to Note 4). 
DEPARTMENT OF THE TREASURY 121 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

COVID-19: Investments, Net

The common stock warrants are accounted for at fair value, with changes in the fair value of these investments recorded as

realized or unrealized gains or losses within the Consolidated Statements of Net Costs. As of September 30, 2020, our common

stock warrants are valued at $487 million, which includes a fair value gain of $99 million recognized for the fiscal year ended

September 30, 2020. 

Our common stock warrants are comprised of those that either give us a right to purchase common shares of publicly traded or

non-publicly traded air carriers. If the warrants were obtained from publicly traded companies, then their fair value was

readily determinable based on quoted prices of underlying shares in an active market. If the warrants were obtained from nonpublicly traded companies, then their fair value was determined based on significant unobservable inputs that reflect

assumptions about the expectations that market participants would use in pricing. Factors impacting the fair value of the

warrants include the nominal exercise price and the number of potential exercise shares, along with the time until the

expiration of the warrants. Other factors impacting the fair value of our warrants of publicly traded companies include the

market trading of the common stock that underlies the warrants as of September 30, the market estimate of the volatility of the

common stock, and the market participants. 

The warrant investments are treated as exchange transactions as we received them as compensation for financial assistance

paid to air carriers to support ongoing employment of their aviation workers. These equity instruments also represent assets of

the U.S. government, or non-entity assets, as we are precluded from using any of the cash proceeds realized from these equity

investments. Accordingly, the initial recording at fair value of the warrants at inception, along with subsequent changes in the

fair value of these investments, are reported within the “COVID-19 Non-Entity Revenue (Cost), Net” line item of the

Consolidated Statements of Net Cost. The recording of this investment also resulted in a corresponding amount recorded to the

“Due To the General Fund” liability.

CORONAVIRUS RELIEF FUND – PAYMENTS TO STATES, LOCAL, TERRITORIAL, AND TRIBAL GOVERNMENTS 

Treasury established the Coronavirus Relief Fund (Fund) pursuant to the CARES Act to reduce financial pressure placed

upon states, territorial and tribal governments, and certain eligible units of local governments as a result of the pandemic. 

Congress appropriated $150 billion to this Fund, of which $8.0 billion was reserved for making payments to Tribal

governments, and $3.0 billion was reserved for making payments to the District of Columbia, other U.S. territories including

the Commonwealth of Puerto Rico, the U.S. Virgin Islands, Guam, the Commonwealth of the Northern Mariana Islands, and

American Samoa.

Pursuant to the terms of the Act, we made payments from the Fund to state, local, territorial, and tribal governments which

are to use these funds to specifically cover costs that:

• are necessary expenditures incurred due to COVID–19; 

• were not accounted for in the budget most recently approved as of March 27, 2020 (the date of enactment of the CARES

Act) for the state or government; and

• were incurred during the period that begins on March 1, 2020 and ends on December 30, 2020 (refer to the section below 

entitled “Subsequent Events”). 

As set forth by the Act, amounts paid from the Fund were subject to certain restrictions. Amounts paid to states, the District

of Columbia, U.S. Territories, and eligible units of local government are based on population. A unit of local government

eligible for receipt of direct payment includes a county, municipality, town, township, village, parish, borough, or other unit
122 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

of general government below the state level with a population that exceeds 500,000. Payments to tribal governments were 

determined by the Secretary in consultation with the Secretary of the Interior and Indian Tribes. 

Section 601(f)(2) of the Social Security Act, as added by Section 5001(a) of the CARES Act, provides for recoupment by the

Treasury Office of Inspector General of amounts recipients received from the Fund that have not been used in a manner

consistent with Section 601(d) of the Social Security Act. If a recipient has not used funds it has received to cover costs that

were incurred by December 30, 2020, as required by the statute, those funds must be returned to us (refer to the section

below entitled “Subsequent Events”).

The following is a discussion of the accounting for these direct payments.

COVID-19: Advances, Net 

We disbursed $149.5 billion of $150.0 billion of appropriated and obligated funds to states, local, territorial, and tribal

governments to cover eligible costs incurred in response to the pandemic. We initially recorded the $149.5 billion of 

disbursed funds as an advance on the Consolidated Balance Sheets, and subsequently recognized $80.6 billion of this

advance as an expense recorded to the “Economic Program Cost” line item of the Consolidated Statements of Net Cost to

reflect the estimated amount of eligible costs incurred by recipients as of September 30, 2020. 

ECONOMIC IMPACT PAYMENTS FOR INDIVIDUALS

Section 2201 of the CARES Act included provisions to help stimulate the economy through recovery rebates for individuals

(also referred to as the “Economic Impact Payments”). The Act authorized the IRS to allow for a tax credit (or rebate) to

individuals against their 2020 income tax, refundable in advance, of $1,200 per individual and $2,400 per eligible individuals

filing a joint return, with an additional $500 for each qualifying child. These Economic Impact Payments were reduced 

above certain income limitations per individual tax return. During fiscal year 2020, the IRS disbursed $274.7 billion under

this provision to eligible recipients in every state and territory and at foreign addresses. These outlays were reported as

“Refunds and Other Payments” of the Statements of Custodial Activity (also refer to Note 23).

SICK AND FAMILY LEAVE AND EMPLOYEE RETENTION TAX CREDITS

The Families First Coronavirus Response Act of 2020 (FFCRA), Section 7001-7004, created the Sick and Paid Family Leave 

tax credit. The credit allows employers a payroll credit against the tax imposed on the qualified sick leave and family leave

wages paid in the calendar quarter, limited to 10 sick days and $200 leave wages per day. In addition, the family leave

wages paid is limited to $10,000. The credit is available to employers with fewer than 500 employees. 

In addition, Section 2301 of the CARES Act authorized eligible employers to claim a credit against applicable employment 

taxes for an amount equal to 50 percent of qualified wages of up to $10,000 paid by employers to employees during the

COVID-19 crisis. The credit is available to employers whose (1) operations were fully or partially suspended, due to a 

COVID-19 related shut-down order, or (2) gross receipts declined by more than 50 percent when compared to the same

quarter in the prior year. 

The IRS obtained permanent and indefinite authority of $10 billion, of which $714 million of tax credits were obligated as of 

September 30, 2020. These credits are reported with the “Refunds and Other Payments” line of the Statements of Custodial

Activity (refer to Note 23). 
DEPARTMENT OF THE TREASURY 123 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

In addition to the COVID-19 tax relief options mentioned above, the CARES Act includes other tax measures to help

businesses reduce their tax obligations or receive cash refunds. The Act contains a provision for employers to defer payment

of the employer’s share of the Social Security portion of FICA, and their share and the employee representative’s share of the

same portion of RRTA (refer to Note 8). The tax law changes in the Act also modify several provisions of the Tax Cuts and

Jobs Act, such as carrying additional losses back to prior tax years. 

COVID-19 PANDEMIC RELIEF – SUMMARY IMPACT ON THE STATEMENT OF NET COST

For the fiscal year ended September 30, 2020, the primary impact of COVID-19 relief efforts as reported within our

Consolidated Statement of Net Cost were as follows: 

(in millions) 2020 

Entity Cost/(Revenue):

Section 13(3) SPV Investments – Fair Value Loss $ 4,554 

Section 13(3) Other Assets – MMLF Accrued Facility Fees Revenue (119) 

Direct Loans – Subsidy Costs 243 

Payroll Support to Aviation Workers – Financial Assistance Payments 28,170 

Coronavirus Relief Fund – Expense Recognition of Advances to States, Local, Territorial, and Tribal 

Governments 80,578 

Total Net Entity Costs (Economic Program) (Note 21) 113,426

Non-Entity Cost/(Revenue): 

Payroll Support for Aviation Workers – Promissory Note Compensation Received (5,345) 

Payroll Support for Aviation Workers – Common Stock Warrant Compensation Received (487) 

Total Non-Entity Revenue (5,832) 

Total COVID-19 Pandemic Relief Costs, Net $ 107,594 

SUBSEQUENT EVENTS

The following are events that transpired after September 30, 2020 but prior to the issuance date of this report. 

Enactment of New COVID-19 Relief Legislation 

On December 27, 2020, the President signed into law the Consolidated Appropriations Act, 2021, which, as of the date of 

enactment, rescinded $429.0 billion of the $500.0 billion appropriation provided to Treasury under Section 4027 of the

CARES Act and provided that the remaining unobligated appropriation as of January 9, 2021 will be rescinded as of that

date other than with respect to those funds made available for administrative expenses pursuant to Section 4003(f), for the

Special Inspector General for Pandemic Recovery pursuant to Section 4018(g), and for the Congressional Oversight

Commission pursuant to Section 4020. Effective January 9, 2021, the statute eliminates Treasury’s ability to make new 

loans and investments under Section 4003 of the CARES Act. In addition, the statute prohibits the Federal Reserve from 

engaging in further lending or extensions of credit, after December 31, 2020, through facilities established by the Federal 

Reserve under Section 13(3) of the Federal Reserve Act in which Treasury made investments under Section 4003 of the

CARES Act other than a loan submitted on or before December 14, 2020, to the MSF for the sale of a participation interest in

such loan, provided that the MSF purchase a participation interest in such loan on or before January 8, 2021. After

December 31, 2020, the Federal Reserve is also prohibited from modifying the terms and conditions of any of the facilities in

which Treasury made investments under the CARES Act. 
124 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

The new legislation, provides for additional Economic Impact Payments to individuals estimated at $166.0 billion and

various tax breaks for employers, and extends the use of the Coronavirus Relief Fund program paid to state, local, territorial,

and tribal governments from December 30, 2020 to December 31, 2021. The legislation also provides separate

appropriations to Treasury for COVID-19 emergency funding, primarily including $16.0 billion for payroll support payments

to passenger air carriers and contractors and an additional $2.0 billion for transportation services, $25.0 billion for 

emergency rental financial assistance payments to state, local, territorial, and tribal governments, $9.0 billion for 

investments in community development financial institutions (CDFIs) to support low-income and minority communities, and

$3.0 billion for COVID-19 grants to CDFIs. Treasury has not yet assessed the impact of this new legislation on our FY 2021

consolidated financial statements. 

Amendment of SPV Agreements

Consistent with the Consolidated Appropriations Act, 2021, on December 29, 2020, Treasury and the Federal Reserve 

amended the SPV LLC Agreements for each of the SPVs funded under the CARES Act. The amended agreements provide

that Treasury’s investment in excess of the amount equivalent to the purchased asset amount within each of the SPVs will

be returned to Treasury between December 31, 2020 and January 8, 2021, and cancels Treasury’s additional commitments to

those SPVs. As provided to us by the Federal Reserve, the purchased assets held in the CCF, MSF, MLF and the TALF as of 

December 17, 2020 were $13.9 billion, $12.3 billion, $6.4 billion, and $3.7 billion, respectively, excluding our equity

contribution in each of these SPVs. The purchased assets held by the MSF are expected to be higher due to purchase volume

occurring between December 17, 2020 and January 8, 2021. 

The amount of Treasury’s canceled commitments will be de-obligated and, under the Consolidated Appropriations Act, 2021,

rescinded as of January 9, 2021, and Treasury funds remaining in the SPVs funded under the CARES Act (like the SPVs

themselves) cannot be used for further lending or extensions of credit after that date.
DEPARTMENT OF THE TREASURY 125 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

11. INVESTMENTS IN GOVERNMENT SPONSORED ENTERPRISES

Congress established Fannie Mae and Freddie Mac as GSEs to provide stability and increase liquidity in the secondary

mortgage market and to promote access to mortgage credit throughout the nation. A key function of the GSEs is to purchase

mortgages, package those mortgages into securities, which are subsequently sold to investors, and guarantee the timely

payment of principal and interest on these securities.

Leading up to the financial crisis, increasingly difficult conditions in the housing market challenged the soundness and

profitability of the GSEs, thereby threatening to undermine the entire housing market. In response, Congress passed HERA

(P.L. 110-289) in July 2008. This act created FHFA, with enhanced regulatory authority over the GSEs, and provided the

Secretary with certain authorities intended to ensure the financial stability of the GSEs, if necessary. In September 2008,

FHFA placed the GSEs under conservatorship, and we invested in the GSEs by entering into a SPSPA with each GSE. We

took these actions to preserve the GSEs’ assets, ensure a sound and solvent financial condition, and mitigate systemic risks

that contributed to market instability. The purpose of such actions is to maintain the solvency of the GSEs so they can

continue to fulfill their vital roles in the mortgage market while the Administration and Congress determine what structural

changes should be made to the housing finance system. Draws under the SPSPAs result in an increased investment in the

GSEs as further discussed below.

Under the SPSPAs, we initially received from each GSE: (i) 1,000,000 shares of non-voting variable liquidation preference 

senior preferred stock with a liquidation preference value of $1,000 per share, and (ii) a non-transferable warrant for the

purchase, at a nominal cost, of 79.9 percent of common stock on a fully-diluted basis. The warrants expire on 

September 7, 2028. Under the amended SPSPAs, the quarterly dividend payment changed from a 10.0 percent per annum

fixed rate dividend on the total liquidation preference (as discussed below) to an amount equivalent to the GSEs’ 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 by $600 million at the beginning of each calendar year thereafter, and was scheduled to reach zero by

calendar year 2018. 

On December 21, 2017, the Department and FHFA modified the SPSPAs between Treasury and the GSEs to increase the

capital reserve amount for each GSE back to $3 billion, effective with the December 2017 dividend payment. In exchange for

the increase in the capital reserve, Treasury’s liquidation preference in each GSE increased by $3 billion on 

December 31, 2017. On September 27, 2019, the Department and FHFA agreed to increase the capital reserve amounts of 

Fannie Mae and Freddie Mac to $25 billion and $20 billion, representing an increase of $22 billion and $17 billion,

respectively, over the prior reserve amount of $3 billion. In exchange, our liquidation preference in each GSE will gradually

increase up to the adjusted capital reserve amounts based on the quarterly earnings of each GSE. As of September 30, 2020, 

Treasury’s liquidation preference in Fannie Mae and Freddie Mac increased by $10.8 billion and $6.6 billion, respectively. 

As of September 30, 2019, Treasury’s liquidation preference in Fannie Mae and Freddie Mac increased by $3.4 billion and

$1.8 billion, respectively. The GSEs will not pay a quarterly dividend if their positive net worth is below their capital reserve

threshold. We received no cash dividends for the fiscal year ended September 30, 2020 as the GSEs’ positive net worth was

below their permitted capital reserve amounts as of September 30, 2020. For the fiscal year ended September 30, 2019, we

received cash dividends totaling $15.3 billion. 
126 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

The SPSPAs, which have no expiration date, require us to disburse funds to either GSE if, at the end of any quarter, the

FHFA determines that the liabilities of either GSE exceed its assets. Draws from 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, they increase the liquidation preference of the initial 1,000,000 shares by the amount of the draw. The combined

cumulative liquidation preference totaled $222 billion and $204 billion as of September 30, 2020 and 2019, respectively. 

There were no payments to the GSEs for the fiscal years ended September 30, 2020 and 2019. 

ACCOUNTING TREATMENT

Entity Transactions― If we estimate a probable contingent liability to the GSEs, we will accrue and report this liability on 

our Consolidated Balance Sheets, and fund the liability through our direct appropriations. We will report the liability

accrual, if any, at its gross amount as an “entity” cost on our Consolidated Statements of Net Cost, and within the line item,

“Cumulative Results of Operations” on our Consolidated Balance Sheets, without considering the increase in senior preferred 

stock liquidation preference/fair value adjustments, and future dividend receipts from the GSEs.

Non-Entity Transactions― If we make actual payments to the GSEs, they will result in increases to the U.S. government’s

liquidation preference in the GSEs’ senior preferred stock, and thus represent General Fund exchange revenue reported on 

our Consolidated Statements of Net Cost as “GSEs Non-Entity Revenue, Net.” Changes in the fair valuation of the GSE

preferred stock and common stock warrants, and related dividends received, are General Fund-related costs and revenues

which we report as “GSEs Non-Entity Revenue, Net.”

INVESTMENTS IN GSES 

As of September 30, 2020 and 2019, our investments in the GSEs consisted of the following: 

Gross Cumulative 

Investments Valuation 9/30/20 

GSEs Investments (in millions) As of 9/30/20 Gain/(Loss) Fair Value

Fannie Mae Senior Preferred Stock $ 137,815 $ (79,515) $ 58,300 

Freddie Mac Senior Preferred Stock 83,914 (46,014) 37,900 

Fannie Mae Warrants Common Stock 3,104 5,196 8,300 

Freddie Mac Warrants Common Stock 2,264 2,146 4,410 

Total GSEs Investments $ 227,097 $ (118,187) $ 108,910 

Gross Cumulative 

Investments Valuation 9/30/19 

GSEs Investments (in millions) As of 9/30/19 Gain/(Loss) Fair Value

Fannie Mae Senior Preferred Stock $ 127,041 $ (78,341) $ 48,700 

Freddie Mac Senior Preferred Stock 77,298 (38,498) 38,800 

Fannie Mae Warrants Common Stock 3,104 12,896 16,000 

Freddie Mac Warrants Common Stock 2,264 6,306 8,570 

Total GSEs Investments $ 209,707 $ (97,637) $ 112,070 
DEPARTMENT OF THE TREASURY 127 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

SENIOR PREFERRED STOCK AND WARRANTS FOR COMMON STOCK

In determining the fair value of the senior preferred stock and warrants for common stock, we relied on the GSEs’ public

filings and press releases concerning their financial statements, as well as non-public, long-term financial forecasts, monthly

summaries, quarterly credit supplements, independent research regarding preferred stock trading, independent research

regarding the GSEs’ common stock trading on the OTC Bulletin Board, discussions with each of the GSEs and FHFA, and

other information pertinent to the valuations. Because the instruments are not publicly traded, there is no comparable

trading information available. The fair valuations rely on significant unobservable inputs that reflect assumptions about the

expectations that market participants would use in pricing. 

The fair value of the senior preferred stock considers the amount of forecasted cash flows to equity. 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—as measured by unobservable inputs—increased as of September 30, 2020 when compared to

September 30, 2019. Fannie Mae’s senior preferred stock drove this increase primarily due to higher projected cash flows 

and a decrease in the market value of Fannie Mae’s other equity securities that comprise its total equity, partially offset by a 

higher discount rate (refer to Note 1V).

Factors impacting the fair value of the warrants include the nominal exercise price and the large number of potential

exercise shares, the market trading of the common stock that underlies the warrants as of September 30, the principal

market, and the market participants. Other factors impacting the fair value include, among other things, the holding period 

risk related directly to the assumption of the amount of time that it will take to sell the exercised shares without depressing

the market. The fair value of the warrants—as measured by observable inputs—decreased at the end of FY 2020, when 

compared to 2019, primarily due to decreases in the Level 1 fair value measurement of the market price of the underlying

common stock of each GSE.

CONTINGENT LIABILITY TO GSES

As part of the annual process undertaken by the Department, we prepare a series of long-term financial forecasts to assess, 

as of September 30, the likelihood and magnitude of future draws to be required by the GSEs under the SPSPAs within the

forecast time horizon. We used 25-year financial forecasts prepared through years 2045 and 2044 in assessing if a 

contingent liability was required as of September 30, 2020 and 2019, respectively. If future payments under the SPSPAs are

deemed to be probable within the forecast horizon, and we can reasonably estimate such payment, we will accrue a 

contingent liability to the GSEs to reflect the forecasted equity deficits of the GSEs. We do not discount this accrued

contingent liability, nor do we take into account any of the offsetting dividends that we could receive, as the dividends, if any,

would be owed directly to the General Fund. We will adjust such recorded accruals in subsequent years as new information

develops or circumstances change. 

Based on our annual assessment, we estimated there was no probable future funding draws as of September 30, 2020 and

2019, and thereby accrued no contingent liability. However, as of September 30, 2020, it is reasonably possible that a period 

of sustained economic and housing market volatility could potentially cause the GSEs to generate quarterly losses, and

therefore, result in future funding draws against our funding commitment. Due to challenges quantifying future market

volatility or the timing, magnitude, and likelihood of such events, we could not estimate the total amount of this reasonably

possible future funding liability as of September 30, 2020. There were no payments to the GSEs for the fiscal year ended 

September 30, 2020. At September 30, 2020 and 2019, the maximum remaining contractual commitment to the GSEs for the

remaining life of the SPSPAs was $254.1 billion. 
128 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

In assessing the need for an estimated contingent liability, we rely on the GSEs’ public filings and press releases, including

their financial statements, monthly business 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, 2020 include four potential scenarios, with varying assumptions regarding the continuation of the GSEs new 

business activities, including purchasing mortgage loans and issuing new guaranteed mortgage-backed securities. The 

forecasts as of September 30, 2020, also assumed the maintenance of the GSEs’ retained mortgage portfolios below the

$250 billion maximum permitted under the amended SPSPAs.

ESTIMATION FACTORS

Our forecasts concerning the GSEs may differ from actual experience. Estimated senior preferred values and future draw

amounts will depend on numerous factors that are difficult to predict including, but not limited to, changes in government

policy with respect to the GSEs, the business cycle, inflation, home prices, unemployment rates, interest rates, changes in

housing preferences, home financing alternatives, availability of debt financing, market rates of guarantee fees, outcomes of 

loan refinancings and modifications, new housing programs, and other applicable factors. 

FINANCIAL PERFORMANCE OF THE GSES

The summarized unaudited aggregated financial condition of the GSEs as of September 30, 2020 and 2019, along with their

summarized unaudited aggregated financial operating results for the nine months ended September 30, 2020 and 2019 were 

as follows: 

(in millions) 2020 2019 

Combined Assets

 Investment Securities $ 216,069 $ 119,878 

 Mortgage Loans 5,767,584 5,311,626 

 Other 335,021 233,178 

Total Combined Assets 6,318,674 5,664,682 

Combined Liabilities

 Long-Term Debt 6,201,946 5,480,961 

 Other 82,144 166,705 

Total Combined Liabilities 6,284,090 5,647,666 

Combined Net Equity $ 34,584 $ 17,016 

For the Nine Months Ended September 30 

Combined Net Interest Income $ 26,898 $ 23,602 

Combined (Provision) Benefit for Loan Losses (4,359) 4,206 

Combined Net Interest Income After (Provision) Benefit for Loan Losses $ 22,539 $ 27,808 

Combined Total Comprehensive Income $ 12,233 $ 15,042 

We obtained this financial information from the GSEs’ quarterly financial reports filed with the Securities and Exchange

Commission. The financial information above excludes certain financial guarantees not directly reflected on the

GSEs’ balance sheets.
DEPARTMENT OF THE TREASURY 129 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

GSES NON-ENTITY REVENUE

For the fiscal years ended September 30, 2020 and 2019, GSEs Non-Entity Revenue, Net consisted of the following: 

Summary of GSEs Non-Entity Revenue (in millions) 2020 2019 

General Fund Revenue from Increase in Liquidation Preference of GSEs 

 Preferred Stock $ (17,389) $ (5,191) 

Fair Value Loss on GSEs Warrants/Preferred Stock 20,549 6,271 

GSEs Preferred Stock Dividends - (15,279) 

Total GSEs Non-Entity Cost (Revenue), Net $ 3,160 $ (14,199) 

REGULATORY ENVIRONMENT

To date, Congress has not passed legislation nor has FHFA taken action to end the GSEs’ conservatorships. The GSEs

continue to operate under the direction of FHFA as conservator. On March 27, 2019, the President issued a Memorandum

that directed the Secretary of the Treasury to develop a plan for administrative and legislative reforms to achieve the

following housing finance reform goals: (i) ending the conservatorships of the GSEs upon completion of specified reforms; (ii)

facilitating competition in the housing finance market; (iii) establishing regulation of the GSEs that safeguards their safety

and soundness and minimizes the risks they pose to the financial stability of the U.S.; and (iv) providing that the federal 

government is properly compensated for any explicit or implicit support it provides to the GSEs or the secondary housing

finance market. On September 5, 2019, we released our Housing Reform Plan, which included recommended legislative and

administrative reforms to achieve each of these goals. 

The Temporary Payroll Tax Cut Continuation Act of 2011 (P.L. 112-78) was funded by an increase of ten basis points in the

GSEs’ guarantee fees (referred to as “the incremental fees”) which began in April 2012, and is effective through

September 30, 2021. The incremental fees are remitted to us and not retained by the GSEs and, thus, do not affect the

profitability of the GSEs. For FY 2020 and 2019, the GSEs remitted to us the incremental fees totaling $4.2 billion and

$3.9 billion, respectively, which are reported within the line item entitled “Fines, Penalties, Interest and Other Revenue” on 

our Statements of Custodial Activity. 

12. INVESTMENTS IN MULTILATERAL DEVELOPMENT BANKS

As of September 30, 2020 and 2019, Investments in Multilateral Development Banks consisted of the following:

(in millions) 2020 2019 

International Bank for Reconstruction and Development $ 3,057 $ 2,850 

Inter-American Development Bank (1) 2,023 2,023 

Asian Development Bank 991 991 

European Bank for Reconstruction and Development 636 636 

International Finance Corporation 569 569 

North American Development Bank 450 225 

African Development Bank 434 434 

Multilateral Investment Guarantee Agency 45 45 

Total $ 8,205 $ 7,773 

Refer to Note 27 for a description of the additional commitments related to these institutions. 

(1) Includes Inter-American Investment Corporation 
130 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

13. OTHER INVESTMENTS AND RELATED INTEREST

Other investments and related interest include foreign currency holdings that we typically invest in interest-bearing

securities issued or held through foreign governments or monetary authorities (refer to Note 5). The ESF holds most of our 

foreign currency investments. Of the total $5.7 billion fair value of foreign investments (excluding interest receivable) held

at September 30, 2020, $1.7 billion will mature within one year, $2.2 billion will mature after one year but before five years,

and $1.8 billion will mature after five years but before ten years. The majority of our foreign currency holdings and other 

investments are Level 1 fair value measurements and $16 million are Level 3 fair value measurements.

As of September 30, 2020 and 2019, Other Investments and Related Interest consisted of the following:

Cost/ Unamortized 9/30/20 

Acquisition (Premium)/ Interest Net Unrealized 9/30/20 

(in millions) Value Discount Receivable Investment Gain/(Loss) Fair Value

Foreign Investments:

 Euro Bonds & Notes $ 4,504 $ 290 $ 53 $ 4,847 $ 437 $ 5,284 

 Japanese Government Bonds 334 - - 334 41 375 

 Other FCDAs 142 - - 142 - 142 

Other Investments 26 - - 26 (5) 21 

Total Non-Federal $ 5,006 $ 290 $ 53 $ 5,349 $ 473 $ 5,822 

Type of Investment: 

Available for Sale $ 1,307 $ 47 $ 15 $ 1,369 $ 127 $ 1,496 

Held to Maturity 26 - - 26 (5) 21 

Trading 3,673 243 38 3,954 351 4,305 

Total Non-Federal $ 5,006 $ 290 $ 53 $ 5,349 $ 473 $ 5,822 

Cost/ Unamortized 9/30/19 

Acquisition (Premium)/ Interest Net Unrealized 9/30/19 

(in millions) Value Discount Receivable Investment Gain/(Loss) Fair Value

Foreign Investments:

 Euro Bonds & Notes $ 5,039 $ 370 $ 53 $ 5,462 $ 100 $ 5,562 

 Japanese Government Bonds 941 - - 941 111 1,052 

Other Investments 29 (1) - 28 (11) 17 

Total Non-Federal $ 6,009 $ 369 $ 53 $ 6,431 $ 200 $ 6,631 

Type of Investment: 

Available for Sale $ 2,339 $ 69 $ 18 $ 2,426 $ 127 $ 2,553 

Held to Maturity 29 (1) - 28 (11) 17 

Trading 3,641 301 35 3,977 84 4,061 

Total Non-Federal $ 6,009 $ 369 $ 53 $ 6,431 $ 200 $ 6,631 
DEPARTMENT OF THE TREASURY 131 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

14. PROPERTY, PLANT, AND EQUIPMENT, NET

As of September 30, 2020 and 2019, Property, Plant, and Equipment, Net consisted of the following:

2020 

Net

Depreciation Service Accumulated Book

(in millions) Method Life Cost Depreciation Value 

Buildings, Structures and Facilities S/L 3 - 50 years $ 846 $ (538) $ 308 

Furniture, Fixtures and Equipment S/L 2 - 20 years 2,951 (2,160) 791 

Construction-in-Progress N/A N/A 332 - 332 

Land and Land Improvements N/A N/A 20 (4) 16 

Internal-Use Software in Use S/L 2 - 15 years 3,728 (2,788) 940 

Internal-Use Software in Development N/A N/A 426 - 426 

Assets Under Capital Lease S/L 2 - 25 years 32 (17) 15 

Leasehold Improvements S/L 2 - 25 years 412 (282) 130 

Total $ 8,747 $ (5,789) $ 2,958 

2019 

Net

Depreciation Service Accumulated Book

(in millions) Method Life Cost Depreciation Value 

Buildings, Structures and Facilities S/L 3 - 50 years $ 811 $ (510) $ 301 

Furniture, Fixtures and Equipment S/L 2 - 20 years 2,951 (2,133) 818 

Construction-in-Progress N/A N/A 180 - 180 

Land and Land Improvements N/A N/A 20 (3) 17 

Internal-Use Software in Use S/L 2 - 15 years 3,646 (2,525) 1,121 

Internal-Use Software in Development N/A N/A 276 - 276 

Assets Under Capital Lease S/L 2 - 25 years 33 (14) 19 

Leasehold Improvements S/L 2 - 25 years 407 (269) 138 

Total $ 8,324 $ (5,454) $ 2,870 

The service life ranges vary significantly due to the diverse nature of PP&E we hold.
132 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

The following table provides a reconciliation of total PP&E and accumulated depreciation for the fiscal year ended 

September 30, 2020:

2020 

Accumulated Net

(in millions) PP&E Depreciation PP&E

Balance Beginning of Year $ 8,324 $ (5,454) $ 2,870 

 Capitalized Acquisitions 623 (4) 619 

 Dispositions (200) 192 (8) 

 Depreciation Expense - (523) (523) 

Balance at End of Year $ 8,747 $ (5,789) $ 2,958 

HERITAGE ASSETS

We have 15 heritage assets, of which five are considered multi-use, for FY 2020 and 2019. The Treasury Complex (Main

Treasury Building and Annex), declared a national historical landmark in 1972, is treated as a multi-use heritage asset, 

along with the collection of artifacts within, and is expected to be preserved indefinitely. The buildings that house the Mint

in Denver, San Francisco, Fort Knox, and West Point are also multi-use heritage assets and included on the National

Register of Historic Places. Additionally, the Mint maintains heritage assets consisting of four coin collections and six

collections of historical artifacts. 
DEPARTMENT OF THE TREASURY 133 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

15. NON-ENTITY VS. ENTITY ASSETS 

Non-entity assets are those that we hold and manage on behalf of the General Fund but are not available for our use. The 

table below shows our total assets, segregated between non-entity and entity, as of September 30, 2020 and 2019: 

 2020 

(in millions) Non-Entity Entity Total 

Intra-governmental Assets:

Fund Balance (a) $ 3,917 $ 892,468 $ 896,385 

Loans and Interest Receivable (Note 3) 1,654,096 80,820 1,734,916 

Advances to Trust Funds (Note 4) 37,166 - 37,166 

Due From the General Fund (Note 4) 27,093,930 - 27,093,930 

Other Intra-governmental Assets 1,162 56 1,218 

Total Intra-governmental Assets 28,790,271 973,344 29,763,615 

Cash, Foreign Currency, and Other Monetary Assets (Note 5) 1,770,303 68,062 1,838,365 

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

Taxes, Interest, and Other Receivables, Net (Note 8) 237,357 233 237,590 

COVID-19 Investments, Advances, Receivables, and Other (Note 10)

 Investments, Net 487 107,946 108,433 

 Advances, Net - 68,889 68,889 

 Notes and Interest Receivable, Net 5,320 - 5,320 

 Credit Program Receivables, Net - 1,580 1,580 

 Other Assets - 1,619 1,619 

Investments in GSEs (Note 11) 108,910 - 108,910 

Other Assets (b) 7 54,704 54,711 

Total Assets $ 30,923,717 $ 1,276,377 $ 32,200,094 

(a) $2.5 billion of the non-entity balance represents assets held on behalf of the General Fund (refer to Note 4).

(b) Other Assets (Entity) include loans and interest receivable, other investments and related interest, reserve position in the IMF, and other

various assets on the Consolidated Balance Sheets not separately presented in this table.

2019 

(in millions) Non-Entity Entity Total 

Intra-governmental Assets:

Fund Balance (c) $ 3,294 $ 412,033 $ 415,327 

Loans and Interest Receivable (Note 3) 1,504,794 76,225 1,581,019 

Advances to Trust Funds (Note 4) 3,152 - 3,152 

Due From the General Fund (Note 4) 22,855,331 - 22,855,331 

Other Intra-governmental Assets 989 22 1,011 

Total Intra-governmental Assets 24,367,560 488,280 24,855,840 

Cash, Foreign Currency, and Other Monetary Assets (Note 5) 376,901 64,464 441,365 

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

Taxes, Interest, and Other Receivables, Net (Note 8) 145,729 149 145,878 

Investments in GSEs (Note 11) 112,070 - 112,070 

Other Assets (d) 7 48,314 48,321 

Total Assets $ 25,013,329 $ 601,207 $ 25,614,536 

(c) $1.9 billion of the non-entity balance represents assets held on behalf of the General Fund (refer to Note 4).

(d) Other Assets (Entity) include loans and interest receivable, other investments and related interest, reserve position in the IMF, and other

various assets on the Consolidated Balance Sheets not separately presented in this table.
134 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

16. FEDERAL DEBT AND INTEREST PAYABLE

Treasury is responsible for administering the federal debt on behalf of the U.S. government. The federal debt includes

borrowings from the public as well as borrowings from federal agencies. The federal debt does not include debt issued by

other governmental agencies, such as the Tennessee Valley Authority or Department of Housing and Urban Development.

Debt held by the public primarily represents the amount the U.S. government has borrowed to finance cumulative cash

deficits. In contrast, debt held by other federal agencies, primarily trust funds, represents balances of Treasury securities

held by individual federal agencies with either the authority or the requirement to invest excess receipts in Treasury

securities, with the principal and interest guaranteed by the full faith and credit of the U.S. government.

Federal Debt and Interest Payable as of September 30, 2020 and 2019 was as follows:

Held by Other Federal Agencies (Intra-governmental) (in millions) 2020 2019 

Beginning Balance $ 5,869,095 $ 5,712,537 

New Borrowings/(Repayments) - Net 28,097 156,558 

Subtotal at Par Value 5,897,192 5,869,095 

Premium/(Discount) 72,193 73,111 

Debt Principal Not Covered by Budgetary Resources (Note 19) 5,969,385 5,942,206 

Interest Payable Covered by Budgetary Resources 35,867 38,823 

Total $ 6,005,252 $ 5,981,029 

Held by the Public (in millions) 2020 2019 

Beginning Balance $ 16,809,092 $ 15,761,155 

New Borrowings - Net of Repayments 4,209,860 1,047,937 

Subtotal at Par Value 21,018,952 16,809,092 

Premium/(Discount) (26,702) (42,688) 

Debt Principal Not Covered by Budgetary Resources (Note 19) 20,992,250 16,766,404 

Interest Payable Covered by Budgetary Resources 70,600 73,223 

Total $ 21,062,850 $ 16,839,627 

FEDERAL DEBT HELD BY OTHER FEDERAL AGENCIES

Certain federal agencies are allowed to invest excess funds in debt securities we issue on behalf of the U.S. government. The 

terms and the conditions of debt securities issued allow the U.S. government to meet its cash needs. The vast majority of 

debt securities are non-marketable securities issued at par value, but others are issued at market prices and interest rates

that reflect market terms. The average intra-governmental interest rate for debt held by the federal entities, excluding

Treasury Inflation-Protected Securities (TIPS) and Floating Rate Notes (FRNs), for FY 2020 and 2019 was 2.3 percent and

2.7 percent, respectively. The average intra-governmental interest rate on TIPS for both FY 2020 and 2019 was 1.3 percent. 

The average interest rate on FRNs for FY 2020 and 2019 was 0.2 percent and 1.9 percent, respectively. 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, 2020 and 2019 was as follows: 
DEPARTMENT OF THE TREASURY 135 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

(in millions) 2020 2019 

Social Security Administration $ 2,908,423 $ 2,900,916 

Office of Personnel Management 1,074,149 1,051,505 

Department of Defense Agencies 1,197,374 1,093,955 

Department of Health and Human Services 225,210 307,225 

All Other Federal Entities — Consolidated 492,036 515,494 

Total Federal Debt Held by Other Federal Agencies $ 5,897,192 $ 5,869,095 

These amounts do not include intra-departmental debt and related interest that are eliminated from our financial statements.

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, 2020

and 2019 consisted of the following:

Average 

Interest

(at par value in millions) Term Rates 2020 

Marketable: 

Treasury Bills 1 Year or Less 0.2% $ 5,028,127 

Treasury Notes Over 1 Year - 10 Years 1.9% 10,655,969 

Treasury Bonds Over 10 Years 3.5% 2,668,116 

Treasury Inflation-Protected Securities (TIPS) 5 Years or More 0.7% 1,522,418 

Treasury Floating Rate Notes (FRN) 2 Years 0.3% 478,320 

Total Marketable 20,352,950 

Non-Marketable On Demand to Over 40 Years 1.1% 666,002 

Total Federal Debt Held by the Public $ 21,018,952 

Average 

Interest

(at par value in millions) Term Rates 2019 

Marketable: 

Treasury Bills 1 Year or Less 2.1% $ 2,376,370 

Treasury Notes Over 1 Year - 10 Years 2.2% 9,755,985 

Treasury Bonds Over 10 Years 3.9% 2,311,517 

Treasury Inflation-Protected Securities (TIPS) 5 Years or More 0.8% 1,454,698 

Treasury Floating Rate Notes (FRN) 2 Years 2.0% 424,067 

Total Marketable 16,322,637 

Non-Marketable On Demand to Over 40 Years 2.2% 486,455 

Total Federal Debt Held by the Public $ 16,809,092 

We generally issue Treasury bills, notes, bonds, and TIPS to meet the borrowing needs of the U.S. government. We issue

marketable bills at a discount or at par, and pay the par amount of the security upon maturity. The average interest rate on 

Treasury bills represents the original issue effective yield on securities outstanding at year end. We issue marketable notes 

and bonds as long-term securities that pay semi-annual interest based on the securities’ stated interest rates. We issue

these securities at either par value or at an amount that reflects a discount or premium. The average interest rate on 

marketable notes and bonds represents the stated interest rate adjusted by any discount or premium on securities

outstanding at year-end. During FY 2020, Treasury’s borrowing needs increased substantially as a result of the federal 

government’s response to the COVID-19 pandemic. As a result, we increased our issuances. While the initial issuances were 
136 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

focused on Treasury bills, we shifted financing from bills to longer-term securities, using longer-term issuances as a prudent

means of managing our maturity profile and limiting potential future issuance volatility.

We also issue TIPS that have interest and redemption payments tied to the CPI for all Urban Consumers, a widely used

measurement of inflation. We adjust the principal for TIPS daily over the life of the security based on the CPI for all Urban

Consumers. At maturity, TIPS are redeemed at the inflation-adjusted principal amount, or the original par value, whichever

is greater. TIPS pay a semi-annual fixed rate of interest applied to the inflation-adjusted principal. The average interest

rate on TIPS represents the stated interest rate on principal plus inflation, adjusted by any discount or premium on

securities outstanding as of the end of the fiscal year. The inflation-adjusted TIPS principal balance of federal debt held by

the public included inflation of $151.0 billion and $150.6 billion as of September 30, 2020 and 2019, respectively.

We also issue marketable FRNs which pay interest quarterly based on the interest rate at the time of payment. The interest

rate of FRNs can change over time and is indexed to the highest acceptable discount rate of the most recent 13-week 

marketable bill auction. Similar to marketable notes and bonds, we issue these securities at either par value or at an

amount that reflects a discount or premium. The average interest rate on marketable FRNs represents the highest accepted 

discount rate of the most recent 13-week marketable auction as of September 30, adjusted by any discount or premium on 

securities outstanding as of that date. 

Federal Debt Held by the Public includes federal debt held outside of the U.S. government by individuals, corporations,

FRBs, state and local governments, foreign governments, and central banks. As of September 30, 2020, the FRB’s SOMA

had total holdings of $4.1 trillion which: (i) excluded $395.1 billion in Treasury securities used in overnight reverse

repurchase transactions, and (ii) excluded a negligible amount lent to dealers and not collateralized by other Treasury

securities. As of September 30, 2019, the FRB’s SOMA had total holdings of $1.6 trillion which: (i) excluded $475.0 billion in

Treasury securities used in overnight reverse repurchase transactions, and (ii) excluded a negligible amount lent to dealers 

and not collateralized by other Treasury securities. The significant increase in FY 2020 is a result of FRB’s increased

holdings of Treasury securities in amounts needed to support the smooth functioning and effective transmission of monetary

policy to broader financial conditions. For the years ended September 30, 2020 and 2019, we incurred interest expense of 

$64.3 billion and $59.0 billion, respectively, related to Treasury securities held by the FRBs.

We issue non-marketable securities at either par value or at an amount that reflects a discount or a premium. The average

interest rate on the non-marketable securities represents the original issue weighted effective yield on securities outstanding

as of September 30, 2020 and 2019. Non-marketable securities are issued with a term of on demand out to 40 years. In

FY 2020, we expanded our non-marketable securities to include a new special non-marketable Treasury security, known as a 

Special Purpose Vehicle (SPV) security. We issued these securities to SPVs, which were established by the Federal Reserve 

to implement its emergency lending facilities under Section 13(3) of the Federal Reserve Act to respond to the COVID-19

pandemic (refer to Note 10). An SPV security is a demand deposit certificate of indebtedness for which interest accrues daily

and is paid at redemption. As of September 30, 2020, the total amount of SPV securities outstanding was $96 billion.

STATUTORY DEBT LIMIT 

The statutory debt limit is the total amount of money that the U.S. government is authorized to borrow to meet its existing

legal obligations, with certain adjustments. Outstanding debt obligations subject to the statutory limit were $26.9 trillion

and $22.7 trillion as of September 30, 2020 and 2019, respectively. Congress has provided us with statutory authority to

take certain extraordinary measures in the event that the public debt nears the statutory debt limit and a delay in raising

the statutory debt limit occurs. These measures authorize us to deviate from our normal debt management operations – 
DEPARTMENT OF THE TREASURY 137 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

which include the investment (or non-investment) of trust fund balances in Treasury securities – to avoid exceeding the

statutory debt limit.

During a period of delay in raising the statutory debt limit, we may undertake the following extraordinary measures: (i)

suspend new issuances of Treasury securities to the Government Securities Investment Fund (G Fund) of the FERS TSP, the

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

Benefits Fund), and the ESF; (ii) redeem early a certain amount of Treasury securities held by the Civil Service Fund and

Postal Benefit Fund; (iii) suspend new issuances of State and Local Government Series (SLGS) securities; (iv) utilize FFB to

exchange outstanding Treasury securities held by the Civil Service Fund for non-Treasury securities (refer to Note 17); and

(v) issue cash management bills to manage short-term financing needs. 

When the period of delay in raising the statutory debt limit ends, we discontinue our use of extraordinary measures and

resume our normal debt management operations. Furthermore, we are required by the relevant statutes to issue to the

G Fund, along with the OPM-administered Civil Service Fund and Postal Benefits Fund (the OPM funds), Treasury

securities that bears such interest rates and maturity dates necessary to replicate the investments the funds would have

held had the delay not occurred (the unissued securities). In addition, relevant statutes require us to pay these funds the

related lost interest (foregone interest) on the unissued securities. While we may restore the ESF, relevant statutes do not 

permit us to pay the ESF interest lost during a period of delay. 

A delay in raising the statutory debt limit occurred from March 2, 2019 until August 1, 2019. On August 2, 2019, Congress

enacted the Bipartisan Budget Act of 2019 (P.L. 116-37) which temporarily suspended the debt limit through July 31, 2021. 

During the period from March 4, 2019 through August 1, 2019, we departed from our normal debt management operations 

and undertook extraordinary measures to avoid exceeding the statutory debt limit. On August 2, 2019 when Congress 

temporarily suspended the debt limit, we discontinued the use of extraordinary measures and resumed normal debt

management operations. On this date, we restored unissued securities totaling $263.4 billion, of which $159.4 billion and

$104.0 billion was restored to the G Fund and the two OPM Funds, respectively. We also restored foregone interest of 

$1.7 billion to the G Fund on August 5, 2019. Foregone interest totaling $696 million related to the unissued securities owed 

to the two OPM funds for the period from March 4, 2019 through August 1, 2019, was restored on the next semi-annual

interest payable date of December 31, 2019. The foregone interest was reported in FY 2019 as a current year, non-entity

expense on the Consolidated Statements of Net Costs within the line item “Restoration of Foregone Federal Debt Interest.” 

An additional $116 million of foregone interest owed to the two OPM funds was accrued and paid in FY 2020 and reported on 

the Consolidated Statements of Net Costs within the line item “Restoration of Foregone Federal Debt Interest.” 

17. OTHER DEBT AND INTEREST PAYABLE

Through FFB, we have outstanding borrowings and related accrued interest owed to the Civil Service Fund. At

September 30, 2020 and 2019, FFB had outstanding borrowings of $7.3 billion and $8.9 billion, inclusive of $48 million and

$60 million of accrued interest payable, respectively. The outstanding borrowings at September 30, 2020 had stated interest

rates that ranged from 2.25 percent to 2.88 percent per annum, and an effective interest rate of 2.64 percent. The

outstanding borrowings at September 30, 2019 had stated interest rates that ranged from 2.25 percent to 2.88 percent per

annum, and an effective interest rate of 2.69 percent. Maturity dates ranged from June 30, 2021 to June 30, 2029 for 

outstanding borrowings at September 30, 2020, and from June 30, 2020 to June 30, 2029 for outstanding borrowings at

September 30, 2019.
138 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

18. D.C. FEDERAL PENSION 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 our responsibility, we

manage two funds ― the District of Columbia Teachers, Police Officers, and Firefighters Federal Pension Fund (the D.C.

Federal Pension Fund) and the District of Columbia Judicial Retirement and Survivors Annuity Fund (the Judicial

Retirement Fund). We are required to make annual amortized payments from the General Fund to the D.C. Federal Pension 

Fund and the Judicial Retirement Fund. The D.C. Federal Pension Fund benefit payments relate to creditable service

performed on or before June 30, 1997, while the Judicial Retirement Fund benefit payments relate to all creditable service. 

A reconciliation of the combined actuarial pension liability for the D.C. Federal Pension Fund and the Judicial Retirement

Fund as of September 30, 2020 and 2019 is as follows: 

(in millions) 2020 2019 

Beginning Liability Balance $ 8,398 $ 8,372 

Pension Expense:

Normal Cost 5 6 

Interest on Pension Liability During the Year 66 55 

Actuarial (Gains) Losses During the Year:

From Experience 53 34 

From Discount Rate Assumption Change 383 290 

From Other Assumption Changes (36) 133 

From Non-Economic Changes (44) 64 

Total Pension Expense 427 582 

Less Amounts Paid (553) (556) 

Ending Liability Balance $ 8,272 $ 8,398 
DEPARTMENT OF THE TREASURY 139 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

D.C. Federal Judicial 2020 

Additional Information ($ in millions): Pension Fund Retirement Fund Total 

Amount Received from the General Fund $ 540 $ 16 $ 556 

Annual Rate of Investment Return Assumption 0.82% - 3.60% 0.82% - 3.60%

Future Annual Rate of Inflation and Cost-Of- 

 Living Adjustment:

 Police Officers 1.76% N/A

 Firefighters 1.76% N/A

 Teachers 1.71% N/A

 Judicial N/A 1.52%

Future Annual Rate of Salary Increases:

 Police Officers 2.15% N/A

 Firefighters 2.20% N/A

 Teachers 2.30% N/A

 Judicial N/A 0.94%

D.C. Federal Judicial 2019 

Additional Information ($ in millions): Pension Fund Retirement Fund Total 

Amount Received from the General Fund $ 498 $ 17 $ 515 

Annual Rate of Investment Return Assumption 0.74% - 3.84% 0.74% - 3.84%

Future Annual Rate of Inflation and Cost-Of- 

 Living Adjustment:

 Police Officers 1.80% N/A 

 Firefighters 1.80% N/A 

 Teachers 1.82% N/A

 Judicial N/A 1.36%

Future Annual Rate of Salary Increases:

 Police Officers 1.95% N/A 

 Firefighters 2.00% N/A 

 Teachers 2.30% N/A

 Judicial N/A 0.83% 
140 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

19. LIABILITIES

LIABILITIES NOT COVERED BY BUDGETARY RESOURCES 

As of September 30, 2020 and 2019, liabilities not covered by budgetary resources consisted of the following: 

(in millions) 2020 2019 

Intra-governmental Liabilities Not Covered by Budgetary Resources

Federal Debt Principal, Premium/Discount (Note 16) $ 5,969,385 $ 5,942,206 

Other Intra-governmental Liabilities 85 90 

Total Intra-governmental Liabilities Not Covered by Budgetary Resources 5,969,470 5,942,296 

Federal Debt Principal, Premium/Discount (Note 16) 20,992,250 16,766,404 

Other Liabilities 1,152 1,049 

Total Liabilities Not Covered by Budgetary Resources 26,962,872 22,709,749 

Total Liabilities Covered by or Not Requiring Budgetary Resources 4,189,881 2,415,211 

Total Liabilities $ 31,152,753 $ 25,124,960 

OTHER LIABILITIES

Total “Other Liabilities” displayed on the Consolidated Balance Sheets consists of liabilities that are covered by, not covered 

by, and not requiring budgetary resources. “Other Liabilities” at September 30, 2020 and 2019, consisted of the following: 

Non- 2020 Non- 2019 

(in millions) Current Current Total Current Current Total 

Intra-governmental 

Accounts Payable $ 112 $ - $ 112 $ 76 $ - $ 76 

Unfunded Federal Workers Compensation 

 Program Liability (FECA) 39 44 83 41 48 89 

Other Accrued Liabilities 510 21 531 446 21 467 

Total Intra-governmental $ 661 $ 65 $ 726 $ 563 $ 69 $ 632 

With the Public

Liability for Deposit Funds (Held by the

 U.S. government for Others)

 and Suspense Accounts $ 3,056 $ - $ 3,056 $ 1,437 $ - $ 1,437 

Actuarial Federal Workers Compensation 

 Program Liability (FECA) - 574 574 - 576 576 

Accrued Funded Payroll and Benefits 564 - 564 462 - 462 

Accounts Payable and Other Accrued

 Liabilities 2,569 102 2,671 2,902 90 2,992 

Total With the Public $ 6,189 $ 676 $ 6,865 $ 4,801 $ 666 $ 5,467 
DEPARTMENT OF THE TREASURY 141 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

20. 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. We report 

adjustments related to unexpended appropriations, such as cancellations of expired funds or rescissions, as “Other

Adjustments” on the Consolidated Statements of Changes in Net Position. 

Cumulative Results of Operations represents the net results of operations since inception, and includes cumulative amounts

related to investments in capitalized assets and donations and transfers of assets in and out without reimbursement. Also

included as a reduction in Cumulative Results of Operations are accruals for which the related expenses require funding

from future appropriations and assessments. These future funding requirements include, among others: (a) accumulated

annual leave earned but not taken; (b) accrued FECA; (c) credit reform cost re-estimates; (d) unfunded D.C. Federal pension; 

and (e) expenses for contingent liabilities.

APPROPRIATIONS RECEIVED

Congress appropriates the amount reported as “Appropriations Received” from the General Fund receipts, such as income

taxes, that are not dedicated by law for a specific purpose. This amount will not necessarily agree with the “Appropriations

(discretionary and mandatory)” amount reported on the Combined Statements of Budgetary Resources because of differences 

between proprietary and budgetary accounting concepts and reporting requirements. For example, certain dedicated

receipts are recorded as “Appropriations (discretionary and mandatory)” on the Combined Statements of Budgetary

Resources, but are recognized as exchange or non-exchange revenue (i.e., typically in revolving, special, and non-revolving

trust funds) and reported on the Consolidated Statements of Changes in Net Position in accordance with SFFAS No. 7.

TRANSFERS TO THE GENERAL FUND AND OTHER

The amount reported as “Transfers to the General Fund and Other” on the Consolidated Statements of Changes in Net

Position under “Other Financing Sources” includes the following for the years ended September 30, 2020 and 2019: 

(in millions) 2020 2019 

Categories of Transfers to the General Fund and Other

Interest Revenue $ (58,451) $ (46,616) 

Downward Re-estimates of Credit Reform Subsidies (14,188) (105) 

COVID-19 Non-Entity Revenue (Note 10) (5,832) - 

Increase in Liquidation Preference of GSEs Preferred Stock, 

 GSEs Preferred Stock Dividends and Valuation Changes (Note 11) 3,160 (14,199) 

Other 305 (2,254) 

Total (75,006) (63,174) 

Included in “Transfers to the General Fund and Other” is accrued interest revenue on inter-agency loans held on behalf of 

the U.S. government. We report a corresponding amount on the Consolidated Statements of Net Cost under “Non-Entity

Costs: Less Interest Revenue from Loans.” Eliminations between our bureaus reduce the amount reported on the

Consolidated Statements of Net Cost. The credit reform downward re-estimate subsidies transferred to the General Fund is

driven by a change in forecasted future cash flows. Our “COVID-19 Non-Entity Revenue” represents the value of our notes 

receivable and common stock warrants received pursuant to Section 4112 of the CARES Act. Also, included is the annual

valuation adjustment on the GSE Senior Preferred Stock investments and related dividends. 
142 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

The “Other” line generally includes collections from other federal agencies for reimbursement of costs we incurred for our

administration of trust funds established within the Social Security Act. We execute these administrative services as

directed by statute. Seigniorage and numismatic profits also are included in the “Other” line. Seigniorage is the face value

of newly minted circulating coins less the cost of production. Numismatic profit is any profit on the sale of proof coins,

uncirculated coins, commemorative coins, and related products and accessories. The Mint is required to distribute

seigniorage and numismatic profits in excess of operating expenses to the General Fund (refer to Note 22). 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. 

21. CONSOLIDATED STATEMENTS OF NET COST AND NET COSTS OF

TREASURY SUB-ORGANIZATIONS

Our Consolidated Statements of Net Cost display information on a consolidated basis. We consist of DO and seven operating

bureaus that we provide supporting schedules for Net Cost in the notes to the financial statements (refer to Note 1). These 

supporting schedules provide consolidating information, which fully displays the costs, revenues, and net cost of DO and

each operating bureau.

The classification of sub-organizations has been determined in accordance with SFFAS No. 4, Managerial Cost Accounting

Standards and Concepts which states that the predominant factor is the reporting entity’s organization structure and

existing responsibility components, such as bureaus, administrations, offices, and divisions within a department.

Each sub-organization is responsible for accumulating costs. The assignment of the costs to Department-wide programs is

the result of using the following cost assignment methods: (1) direct costs, (2) cause and effect, and (3) cost allocation.

INTRA-DEPARTMENTAL COSTS/REVENUES

We report intra-departmental costs/revenues resulting from the provision of goods and/or services on a reimbursable basis

among our sub-organizations as costs by providing sub-organizations and as revenues by receiving sub-organizations. We

recognized intra-departmental imputed costs, such as un-reimbursed payments made from the Treasury Judgment Fund on 

our behalf, on the Consolidated Statements of Net Cost of $938 million and $912 million during FY 2020 and 2019,

respectively. Accordingly, we eliminated such costs or revenues in the consolidation process.

INTRA-GOVERNMENTAL COSTS

Intra-governmental costs relate to the source of goods and services we purchased and not to the classification of the related

intra-governmental revenue.

In certain cases, other federal agencies incur costs that are directly identifiable to our operations. In accordance with SFFAS 

No. 4, as amended, we recognize identified costs paid on our behalf by other agencies. The imputed intra-governmental 

financing sources we currently recognize include the actual cost of future benefits for the federal pension plans, and the

Federal Employees Health Benefits Program that other federal entities pay on our behalf. We reflect the funding for these

costs as costs on the Consolidated Statements of Net Cost, and as imputed financing sources on the Consolidated Statements

of Changes in Net Position. Costs paid by other agencies on our behalf were $666 million and $807 million for the fiscal

years ended September 30, 2020 and 2019, respectively.
DEPARTMENT OF THE TREASURY 143 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

CONSOLIDATED STATEMENTS OF NET COST PRESENTATION

OMB Circular No. A-136, as revised, requires that the Consolidated Statements of Net Cost present the net cost of 

operations by major programs, which may describe an agency’s mission, strategic goals, functions, or other meaningful

grouping. We have presented the gross costs and earned revenues by major program categories aligned with our strategic

goals identified in Treasury’s FY 2018 – 2022 Strategic Plan. The majority of our bureaus’ and reporting entities’ gross costs 

and earned revenues falls within a single program category in the Consolidated Statements of Net Cost. DO allocates gross

costs and earned revenues to multiple programs using a net cost percentage calculation. All of our management offices 

coordinate, on a Treasury-wide basis, their efforts to achieve the Management program-related strategic goals. For financial

statement presentation purposes, we combine the gross costs and earned revenues associated with our Management

program-related goals with those costs and revenues associated with our Financial program-related strategic goals.

Our Consolidated Statements of Net Cost also present interest expense on the federal debt, other federal costs incurred, and

non-entity exchange revenues earned on behalf of the U.S. government. We do not reflect these costs and revenues as net 

program costs related to our strategic plan missions. We eliminate these costs in the consolidation process to the extent that

they involve transactions with our sub-organizations. 

Non-entity other federal costs shown on the Consolidated Statements of Net Cost for the fiscal years ended 

September 30, 2020 and 2019 consisted of the following: 

(in millions) 2020 2019 

Credit Reform Interest on Uninvested Funds (Intra-governmental) $ 21,144 $ 7,109 

Judgment Claims and Contract Disputes 7,802 1,299 

Resolution Funding Corporation 2,425 2,628 

Corporation for Public Broadcasting 540 465 

All Other Payments 838 515 

Total $ 32,749 $ 12,016 
144 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

21. CONSOLIDATED STATEMENT OF NET COST AND NET COSTS OF

TREASURY SUB-ORGANIZATIONS (IN MILLIONS) 

For Fiscal Year Ended September 30, 2020 

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

Gross Cost $ - $ 2,317 $ 6,233 $ - $ - $ - 

Less Earned Revenue - (518) (4,351) - - - 

Net Program Cost - 1,799 1,882 - - - 

ECONOMIC PROGRAM

Gross Cost 691 - 123,086 - 14,072 3,066 

Less Earned Revenue (773) - (9,302) - (460) (3,067) 

Net Program Cost (82) - 113,784 - 13,612 (1) 

SECURITY PROGRAM

Gross Cost - - 352 128 - - 

Less Earned Revenue - - (11) (1) - - 

Net Program Cost - - 341 127 - - 

Total Net Program Cost (Revenue)

 Before Changes in Actuarial

 Assumptions (82) 1,799 116,007 127 13,612 (1) 

(Gain)/Loss on Pension, ORB, or OPEB

 Assumption Changes - - 303 - - - 

Total Net Cost of (Revenue From)

 Treasury Operations $ (82) $ 1,799 $ 116,310 $ 127 $ 13,612 $ (1) 

(a) The total $113.8 billion of the Economic Program net costs reported by DO consisted of $109.0 billion of net costs from DO Policy Offices primarily related

to the COVID-19 stimulus programs: $80.6 billion for payments made to States, Municipalities and Tribal Organizations as part of Section 5001 of the

CARES Act Relief funding; $28.2 billion for payments made to Air Carriers Worker Support as part of Section 4112 of the CARES Act Relief funding; and

$4.4 billion of net costs from ESF primarily for CARES Act program related costs (refer to Note 10). The remaining net costs consisted of net costs from

other DO programs or offices. 
DEPARTMENT OF THE TREASURY 145 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

21. CONSOLIDATED STATEMENT OF NET COST AND NET COSTS OF

TREASURY SUB-ORGANIZATIONS (IN MILLIONS) (CON’T):

For Fiscal Year Ended September 30, 2020 

Program Costs

Office of the 

Comptroller of the 

Currency

Alcohol

and 

Tobacco

Tax and

Trade

Bureau 

Combined 

Total Eliminations

2020 

Consolidated

FINANCIAL PROGRAM

Gross Cost $ - $ - $ 8,550 $ 2,363 $ 6,187 

Less Earned Revenue - - (4,869) (1,120) (3,749) 

Net Program Cost - - 3,681 1,243 2,438 

ECONOMIC PROGRAM

Gross Cost 1,079 128 142,122 4,532 137,590 

Less Earned Revenue (1,095) (7) (14,704) (2,504) (12,200) 

Net Program Cost (16) 121 127,418 2,028 125,390 

SECURITY PROGRAM

Gross Cost - - 480 125 355 

Less Earned Revenue - - (12) (5) (7) 

Net Program Cost - - 468 120 348 

Total Net Program Cost (Revenue)

 Before Changes in Actuarial

 Assumptions (16) 121 131,567 3,391 128,176 

(Gain)/Loss on Pension, ORB, or OPEB

 Assumption Changes 8 - 311 - 311 

Total Net Cost of (Revenue From)

 Treasury Operations $ (8) $ 121 $ 131,878 $ 3,391 $ 128,487 
146 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

21. CONSOLIDATED STATEMENT OF NET COST AND NET COSTS OF

TREASURY SUB-ORGANIZATIONS (IN MILLIONS) (CON’T):

For Fiscal Year Ended September 30, 2019 

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

Gross Cost $ - $ 2,246 $ 6,478 $ - $ - $ - 

Less Earned Revenue - (401) (3,858) - - - 

Net Program Cost - 1,845 2,620 - - - 

ECONOMIC PROGRAM

Gross Cost 730 - 6,727 - 13,591 1,548 

Less Earned Revenue (802) - (6,147) - (517) (1,503) 

Net Program Cost (72) - 580 - 13,074 45 

SECURITY PROGRAM

Gross Cost - - 424 125 - - 

Less Earned Revenue - - (12) (2) - - 

Net Program Cost - - 412 123 - - 

Total Net Program Cost (Revenue)

 Before Changes in Actuarial

 Assumptions (72) 1,845 3,612 123 13,074 45 

(Gain)/Loss on Pension, ORB, or OPEB

 Assumption Changes - - 487 - - - 

Total Net Cost of (Revenue From)

 Treasury Operations $ (72)$ 1,845 $ 4,099 $ 123 $ 13,074 $ 45 

(a) The total $2.6 billion of the Financial Program net costs reported by DO consisted of $1.5 billion of net costs from OAS and $1.4 billion of net costs from

OFS. The remaining net costs consisted of net costs from other DO programs or offices. 
DEPARTMENT OF THE TREASURY 147 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

21. CONSOLIDATED STATEMENT OF NET COST AND NET COSTS OF

TREASURY SUB-ORGANIZATIONS (IN MILLIONS) (CON’T):

For Fiscal Year Ended September 30, 2019 

Program Costs

Office of the 

Comptroller of the 

Currency

Alcohol

and 

Tobacco

Tax and

Trade

Bureau 

Combined 

Total Eliminations

2019 

Consolidated

FINANCIAL PROGRAM

Gross Cost $ - $ - $ 8,724 $ 2,510 $ 6,214 

Less Earned Revenue - - (4,259) (813) (3,446) 

Net Program Cost - - 4,465 1,697 2,768 

ECONOMIC PROGRAM

Gross Cost 1,081 128 23,805 1,382 22,423 

Less Earned Revenue (1,196) (6) (10,171) (683) (9,488) 

Net Program Cost (115) 122 13,634 699 12,935 

SECURITY PROGRAM

Gross Cost - - 549 117 432 

Less Earned Revenue - - (14) (9) (5) 

Net Program Cost - - 535 108 427 

Total Net Program Cost (Revenue)

 Before Changes in Actuarial

 Assumptions (115) 122 18,634 2,504 16,130 

(Gain)/Loss on Pension, ORB, or OPEB

 Assumption Changes 13 - 500 - 500 

Total Net Cost of (Revenue From)

 Treasury Operations $ (102)$ 122 $ 19,134 $ 2,504 $ 16,630 
148 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

22. ADDITIONAL INFORMATION RELATED TO THE COMBINED 

STATEMENTS OF BUDGETARY RESOURCES

NET ADJUSTMENTS TO UNOBLIGATED BALANCE, BROUGHT FORWARD, OCTOBER 1 

Net adjustments to unobligated balance, brought forward, October 1 as of September 30, 2020 and 2019 consisted of the

following: 

(in millions) 2020 2019 

Unobligated Balance, Brought Forward From Prior Year $ 315,349 $ 313,661 

Adjustments to Budgetary Resources Made During Current Year

 Downward Adjustments of Prior Year Undelivered Orders 994 651 

 Downward Adjustments of Prior Year Delivered Orders 539 1,608 

 Other Adjustments 2,689 (916) 

Unobligated Balance From Prior Year Budgetary Authority, Net

 (Discretionary and Mandatory) $ 319,571 $ 315,004 

UNDELIVERED ORDERS

Undelivered orders represent goods and services ordered and obligated which have not been received. This includes any

orders for which we have paid in advance, but for which delivery or performance has not yet occurred. The increase in

Undelivered Orders - Paid as of September 30, 2020, resulted from Coronavirus Relief Fund obligations incurred related to

advance payments made to states, local, territorial, and tribal governments under the Section 5001 of the CARES Act (refer 

to Note 10). The increase in Undelivered Orders - Unpaid as of September 30, 2020, resulted from obligated but undisbursed

funding associated with the FRB’s emergency liquidity lending facilities (refer to Note 10). Undelivered orders as of 

September 30, 2020 and 2019 consisted of the following: 

2020 2019 

(in millions) Federal Non-Federal Total Federal Non-Federal Total 

Paid $ 8 $ 68,900 $ 68,908 $ 4 $ 9 $ 13 

Unpaid 13,036 120,484 133,520 471 6,478 6,949 

Undelivered Orders at the End of the Year $ 13,044 $ 189,384 $ 202,428 $ 475 $ 6,487 $ 6,962 

CONTRIBUTED CAPITAL

Contributed capital represents the current year authority and prior year balances of amounts actually transferred through

non-expenditure transfers to miscellaneous receipt accounts of the General Fund to repay a portion of a capital investment

or transfer seigniorage and numismatic profits (refer to Note 20). Contributed capital for the fiscal years ended 

September 30, 2020 and 2019 was $0 million and $9 million, respectively. 

TERMS OF BORROWING AUTHORITY USED

Several of our programs have authority to borrow under the FCRA, as amended. The FCRA provides indefinite borrowing 

authority to financing accounts to fund the unsubsidized portion of direct loans and to satisfy obligations in the event the

financing account’s resources are insufficient. OMB Circular No. A-11 defines repayment requirements. Interest expense 

due is calculated based on the beginning balance of borrowings outstanding and the borrowings/repayments activity that

occurred during the fiscal year. Undisbursed Departmental borrowings earn interest at the same rate as the financing

account pays on its debt owed to the Fiscal Service. In the event that principal and interest collections exceed the interest
DEPARTMENT OF THE TREASURY 149 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

expense due, we receive the excess payment. If principal and interest do not exceed interest expense due, we will borrow the

difference. We make periodic principal repayments based on the analysis of cash balances and future disbursement needs. 

All interest on borrowings is due on September 30. Interest rates on FCRA borrowings range from 1.92 percent to

5.83 percent.

AVAILABLE BORROWING

The available borrowing authority and related changes in available borrowing authority as of and for the fiscal years ended 

September 30, 2020 and 2019 are shown below: 

(in millions) 2020 2019 

Beginning Balance $ 6,248 $ 6,523 

Current Authority (1) 188,664 125 

Borrowing Authority Withdrawn (43) (20) 

Borrowing Authority Converted to Cash (95,193) (380) 

Ending Balance $ 99,676 $ 6,248 

(1) The significant increase in borrowing authority is related to the CARES Act in response to the COVID-19 pandemic (refer to Note 10).

RECONCILIATION OF THE PRESIDENT’S BUDGET

The Budget of the United States (also known as the President’s Budget), with actual numbers for FY 2020, was not 

published at the time that these financial statements were issued. The FY 2022 President’s Budget is expected to be

published by OMB in February 2021, and will be available from the U.S. Government Publishing Office. The following chart

displays the differences between the Combined Statement of Budgetary Resources (SBR) in the FY 2019 AFR and the actual

FY 2019 balances included in the FY 2021 President’s Budget.
150 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

Reconciliation of FY 2019 Combined Statement of Budgetary Resources

to the FY 2021 President’s Budget

New

Obligations Outlays (net Distributed

Budgetary and Upward of offsetting Offsetting Net

(in millions) Resources Adjustments collections) Receipts Outlays 

Combined Statement of Budgetary Resources (SBR) Amounts (1) $ 930,297 $ 614,948 $ 606,624 $ (68,686) $ 537,938 

IRS non-entity tax credit payments and other outlays not in SBR (2) 164,891 164,890 154,294 - 154,294 

Tax and Trade Bureau (TTB) non-entity collections for Puerto Rico not in SBR 445 445 445 - 445 

Expired funds in SBR (479) - - - - 

Non-Treasury offsetting receipts - - - (177) (177) 

Other 1 - 2 - 2 

President's Budget Amounts $ 1,095,155 $ 780,283 $ 761,365 $ (68,863) $ 692,502 

(1) The Outlays amount is based on FY 2019 SBR presentation which included ($202) million of non-budgetary disbursements. (2) These are primarily refundable Earned Income Tax Credit, Refundable Premium Tax Credit and Child Tax Credit, reported with refunds as

custodial activities in our financial statements and thus are not reported as budgetary resources.

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 Treasury account fund symbols are available in the next fiscal year for new obligations unless some

restrictions have been placed on those funds by law. In those situations, the restricted funding will be temporarily

unavailable until such time as the reasons for the restriction have been satisfied or legislation has been enacted to remove 

the restriction.

Amounts in expired Treasury account fund symbols are not available for new obligations, but may be used to make

adjustments to reflect, and make disbursements to liquidate, obligations that were created before the budgetary authority

expired.

 
DEPARTMENT OF THE TREASURY 151 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

23. SOURCES AND DISPOSITION OF CUSTODIAL REVENUE 

We collect the majority of federal revenue from income and excise taxes. The table below shows collection activity, by

revenue type and tax year, for the fiscal years ended September 30, 2020 and 2019: 

Tax Year

Pre- 2020 

(in millions) 2020 2019 2018 2018 Collections

Individual Income and FICA Taxes $ 1,947,888 $ 1,118,473 $ 33,689 $ 27,490 $ 3,127,540 

Corporate Income Taxes 152,005 89,037 9,932 12,589 263,563 

Estate and Gift Taxes 2,578 11,805 2,066 1,749 18,198 

Excise Taxes 68,084 23,601 143 230 92,058 

Railroad Retirement Taxes 3,848 1,323 1 1 5,173 

Unemployment Taxes 4,350 1,827 18 87 6,282 

Fines, Penalties, Interest & Other Revenue - 

 Tax Related 253 1 - - 254 

Tax Related Revenue Received 2,179,006 1,246,067 45,849 42,146 3,513,068 

Deposit of Earnings, Federal Reserve System 66,877 15,003 - - 81,880 

Fines, Penalties, Interest & Other Revenue - 

 Non-Tax Related 4,170 1,029 - - 5,199 

Non-Tax Related Revenue Received 71,047 16,032 - - 87,079 

Total Revenue Received $ 2,250,053 $ 1,262,099 $ 45,849 $ 42,146 $ 3,600,147 

Less Amounts Collected for Non-Federal Entities 477 

Total $ 3,599,670 

Tax Year

 Pre- 2019 

(in millions) 2019 2018 2017 2017 Collections

Individual Income and FICA Taxes $ 2,022,987 $ 1,087,931 $ 37,286 $ 28,202 $ 3,176,406 

Corporate Income Taxes 181,559 85,323 4,116 6,060 277,058 

Estate and Gift Taxes 809 13,683 1,483 1,590 17,565 

Excise Taxes 65,221 34,960 63 322 100,566 

Railroad Retirement Taxes 4,850 1,368 - 1 6,219 

Unemployment Taxes 4,479 1,800 43 116 6,438 

Fines, Penalties, Interest & Other Revenue - 

 Tax Related 144 - - 1 145 

Tax Related Revenue Received 2,280,049 1,225,065 42,991 36,292 3,584,397 

Deposit of Earnings, Federal Reserve System 39,373 13,420 - - 52,793 

Fines, Penalties, Interest & Other Revenue - 

 Non-Tax Related 4,394 1,052 - - 5,446 

Non-Tax Related Revenue Received 43,767 14,472 - - 58,239 

Total Revenue Received $ 2,323,816 $ 1,239,537 $ 42,991 $ 36,292 $ 3,642,636 

Less Amounts Collected for Non-Federal Entities 454 

Total $ 3,642,182 
152 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

AMOUNTS PROVIDED TO FUND THE U.S. GOVERNMENT 

For the fiscal years ended September 30, 2020 and 2019, collections of custodial revenue transferred to other federal entities

were as follows: 

(in millions) 2020 2019 

General Fund $ 2,862,273 $ 3,188,795 

Other Federal Agencies 865 953 

Total $ 2,863,138 $ 3,189,748 

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. The CARES Act included provisions to help stimulate the

economy through economic impact payments. In FY 2020, the IRS disbursed $274.7 billion of payments to eligible taxpayers

of up to $1,200 for individuals and $2,400 for individuals filing a joint tax return, with up to an additional $500 for each

eligible child added (refer to Note 10). Refunds and other payments, by revenue type and tax year, were as follows for the

years ended September 30, 2020 and 2019: 

Tax Year

2020 

Pre- Refunds/

(in millions) 2020 2019 2018 2018 Payments 

Individual Income and FICA Taxes $ 335,586 $ 299,269 $ 31,040 $ 7,455 $ 673,350 

Corporate Income Taxes 3,986 13,975 20,151 21,313 59,425 

Estate and Gift Taxes - 52 316 242 610 

Excise Taxes 387 1,813 338 338 2,876 

Railroad Retirement Taxes - 3 - 137 140 

Unemployment Taxes - 70 23 37 130 

Fines, Penalties, Interest & Other Revenue - - 1 - 1 

Total $ 339,959 $ 315,182 $ 51,869 $ 29,522 $ 736,532 

Tax Year

2019 

Pre- Refunds/

(in millions) 2019 2018 2017 2017 Payments 

Individual Income and FICA Taxes $ 58,150 $ 301,039 $ 30,051 $ 8,580 $ 397,820 

Corporate Income Taxes 3,919 14,769 10,737 21,867 51,292 

Estate and Gift Taxes - 218 441 269 928 

Excise Taxes 617 850 250 244 1,961 

Railroad Retirement Taxes - 2 10 154 166 

Unemployment Taxes - 230 13 24 267 

Total $ 62,686 $ 317,108 $ 41,502 $ 31,138 $ 452,434 

FEDERAL TAX REFUNDS AND OTHER AMOUNTS PAYABLE

As of September 30, 2020 and 2019, refunds and other amounts payable consisted of the following:

(in millions) 2020 2019 

Internal Revenue Service $ 3,751 $ 2,923 

Alcohol and Tobacco Tax and Trade Bureau - 16 

Total $ 3,751 $ 2,939 
DEPARTMENT OF THE TREASURY 153 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

24. FUNDS FROM DEDICATED COLLECTIONS

The ESF represents the majority of our FDC activities. In addition, such funds managed by BEP, Mint, and OCC (our nonappropriated bureaus) and certain funds managed by the IRS are public enterprise (or revolving) funds and receive no

appropriations from the Congress. Fiscal Service, DO, IRS, OFR, TFF, and the CDFI Fund manage other miscellaneous

FDCs.

The following is a list of FDCs and a brief description of the purpose, accounting, and uses of these funds.

Bureau Fund Code Fund Title/Description

Exchange Stabilization Fund (ESF)

ESF 020X4444 Exchange Stabilization Fund

Public Enterprise/Revolving Funds

BEP 020X4502 Bureau of Engraving and Printing Fund

Mint 020X4159 United States Mint 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 5805585001 Travel Promotion Fund, Corp for Travel Promotion

Fiscal Service 580X5585 Travel Promotion Fund, Corp for Travel Promotion

Fiscal Service 020X5581 HOPE Reserve Fund

Fiscal Service 0205445002 Debt Collection Special Fund

Fiscal Service 0205445003 Debt Collection Special Fund

Fiscal Service 020X5445 Debt Collection Special Fund

Fiscal Service 0204/55445 Debt Collection Special Fund

Fiscal Service 0205/65445 Debt Collection Special Fund

Fiscal Service 0206/75445 Debt Collection Special Fund

Fiscal Service 0207/85445 Debt Collection Special Fund

Fiscal Service 0208/95445 Debt Collection Special Fund

Fiscal Service 0209/05445 Debt Collection Special Fund

Fiscal Service 0200/15445 Debt Collection Special Fund

Fiscal Service 020X5680 Guam World War II Claims Fund

Fiscal Service 0205680001 Taxes, Duties and Fees, Guam World War II Claims Fund

DO 020X8790 Gifts and Bequests Trust Fund

IRS 020X5510 Private Collection Agency Program

IRS 020X5433 Informant Reimbursement

IRS 020X5622 Special Compliance Personnel Program Account

OFR 020X5590 Financial Research Fund

TFF 020X5697 Treasury Forfeiture Fund

CDFI 020X8524 Capital Magnet Fund
154 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

Pursuant to the legal authority found in Section 10 of the Gold Reserve Act of 1934, as amended, the Secretary, with the

approval of the President, through the ESF, may deal in gold, foreign exchange, and other instruments of credit and

securities the Secretary considers necessary, consistent with U.S. obligations in the IMF on orderly exchange arrangements

and a stable system of exchange rates. The ESF accounts for and reports its holdings to the Fiscal Service on the Standard

Form 224, “Statement of Transactions,” and provides other reports to Congress. Interest on SDRs in the IMF, investments

in Treasury securities, and investments in foreign currency assets are the 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 Treasury securities are the result of intra-departmental flows.

The BEP, Mint, OCC, and IRS operate “public enterprise/revolving funds” to account for all or some of their respective

revenues and expenses. 31 USC 5142 established the Bureau of Engraving and Printing Fund for BEP to account for 

revenue and expenses related to the production of currency and other federal security documents. 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 16, 481 and 482 established the Assessment Funds for OCC. Revenue and

financing sources are from the bank assessments for the oversight of the national banks, federal savings associations, and

federal branches and agencies of foreign banks. 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 U.S. government. There are minimal transactions with other government agencies.

There are other FDCs at several of our bureaus, such as donations to the Presidential Election Campaign Fund, gifts to

reduce the public debt, and other enforcement related activities. Public laws and the U.S. Code established and authorized

the use of these funds. Sources of revenues and other financing sources include contributions, cash and property forfeited in

enforcement activities, public donations, and other allocations, all which represent inflows to the government.

INTRA-GOVERNMENTAL INVESTMENTS IN TREASURY SECURITIES

The U.S. government does not set aside assets to pay future benefits or other expenditures associated with FDCs. Our

bureaus and other federal agencies invest some of the funds that they collect from the public, if they have the statutory

authority to do so, in Treasury securities. The Fiscal Service collects cash and makes deposits in the General Fund, which is

then available for general government purposes.

When our bureaus or other federal agencies redeem these securities to make expenditures, the government finances those

redemptions out of accumulated cash balances, by collecting taxes or other receipts, by borrowing from the public, or by

curtailing expenditures. This is the same way that the government finances all other expenditures.

The securities are an asset to our bureaus and other federal agencies and a liability of the General Fund. Because our 

bureaus and other federal agencies are parts of the U.S. government, these assets and liabilities offset each other from the

standpoint of the government as a whole. For this reason, they do not represent an asset or a liability in the U.S.

government-wide financial statements.
DEPARTMENT OF THE TREASURY 155 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

Our financial statements do not display the balances related to the investments made by our bureaus because the bureaus

are subcomponents of the Department. However, the General Fund remains liable to the Fiscal Service for the invested

balances and the Fiscal Service remains liable to the investing bureaus (refer to Note 4).
156 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

Summary Information for Funds from Dedicated Collections

 as of and for the Fiscal Year Ended September 30, 2020

 Public

 Exchange Enterprise/

Stabilization Revolving Other FDC Combined

(in millions) Fund Funds Funds FDC Funds

ASSETS

Intra-governmental Assets

Fund Balance $ - $ 1,226 $ 1,408 $ 2,634 

Investments and Related Interest 11,170 1,995 2,982 16,147 

Other Intra-governmental Assets - 6 - 6 

Total Intra-governmental Assets 11,170 3,227 4,390 18,787 

Cash, Foreign Currency and Other Monetary Assets 67,607 - 78 67,685 

Taxes, Interest, and Other Receivables, Net - 79 146 225 

COVID-19 Investments, Advances, Receivables, and Other 

 Investments, Net 10,047 - - 10,047 

 Other Assets 1,619 - - 1,619 

Other Investments and Related Interest 5,801 5 - 5,806 

Property, Plant, and Equipment, Net - 809 27 836 

Other Assets - 1,005 89 1,094 

Total Assets $ 96,244 $ 5,125 $ 4,730 $ 106,099 

LIABILITIES 

Intra-governmental Liabilities

Due To the General Fund $ - $ - $ 919 $ 919 

Other Intra-governmental Liabilities - 31 362 393 

Total Intra-governmental Liabilities - 31 1,281 1,312 

Special Drawing Right Certificates Issued to the Federal Reserve 5,200 - - 5,200 

Allocation of Special Drawing Rights 49,709 - - 49,709 

Other Liabilities 8 687 139 834 

Total Liabilities 54,917 718 1,420 57,055 

Net Position

Unexpended Appropriations 200 - - 200 

Cumulative Results of Operations 41,127 4,407 3,310 48,844 

Total Liabilities and Net Position $ 96,244 $ 5,125 $ 4,730 $ 106,099 

Statement of Net Cost

Gross Cost $ 5,464 $ 4,836 $ 911 $ 11,211 

Less: Earned Revenue (6,890) (4,935) (293) (12,118) 

Gains/Losses on Pension, ORB, or OPEB Assumption Changes - 8 - 8 

Total Net Cost of (Revenue From) Operations $ (1,426) $ (91) $ 618 $ (899) 

Statement of Changes in Net Position

Cumulative Results of Operations:

Beginning Balance $ 39,701 $ 3,745 $ 2,905 $ 46,351 

Budgetary Financing Sources - - 544 544 

Other Financing Sources - 571 479 1,050 

Total Financing Sources - 571 1,023 1,594 

Revenue From (Net Cost of) Operations 1,426 91 (618) 899 

Change in Net Position 1,426 662 405 2,493 

Ending Balance $ 41,127 $ 4,407 $ 3,310 $ 48,844 
DEPARTMENT OF THE TREASURY 157 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

Summary Information for Funds from Dedicated Collections

 as of and for the Fiscal Year Ended September 30, 2019

 Public

 Exchange Enterprise/

 Stabilization Revolving Other FDC Combined

(in millions) Fund Funds Funds FDC Funds

ASSETS

Intra-governmental Assets

Fund Balance $ - $ 1,141 $ 1,274 $ 2,415 

Investments and Related Interest 22,622 1,967 2,749 27,338 

Other Intra-governmental Assets - 7 - 7 

Total Intra-governmental Assets 22,622 3,115 4,023 29,760 

Cash, Foreign Currency and Other Monetary Assets 64,086 - 61 64,147 

Taxes, Interest, and Other Receivables, Net 71 68 139 

Other Investments and Related Interest 6,614 - - 6,614 

Property, Plant and Equipment, Net 689 35 724 

Other Assets - 596 97 693 

Total Assets $ 93,322 $ 4,471 $ 4,284 $ 102,077 

LIABILITIES 

Intra-governmental Liabilities

Due To the General Fund $ - $ - $ 911 $ 911 

Other Intra-governmental Liabilities - 28 332 360 

Total Intra-governmental Liabilities - 28 1,243 1,271 

Special Drawing Right Certificates Issued to the Federal Reserve 5,200 - - 5,200 

Allocation of Special Drawing Rights 48,146 - - 48,146 

Other Liabilities 75 698 136 909 

Total Liabilities 53,421 726 1,379 55,526 

Net Position

Unexpended Appropriations 200 - - 200 

Cumulative Results of Operations 39,701 3,745 2,905 46,351 

Total Liabilities and Net Position $ 93,322 $ 4,471 $ 4,284 $ 102,077 

Statement of Net Cost

Gross Cost $ 5,670 $ 3,359 $ 816 $ 9,845 

Less: Earned Revenue (5,932) (3,501) (376) (9,809) 

Gains/Losses on Pension, ORB, or OPEB Assumption Changes - 13 - 13 

Total Net Cost of (Revenue From) Operations $ (262) $ (129) $ 440 $ 49 

Statement of Changes in Net Position

Cumulative Results of Operations:

Beginning Balance $ 39,439 $ 3,756 $ 2,968 $ 46,163 

Budgetary Financing Sources - - 157 157 

Other Financing Sources - (140) 220 80 

Total Financing Sources - (140) 377 237 

Revenue From (Net Cost of) Operations 262 129 (440) (49) 

Change in Net Position 262 (11) (63) 188 

Ending Balance $ 39,701 $ 3,745 $ 2,905 $ 46,351 
158 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

25. RECONCILIATION OF NET COST OF TREASURY OPERATIONS AND

NON-ENTITY COSTS TO AGENCY OUTLAYS, NET

The Reconciliation of Net Cost of Treasury Operations and Non-Entity Costs (referred to as “Net Cost” for purposes of this

note) to Agency Outlays, Net (referred to as “Net Outlays” for purposes of this note) depicts the difference between 

proprietary information and budgetary accounting information. Proprietary financial accounting information is intended to

depict the U.S. government’s financial operations and financial position presented on an accrual basis in accordance with

GAAP, which includes the recognition of assets and liabilities for which collections and payments, respectively, have or have

not been made. In contrast, budgetary accounting information is used for planning and control purposes, and includes net 

outlays that reflect both the receipt and use of cash, as well as reporting of the federal deficit. “Agency Outlays, Net” also

includes $70.6 billion and $73.2 billion of interest accrued on outstanding public debt as of September 30, 2020 and 2019,

respectively; as well as $37.0 billion and $61.4 billion of net amortization of discounts on outstanding public debt as of 

September 30, 2020 and 2019, respectively. These amounts represent non-cash outlays that have not yet been disbursed. 

The reconciliation of Net Cost (presented on an accrual basis) and Net Outlays (presented on a budgetary basis) reflects the

relationship between proprietary accounting and budgetary information. The reconciliation serves not only to identify costs

paid in the past and those that will be paid in the future, but also to assure integrity between financial and budgetary

accounting. The following is a description of principal transactions that result in differences between the Department’s

proprietary net costs and budgetary net outlays:

• Net Valuation Adjustments on COVID-19 Investments and Direct Loans – revenue primarily related to the unrealized

gain resulting from the valuation adjustment of the Section 4003 Special Purpose Vehicles (refer to Note 10). They

represent revenue/cost as a component of Net Cost that are not a part of Net Outlays. For budgetary purposes, these

assets are accounted for in accordance with FCRA, and as a result, in any given year, the amount recognized as current

year accrued costs may differ from the current year President’s Budget due to timing differences. 

• Net unrealized loss on investments in GSEs – cost related to the combination of loss from the valuation adjustment of 

the preferred and common stock investments in the GSEs, and unrealized gain resulting from the increase in liquidation

preference in GSE preferred stock (refer to Note 11). They represent revenue/cost as a component of Net Cost which is

not part of Net Outlays.

• COVID-19 Notes and Interest Receivable – promissory notes received as compensation for financial assistance provided

for air carrier worker support under Section 4112 of the CARES Act (refer to Note 10). They represent an increase in

non-entity assets not affecting Net Outlays.

• CARES Act Section 5001 Advances – advanced funds to state, local, territorial, and tribal governments that have been 

obligated but not expensed until the recipients incur eligible obligations or expenditures in accordance with Section 5001

of the CARES Act (refer to Note 10). They represent a component of Net Outlays that are not a part of Net Cost.

• COVID-19 CPFF SPV Investments – preferred equity investment in the CPFF SPV facility established by the Federal 

Reserve Board, to provide liquidity to the financial system which was funded using unappropriated core funds of the

ESF (refer to Note 10). Investments made using unappropriated funding represent a component of Net Outlays that are

not a part of Net Cost. 

• GSEs guarantee fee collections – fees collected on behalf of the U.S. government in accordance with P.L. 112-78 (refer to

Note 11). They represent custodial collections recognized as a component of Net Outlays but not a component of Net

Cost.
DEPARTMENT OF THE TREASURY 159 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

For the fiscal years ended September 30, 2020 and 2019, the Reconciliation of Net Cost of Treasury Operations and NonEntity Costs to Agency Outlays, Net consisted of the following:

(in millions)

IntragovernmentalWith the 

Public 2020 Total

Total Net Cost of Treasury Operations and Non-Entity Costs $ 124,221 $ 507,022 $ 631,243

Components of Net Cost Not Part of Net Outlays:

Net Valuation Adjustments on COVID-19 Investments and Direct Loans - 13,320 13,320

Net Unrealized Loss on Investments in GSEs - (3,160) (3,160)

Year-end credit reform accrual subsidy re-estimates 2 1,181 1,183

Property, Plant, and Equipment Depreciation - (415) (415)

Other - (63) (63)

Increase/(Decrease) in Assets Not Affecting Net Outlays:

 COVID-19 Notes and Interest Receivable - 5,320 5,320

 Accounts Receivable 210 10 220

 Loans Receivable - (538) (538)

 Other Assets 51 1,568 1,619

(Increase)/Decrease in Liabilities Not Affecting Net Outlays:

 Interest Payable (2,949) - (2,949)

 Other Liabilities 95 (1,662) (1,567)

Other Financing Sources:

 Imputed Financing Sources (666) - (666)

 Transfers Out (In) Without Reimbursement 187 - 187

 Other Financing Sources (130) - (130)

Total Components of Net Cost Not Part of Net Outlays (3,200) 15,561 12,361

Components of Net Outlays That Are Not Part of Net Cost 

 COVID-19 CPFF SPV Investments - 10,000 10,000

 COVID-19 Other Assets - 1,500 1,500

 CARES Act Section 5001 Advances - 68,889 68,889

 GSEs Guarantee Fee Collections - (4,238) (4,238)

 Acquisition of Capital Assets - 213 213

 Other (1,563) (154) (1,717)

Total Components of Net Outlays That Are Not Part of Net Cost (1,563) 76,210 74,647

Agency Outlays, Net $ 119,458 $ 598,793 $ 718,251
160 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

(in millions)

IntragovernmentalWith the 

Public 2019 Total

Total Net Cost of Treasury Operations and Non-Entity Costs $ 133,066 $ 409,554 $ 542,620

Components of Net Cost Not Part of Net Outlays:

Net Unrealized Loss on Investments in GSEs - (1,080) (1,080)

Property, Plant, and Equipment Depreciation - (551) (551)

Other 76 514 590

Increase/(Decrease) in Assets Not Affecting Net Outlays:

 Accounts Receivable 476 (14) 462

 Loans Receivable - 7 7

 Other Assets (9) 58 49

(Increase)/Decrease in Liabilities Not Affecting Net Outlays:

 Interest Payable 440 - 440

 Other Liabilities (265) (462) (727)

Other Financing Sources:

 Imputed Financing Sources (807) - (807)

 Transfers Out (In) Without Reimbursement 742 - 742

 Other Financing Sources (217) - (217)

Total Components of Net Cost Not Part of Net Outlays 436 (1,528) (1,092)

Components of Net Outlays That Are Not Part of Net Cost 

 GSEs Guarantee Fee Collections - (3,903) (3,903)

 Acquisition of Capital Assets 1 259 260

 Other 201 54 255

Total Components of Net Outlays That Are Not Part of Net Cost 202 (3,590) (3,388)

Agency Outlays, Net $ 133,704 $ 404,436 $ 538,140
DEPARTMENT OF THE TREASURY 161 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

26. SCHEDULE OF FIDUCIARY ACTIVITY

We have identified the following 22 funds as meeting the criteria for fiduciary activity. Details of the funds are provided 

below.

Bureau Fund Code Authority Fund Title/Description

Fiscal Service 020X6133 31 USC 1322 Payment of Unclaimed Monies

BEP 020X6513.013 31 USC 5119 Mutilated Currency Claims Funds

Fiscal Service 020X6045 31 USC 3328 Proceeds, Payments of Unpaid Checks

Fiscal Service 020X6048 31 USC 3329, 3330 Proceeds of Withheld Foreign Checks

Fiscal Service 020015X6078 50 APP. USC 2012 War Claims Fund, Foreign Claims Settlement Commission

Fiscal Service 020X6092 31 USC 1321 Debt Management Operations

Fiscal Service 020X6104 22 USC 1627 Albanian Claims Fund, Treasury

Fiscal Service 020X6210 22 USC 1623 Iraq Claims Settlement Fund

Fiscal Service 020X6309 22 USC 1627(a) Libyan Claims Settlement Fund

Fiscal Service 020X6310 22 USC 1627(a) Libyan Claims Settlement Fund

Fiscal Service 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 Small Difference Account for Deposit and Check Adjustments

Fiscal Service 020X6830 104 Stat. 1061 Net Interest Payments to/from State

Fiscal Service 020X6999 31 USC 3513 Accounts Payable, Check Issue Underdrafts

Fiscal Service 020X6317.001 22 USC 2431 Belize Escrow, Debt Reduction

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

“Payment of Unclaimed Monies” is a fund authorized by 31 USC 1322, permitting the Fiscal Service to collect unclaimed

monies on behalf of the public. Our other fiduciary activities as listed above are included in All Other Fiduciary Funds.

Schedule of Fiduciary Activity

2020 2019 

Payment of All Payment of All

Unclaimed Other Total Unclaimed Other Total 

Monies Fiduciary Fiduciary Monies Fiduciary Fiduciary

(in millions) Fund Funds Funds Fund Funds Funds

Fiduciary Net Assets, Beginning of

 the Year $ 803 $ 166 $ 969 $ 749 $ 55 $ 804 

Increases:

 Contributions to Fiduciary Net Assets 52 5,109 5,161 54 609 663 

 Investment earnings - 1 1 - - - 

Total Increases 52 5,110 5,162 54 609 663 

Decreases:

 Disbursements to and on behalf

 of beneficiaries - (5,126) (5,126) - (498) (498) 

Total Decreases - (5,126) (5,126) - (498) (498) 

Net Increase (Decrease) in

 Fiduciary Assets 52 (16) 36 54 111 165 

Fiduciary Net Assets, End of Year $ 855 $ 150 $ 1,005 $ 803 $ 166 $ 969 
162 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

Schedule of Fiduciary Net Assets

2020 2019 

Payment of All Payment of All

Unclaimed Other Total Unclaimed Other Total 

Monies Fiduciary Fiduciary Monies Fiduciary Fiduciary

(in millions) Fund Funds Funds Fund Funds Funds

Fiduciary Net Assets

Cash and Cash Equivalents

 Fund Balance with Treasury $ 855 $ 146 $ 1,001 $ 803 $ 54 $ 857 

Investments

 Investments in Treasury Securities - 4 4 - 112 112 

Total Fiduciary Assets 855 150 1,005 803 166 969 

Total Fiduciary Net Assets $ 855 $ 150 $ 1,005 $ 803 $ 166 $ 969 

27. COMMITMENTS AND CONTINGENCIES

LEGAL CONTINGENCIES

We are a party in various administrative proceedings, legal actions, and claims, which may ultimately result in settlements

or decisions adverse to the U.S. government. These contingent liabilities arise in the normal course of operations, and their

ultimate disposition is unknown. We disclose contingent liabilities where the conditions for liability recognition have not 

been met and the likelihood of unfavorable outcome is more than remote. We do not accrue for possible losses related to

cases where we cannot estimate the potential loss or the likelihood of an unfavorable outcome is less than probable.

In some cases, a portion of any loss that may occur may be paid by our Judgment Fund, which is separate from our operating

resources. For cases related to the Contract Disputes Act of 1978 (P.L. 95-563) and awards under federal anti-discrimination

and whistle-blower protection acts, we must reimburse the Judgment Fund from future appropriations.

In the opinion of our management and legal counsel, based on information available as of the date of this report, the

expected outcome of other legal actions, individually or in the aggregate, will not have a materially adverse effect on our

consolidated financial statements, except for the pending legal actions described below which may have a materially adverse

impact on our consolidated financial statements depending on the outcomes of the cases.

Pending Legal Actions

• Tribal Trust Fund Cases: Native American tribes have filed numerous cases in the U.S. District Courts seeking a 

declaration that the U.S. has not provided the tribes with a full and complete accounting of their trust funds, and also

seeking an order requiring the U.S. government to provide such an accounting. In addition, there are a number of other 

related cases seeking damages in the U.S. Court of Federal Claims, that do not name us as a defendant. The U.S.

government is currently in discussion with counsel representing most of the remaining plaintiff tribes with tribal trust

fund cases pending against the U. S. about the feasibility of an out-of-court settlement. Plaintiff tribes in several of the

pending cases have chosen to pursue active litigation, rather than settlement discussion, and the U.S. government is

litigating those cases vigorously. We are unable to determine the likelihood of an unfavorable outcome or an estimate of 

potential loss at this time.

• GSE Related Cases: A number of cases were filed in the U.S. Court of Federal Claims and U.S. District Courts in which

the plaintiffs allege, among other things, that the U.S. government took their property, breached contractual rights of 
DEPARTMENT OF THE TREASURY 163 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

preferred and common stockholders, and breached fiduciary duties when the third amendments to the SPSPAs between 

us and each GSE were executed in August 2012 (refer to Note 11). One case also alleges that the U.S. government took 

plaintiffs’ property and contractual rights when the GSEs were placed into conservatorship and entered into the SPSPAs 

with us in September 2008. In the U.S. Court of Federal Claims, the plaintiffs seek just compensation and other 

damages from the U.S. government. With respect to certain cases pending before the U.S. Court of Federal Claims, the

U.S. government’s motion to dismiss was granted with respect to certain claims and denied with respect to certain other

claims. The parties have appealed, and the appeals are still pending. In the U.S. District Courts, the plaintiffs seek to

set aside the third amendments to the SPSPAs as well as damages, and in some cases a declaration that the FHFA’s 

structure violates the separation of powers. A case in the U.S. District Court for the Southern District of Texas was

dismissed by that District Court; and the Fifth Circuit Court of Appeals affirmed dismissal of all claims against the

Department but allowed one claim against the FHFA to proceed that is pending before the Supreme Court. Cases in the

U.S. District Courts for the District of Minnesota and Western District of Michigan were dismissed by the District

Courts, and appeals are pending. A case in the Eastern District of Pennsylvania remains in litigation, and a motion to

dismiss is pending. We are unable to determine the likelihood of an unfavorable outcome or an estimate of potential loss

in these cases at this time.

• Adam Steele, Brittany Montrois, and Joseph Henchman v. United States: The plaintiffs filed a class claim in the U.S.

District Court for the District of Columbia seeking refunds of all user fees paid, plus interest, to obtain a preparer tax

identification number (PTIN). Additionally, the plaintiffs seek to force us to cease charging a user fee to obtain a PTIN 

and asking for more information than is necessary to issue a PTIN. On June 1, 2017, the U.S. District Court for the

District of Columbia found for the plaintiffs in the previously mentioned matters, and the U.S. government appealed. In

March 2019, the U.S. Court of Appeals for the District of Columbia Circuit reversed the lower court’s opinion and

determined that we are entitled to charge a PTIN user fee. The case was remanded back to the lower court to determine

the appropriate amount of the fee. As of September 30, 2020, the Department has determined the likelihood of an

unfavorable outcome as probable and estimated a potential loss within a range of $0 to $288 million.

• Anonymous Whistleblower Cases: A number of whistleblower cases were filed in the U.S. Tax Court under seal,

appealing the denial of an award by the IRS Whistleblower Office. The anonymous claimants allegedly provided

confidential information about tax fraud committed by multiple taxpayers to the IRS. The U.S. Tax Court is currently

holding these cases in abeyance until it determines the scope and standard of review it will follow. We are unable to

determine the likelihood of an unfavorable outcome or an estimate of potential loss at this time. 

• American Recovery and Reinvestment Tax Act of 2009 (ARRA) Related Cases: A number of cases were filed in the U.S.

Court of Federal Claims alleging that the U.S. government violated statutory and regulatory mandates to make proper

payments to plaintiffs under ARRA, Section 1603, for having placed certain energy properties into service. As of 

September 30, 2020 and 2019, we have determined there is a reasonably possible likelihood of an unfavorable outcome

in some of the cases totaling approximately $460 million. On October 28, 2016, the U.S. Court of Federal Claims entered 

judgment against the U. S. in the amount of $207 million in one of the cases. The U.S. government appealed the

judgment, and on July 27, 2018, the Federal Circuit reversed the trial court’s decision, vacated judgment, and remanded 

the case to the U.S. Court of Federal Claims for reassignment to a new judge. The case remains in litigation. Additional
164 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

related cases with alleged damages of approximately $58 million have been filed. Two additional unrelated cases with

alleged damages totaling $195 million remain in litigation. 

• State of Texas et. al. v. United States: Two cases were filed in the U.S. District Court for the Northern District of Texas 

in which various states allege, among other things, that the payments of the Affordable Care Act’s Health Insurance

Provider Fee (HIPF) imposed on “covered entities,” is unlawfully applied to states. Although the states themselves are

not covered entities, payments that were made to for-profit Medicaid managed care organizations that entered into

contracts with the states are covered entities subject to the HIPF. Therefore, the managed care organizations structured

their coverage rates for each state to account for the fee. On July 31, 2020, the Fifth Circuit Court of Appeals ruled in

favor of the U.S. government. The plaintiffs filed a petition for rehearing and, on October 5, 2020, the court ordered the

U.S. government to respond to this petition. The U.S. government responded to the motion for rehearing en banc on

November 16, 2020. The plaintiffs have filed a reply, which is still pending. The second case is stayed pending the

outcome of the first case. We are unable to determine the likelihood of an unfavorable outcome but estimate a potential

loss of $479 million at this time. 

• Braun v. United States: A civil suit was filed in the U.S. District Court for the District of Columbia seeking to determine

if legislation passed in November 2019 is retroactive to December 2015, when the U.S. Victims of State Sponsored 

Terrorism Fund (USVSST) was created. The November 2019 legislation increased the mandatory percentage of deposits

into the USVSST fund from eligible civil forfeitures, fines, and penalties from 50 percent to 75 percent, payable to

victims on a pro rata basis. The suit was filed on September 16, 2020. We are unable to determine the likelihood of an

unfavorable outcome or an estimate of potential loss at this time. 

• Keough et al. v. United States et al.: A case was filed in the U.S. District Court for the District of Massachusetts seeking 

to determine if the fees Treasury charges agencies in its Cross-Servicing program related to the collection of delinquent

debt are unlawful. We are unable to determine the likelihood of an unfavorable outcome or an estimate of potential loss

at this time.

• Other Legal Actions: We are also involved in employment related legal actions (e.g., matters alleging discrimination and

other claims before federal courts, the Equal Employment Opportunity Commission, and the Merit Systems Protection 

Board) for which an unfavorable outcome is reasonably possible, but for which an estimate of potential loss cannot be

determined at this time. We do not expect that these cases will have a material adverse effect on our consolidated

financial position or results. 

OTHER COMMITMENTS AND CONTINGENCIES

Loan Commitments 

Through the FFB, we make loan commitments with federal agencies, or private sector borrowers with loans guaranteed by

federal agencies, to extend them credit for their own use (refer to Notes 1L and 3). As of September 30, 2020 and 2019, we

had remaining loan commitments totaling $35.9 billion and $17.8 billion, respectively.

In addition to the loan commitments, the FFB has agreements with agencies that permit FFB to issue loans up to amounts

authorized in those agencies’ annual program appropriations. The FFB also has agreements with the Federal Deposit 

Insurance Corporation and the Farm Credit System Insurance Corporation that permit FFB to issue loans up to a specified 

amount of $100 billion and $10 billion, respectively. 
DEPARTMENT OF THE TREASURY 165 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

Multilateral Development Banks

On behalf of the U.S., we have subscribed to shares of certain MDBs, of which some shares represent capital commitments 

that 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, 2020 and 2019, U.S.

callable capital in MDBs was as follows:

(in millions) 2020 2019 

Inter-American Development Bank $ 49,181 $ 49,181 

International Bank for Reconstruction and Development 44,942 43,521 

Asian Development Bank 18,702 18,702 

African Development Bank 5,608 5,608 

European Bank for Reconstruction and Development 3,055 3,055 

North American Development Bank 1,530 1,275 

Multilateral Investment Guarantee Agency (1) 315 315 

Total $ 123,333 $ 121,657 

(1) Both FY 2020 and 2019 include commitments of $22 million for the undisbursed portion of the subscription to paid-in capital 

investments. 

Terrorism Risk Insurance Program

Congress originally enacted the Terrorism Risk Insurance Act in November 2002, to address market disruptions resulting

from terrorist attacks on September 11, 2001. Most recently, the Terrorism Risk Insurance Program Reauthorization Act of 

2019 (P.L. 116-94) extended the Terrorism Risk Insurance Program (TRIP) until December 31, 2027. The TRIP helps to

ensure available and affordable commercial property and casualty insurance for terrorism risk, and simultaneously allows

private markets to stabilize. The authority to pay claims under the TRIP is activated when the Secretary (in consultation

with the Secretary of the Department of Homeland Security and the Attorney General of the United States) certifies an “act

of terrorism.” In the event of certification of an “act of terrorism,” insurers may be eligible to receive reimbursement from 

the U.S. government for associated insured losses – assuming an aggregate insured loss threshold (“program trigger”) has

been reached – once a particular insurer has satisfied its designated deductible amount. For calendar years 2020 and 2019,

the program trigger amount was $200 million and $180 million, respectively. Insured losses above insurer deductibles will

be shared between insurance companies and the U.S. government. The TRIP includes both mandatory and discretionary

authority for Treasury to recoup federal payments made under the TRIP through policyholder surcharges under certain

circumstances, and contains provisions designed to manage litigation arising from or relating to a certified act of terrorism. 

There were no claims under the TRIP as of September 30, 2020 or 2019.

Exchange Stabilization Agreement

The North American Framework Agreement (NAFA), which we signed in 1994 and renew annually, is implemented by

Treasury through the Exchange Stabilization Agreement (ESA) with Mexico. Treasury, through the ESF, offers Mexico a 

swap line with drawings contingent on certain conditions being met. Effective November 30, 2018, an amended and restated

ESA increased the potential size of the swap line from $3.0 billion to $9.0 billion. The amounts and terms (including the

assured source of repayment) of any swap arrangement under the NAFA and/or the ESA will have to be negotiated and

agreed to before any actual drawing can occur. There were no drawings outstanding on the ESF swap line as of 

September 30, 2020 and 2019. 
166 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

IMF Commitments 

The U.S. participates in the IMF through a quota subscription and the NAB which is a borrowing arrangement that

supplements IMF resources. As of September 30, 2020 and 2019, the U. S. financial commitment under the U.S. quota was

SDR 83.0 billion, which was equivalent to $116.6 billion and $113.0 billion, respectively. Its financial commitment under the

NAB was SDR 28.2 billion as of September 30, 2020 and 2019, which was equivalent to $39.7 billion and $38.4 billion,

respectively. In May 2020, the United States issued its consent to increase participation by the U.S. in the NAB by an

additional SDR 28.2 billion, which is scheduled to take effect January 1, 2021. Refer to Note 7 for further information.

Housing Programs Under TARP 

We design housing programs under TARP to provide stability for both the housing market and homeowners. These 

programs assist homeowners who are experiencing financial hardships to remain in their homes until their financial position

improves or they relocate to a more sustainable living situation, and to obtain other assistance designed to prevent

foreclosures. As of September 30, 2020 and 2019, we had committed up to $32.6 billion and $33.1 billion, respectively, for

these programs. Outstanding commitments totaled $1.7 billion and $3.0 billion as of September 30, 2020 and 2019,

respectively. For FY 2020 and 2019, payments made on behalf of the housing programs under TARP totaled $760 million

and $1.5 billion, respectively, reported within the Financial Program on our Consolidated Statements of Net Cost. 

Commitment to GSEs

The SPSPAs between us and each GSE, which have no expiration date, provide for us to disburse funds to the GSEs if, at the

end of any quarter, the FHFA determines that the liabilities exceed the GSE’s assets. At September 30, 2020 and 2019, our 

maximum remaining potential commitment to the GSEs was $254.1 billion. Refer to Note 11 for further information. 

COVID-19 Future Funding Commitments 

As of September 30, 2020, we committed to contribute $205.0 billion to capitalize the FRBs’ SPVs (utilizing $195.0 billion of 

both appropriated and Fiscal Service borrowings and $10.0 billion of ESF unappropriated core funds) to protect the FRBNY

and FRBB from potential losses incurred by these liquidity lending facilities that were established in response to the

COVID-19 pandemic. We funded $112.5 billion of this commitment as of September 30, 2020 and had a commitment, as of 

that date, to fund the remaining $92.5 billion as stipulated by the SPV LLC Agreements. However, as discussed in Note 10,

consistent with the enactment of the Consolidated Appropriations Act, 2021, on December 29, 2020, Treasury and the

Federal Reserve amended the SPV LLC Agreements for each of the SPVs funded under the CARES Act to, among other 

things, change the terms of our commitments to the SPVs (refer to the section entitled “Subsequent Events” within Note 10). 

Pursuant to the ESF core authority, we also committed $10.0 billion to the FRBB to provide it with credit protection in the

event of potential credit losses related to the MMLF liquidity lending facility. We satisfied a portion of our MMLF

commitment by transferring $1.5 billion of funds into a deposit account, and may be required to transfer the remaining

$8.5 billion. Under Section 4003, we also entered into direct loan agreements that provide for up to an aggregate total of 

$14.7 billion and $700 million, respectively, of available borrowings by certain passenger airlines and a national security

business, respectively, of which $13.1 billion and $455 million, respectively, remain available for future borrowings as of 

September 30, 2020. Refer to Note 10 for further information. As of September 30, 2020, there was no requirement for any

additional funding.
DEPARTMENT OF THE TREASURY 167 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

28. RECLASSIFICATION OF AGENCY FINANCIAL STATEMENTS TO 

FINANCIAL REPORT OF THE U.S. GOVERNMENT FORMAT

To prepare the Financial Report of the U.S. Government (FR), federal agencies submit to Fiscal Service a trial balance

containing financial statement account ending balances and activity. Fiscal Service uses this trial balance information to

reclassify agencies’ account balances and activity in a manner that conforms to the format of the financial statement

presentation in the FR. Our reclassified financial statements—including the Reclassified Balance Sheet, Reclassified

Statement of Net Cost, and Reclassified Statement of Operations and Changes in Net Position—are accessed using the

Government-wide Treasury Account Symbol Adjusted Trial Balance System. Fiscal Service eliminates all

intragovernmental balances and activity between federal agencies in generating the FR consolidated financial statements. 

This note depicts how our AFR consolidated financial statements are adjusted to derive the FR reclassified financial

statements prior to the elimination of intragovernmental balances and prior to the aggregation of repeated FR line items. A 

copy of the FY 2019 FR can be found on the Fiscal Service website and a copy of the FY 2020 FR will be posted to the site as

soon as it is released.
168 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

Consolidated Balance Sheet 

As of September 30, 2020

AFR Financial Statement Line

Amounts

(in millions)

Dedicated 

Collections 

Combined

Dedicated 

Collections 

Eliminations

All Other 

Amounts 

(with 

Eliminations)

Eliminations 

between 

Dedicated 

and All Other

Total 

(in millions) Reclassified Financial Statement Line

ASSETS

Intra-governmental Assets

Fund Balance $ 896,385 $ 2,634 $ - $ 893,751 $ - $ 896,385 Fund Balance with Treasury

Loans and Interest Receivable 1,734,916 - - 1,734,684 - 1,734,684 Loans Receivable 

- - 232 - 232 Interest Receivable - Loans and Not Otherwise 

Classified

 Total Loans and Interest Receivable 1,734,916 - - 1,734,916 - 1,734,916 Total 

Investments and Related Interest - 16,142 - - 16,142 - Federal Investments

5 - - 5 - Interest Receivable - Investments

 Total Investments and Related Interest - 16,147 - - 16,147 - Total 

Advances to Trust Funds 37,166 - - 37,154 - 37,154 Loans Receivable 

- - 12 - 12 Interest Receivable - Loans and Not Otherwise 

Classified

 Total Advances to Trust Funds 37,166 - - 37,166 - 37,166 Total 

Due From the General Fund 27,093,930 - - 27,093,930 - 27,093,930 Other Assets 

Other Intra-governmental Assets 1,218 3 - 1,219 12 1,210 Accounts Receivable, Net

- - 7 7 - Transfers Receivable

3 - 5 - 8 Advances to Others and Prepayments

 Total Other Intra-governmental Assets 1,218 6 - 1,231 19 1,218 Total 

Total Intra-governmental Assets 29,763,615 18,787 - 29,760,994 16,166 29,763,615 Total Intra-governmental Assets

Cash, Foreign Currency, and Other Monetary Assets 1,838,365 67,685 - 1,770,680 - 1,838,365 Cash and Other Monetary Assets 

Gold and Silver Reserves 11,062 - - 11,062 - 11,062 Cash and Other Monetary Assets 

Reserve Position in the International Monetary Fund 31,211 - - 31,211 - 31,211 Cash and Other Monetary Assets 

Taxes, Interest, and Other Receivables, Net 237,590 225 - 237,365 - 237,590 Accounts Receivable, Net

Credit Program Receivables, Net 3,704 - - 3,704 - 3,704 Direct Loan and Loan Guarantees Receivable, Net

Loans and Interest Receivable, Net 1,708 - - 1,708 - 1,708 Direct Loan and Loan Guarantees Receivable, Net
DEPARTMENT OF THE TREASURY 169 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

Consolidated Balance Sheet 

As of September 30, 2020

AFR Financial Statement Line

Amounts

(in millions)

Dedicated 

Collections 

Combined

Dedicated 

Collections 

Eliminations

All Other 

Amounts 

(with 

Eliminations)

Eliminations 

between 

Dedicated 

and All Other

Total 

(in millions) Reclassified Financial Statement Line

COVID-19 Investments, Advances, Receivables, and 

Other 

 Investments, Net 108,433 10,047 - 98,386 - 108,433 Securities and Investments

 Advances, Net 68,889 - - 68,889 - 68,889 Other Assets

 Notes and Interest Receivable, Net 5,320 - - 5,320 - 5,320 Direct Loan and Loan Guarantees Receivable, Net

 Credit Program Receivables, Net 1,580 - - 1,580 - 1,580 Direct Loan and Loan Guarantees Receivable, Net

 Other Assets 1,619 1,619 - - - 1,619 Other Assets

Investments in Government Sponsored Enterprises 

(GSEs) 

108,910 - - 108,910 - 108,910 Investments in Government Sponsored Enterprises 

Investments in Multilateral Development Banks 8,205 - - 8,205 - 8,205 Other Assets

Other Investments and Related Interest 5,822 5,806 - 16 - 5,822 Securities and Investments

Property, Plant, and Equipment, Net 2,958 836 - 2,122 - 2,958 General Property, Plant, and Equipment, Net

Other Assets 1,103 1,093 - - - 1,093 Inventory and Related Property, Net

1 - 9 - 10 Other Assets

 Total Other Assets 1,103 1,094 - 9 - 1,103 Total 

Total Assets $ 32,200,094 $ 106,099 $ - $ 32,110,161 $ 16,166 $ 32,200,094 Total Assets 

LIABILITIES 

Intra-governmental Liabilities

Federal Debt and Interest Payable $ 6,005,252 $ - $ - $ 5,985,525 $ 16,141 $ 5,969,384 Federal Debt

- - 35,873 5 35,868 Interest Payable - Debt

 Total Federal Debt and Interest Payable 6,005,252 - - 6,021,398 16,146 6,005,252 Total 

Other Debt and Interest Payable 7,310 - - 7,262 - 7,262 Federal Debt

- - 48 - 48 Interest Payable - Debt

 Total Other Debt and Interest Payable 7,310 - - 7,310 - 7,310 Total 

Due To the General Fund 3,991,781 918 - 3,990,862 - 3,991,780 Liability to the General Fund for Custodial and Other NonEntity Assets

1 - - - 1 Other Liabilities

 Total Due To the General Fund 3,991,781 919 - 3,990,862 - 3,991,781 Total 
170 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

Consolidated Balance Sheet 

As of September 30, 2020

AFR Financial Statement Line

Amounts

(in millions)

Dedicated 

Collections 

Combined

Dedicated 

Collections 

Eliminations

All Other 

Amounts 

(with 

Eliminations)

Eliminations 

between 

Dedicated 

and All Other

Total 

(in millions) Reclassified Financial Statement Line

Other Intra-governmental Liabilities 726 27 - 176 - 203 Benefit Program Contributions Payable 

46 - 109 12 143 Accounts Payable

319 - - 7 312 Transfers Payable 

- - 35 - 35 Advances from Others and Deferred Credits 

1 - 25 - 26 Other Liabilities (without Reciprocals)

- - 7 - 7 

Liability to Agency Other Than the General Fund for 

Custodial and Other Non-Entity Assets

 Total Other Intra-governmental Liabilities 726 393 - 352 19 726 Total 

Total Intra-governmental Liabilities 10,005,069 1,312 - 10,019,922 16,165 10,005,069 Total Intra-governmental Liabilities

Federal Debt and Interest Payable 21,062,850 - - 21,062,850 - 21,062,850 Federal Debt and Interest Payable 

Special Drawing Right Certificates Issued to the 

Federal Reserve 

5,200 5,200 - - - 5,200 Other Liabilities

Allocation of Special Drawing Rights 49,709 49,709 - - - 49,709 Other Liabilities

Gold Certificates Issued to the Federal Reserve 

Banks 

11,037 - - 11,037 - 11,037 Other Liabilities

Refunds Payable 3,751 - - 3,751 - 3,751 Accounts Payable

D.C. Federal Pension and Judicial Retirement 

Actuarial Liability 

8,272 - - 8,272 - 8,272 Other Liabilities

Other Liabilities 6,865 101 - 531 - 632 Accounts Payable 

206 - 1,157 - 1,363 Federal Employee and Veteran Benefits Payable

527 - 4,343 - 4,870 Other Liabilities

 Total Other Liabilities 6,865 834 - 6,031 - 6,865 Total 

Total Liabilities 31,152,753 57,055 - 31,111,863 16,165 31,152,753 Total Liabilities
DEPARTMENT OF THE TREASURY 171 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

Consolidated Balance Sheet 

As of September 30, 2020

AFR Financial Statement Line

Amounts

(in millions)

Dedicated 

Collections 

Combined

Dedicated 

Collections 

Eliminations

All Other 

Amounts 

(with 

Eliminations)

Eliminations 

between 

Dedicated 

and All Other

Total 

(in millions) Reclassified Financial Statement Line

NET POSITION

Unexpended Appropriations: 

 Funds from Dedicated Collections 200 200 - - - 200 Unexpended Appropriations - Funds from Dedicated 

Collections (Combined)

 Other Funds 903,758 - - 903,758 - 903,758 Unexpended Appropriations - Funds Other than Those 

from Dedicated Collections (Combined)

Cumulative Results of Operations:

 Funds from Dedicated Collections 48,844 48,844 - - - 48,844 Cumulative Results of Operations - Funds from Dedicated 

Collections (Combined)

 Other Funds 94,539 - - 94,539 - 94,539 Cumulative Results of Operations - Funds Other than Those 

from Dedicated Collections (Combined)

Total Net Position (Combined Totals) 1,047,341 49,044 - 998,297 - 1,047,341 Total Net Position

Total Liabilities and Net Position $ 32,200,094 $ 106,099 $ - $ 32,110,160 $ 16,165 $ 32,200,094 Total Liabilities and Net Position
172 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

Consolidated Statement of Net Cost

For the Fiscal Year Ended September 30, 2020

AFR Financial Statement Line

Amounts

(in millions)

Dedicated 

Collections 

Combined

Dedicated 

Collections 

Eliminations

All Other 

Amounts 

(with 

Eliminations)

Eliminations 

between 

Dedicated 

and All Other

Total 

(in millions) Reclassified Financial Statement Line

Cost of Treasury Operations: 

Total Program Gross Costs $ 144,132 $ 10,348 $ - $ 128,272 $ - $ 138,620 Non-Federal Gross Costs

Intra-governmental Costs

233 - 1,852 - 2,085 Benefit Program Costs

55 - 612 - 667 Imputed Costs

400 - 1,346 227 1,519 Buy/Sell Cost

- - 4 - 4 Purchase of Assets 

- - 226 - 226 Federal Securities Interest Expense

- - 498 - 498 Borrowing Losses

16 - 501 - 517 Other Expenses (without Reciprocals) 

- - (4) - (4) Purchase of Assets Offset

704 - 5,035 227 5,512 Total Intra-governmental Costs

Total Program Gross Costs 144,132 11,052 - 133,307 227 144,132 Total 

Total Program Gross Earned Revenues (15,956) (11,743) - (765) - (12,508) Non-Federal Earned Revenue

Intra-governmental Revenue

(115) - (598) (224) (489) Buy/Sell Revenue

(197) - - (197) - 

Federal Securities Interest Revenue Including Associated 

Gains and Losses 

- - (2,192) - (2,192) Borrowing and Other Interest Revenue

- - (767) - (767) Borrowing Gains

(312) - (3,557) (421) (3,448) Total Intra-governmental Earned Revenue

Total Program Gross Earned Revenues (15,956) (12,055) - (4,322) (421) (15,956) Total 

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

Changes 311 8 - 303 - 311 Non-Federal Gross Costs

Total Net Cost of Treasury Operations $ 128,487 $ (995) $ - $ 129,288 $ (194) $ 128,487 Total 
DEPARTMENT OF THE TREASURY 173 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

Consolidated Statement of Net Cost

For the Fiscal Year Ended September 30, 2020

AFR Financial Statement Line

Amounts

(in millions)

Dedicated 

Collections 

Combined

Dedicated 

Collections 

Eliminations

All Other 

Amounts 

(with 

Eliminations)

Eliminations 

between 

Dedicated 

and All Other

Total 

(in millions) Reclassified Financial Statement Line

Non-Entity Costs:

Federal Debt Interest $ 526,814 $ - $ - $ 371,090 $ - $ 371,090 Interest on Debt Held by the Public (Non-Federal)

- - 155,964 240 155,724 Federal Securities Interest Expense (Federal)

 Total Federal Debt Interest 526,814 - - 527,054 240 526,814 Total 

Restoration of Foregone Federal Debt Interest 116 - - 116 - 116 Federal Securities Interest Expense (Federal)

Less Interest Revenue from Loans (53,561) - - (53,561) - (53,561) Borrowing and Other Interest Revenue (Federal)

Other Federal Costs, Net 32,749 119 - 12,083 - 12,202 Non-Federal Gross Costs

Intra-governmental Costs

- - 39 - 39 Buy/Sell Cost

- - 21,144 - 21,144 Borrowing and Other Interest Expenses

- - 21,183 - 21,183 Total Intra-governmental Costs

(64) - - - (64) Non-Federal Earned Revenue

- - (572) - (572) Buy/Sell Revenue (Federal)

 Total Other Federal Costs, Net 32,749 55 - 32,694 - 32,749 Total 
174 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

Consolidated Statement of Net Cost

For the Fiscal Year Ended September 30, 2020

AFR Financial Statement Line

Amounts

(in millions)

Dedicated 

Collections 

Combined

Dedicated 

Collections 

Eliminations

All Other 

Amounts 

(with 

Eliminations)

Eliminations 

between 

Dedicated 

and All Other

Total 

(in millions) Reclassified Financial Statement Line

GSEs Non-Entity Cost (Revenue), Net 3,160 - - 3,160 - 3,160 Non-Federal Earned Revenue

COVID-19 Non-Entity Revenue, Net (5,832) - - 2,178 - 2,178 Non-Federal Gross Costs

- - (8,010) - (8,010) Non-Federal Earned Revenue

 Total COVID-19 Non-Entity Revenue, Net (5,832) - - (5,832) - (5,832) Total 

Other, Net (690) 41 - 1 - 42 Non-Federal Gross Costs

- - (732) - (732) Buy/Sell Revenue (Federal)

 Total Other, Net (690) 41 - (731) - (690) Total 

Total Net Non-Entity Costs 502,756 96 - 502,900 240 502,756 Total 

63 - 436,763 - 436,826 Non-Federal Gross Costs(1)

Total Net Cost of Treasury Operations and NonEntity Costs $ 631,243 $ (836) $ - $ 1,068,951 $ 46 $ 1,068,069 Total Net Cost (1)

(1) Includes income tax credits of $436.8 billion, which are reported on the Treasury Statement of Custodial Activity within the “Less Refunds and Other Payments” line item. These costs are reported as part of net cost on the reclassified

financial statements for the purpose of presenting these costs in the manner presented in the FR.
DEPARTMENT OF THE TREASURY 175 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

Consolidated Statement of Changes in Net Position and Statement of Custodial Activity

For the Fiscal Year Ended September 30, 2020

AFR Financial Statement Line

Amounts (in 

millions)

Dedicated 

Collections 

Combined

Dedicated 

Collections 

Eliminations

All Other 

Amounts 

(with 

Eliminations)

Eliminations 

between 

Dedicated 

and All Other

Total 

(in millions) Reclassified Financial Statement Line

STATEMENT OF CHANGES IN NET POSITION

UNEXPENDED APPROPRIATIONS

Beginning Balance $ 419,596 $ 200 $ - $ 419,396 $ - $ 419,596 Net Position, Beginning of Period

Budgetary Financing Sources

Appropriations Received 1,273,854 - - 1,273,854 - 1,273,854 Appropriations Received as adjusted

Appropriations Transferred In/Out 60 - - 60 - 60 

Non-Expenditure Transfers-In of Unexpended 

Appropriations and Financing Sources

Other Adjustments (12,802) - - (12,802) - (12,802) Appropriations Received as adjusted

Appropriations Used (776,750) - - (776,750) - (776,750) Appropriations Used

Total Unexpended Appropriations 903,958 200 - 903,758 - 903,958 Total 

CUMULATIVE RESULTS OF OPERATIONS

Beginning Balance 69,980 46,351 - 23,629 - 69,980 Net Position, Beginning of Period

Budgetary Financing Sources

Appropriations Used 776,750 - - 776,750 - 776,750 Appropriations Expended

Non-Exchange Revenue 481 456 - - - 456 

Collections Transferred into Another TAS other than the 

General Fund of the U.S. Government

24 - - - 24 Individual Income Tax and Tax Withholdings

- - 1 - 1 Other Taxes and Receipts

43 - - 43 - 

Federal Securities Interest Revenue Including Associated 

Gains and Losses (Non-Exchange)

 Total Non-Exchange Revenue 481 523 - 1 43 481 Total

Donations and Forfeitures of Cash/Equivalent 239 239 - - - 239 Other Taxes and Receipts
176 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

Consolidated Statement of Changes in Net Position and Statement of Custodial Activity

For the Fiscal Year Ended September 30, 2020

AFR Financial Statement Line

Amounts (in 

millions)

Dedicated 

Collections 

Combined

Dedicated 

Collections 

Eliminations

All Other 

Amounts 

(with 

Eliminations)

Eliminations 

between 

Dedicated 

and All Other

Total 

(in millions) Reclassified Financial Statement Line

Transfers In/Out Without Reimbursement (187) 379 379 - - - 

Appropriation of Unavailable Special or Trust Fund 

Receipts Transfers-In

(379) (379) - - - 

Appropriation of Unavailable Special or Trust Fund 

Receipts Transfers-Out

3 3 1 1 - 

Non-expenditure Transfers-In of Unexpended 

Appropriations and Financing Sources

(4) (3) - (1) - 

Non-expenditure Transfers-Out of Unexpended 

Appropriations and Financing Sources

2 - 129 130 1 Expenditure Transfers-In of Financing Sources

(317) - (1) (130) (188) Expenditure Transfers-Out of Financing Sources

 Total Transfers In/Out Without Reimbursement (187) (316) - 129 - (187) Total

Other 105 98 - 7 - 105 Other Budgetary Financing Sources

Other Financing Sources (Non-Exchange)

Donation/Forfeiture of Property 93 93 - - - 93 Other Taxes and Receipts

Accrued Interest and Discount on Debt 1,505 - - 1,505 - 1,505 

Other Non-Budgetary Financing Sources for Debt 

Accruals/Amortization

Transfers In/Out Without Reimbursement - 2,472 2,472 - - - Transfers-In Without Reimbursement

(2,471) (2,471) - - - Transfers-Out Without Reimbursement

 Total Transfers In/Out Without Reimbursement - 1 1 - - - Total

Imputed Financing Sources 666 54 - 612 - 666 Imputed Financing Sources
DEPARTMENT OF THE TREASURY 177 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

Consolidated Statement of Changes in Net Position and Statement of Custodial Activity

For the Fiscal Year Ended September 30, 2020

AFR Financial Statement Line

Amounts (in 

millions)

Dedicated 

Collections 

Combined

Dedicated 

Collections 

Eliminations

All Other 

Amounts 

(with 

Eliminations)

Eliminations 

between 

Dedicated 

and All Other

Total 

(in millions) Reclassified Financial Statement Line

Transfers to the General Fund and Other (75,006) - - (18,803) - (18,803) 

Accrual for Non-Entity Amounts to be Collected and 

Transferred to the General Fund of the U.S. Government

(9) - (58,062) - (58,071) Non-Entity Collections Transferred to the General Fund

65 - (2) - 63 Other Non-Budgetary Financing Sources

846 - 959 - 1,805 Other Taxes and Receipts

 Total Transfers to the General Fund and Other (75,006) 902 - (75,908) - (75,006) Total

Net Cost of Treasury Operations and Non-Entity 

Costs (631,243) 836 - (1,068,951) (46) (1,068,069) Net Cost of Operations(2)

Total Cumulative Results of Operations 143,383 48,781 1 (342,226) (3) (293,443) Total 

STATEMENT OF CUSTODIAL ACTIVITY

Sources of Custodial Revenue

Individual Income and FICA Taxes $ 3,127,540 $ 63 $ - $ 3,127,477 $ - $ 3,127,540 Individual Income Tax and Tax Withholdings

Corporate Income Taxes 263,563 - - 263,563 - 263,563 Corporation Income Taxes

Estate and Gift Taxes 18,198 - - 18,198 - 18,198 Estate and Gift Taxes

Excise Taxes 92,058 - - 92,058 - 92,058 Excise Taxes

Railroad Retirement Taxes 5,173 - - 5,173 - 5,173 Other Taxes and Receipts

Unemployment Taxes 6,282 - - 6,282 - 6,282 Unemployment Taxes

Deposit of Earnings, Federal Reserve System 81,880 - - 81,880 - 81,880 Other Taxes and Receipts

Fines, Penalties, Interest and Other Revenue 5,453 - - 5,451 - 5,451 Other Taxes and Receipts

- - 2 - 2 Borrowing and Other Interest Revenue

 Total Fines, Penalties, Interest and Other 

Revenue 5,453 - - 5,453 - 5,453 Total

Less Refunds and Other Payments (736,532) - - (257,558) - (257,558) Individual Income Tax and Tax Withholdings

- - (38,492) - (38,492) Corporation Income Taxes

- - (128) - (128) Unemployment Taxes

- - (2,850) - (2,850) Excise Taxes

- - (573) - (573) Estate and Gift Taxes

- - (105) - (105) Other Taxes and Receipts

 Total Less Refunds and Other Payments (736,532) - - (299,706) - (299,706) Total (2)

(2) Includes income tax credits of $436.8 billion, which are reported on the Treasury Statement of Custodial Activity within the “Less Refunds and Other Payments” line item. These tax credits are reported as part of net cost on the

reclassified financial statements for the purpose of presenting these costs in the manner presented in the FR.
178 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

Consolidated Statement of Changes in Net Position and Statement of Custodial Activity

For the Fiscal Year Ended September 30, 2020

AFR Financial Statement Line

Amounts (in 

millions)

Dedicated 

Collections 

Combined

Dedicated 

Collections 

Eliminations

All Other 

Amounts 

(with 

Eliminations)

Eliminations 

between 

Dedicated 

and All Other

Total 

(in millions) Reclassified Financial Statement Line

Non-Cash Accrual Adjustment 90,818 - - 91,630 - 91,630 Other Taxes and Receipts

- - (812) - (812) 

Accrual for Non-Entity Amounts to be Collected and 

Transferred to the General Fund of the U.S. Gov't

 Total Non-Cash Accrual Adjustment 90,818 - - 90,818 - 90,818 Total

Disposition of Custodial Revenue

Amounts Provided to Fund Non-Federal Entities (477) - - (477) - (477) Other Taxes and Receipts

Amounts Provided to Fund the Federal 

Government (2,863,138) - - (2,862,273) - (2,862,273) Non-Entity Collections Transferred to the General Fund

- - (865) (865) 

Collections Transferred to a TAS Other Than the General 

Fund of the U.S. Government

 Total Amounts Provided to Fund the Federal 

Government (2,863,138) - - (2,863,138) - (2,863,138) Total

Non-Cash Accrual Adjustment (90,818) - - (90,817) - (90,817) 

Accrual for Non-Entity Amounts to be Collected and 

Transferred to the General Fund of the U.S. Gov't

- - (1) - (1) 

Accrual of Collections Yet to be Transferred to a TAS Other 

Than the General Fund of the U.S. Gov't

 Total Non-Cash Accrual Adjustment (90,818) - - (90,818) - (90,818) Total

Total Statement of Changes in Net Position and 

Statement of Custodial Activity $ 1,047,341 $ 49,044 $ 1 $ 998,295 $ (3) $ 1,047,341 

Total Reclassified Statement of Changes in Operations 

and Net Position
DEPARTMENT OF THE TREASURY 179 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED – SEE ACCOMPANYING 

AUDITORS’ REPORT) 

INTRODUCTION

This section provides the Required Supplementary Information as prescribed by accounting standards.

OTHER CLAIMS FOR REFUNDS

We estimated that $3.3 billion and $10.1 billion as of September 30, 2020 and 2019, respectively, may be payable as other 

claims for tax refunds. This estimate represents amounts (principal and interest) that we may pay for claims pending

judicial review by the federal courts or internally, by Appeals. In FY 2020, the total estimated payout (including principal

and interest) for claims pending judicial review by the federal courts and appeals courts is $1.6 billion and $1.7 billion,

respectively. In FY 2019, the total estimated payout (including principal and interest) for claims pending judicial review by

the federal courts and appeals courts was $7.8 billion and $2.3 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, some unpaid tax assessments do not meet the criteria for financial statement recognition. 

Internal Revenue Code (IRC) 6201 authorizes and requires us to make inquiries, determinations, and assessments of all

taxes which taxpayers have not duly paid (including interest, additions to the tax, and assessable penalties) under the law. 

Unpaid assessments result from taxpayers filing returns without sufficient payment, as well as from tax compliance

programs such as examination, under-reporter, substitute for return, and combined annual wage reporting. We also have

authority to abate the paid or unpaid portion of an assessed tax, interest, and penalty. Abatements occur for a number of 

reasons and are a normal part of the tax administration process. Abatements may result in claims for refunds or a reduction

of the unpaid assessed amount.

Under federal accounting standards, we consider unpaid assessments which require taxpayer or court agreement federal 

taxes receivable. We consider assessments not agreed to by taxpayers or the courts compliance assessments and not federal 

taxes receivable. Due to the lack of agreement, these compliance assessments are less likely to have future collection

potential than those unpaid assessments that we consider federal taxes receivable.

We call assessments with little or no future collection potential write-offs. Write-offs principally consist of amounts owed by

deceased, bankrupt, or defunct taxpayers. Write-offs have little or no future collection potential, but statutory provisions

require that we maintain these assessments until the statute for collection expires.

Although we do not consider compliance assessments and write-offs receivables under federal accounting standards, they

represent legally enforceable claims of the U.S. government. 

The components of the total unpaid assessments at September 30, 2020 and 2019, were as follows: 
180 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

(in millions) 2020 2019 

Total Unpaid Assessments $ 596,000 $ 550,000 

Less Compliance Assessments (74,000) (75,000) 

Write Offs (95,000) (106,000) 

Gross Federal Taxes Receivable 427,000 369,000 

Less Allowance for Doubtful Accounts (191,000) (225,000) 

Federal Taxes Receivables, Net $ 236,000 $ 144,000 

Total unpaid assessments include $200 billion of non-delinquent taxes receivable, including $178 billion of non-delinquent

IRC 965(h) tax of which $168 billion is collectible based on the type of taxpayer and the financial assistance of large dollar

businesses. The non-delinquent IRC 965 (h) component refers to taxpayers who elected to pay their IRC 965(h) tax on an

eight year installment schedule. The remaining balance is related to Social Security tax deferral under the CARES Act,

which contains a provision for employers to defer the employer’s share of the Social Security portion of FICA, and the

employer and employee representative’s share of the RRTA. The deferred amount is due by December 31, 2022.

To eliminate double counting, the compliance assessments reported above exclude trust fund recovery penalties assessed

against officers and directors of businesses involved in the non-remittance of federal taxes withheld from their employees. 

The penalties totaled $1.4 billion and $1.5 billion as of September 30, 2020 and 2019, respectively. We report the related

unpaid assessments of those businesses as taxes receivable or write-offs, but we may also recover portions of those

businesses’ unpaid assessments from any and all individual officers and directors against whom we assess a trust fund

recovery penalty.

ALCOHOL AND TOBACCO TAX AND TRADE BUREAU

As an agent of the U.S. government and as authorized by 26 USC, the TTB collects excise taxes from alcohol, tobacco,

firearms, and ammunition industries. In addition, the TTB collects special occupational taxes from certain tobacco

businesses. During FY 2020 and 2019, TTB collected approximately $20.0 billion and $19.8 billion in taxes, interest, and

other revenues, respectively. TTB also collects Federal excise taxes on certain articles produced in Puerto Rico and the

Virgin Islands, and imported into the U.S. In accordance with 26 USC 7652, such taxes collected on rum imported into the

U.S. are “covered over” or paid into the treasuries of Puerto Rico and the Virgin Islands.

TTB remits substantially all of the taxes collected, net of related refund disbursements, to the General Fund. We further

distribute this revenue to Federal agencies in accordance with various laws and regulations. The firearms and ammunition

excise taxes are an exception. TTB remits those revenues to the Fish and Wildlife Restoration Fund under provisions of the

Pittman-Robertson Act of 1937.

DEFERRED MAINTENANCE AND REPAIRS

In FY 2020 and 2019, we had no material amounts of deferred maintenance and repair costs to report on vehicles, buildings,

heritage assets, and structures we owned.
DEPARTMENT OF THE TREASURY 181 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

Deferred maintenance and repairs applies to owned PP&E. Deferred maintenance and repairs are maintenance and repair 

activity that we had not performed when it should have been, or scheduled to be, and put off or delayed for a future period. 

We define maintenance and repairs 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. Deferred maintenance and repairs 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 if there are any

deferred maintenance and repairs needed to keep an asset in acceptable operating condition. We use periodic condition

assessments, physical inspections, and review of manufacturing and engineering specifications, work orders, and building

and other structure logistics reports under these methodologies. 

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, 2020 and 2019

disaggregated by Treasury reporting entity rather than by Treasury major budget account, since we manage our budget at

the reporting entity level. 
182 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

Fiscal Year 2020 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 from prior year budget authority, net

 (discretionary and mandatory) $ 582 $ 1,686 $ 313,936 $ 31 $ 1,172

Appropriations (discretionary and mandatory) - 560,753 686,970 126 12,708

Borrowing authority (discretionary and mandatory) - - 188,664 - - 

Spending authority from offsetting collections 

 (discretionary and mandatory) 1,045 314 30,686 2 185

Total Budgetary Resources $ 1,627 $ 562,753 $ 1,220,256 $ 159 $ 14,065

STATUS OF BUDGETARY RESOURCES

New obligations and upward adjustments $ 879 $ 560,942 $ 455,325 $ 125 $ 12,670

Unobligated balance, end of year:

 Apportioned, unexpired accounts 584 1,669 743,336 30 1,077

 Exempt from apportionment, unexpired accounts - 5 86 - 7 

 Unapportioned, unexpired accounts 164 117 21,364 - 70

 Unexpired unobligated balance, end of year 748 1,791 764,786 30 1,154

 Expired unobligated balance, end of year - 20 145 4 241

Unobligated balance, end of year 748 1,811 764,931 34 1,395

Total Status of Budgetary Resources $ 1,627 $ 562,753 $ 1,220,256 $ 159 $ 14,065

OUTLAYS, NET, AND DISBURSEMENTS, NET

Outlays, net (discretionary and mandatory) $ 75 $ 561,109 $ 212,795 $ 120 $ 12,171

Distributed offsetting receipts - (60,689) (6,460) (3) (812)

Agency Outlays, Net (Discretionary and Mandatory) $ 75 $ 500,420 $ 206,335 $ 117 $ 11,359

Disbursements, net (mandatory) $ - $ - $ 85,859 $ - $ - 

(a) Of the $1,220 billion of Total Budgetary Resources for DO, ESF, GSE, and OAS had $758 billion, $254 billion, and

$14 billion, respectively. The remainder is spread throughout other offices. 
DEPARTMENT OF THE TREASURY 183 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

Fiscal Year 2020 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 from prior year budget authority, net

 (discretionary and mandatory) $ 487 $ 1,669 $ 8 $ 319,493 $ 78

Appropriations (discretionary and mandatory) - - 120 1,260,677 - 

Borrowing authority (discretionary and mandatory) - - - - 188,664

Spending authority from offsetting collections 

 (discretionary and mandatory) 3,574 1,056 7 10,466 26,403

Total Budgetary Resources $ 4,061 $ 2,725 $ 135 $ 1,590,636 $ 215,145

STATUS OF BUDGETARY RESOURCES

New obligations and upward adjustments $ 3,462 $ 1,069 $ 128 $ 819,600 $ 215,000

Unobligated balance, end of year:

 Apportioned, unexpired accounts 594 - 5 747,266 29

 Exempt from apportionment, unexpired accounts - 1,656 - 1,754 - 

 Unapportioned, unexpired accounts 5 - - 21,604 116

 Unexpired unobligated balance, end of year 599 1,656 5 770,624 145

 Expired unobligated balance, end of year - - 2 412 - 

Unobligated balance, end of year 599 1,656 7 771,036 145

Total Status of Budgetary Resources $ 4,061 $ 2,725 $ 135 $ 1,590,636 $ 215,145

OUTLAYS, NET, AND DISBURSEMENTS, NET

Outlays, net (discretionary and mandatory) $ (159)$ (16)$ 120 $ 786,215

Distributed offsetting receipts - - - (67,964)

Agency Outlays, Net (Discretionary and Mandatory) $ (159)$ (16)$ 120 $ 718,251 $ - 

Disbursements, net (mandatory) $ - $ - $ - $ 85,859
184 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | FINANCIAL SECTION

Fiscal Year 2019 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 from prior year budget authority, net $ 650 $ 1,598 $ 309,219 $ 44 $ 1,212

Appropriations (discretionary and mandatory) - 590,315 4,571 118 11,789

Borrowing authority (discretionary and mandatory) - - 125 - - 

Spending authority from offsetting collections 

 (discretionary and mandatory) 879 259 4,510 2 135

Total Budgetary Resources $ 1,529 $ 592,172 $ 318,425 $ 164 $ 13,136

STATUS OF BUDGETARY RESOURCES

New obligations and upward adjustments $ 955 $ 590,586 $ 8,429 $ 132 $ 12,110

Unobligated balance, end of year:

 Apportioned, unexpired accounts 574 1,477 269,740 27 566

 Exempt from apportionment, unexpired accounts - 6 78 - 8 

 Unapportioned, unexpired accounts - 91 40,017 - 257

 Unexpired unobligated balance, end of year 574 1,574 309,835 27 831

 Expired unobligated balance, end of year - 12 161 5 195

Unobligated balance, end of year 574 1,586 309,996 32 1,026

Total Status of Budgetary Resources $ 1,529 $ 592,172 $ 318,425 $ 164 $ 13,136

OUTLAYS, NET, AND DISBURSEMENTS, NET

Outlays, net (discretionary and mandatory) $ (55)$ 589,472 $ 5,359 $ 119 $ 11,707

Distributed offsetting receipts - (47,671) (20,388) - (627)

Agency Outlays, Net (Discretionary and Mandatory) $ (55)$ 541,801 $ (15,029)$ 119 $ 11,080

Disbursements, net (mandatory) $ - $ - $ (202)$ - $ - 

(a) Of the $318 billion of Total Budgetary Resources for DO, GSE, ESF, and OAS had $254 billion, $40 billion, 

and $14 billion, respectively. The remainder is spread throughout other offices. 
DEPARTMENT OF THE TREASURY 185 

FINANCIAL SECTION | FY 2020 AGENCY FINANCIAL REPORT

Fiscal Year 2019 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 from prior year budget authority, net $ 731 $ 1,542 $ 8 $ 314,985 $ 19

Appropriations (discretionary and mandatory) - - 120 606,913 - 

Borrowing authority (discretionary and mandatory) - - - - 125

Spending authority from offsetting collections 

 (discretionary and mandatory) 1,292 1,171 7 7,830 425

Total Budgetary Resources $ 2,023 $ 2,713 $ 135 $ 929,728 $ 569

STATUS OF BUDGETARY RESOURCES

New obligations and upward adjustments $ 1,555 $ 1,053 $ 128 $ 614,608 $ 340

Unobligated balance, end of year:

 Apportioned, unexpired accounts 468 - 5 272,845 12

 Exempt from apportionment, unexpired accounts - 1,660 - 1,752 - 

 Unapportioned, unexpired accounts - - - 40,148 217

 Unexpired unobligated balance, end of year 468 1,660 5 314,745 229

 Expired unobligated balance, end of year - - 2 375 - 

Unobligated balance, end of year 468 1,660 7 315,120 229

Total Status of Budgetary Resources $ 2,023 $ 2,713 $ 135 $ 929,728 $ 569

OUTLAYS, NET, AND DISBURSEMENTS, NET

Outlays, net (discretionary and mandatory) $ 241 $ (131)$ 114 $ 606,826

Distributed offsetting receipts - - - (68,686)

Agency Outlays, Net (Discretionary and Mandatory) $ 241 $ (131)$ 114 $ 538,140 $ - 

Disbursements, net (mandatory) $ - $ - $ - $ (202)
 

 

[Page intentionally left blank]
PART 3: 

OTHER INFORMATION 

(UNAUDITED)

SECTION A: TAX GAP AND TAX BURDEN............................. 189

SECTION B: MANAGEMENT CHALLENGES AND

TREASURY RESPONSE.................................................. 199

SECTION C: SUMMARY OF FINANCIAL STATEMENT

AUDIT AND MANAGEMENT ASSURANCES....................... 242

SECTION D: PAYMENT INTEGRITY...................................... 244

SECTION E: FRAUD REDUCTION REPORT ............................ 255

SECTION F: REAL PROPERTY............................................. 259

SECTION G: CIVIL MONETARY PENALTIES

INFLATION ADJUSTMENT ............................................. 260

SECTION H: GRANTS PROGRAMS ...................................... 266

APPENDIX: GLOSSARY OF ACRONYMS................................ 267
 

 
DEPARTMENT OF THE TREASURY 189 

OTHER INFORMATION | FY 2020 AGENCY FINANCIAL REPORT

SECTION A: TAX GAP AND TAX BURDEN

TAX GAP

The gross tax gap is the difference between the amount of tax imposed by law and what taxpayers actually pay on time. The 

tax gap provides an estimate of the level of overall non-compliance and voluntary compliance during the relevant tax periods

and under the Internal Revenue Code (IRC) provisions in effect at the time. Tax gap estimates provide the Internal Revenue

Service (IRS) with periodic appraisals about the nature and extent of noncompliance for use in formulating tax

administration strategies. 

Measuring and reporting on taxpayer compliance related to various tax provisions is inherently complex and challenging. As

a result, the IRS develops estimates of the tax gap in order to measure overall compliance with the current tax system. The 

IRS also undertakes analyses of compliance behavior with respect to specific tax provisions, such as refundable and nonrefundable tax credits. The IRS enforcement strategies and legislative proposals are influenced by its National Research

Program (NRP), which involves conducting detailed audits of a statistically representative sample of taxpayers to estimate

compliance with individual income tax provisions and provides data on misreporting on voluntarily filed returns. To provide

greater reliability and precision of the compliance estimates, the IRS groups multiple years of data together. This results in

a timing difference between the time period from which the reported data is generated and the report issuance date. 

Misreporting can be in favor of the taxpayer or the government, although estimates indicate that the majority of 

misreporting is due to tax underreporting. Underreporting can manifest as either underpayments of the liability due at the

time the return is filed, claiming and receiving an excessive refund, or a combination of both.

Tax Gap Estimates 

The tax gap estimates are prepared on a periodic basis, depending on the availability of the NRP data to produce such

estimates. In Fiscal Year (FY) 2019, the IRS released new estimates covering the Tax Year (TY) 2011 – 2013 timeframe.1 

The following is a brief overview of these estimates. A more in-depth discussion of the tax gap can be found on the IRS

website at:

• Federal Tax Compliance Research: Tax Gap Estimates for Tax Years 2011 – 2013 (https://www.irs.gov/pub/irspdf/p1415.pdf); and

• Understanding the Latest Tax Gap Estimates and Overall Taxpayer Compliance

(https://www.irs.gov/newsroom/understanding-the-latest-tax-gap-estimates-and-overall-taxpayer-compliance).

The gross tax gap is the amount of tax liability that is not paid voluntarily and on time. The average annual estimated gross

tax gap for the TY 2011 – 2013 timeframe is $441 billion. The net tax gap is the gross tax gap less tax that will be

subsequently paid, either paid voluntarily but late, or collected as a result of IRS administrative and enforcement activities. 

In effect, the net tax gap is the portion of the gross tax gap that will not be paid. It is estimated that $60 billion of the gross

tax gap will eventually be paid, resulting in a net tax gap of $381 billion.

1 The tax gap estimates released in FY 2019 are the most recent estimates available.
190 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | OTHER INFORMATION

The tax gap structure separates noncompliance into components by the type of tax and source of noncompliance. The three

primary sources of noncompliance that result in payment of less than the tax owed are: (i) the non-filing tax gap, which is

the tax not paid on time by those who do not file required returns on time; (ii) the underreporting tax gap, which is the net 

understatement of tax on timely filed returns; and (iii) the underpayment tax gap, which is the amount of tax reported on 

timely filed returns that is not paid on time. These components comprise $39 billion, $352 billion, and $50 billion,

respectively, of the $441 billion estimated annual average gross tax gap. The gross tax gap estimates can also be grouped by

type of tax. The estimated gross tax gap for individual income tax, corporate income tax, employment tax, and estate and 

excise tax is $314 billion, $42 billion, $81 billion, and $3 billion, respectively. These estimates are displayed below in an

excerpt from the schematic representation of the estimates, known as the tax gap “map” from the Tax Gap Estimates for Tax

Years 2011 – 2013 publication.

TAX GAP MAP: TAX GAP ESTIMATES FOR TAX YEARS 2011 – 2013 (EXCERPT) ($ IN BILLIONS)

Source: Federal Tax Compliance Research: Tax Gap Estimates for Tax Years 2011 - 2013

# - No estimate.

The percentage reported is the share of enforced and other late payments from the four different types of taxes.

The estimates are the annual averages for the TY 2011 – 2013 timeframe.

[1] Includes adjustments, deductions, and exemptions.

[2] Includes the Alternative Minimum Tax and taxes reported in the “Other Taxes” section of the Form 1040 except for self-employment tax and unreported

Social Security and Medicare tax (which are included in the employment tax gap estimates).

[3] Is the difference between (1) the estimate of the individual income tax underreporting tax gap where underreported tax is calculated based on all

misreporting combined and (2) the estimate of the individual income tax underreporting tax gap based on the sum of the tax gaps associated with each line

item where the line item tax gap is calculated based on the misreporting of that item only. There may be differences if the marginal tax rates are different in

these two situations. 

[4] Self-employment tax only.

Note: Individual amounts may not add to totals due to rounding.
DEPARTMENT OF THE TREASURY 191 

OTHER INFORMATION | FY 2020 AGENCY FINANCIAL REPORT

Tax Gap Estimation Methodology

Estimating the tax gap is inherently challenging and requires assessing alternative methods, assumptions, and data sources. 

There is no single approach for estimating all the components of the tax gap. Each approach to estimating the tax gap is

subject to non-sampling error. Furthermore, the component estimates that are based on statistical samples are also subject

to sampling error. The uncertainty of the estimates is not readily captured by standard errors that typically accompany

estimates based on sample data. For that reason, standard errors, confidence intervals, and statistical comparisons across

years are not reported.

These estimates reflect an estimated average compliance rate and associated average annual tax gap for the TY 2011 – 2013

timeframe. The IRS estimates tax gap using a three-year timeframe to provide greater reliability and precision on the

estimates. For individual income tax compliance, the tax gap is estimated using pooled data from several tax years because

the aggregated data provides more information upon which to base estimates of individual income tax underreporting,

categorized by sources of noncompliance. The individual income tax NRP reporting compliance studies are the foundation 

for the individual income tax underreporting tax gap estimates. The methodology incorporates additional data and

analytical techniques designed to account for income that is not detected by the NRP audits. The IRS audits tax returns to

produce the compliance estimates for the individual income tax underreporting tax gap estimate. Since the individual

income tax underreporting estimate is derived from actual compliance data obtained through the audit of tax returns, there

is a resulting mismatch between the latest tax year and the period from which the estimates are calculated. 

Individual Income Tax Underreporting Tax Gap Estimates for Tax Years 2011 – 2013 

The estimates in the table below provide a breakout of the components of the individual income tax underreporting tax gap,

the largest single contributor to the gross tax gap. For each income component, the table shows the component’s share of the

individual income tax underreporting tax gap. The table also shows each component’s share of the gross tax gap. Business

income accounts for 45 percent of the total individual income tax underreporting tax gap for TY 2011 – 2013. This primarily

consists of nonfarm proprietor income which accounts for 28 percent, flow-through income (partnerships, S corporations, and

estates and trusts) which accounts for eight percent, rent and royalty income which accounts for seven percent, and farm

income which accounts for two percent.
192 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | OTHER INFORMATION

INDIVIDUAL INCOME TAX UNDERREPORTING TAX GAP BY SOURCE: TAX YEARS 2011–2013 (1)

($ IN BILLIONS) 

Tax Line Item Amount

Tax Return Line Items Tax Gap

Share of Gross Tax 

Gap 

Share of Individual 

Income Tax 

Underreporting 

Tax Gap

Net Misreporting 

Percentage (2)

Gross Tax Gap $ 441 100% N/A N/A

Individual Income Tax Underreporting Tax Gap $ 245 56% 100% 18% 

Items Subject to Substantial Information Reporting and 

Withholding $ 9 2% 4% 1% 

Wages, salaries, tips $ 9 2% 4% 1% 

Items Subject to Substantial Information Reporting $ 12 3% 5% 5% 

Interest income (3) (3) (3) 1% 

Dividend income $ 1 (3) 1% 5% 

State income tax refunds $ 1 (3) (3) 12% 

Pension & annuities $ 5 1% 2% 3% 

Unemployment Compensation (3) (3) (3) 7% 

Taxable Social Security benefits $ 4 1% 2% 11% 

Items Subject to Some Information Reporting $ 36 8% 15% 17% 

Partnership, S-Corp, Estate & Trust, etc. $ 19 4% 8% 11% 

Alimony income (4) (4) (4) (4)

Capital Gains(5) $ 17 4% 7% 23% 

Short-term Capital Gains $ 7 2% 3% 24% 

Long-Term Capital Gains $ 10 2% 4% 15% 

Items Subject to Little or No Information Reporting $ 109 25% 45% 55% 

Form 4797 income $ 2 1% 1% 36% 

Other income $ 16 4% 6% 42% 

Nonfarm proprietor income $ 68 15% 28% 56% 

Farm income $ 6 1% 2% 62% 

Rents and royalties $ 17 4% 7% 51% 

Other Taxes $ 1 (3) 1% 3% 

Unallocated Marginal Effects $ 10 2% 4% N/A

Income Offsets (Adjustments, Deductions, Exemptions) $ 20 4% 8% 5% 

Total Tax Credits $ 42 10% 17% 38% 

Filing Status $ 5 1% 2% N/A (1) The estimates are the annual averages for the TY 2011 – 2013 timeframe.

(2) The net misreporting percentage is the net misreported amount divided by the sum of the absolute values of the amounts that should have been reported,

expressed as a percentage.

(3) Less than 0.5 percent or $0.5 billion.

(4) Estimate is based on very small sample size. Estimated tax gap is less than $0.5 billion and Net Misreporting Percentage is less than 0.5%.

(5) The TY 2008 – 2010 Net Misreporting Percentage for capital gains was incorrectly reported as 27%. The correct Net Misreporting Percentage for TY 2008 – 

2010 was 21%.

Note: Individual amounts may not add to total due to rounding.

Individual Income Tax Credits 

The IRS is responsible for administering 21 refundable and non-refundable individual income tax credits. Total tax credits

account for 17 percent of the individual income tax underreporting tax gap. The Earned Income Tax Credit (EITC), 

American Opportunity Tax Credit (AOTC), and Additional Child Tax Credit (ACTC) are three of the most widely claimed
DEPARTMENT OF THE TREASURY 193 

OTHER INFORMATION | FY 2020 AGENCY FINANCIAL REPORT

refundable tax credits. EITC accounts for 11 percent of the individual income tax underreporting tax gap, followed by the

refundable and non-refundable Child Tax Credit (CTC) (three percent), and the refundable and non-refundable education

credits which includes AOTC (two percent). 

INDIVIDUAL INCOME TAX UNDERREPORTING TAX GAP ESTIMATES FOR TAX CREDITS: TY 2011 – 2013 ($ IN

BILLIONS) (1)

Tax Return Line Items Tax Gap Share of Gross Tax Gap

Share of Individual 

Income Tax 

Underreporting Tax 

Gap 

Gross Tax Gap $441 100% N/A

Individual Income Tax Underreporting Tax Gap $245 56% 100% 

Total Credits $42 10% 17% 

Earned Income Tax Credit $27 6% 11% 

Education Credits (Including AOTC) $5 1% 2% 

Child Tax Credit and Additional Child Tax Credit $9 2% 3% 

All Other Credits $1 (2) 1% (1) The estimates are the annual averages for the TY 2011 – 2013 timeframe.

(2) Less than 0.5 percent.

Note: Individual amounts may not add to total due to rounding.

Earned Income Tax Credit 

Congress enacted the EITC in 1975 through the Tax Reduction Act (Public Law (P.L.) 94-12), as a temporary anti-poverty 

measure to offset inflation and rising Social Security payroll taxes. In addition to encouraging work and reducing

dependence on cash welfare, the credit was also viewed as a means to encourage economic growth in the face of the 1974

recession and rising food and energy prices.2 Since then, the EITC has undergone numerous legislative changes, most

notably by the Revenue Act of 1978, which made the EITC a permanent refundable tax credit. Congress believed the EITC

would be an effective way to provide financial assistance to working families, with or without children, who might otherwise

rely on government subsidized welfare payments. For TY 2018, over 25 million taxpayers received more than $63 billion in

EITCs, making the EITC one of the largest anti-poverty programs in America. 

American Opportunity Tax Credit 

Education tax credits have generally been intended to provide federal financial assistance to students from middle-income

families who may not benefit from other forms of traditional student aid.3 Congress enacted the AOTC as part of the

American Recovery and Reinvestment Act of 2009 (P.L. 111-5) to replace the Hope Credit and to expand the education tax

credit to lower and upper-income students. The AOTC is a partially refundable tax credit that provides financial assistance

to taxpayers (or their children) with qualified educational expenses who are pursuing a higher education. Like other 

education tax credits, the AOTC was enacted with the goal of making higher education more affordable. 

2 Congressional Research Report, The Earned Income Tax Credit (EITC): A Brief Legislative History, March 20, 2018.

3 Congressional Research Report, The American Opportunity Tax Credit: Overview, Analysis, and Policy Options, Updated June 4, 2018.
194 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | OTHER INFORMATION

Additional Child Tax Credit 

Congress enacted the CTC to help ease the financial burdens for families with children as part of P.L. 105-34, the Taxpayer

Relief Act of 1997. If the CTC exceeds the tax liability, taxpayers may receive some or all of the credit as a refund, known as

the Additional Child Tax Credit. Various legislative changes over the past 20 years have made significant changes to the

CTC, which have expanded it from a generally nonrefundable credit available only to the middle and upper-middle class, to a 

partially refundable credit that more low-income families are eligible to claim. Notably, the Tax Cuts and Jobs Act of 2017

(P.L. 115-97) doubled the CTC, increased the amount that could be claimed as a refund, and allowed it to include more

upper-middle class families.

Relationship of Tax Compliance Estimation to Improper Payments 

The Payment Integrity Improvement Act (PIIA) requires additional reporting requirements for payment programs that are

determined to be susceptible to significant improper payments. The focus of PIIA, as well as related guidance issued by the

Office of Management and Budget (OMB), is on implementing internal controls to prevent and detect improper payments. 

PIIA does not take into consideration all aspects of administering tax provisions in a system that relies heavily on voluntary

reporting. In keeping with PIIA requirements, the IRS reports risk assessments for refundable tax credits, as well as

improper payment estimates for the EITC, AOTC, and ACTC (refer to Part 3, Section D: Payment Integrity, of this report). 

The IRS follows the practice of conducting risk assessments largely because refundable tax credits may result in a payment

to the taxpayer in excess of tax liability. It can be challenging to distinguish between the portion of a credit that offsets an

individual tax liability versus the portion that is refundable. Determining the impact of a refundable tax credit depends on 

multiple variables, including other return elements and information provided by the taxpayer, some of which are unrelated

to the refundable tax credit in question. 

The same features of the tax system and taxpayer behaviors that create the compliance problems with refundable tax credits

also create the risk of noncompliance with other tax provisions. Several credits passed into law by Congress to promote

social and economic objectives (e.g., assisting particular groups of individuals or businesses) have eligibility rules that are

often complex and lead to high overclaim rates.

Tax refunds, which constitute a transfer of cash from the federal government to a taxpayer, are an integral part of the tax

system as a whole. The IRS tax gap estimation measures compliance with the current tax system and always includes

noncompliance with refundable and non-refundable tax credits. Whether a tax credit results in a refund instead of a 

reduction in tax liability depends on all of the taxpayers' characteristics, such as income, deductions, and other credits

claimed, and is not simply driven by the credit itself.

The IRS’s risk assessments on refundable tax credits have consistently concluded that improper payments are not rooted in

internal control deficiencies, but instead are due to the complexities of verifying eligibility, including unavailability of 

relevant third-party data, for refundable tax credits within the time periods prescribed by the tax system. Therefore, as

explained further in Part 3, Section D, it is Treasury’s position that refundable tax credit overclaims resulting in payment

errors should not be reported under the improper payments framework. Rather, errors in taxpayer claims for credits are

more appropriately included in analysis of tax compliance.

Refundable Tax Credits and the Challenges of Compliance 

Refundable tax credits generally have different eligibility rules, often relating to personal family and living arrangements,

which determine eligibility. Complexity in the form of differing rules is a contributor to tax credit errors. Additionally, these

credits are difficult for the IRS to verify due to the lack of available, relevant third-party data. 
DEPARTMENT OF THE TREASURY 195 

OTHER INFORMATION | FY 2020 AGENCY FINANCIAL REPORT

Eligibility rules for refundable tax credits contribute to the compliance burden for taxpayers and administrative costs for the

IRS. These rules differ by credit and are often complex because they must address complicated family relationships and

residency arrangements to determine eligibility. The relatively high overclaim error rates for these credits are a result, in

part, of this complexity. The lack of third-party data to verify eligibility requirements for these refundable credits also

complicates the ability of the IRS to administer these credits. Such data may not exist, may be unreliable or inaccurate, or 

may be reported to the IRS too late to be useful during tax return processing. The IRS also has limited authority to correct

mismatches at filing and must use audits to correct errors, which increases taxpayer burden. The IRS continually looks for 

complete and accurate data sources to verify eligibility for claimed refundable credits in order to reduce the burden on 

compliant taxpayers.

Faced with the complexities of claiming certain refundable credits, many potential credit recipients seek help filing their tax

returns from paid preparers. Fifty percent of taxpayers claiming refundable credits use paid preparers. Unenrolled return

preparers, who prepare a significant number of EITC returns, are not subject to the same level of training and certification

requirements as other tax professionals and have higher error rates for EITC returns than taxpayers who prepare their own 

returns or who hire enrolled return preparers. 

The IRS has a responsibility to detect and address errors and misreporting on tax returns, including those claiming the

refundable credits. Filters and other detection tools are frequently being enhanced to improve the accuracy of tax returns 

and reduce taxpayer burden, but in some instances, enforcement activities must take place. The IRS rejects millions of 

electronically filed returns claiming refundable credits for a variety of reasons, such as missing forms, incorrect Social

Security Numbers (SSNs), or if another taxpayer has claimed the same child. Most taxpayers can correct their electronic 

returns and successfully re-file with little burden. In some cases, a taxpayer must print and submit a paper return,

resulting in refund delays. Despite the compliance burden and costs to the government associated with these refundable tax

credits, the burden to taxpayers may be lower than with other payment or benefit programs. For example, tax credit

recipients can self-certify eligibility; they do not need to meet with caseworkers, nor submit upfront documentation as is

required with some direct service anti-poverty programs, such as Supplemental Security Income or Temporary Assistance for 

Needy Families. 

The IRS may initiate a correspondence audit if it identifies, through its scoring and selection process, potential

noncompliance with eligibility requirements. Most refundable credit audits are conducted pre-refund, meaning the IRS

holds the credit refund until the taxpayer substantiates eligibility. The IRS sends a letter to the taxpayer requesting

documentation showing that the taxpayer meets credit eligibility requirements. In addition to the refund delay, taxpayers

face the burden of gathering and sending in the requested information. In FY 2020, the IRS conducted 179,848 refundable

credit exams, the majority through correspondence audits. 

Sustained annual budget reductions at the IRS have heightened the importance of determining how best to allocate finite,

declining resources to ensure the IRS can still meet agency-wide strategic goals of increasing taxpayer compliance, using

resources more efficiently, and minimizing taxpayer burden.

TAX BURDEN

The IRC creates the basis for a progressive tax system that applies higher rates of taxation to progressively higher levels of 

income. For TY 2019, individual income tax rates ranged from 2.0 percent for the lowest income filers to 25.0 percent for the

highest income brackets. The amount of taxable income can be adjusted through the application of exemptions and

deductions, which will influence the amount of taxes owed. In addition, many taxpayers qualify for one or more refundable

tax credits, which collectively have a significant impact on tax administration, federal tax revenues, and refund payments.
196 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | OTHER INFORMATION

The IRS measures tax liability by income level for individuals, and by revenue and assets for corporations. Using these data,

it is possible to illustrate how tax liability rises with increases in Adjusted Gross Income (AGI) for individuals (Figures 1.1

and 1.2 and Table 1). Similar data for corporations shows the tax burden based on the percentage of taxable income (Figure

2 and Table 2). This information is the most recent data available for individuals (TY 2018) and corporations (TY 2017). 
DEPARTMENT OF THE TREASURY 197 

OTHER INFORMATION | FY 2020 AGENCY FINANCIAL REPORT

INDIVIDUAL INCOME TAX LIABILITY

FIGURE 1.1: AVERAGE AGI REPORTED AND AVERAGE INDIVIDUAL INCOME TAX LIABILITY FOR TY 2018

FIGURE 1.2: INDIVIDUAL INCOME TAX LIABILITY AS A PERCENTAGE OF AGI FOR TY 2018

TABLE 1: INDIVIDUAL INCOME TAX DATA BY AGI FOR TY 2018

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 32,618 $ 40,228 $ 591 $ 1,233 $ 18 1.5% 

$15,000 under 

$30,000 28,782 640,648 14,894 22,259 517 2.3% 

$30,000 under 

$50,000 27,528 1,078,886 49,485 39,192 1,798 4.6% 

$50,000 under 

$100,000 35,146 2,507,316 186,826 71,340 5,316 7.5% 

$100,000 under 

$200,000 21,146 2,878,203 320,536 136,111 15,158 11.1% 

$200,000 under 

$500,000 6,906 1,971,306 327,806 285,448 47,467 16.6% 

$500,000 or more 1,648 2,526,852 638,611 1,533,284 387,507 25.3% 

Total 153,774 $ 11,643,439 $ 1,538,749 

$1,233 $22,259 $39,192 $71,340

$136,111 $285,448

$1,533,284

$18 $517 $1,798 $5,316 $15,158 $47,467

$387,507

Under $15,000 $15,000 to

under $30,000

$30,000 to

under $50,000

$50,000 to

under $100,000

$100,000 to

under $200,000

$200,000 to

under $500,000

$500,000

or more

Average AGI per return Average income tax per return
198 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | OTHER INFORMATION

CORPORATION TAX LIABILITY

FIGURE 2: CORPORATION TAX LIABILITY AS A PERCENTAGE OF TAXABLE INCOME FOR TY 2017

TABLE 2: CORPORATION TAX DATA BY TOTAL ASSETS FOR TY 2017

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 $ 25,145 $ 7,740 30.8% 

$1 under $500 7,611 1,514 19.9% 

$500 under $1,000 3,784 950 25.1% 

$1,000 under $5,000 13,638 4,011 29.4% 

$5,000 under $10,000 8,617 2,727 31.7% 

$10,000 under $25,000 12,535 4,021 32.1% 

$25,000 under $50,000 11,831 3,809 32.2% 

$50,000 under $100,000 13,496 4,391 32.5% 

$100,000 under $250,000 21,275 6,652 31.3% 

$250,000 under $500,000 20,996 6,790 32.3% 

$500,000 under $2,500,000 85,366 25,998 30.5% 

$2,500,000 or more 777,981 196,257 25.2% 

Total $ 1,002,275 $ 264,860 
DEPARTMENT OF THE TREASURY 199 

OTHER INFORMATION | FY 2020 AGENCY FINANCIAL REPORT

SECTION B: MANAGEMENT CHALLENGES AND TREASURY RESPONSE

In accordance with the Reports Consolidation Act of 2000, the Inspectors General are required to identify specific

management and performance challenges facing the Department. At the end of each fiscal year, the Treasury Office of 

Inspector General (OIG) and Treasury Inspector General for Tax Administration (TIGTA) send an update of these

management challenges to the Secretary of the Treasury (hereafter referred to as “Secretary”) and cite any new challenges

for the upcoming fiscal year. The Special Inspector General for the Troubled Asset Relief Program (SIGTARP) identifies

their management or performance challenges for the Office of Financial Stability (OFS) separately in their quarterly report

to Congress. This section contains the OIG and TIGTA identified management and performance challenges and

management’s response.
200 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | OTHER INFORMATION

OFFICE OF

INSPECTOR GENERAL

DEPARTMENT OF THE TREASURY

WASHINGTON, D.C. 20220

TREASURY INSPECTOR GENERAL MANAGEMENT CHALLENGES

October 29, 2020 

INFORMATION MEMORANDUM FOR SECRETARY MNUCHIN

FROM: Richard K. Delmar /s/

Deputy Inspector General

SUBJECT: Management and Performance Challenges Facing the 

Department of the Treasury (OIG-CA-21-006) 

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 (hereinafter Treasury or the Department). In this year’s memorandum, my office

is reporting six challenges, one of which one is new and reports on Treasury’s role in combatting 

the economic fallout of the Coronavirus Disease 2019 (COVID-19) global pandemic at the 

forefront of the Nation. Five challenges are repeated and updated from last year to include 

COVID-19 impacts on related workforce and work streams.

• COVID-19 Pandemic Relief (New)

• Operating in an Uncertain Environment (Repeat)

• Cyber Threats (Repeat)

• Anti-Money Laundering/ Terrorist Financing and Bank Secrecy Act Enforcement (Repeat)

• Efforts to Promote Spending Transparency and to Prevent and Detect Improper 

Payments (Repeat)

• Information Technology Acquisition and Project Management (Repeat)

In addition to the above challenges, we are reporting our elevated concerns about the following 

matters: (1) the coin redemption program at the United States Mint (Mint), (2) managerial cost

accounting, and (3) internal control matters at the Bureau of Engraving and Printing (BEP).

We identified challenges and concerns based on the threat they pose to Treasury’s mission and 

stakeholders’ interests. We also acknowledge the Department’s accomplishments and efforts over 

the past year to address critical matters as noted within each challenge. That said, the COVID-19 

pandemic has caused a global health emergency and an ensuing economic crisis that Treasury has 

spent the second half of fiscal year 2020 tackling. As noted throughout the challenges, Treasury

had to act swiftly, and in some cases, draw on its existing resources to meet the more recent

economic needs. 

2021 Management and Performance Challenges

Challenge 1: COVID-19 Pandemic Relief (New)

The COVID-19 pandemic has affected the health and economic stability of communities
DEPARTMENT OF THE TREASURY 201 

OTHER INFORMATION | FY 2020 AGENCY FINANCIAL REPORT

worldwide. In the United States alone, more than 8.7 million people have been infected with

more than 225,000 deaths1reported as of this writing. In March 2020, Congress passed three key

pieces of legislation in succession to address the COVID-19 health crisis and the economic 

fallout affecting individuals, businesses, and other industry sectors. On March 6, 2020, the 

Coronavirus Preparedness and Response Supplemental Appropriation Act of 2020 was signed 

into law providing $8.3 billion in emergency funding to address health and medical care.2

 

Shortly thereafter, the Families First Coronavirus Response Act was enacted on March 18, 2020 

to address the financial stress of individuals and households with approximately $104 billion in

funding.3The Coronavirus Aid, Relief, and Economic Security Act (CARES Act),4which is by 

far the largest relief funding to date, passed on March 27, 2020. The CARES Act provided over 

$2.4 trillion in health and economic relief to hospitals and healthcare providers, individuals and 

households, businesses and employees, as well as, states, local and tribal governments, and 

Federal agencies, among other things. 

Treasury has been instrumental in implementing and/or supporting other Federal agencies in

implementation of economic relief provisions of the CARES Act. To assist individuals and 

households, Treasury directed approximately $468 billion in Economic Impact Payments (EIP)5

to workers and households through the Internal Revenue Service (IRS). Through the IRS,

Treasury also implemented the Employee Retention Tax Credit and Payroll Tax Deferral CARES

Act provisions to protect workers and jobs. Treasury also assisted the Small Business

Administration (SBA) in carrying out the Paycheck Protection Program6and the Economic Injury

Disaster Loans authorized by the CARES Act. SBA’s Paycheck Protection Program authorized 

$349 billion to support payroll, benefits, and other operating costs of small businesses for up to

24 weeks7 in order to keep workers on the payroll. The Economic Injury Disaster Loans provides 

authority for small businesses to receive an advance loan up to $10,000 to cover revenue loss due 

to COVID-19. In addition to all this, the Department established programs to preserve airline

industry jobs, provide liquidity to the financial sector, and disbursed payments to other levels of

government within the United States impacted by the increasing costs caused by the COVID-19 

pandemic. The Emergency Relief and Taxpayer Protections (commonly referred to as Section

4003) provisions authorized Treasury to make up to $500 billion in loans, loan guarantees, and 

other investments to eligible businesses, Sates, and municipalities. Up to $46 billion of this

amount was made available as loans and loan guarantees to air passenger carriers ($25 billion),

air cargo carriers ($4 billion), businesses engaged in national security ($17 billion) and up to

$454 billion was made available as loans, loan guarantees and other investments in programs and 

facilities of the Board of Governors of the Federal Reserve System to provide liquidity to the 

financial system. The Emergency Relief and Taxpayer Protections provisions also authorized the 

establishment of the Special Inspector General for Pandemic Recovery (SIGPR) within Treasury

to oversee $500 billion in loans, loan guarantees, and other investments provided by Treasury.

Although some of the aforementioned CARES Act provisions do not fall under the oversight

jurisdiction of my office, the payment work streams and mechanisms administered by the Bureau

of the Fiscal Service (Fiscal Service) do. In the context of this overarching challenge, we

1 CDC COVID Data Tracker. 2

 Public Law 116-123 (March 6, 2020). 3

 Public Law 116-127 (March 18,2020). 4

 Public Law 116-136 (March 27, 2020). 5 IRS estimate as of April 24, 2020. 6 The Payroll Protection Program received an additional $321 billion under the Paycheck Protection Program and Healthcare Enhancement Act

(Public Law 116-139; April 24, 2020). 7 The Paycheck Protection Program Flexibility Act of 2020 (Public Law 116-142, June 5, 2020), extended the covered period for loan forgiveness

from 8 weeks after the date of loan disbursement to 24 weeks after the date of loan disbursement. 
202 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | OTHER INFORMATION

recognize the breadth and scope of Treasury’s responsibilities as it impacts programs, operations, 

and activities regardless of jurisdictional oversight boundaries. The CARES Act provisions 

within the oversight purview of my office are those that support airline industry workers and 

state, local, territorial, and tribal government entities through direct financial assistance.

To maintain pay and benefits of airline industry workers, Treasury implemented the Air Carrier

Worker Support (hereinafter referred to as the Payroll Support Program) provisions of the 

CARES Act that authorized up to $32 billion of direct financial assistance for passenger air

carriers ($25 billion), cargo air carriers ($4 billion), and contractors ($3 billion). Financial

assistance is to ensure the continuation of workers’ payroll and benefits with the stipulation that

employees are not involuntarily furloughed and do not receive reductions in pay and benefits.

Many requirements for this program, such as program procedures, were implemented within days 

of the CARES Act enactment. Using existing resources and contractor support, Treasury quickly 

stood up the Payroll Support Program to establish, among other things, the application

requirements for requesting financial assistance, terms and conditions for receiving financial

assistance, and subsequent compliance monitoring of air carriers and contractors. Treasury also

consults with the Department of Transportation (DOT) on the larger air carriers that report 

financial information to DOT on a regular basis (referred to as 241 carriers88

). As you are aware,

the CARES Act requires my office to audit the certifications of sworn financial data submitted to

Treasury by passenger and cargo carriers and contractors that do not report to DOT (referred to as

non-241 carriers). While my office has ongoing audits of Treasury’s program implementation and

non-241 carriers’ certifications submitted to Treasury, it is incumbent upon the Department to

establish and maintain strong internal control over recipients’ compliance with signed terms and 

conditions for receiving financial assistance. That is, Treasury’s compliance monitoring function 

is essential to ensuring that recipients use funds for the continuation of salaries and benefits as

intended. 

The $150 billion Coronavirus Relief Fund, established under Title VI of the Social Security Act,

as amended by Title V of the CARES Act, has been a large endeavor for both the Department and

my office. The Department was responsible for making direct payments to States, units of local

government, the District of Columbia, U.S. Territories, and Tribal governments. Disbursement of 

funds was a complicated undertaking given the number of recipients at varying levels of 

government and other payment requirements of the CARES Act. That is, payments to States and 

local units of government were formula-driven and based on the 2019 U.S. Census, while other 

payments were based on consultations with the Department of the Interior and Tribal

Governments and other information obtained by the Department. The CARES Act created a 

unique challenge in distinguishing between the programmatic administrative responsibility for

payments made from the Coronavirus Relief Fund and the Treasury Office of Inspector General’s

(OIG) independent oversight. Although Treasury was authorized to make payments, the CARES

Act assigned Treasury OIG with responsibility for monitoring and oversight of the receipt,

disbursement, and use of funds. Additionally, my office was given authority to recoup funds if it

is determined that recipients fail to comply with uses of funds for COVID-19 related costs under 

Section 601 (d), “Uses of Funds,” of the Social Security Act, as amended.9 Given the direct

oversight authorities of the Treasury OIG, the Department did not establish an administrative

program to ensure recipient compliance. Recipients were not bound to any terms and conditions 

8 14 CFR Part 241, Uniform System of Accounts and Reporting for Large Certified Air Carriers. 9

 Section 601 (d), Use of Funds, ” to cover only those costs of the State, Tribal government, or unit of local government that (1) are necessary 

expenditures incurred due to the public health emergency with respect to COVID– 19; (2) were not accounted for in the budget most recently 

approved as of the date of enactment of this section for the State or government; and (3) were incurred during the period that begins on March 1,

2020, and ends on December 30, 2020.”
DEPARTMENT OF THE TREASURY 203 

OTHER INFORMATION | FY 2020 AGENCY FINANCIAL REPORT

for the receipt of funds. We reported this in our first audit of the Coronavirus Relief Fund 

regarding the lack of terms and conditions and accountability and transparency of funds.10 While

this is unusual for a Federal agency that administers financial assistance programs, Treasury

officials stated commitment to supporting our oversight role for ensuring transparency,

accountability, and adherence to all statutory requirements and will continue to collaborate with

us to ensure compliance by recipients. This continued collaboration is critical for overseeing such

a large and widely dispersed recipient population given the challenges of defining and

interpreting eligible uses of Coronavirus Relief Fund proceeds. That said, it is crucial that the 

Department maintain its fundamental role to establish and interpret policy over the uses of funds. 

As recipients are still in the process of using these funds, we anticipate that questions will

continue to arise that will require interpretation and changes to Treasury’s guidance and

Frequently Asked Questions. Providing as much clarity as possible over allowable uses of 

Coronavirus Relief Fund proceeds is essential for ensuring recipients understand the compliance

requirements and are accountable and transparent in how they report uses of funds. As part of my

office’s compliance monitoring and oversight function, we established a portal using 

GrantSolutions11 for recipients to report their uses of funds on a quarterly basis starting

September 2020 through the quarter ending September 2021. Recipient data will be reported to

the newly created Pandemic Response Accountability Committee (PRAC) for display on its

website (https://pandemicoversight.gov).

Along with administering and delivering economic relief, Treasury must manage the 

unprecedented oversight that CARES Act funding is subject to. In addition to my office’s

ongoing work on the Payroll Support Program and the Coronavirus Relief Fund, Treasury is

subject to a number of additional CARES Act oversight provisions. As mentioned above, SIGPR

was created to oversee $500 billion in “loans, loan guarantees, and other investments” provided 

by Treasury12 and must report to congress 60 days after Senate confirmation, and quarterly

thereafter, on SIGPR’s activities and Treasury’s loan programs. A Congressional Oversight 

Commission was established to report to Congress on Treasury’s and the Federal Reserve

Board’s implementation activities under Title IV, Subtitle A, “Coronavirus Economic 

Stabilization Act of 2020.” Moreover, the commission is required to report every 30 days on the 

use of contractors and administration of loan programs, the impact of programs on the nation’s

financial wellbeing, whether required disclosures of the CARES Act provide market

transparency, and effectiveness of maximizing benefits and minimizing costs to taxpayers, among

other things.13 The PRAC, created within the Council of Inspectors General on Integrity and 

Efficiency, is comprised of Inspectors General of agencies involved in the COVID-19 response to

include Treasury Inspector General for Tax Administration (TIGTA), SIGPR, and my office.14

The CARES Act also provided additional funding to the Government Accountability Office

(GAO) and Offices of Inspectors General to augment oversight of CARES Act programs and 

activities. Among several oversight reporting provisions, GAO is required to conduct a study of 

“loans and loan guarantees, and other investments” authorized under Section 4003.15

10 OIG, Interim Audit Update–Coronavirus Relief Fund Recipient Reporting (OIG-20-036; May 27, 2020). 11 GrantSolutions is a grant program management Federal Shared service provider under the U.S. Department of Health and Human Services. 12 SIGPR terminates five years after enactment of the CARES Act (March 27, 2025). 13 The Congressional Oversight Commission issued its first report on May 18, 2020

(https://hill.house.gov/uploadedfiles/coc_1st_report_05.18.2020.pdf). 14 PRAC is comprised of Inspectors General of the departments of Defense, Education, Health and Human Services, Justice, Labor, Treasury, and 

TIGTA, and any other Inspector General, as designated by the Chairperson of the PRAC from any agency that expends or obligates covered funds

or is involved in the Coronavirus response. The PRAC is to promote accountability and transparency of CARES Act funds and has established a 

public-facing website to make use of funds publically available. PRAC also has authority to conduct and support audits and investigations of the 

COVID-19 responses to mitigate risks across Federal programs and agencies, as well as, provide management alerts to Congress and the President 

on issues requiring immediate attention. 15 Coronavirus Economic Stabilization Act of 2020 (Section 4026(f)).
204 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | OTHER INFORMATION

With no clear end to the COVID-19 pandemic in sight, Treasury must continue to navigate 

through this challenging time and be prepared to administer another fast-paced relief package in

the near future, if legislated. To date, Treasury has been able to leverage its existing workforce 

and hired contractors to address the demands of the CARES Act workload. That said, there was

reported strain associated with working remotely while managing normal responsibilities and 

additional work due to the COVID-19 pandemic. Going forward, Treasury may experience 

difficulties in balancing its new responsibilities and workloads while managing several ongoing 

challenges as described throughout this memorandum. While I am hopeful that fiscal year 2021 

will see an end to the horrific fallout that the COVID-19 pandemic has had on our nation, I am

also mindful that challenges lay ahead for both Treasury and my office in the short-term.

Challenge 2: Operating in an Uncertain Environment (Repeat)

The COVID-19 outbreak presented unique complexities for Treasury to include, among other 

things, implementing measures for the health and safety of its workforce, as well as,

administering more than $2 trillion in financial assistance under the CARES Act. Despite these

challenges, Treasury responded with limited onsite staff and details from within Treasury, other 

Federal agencies and outside contractors. Treasury acted quickly to work with its business

partners16

to prepare disbursements of more than 160 million of EIPs totaling over $267 billion

within two months after the passage of the CARES Act; $28 billion in financial assistance under 

the Payroll Support Program to hundreds of companies in the aviation industry; up to $500 

billion in loans to the aviation industries ($46 billion administered by Treasury, and the

remainder through the Federal Reserve); $150 billion to state, local, territorial, and tribal

governments; as well as working closely with the Small Business Administration to disburse up 

to $659 billion to over 5 million small businesses through the Payroll Protection Program and 

$190 billion through the Economic Injury Disaster Loan program.

In addition to its normal payment operations and the delivery of EIPs, Fiscal Service also

facilitated the delivery of billions of dollars in other CARES Act funding and other urgent 

agency payments as a result of the pandemic in the most efficient and effective manner. Fiscal

Service is also leveraging existing resources and processes in the disbursement of payments

related to the Payroll Support Program and Coronavirus Relief Fund, as well as, disbursements

under the “Coronavirus Economic Stabilization Act” under the oversight of SIGPR. Even with

these additional responsibilities, Fiscal Service continued to process payments on behalf of more

than 250 Federal entities, including salaries, benefits, tax refunds, and vendor/miscellaneous 

payments. These payments were processed on time and in accordance with agency disbursement

instructions. As noted in challenge 5, Fiscal Service plans to leverage its Do Not Pay (DNP)

Initiative and DNP Business Center to assist programs making CARES Act payments in the

identification and prevention of improper payments. 

Departmental Offices re-allocated resources to implement and administer other responsibilities

under the CARES Act. The Office of the Assistant Secretary for Management (OASM) provided 

resources to support implementation to ensure that approximately $180 billion of disbursements

related to the Payroll Support Program and the Coronavirus Relief Fund were properly 

authorized and processed for delivery to Fiscal Service for payment. The Office of CARES

Operations was established within OASM, to support the implementation of applicable 

16 Partners include the Federal Reserve Banks (Kansas City and St. Louis), financial agents, and vendors.
DEPARTMENT OF THE TREASURY 205 

OTHER INFORMATION | FY 2020 AGENCY FINANCIAL REPORT

provisions of the Coronavirus Economic Stabilization Act of 2020 (under SIGPR’s oversight 

jurisdiction) and the Payroll Support Program. The Office of CARES Operations is broken into

seven components to include Administrative and Budget, Performance Reporting and Data

Analytics, IG and GAO Interface, Risk Management, Asset Management and Recipient

Monitoring, Process Controls and Compliance, and Data Management. The Office of the Deputy 

Assistant Secretary for Human Resources and Chief Human Capital Officer (DASHR/CHCO),

along with other Departmental Offices’ detailed personnel, has allocated staff time to filling

positions for the Office of CARES Operations and other project teams.

In other support efforts, the Office of the DSHR/CHCO and the Office of Strategic Planning and 

Performance Improvement (OSPPI) worked to incorporate Treasury’s CARES Act

responsibilities into the Treasury Strategic Plan and draft interim enterprise learning agendas. The

Director of OSSPI helped to stand up the Office of CARES Operations, including planning, 

prioritization, project management, and establishing team norms and business practices. The

Office of Privacy, Transparency and Records is managing higher volumes of Freedom of 

Information Act requests, while the Office of Risk Management has dedicated resources to

develop a risk profile for the Office of CARES Operations that will be regularly updated over 

time. The Office of Budget and Travel (OBT) has shifted portfolios and workloads to

accommodate additional work associated with working groups established within the OASM to

process payments under the Payroll Support Program and the Coronavirus Relief Fund and to

provide budget execution assistance with administrative funding Treasury received under the 

CARES Act.17 The Office of the Deputy Chief Financial Officer worked to determine appropriate

accounting treatment for complex CARES Act financial transactions, designed and implemented

internal controls for CARES Act processes across Departmental Offices, and formulated credit

models and related asset valuations for the various CARES Act investments and direct loans. 

Additionally, the Office of Chief Information Officer has worked on the site development of the 

CARES Act portal used by the Office of CARES Operations to monitor recipient compliance

with the Payroll Support Program requirements.

While this additional level of effort was not anticipated at the beginning of fiscal year 2020, the 

Office of the DASHR/CHCO was able to address new work-streams. The Office of

DASHR/CHCO recruited and on-boarded over 90 details from within Treasury and across the

Federal government to work across all CARES Act functions. Nevertheless, some Treasury

officials have raised concerns over the possibility of a lapse in appropriations during fiscal year

2021, and the disruption it would cause to implementation timelines and organizational 

performance processes. Additionally, concern was raised that with anticipated funding levels for 

fiscal year 2021, the cost associated with administering certain CARES Act programs may have 

an impact on Treasury’s ability to fund other work. 

While Treasury faces unforeseen challenges working through the COVID-19 pandemic going into

fiscal year 2021, other previously reported uncertainties have yet to be resolved. As conveyed in

prior years’ memoranda, it is still unknown what the potential impacts of OMB’s comprehensive 

“Government–wide Reform Plan and Reorganization Recommendations” (Government–wide

Reform Plan) will be. OMB made agency-specific recommendations that would merge functions 

with similar missions across agencies. In response to OMB’s proposed recommendation to

17 Under Division A of the CARES Act, Treasury was authorized $25 million under Title I to carry out Section 1109 related to establishing criteria 

for insured depositories and credit unions participating in the Paycheck Protection Program, among other things; and up to $100 million to carry out

the Air Carrier Worker Support provisions under Title IV, Subtitle B.
206 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | OTHER INFORMATION

transfer alcohol and tobacco responsibilities from the Bureau of Alcohol, Tobacco, Firearms and 

Explosives within the Department of Justice to the Alcohol and Tobacco Tax and Trade Bureau

(TTB), Treasury has included a request for funding in the fiscal year 2021 budget to initiate the 

transfer and implementation of this enforcement program, which includes the transfer of 

enforcement authority for the Contraband Cigarette Trafficking Act and the Prevent All Cigarette

Trafficking Act. Other potential impacts on Treasury include OMB’s recommendations to

increase coordination between agencies and avoid duplication of roles for small business 

programs, the housing finance market, and financial literacy and education. Furthermore, the plan

also includes a proposal to privatize the United States Postal Service (USPS), which is estimated

to be insolvent; however, USPS continues to hold a $15 billion unfunded liability to the

Treasury’s Federal Financing Bank. On July 29, 2020, the USPS Board of Governors 

unanimously approved an agreement with Treasury on the terms and conditions associated with a 

$10 billion lending authority provided in the CARES Act. The agreement has yet to be finalized

due to the House Committee on Oversight and Reform’s concerns related to the loan terms of the 

agreement, which would permit the funding to be used only on operational expenses with

Treasury’s approval. Although no decisions have been made, Treasury started to prepare for the 

potential long-term restructuring of certain functions of offices/bureaus and expected budget cuts.

Another matter on the horizon is the proposed transfer of the United States Secret Service

(USSS) to Treasury from the United States Department of Homeland Security (DHS) included in

the President’s fiscal year 2021 budget. The transfer is intended to improve the response to

cyber- enabled financial crimes and benefit national security efforts. USSS has approximately

6,500 employees and is a global organization with locations in the United States and across the

world. DHS’ fiscal year 2021 budget for USSS is a $2.36 billion appropriations request 

including $20 million for 119 additional personnel and $20 million in costs for the proposed

transition of the USSS to Treasury. If USSS is transferred, Treasury faces challenges with

providing the necessary resources and implementing the infrastructure, as well as cultural

challenges involved with integrating and overseeing the large and diverse missions of the USSS.

These primarily include physical protection of the Nation’s highest elected leaders, visiting

foreign dignitaries, and facilities and major events; investigation and forensic services to combat 

counterfeiting with a focus on securing the Nation’s critical infrastructures, specifically in the 

areas of cyber, banking, and finance; and investigative expertise and innovative approaches to

the detection, investigation, and prevention of financial crimes. The potential transfer of USSS to

Treasury will be a critical and complex undertaking by itself and will be challenging during the

ongoing COVID-19 pandemic if legislation is passed.

Dealing with additional workloads, staffing, and other critical matters during the COVID-19 

pandemic may be more challenging than usual. Two offices significantly impacted are the Office

of International Affairs, which requested an increase in its staffing level from 81 employees to

120 employees by the end of calendar year 2021, to meet expanding workloads as discussed

below; and the Office of Terrorism and Financial Intelligence (TFI), which requested

approximately 50 new positions for fiscal year 2021 to address priorities discussed in challenge 4 

of this memorandum. These positions could be difficult to fill if approved because of the 

expertise required for these positions. Human capital management overall remains an area of

concern as the lengthy security clearance process and backlog of background investigations has 

only recently improved since the responsibility for conducting background investigations was

transferred from the Office of Personnel Management’s (OPM) National Background 

Investigations Bureau to the Department of Defense’s (DOD) Defense Counterintelligence and 

Security Agency, effective June 24, 2019. The intent of this transfer was to develop a unified 
DEPARTMENT OF THE TREASURY 207 

OTHER INFORMATION | FY 2020 AGENCY FINANCIAL REPORT

approach for the security clearance process. As a result of this new process, the Department has

seen a decrease in the number of pending background investigations. With that said, the security

clearance process isstill a culprit in the recruiting process and remained on GAO’s 2019 highrisk list.18 However, in their continuous effort to reduce the wait time for onboarding new 

personnel to fill special- sensitive and critical-sensitive positions within TFI, the Department still

has an investigative waiver request in place for granting interim clearances while clearances are

being adjudicated. If approved on a case-by-case basis, the Department may grant a secret level

clearance with the condition that the employee has access to information at the secret level only. 

Employment is also conditioned on the favorable completion of an investigation and issuance of 

an approved clearance. While this may bring staff on faster, the clearance process still naturally

creates some delays in the hiring process that impacts the mission critical need to fill positions 

dealing with programs and materials of the highest sensitivity.

As noted above, an increase in staffing levels in the Office of International Affairs was proposed 

to address the expanding demands on the Committee on Foreign Investments in the United

States19 (CFIUS), which is charged with reviewing transactions involving foreign investments in

the United States to determine national security risks. The Office of International Affairs carries

out the Secretary’s role as Chair of CFIUS and coordinates the interagency review process.

While the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA)20 modernized

the review process, it also expanded CFIUS’ jurisdiction to address growing concerns over 

certain investment structures that were not within CFIUS’ jurisdiction such as investments 

involving U.S. businesses in close proximity to U.S. military bases and investments with impacts

to critical infrastructure and personally identifiable information (PII). Treasury issued two final

regulations in February 2020 to implement changes to jurisdiction and process. The FY 2020 

budget cited an expected increase in workload from approximately 200 to 1,000 cases annually. 

Because CFIUS’ expanded jurisdiction under FIRRMA became effective recently on February 

13, 2020, and the COVID-19 pandemic impact on case volume is tough to measure, it is difficult

for Treasury to predict the effect of FIRRMA changes over the next year. CFIUS management

stated that it does not plan to lower the 1,000 transactions yearly estimate for now. Treasury

implemented a new Case Management System (CMS) in May 2020 that allows for submission of

transaction-related information through a secure online portal. Treasury had no legacy case

system so staff previously managed information on SharePoint and other Microsoft applications. 

Management intends to add legacy information from Treasury’s secure data network into the

CMS but for now must rely on older methods to work with that data. While the intent of CMS is

to streamline CFIUS activities, there are further developments planned for functionality and 

analytics. In anticipation of increased transaction reviews, the Office of Investment Security and 

the Office of the Assistant General Counsel for International Affairs have been aggressively

hiring for approximately 35 positions. Treasury plans to decrease reliance on contractors over 

time as new employees are hired. While management anticipates being close to filling 81 

positions (including contractors) approved for fiscal year 2020, it requested another 39 positions 

as part of its fiscal year 2021 budget justification. Fiscal Service’s Administrative Resource 

Center has had trouble dealing with increasing recruitment actions and recently began to assign

more support staff to help. With increased telework during the COVID-19 pandemic, CFIUS

activities that involve sensitive and classified materials have been more difficult to perform. In

addition, coordination with other Federal partners has been tougher as they are experiencing their

own COVID-19 challenges.

18 GAO, High-Risk Series, Substantial Efforts Needed to Achieve Greater Progress on High-Risk Areas (GAO-19-157SP: March 2019). 19 CFIUS is an interagency committee comprised of the departments of Commerce, Defense, Energy, Homeland Security, Justice, State, Treasury

and the Office of the U.S. Trade Representative and the Office of Science and Technology. 20 Public Law 115-232 (August 13, 2018).
208 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | OTHER INFORMATION

Over the past several years, we reported that the recruitment of cybersecurity personnel was a 

government-wide challenge due to the lengthy security clearance process. Our previous audits of

select Treasury bureaus found that the cause for many of our findings related to information

systems’ security measures involved a lack of resources and/or management oversight. In its

April 23, 2020 letter21 to the Department regarding its top open recommendations, GAO included 

a recommendation from 2016 that emphasized the need for Treasury to address shortfalls in

Information Technology (IT) workforce planning. While GAO acknowledged that some progress 

was made, Treasury had yet to develop an IT workforce plan that contained the key actions to

address workforce skill gaps. In addition, GAO reported in 2019 that Treasury likely incorrectly

categorized more than a thousand positions performing IT management functions. This means

that Treasury may have unreliable information about its cybersecurity workforce that it will need

to identify its workforce roles of critical need. 

To further complicate matters, Treasury must also operate in the repeated cycle of budget and 

debt ceiling stopgaps. A long-term solution has yet to be found, and the U.S. debt limit was

reinstated at $22 trillion on March 2, 2019. At that time, Treasury immediately implemented

extraordinary measures to prevent the United States from defaulting on its obligations. Measures

included (1) suspending State and Local Government Series securities sales, (2) declaring a “debt

issuance suspension period” which suspended additional investments in the Civil Service

Retirement and Disability Fund and Postal Retiree Health Benefits Fund, and (3) suspending 

investment in the Government Securities Investment Fund of the Federal Employees’ Retirement

System Thrift Savings Plan. In July 2019, Treasury informed Congress that these extraordinary 

measures would be exhausted before September 2019. Consequently, legislation was passed to

suspend the statutory debt limit through July 31, 2021.22 While the debt ceiling has been lifted, it

is only temporary as Congress has yet to resolve unfinished business when it comes to the

Nation’s debt, and the long-term sustainability of the large programs. Although not included as a 

top open recommendation in its April 2020 letter to the Department, GAO raised the same

concerns to Congress in its July 2015 report23 with the approach to managing the federal debt 

limit and its impact on Treasury’s borrowing costs and the need for alternative approaches. Fiscal

Service has increased its communication with the Department, particularly the Office of Fiscal

Projections (OFP). OFP provides Treasury decision‐makers with information on current and 

predicted cash balances. As the Federal Government's financial manager, Fiscal Service plays a 

unique role in ensuring that OFP has current and accurate federal financial data.

The impact of this challenge and the uncertainties require the Department to continue to focus 

its resources on programs that are in the highest need to citizens and/or where there is a unique 

federal role. It is essential that new programs and reforms be managed and communicated

effectively for achieving performance and accountability. 

Challenge 3: Cyber Threats (Repeat)

Cybersecurity remains a long-standing and serious challenge facing the Nation. 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 

21 GAO, Treasury Priority Recommendations (GAO-20-549PR; April 23, 2020). 22 Public Law 116-37 (August 2, 2019). 23 GAO, Debt Limit: Market Response to Recent Impasses Underscores Need to Consider Alternative Approaches (GAO-15-476; July 9, 2015).
DEPARTMENT OF THE TREASURY 209 

OTHER INFORMATION | FY 2020 AGENCY FINANCIAL REPORT

threats continue to evolve and become more sophisticated, subtle, and easier to perform they pose 

ongoing challenges for Treasury to fortify and safeguard its internal systems and operations along 

with the financial sector it oversees. While managing known risks is an ongoing challenge,

Treasury must also be ready to reinforce and/or redirect cybersecurity efforts when unforeseen

events occur such as the COVID-19 global pandemic. As discussed throughout this challenge, the 

ongoing healthcare crisis has created more opportunities for malicious actors to disrupt and 

exploit information systems.

Attackers frequently exploit vulnerable networks or systems in a string of trusted connections to

gain access to government systems. Attempted cyber-attacks against Federal agencies, including 

Treasury, and financial institutions continue to increase in frequency and severity while

continuously evolving. 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; 

disrupt, degrade, or deny access to information systems; or infiltrate information systems and 

maintain a presence to enable future actions. Through cyber information sharing, Federal agencies

are better prepared to thwart potential attacks to the cyber infrastructure of the Federal government 

and the financial sector that it serves. In its 2019 high risk list published biennially, GAO reported

the nations’ cybersecurity as a government-wide issue.

Long-standing cyber threats pose increased risks to networks and information systems during the

ongoing COVID-19 global health pandemic as more opportunities are available for bad actors to

stage cyber-attacks. As the tools used to perpetrate cyber-attacks become easier to use and more

widespread, less technological knowledge and fewer resources are needed to launch successful

attacks of increasing sophistication. Such attacks include distributed denial of service, phishing 

or whaling, fraudulent wire payments, malicious spam (malspam), ransomware, and compromise

of supply chains (both hardware and software). The COVID -19 pandemic has shifted the 

Federal workforce to a primarily telework status which has provided attackers with more

possibilities to disrupt services. Increased network traffic from remote sources provides cover for 

attackers to blend in with the Federal workforce and launch cyber assaults. Attackers may take

advantage of the increased demand for information on COVID-19 by crafting highly attractive

phishing, whaling, and malspam attacks that are more likely to succeed by luring workers in with

promises of information related to COVID-19. These opportunities may allow hackers to launch 

a denial of service attack upon a network that can prevent remote workers from performing their

duties and disrupt operations. Furthermore, information systems and its users are at heightened

risk of COVID-19 related exploitation such as stimulus check scams, tax-fraud schemes, and 

fraudulent coronavirus testing kit scams, among other things. 

There is continuing concern over foreign adversaries creating and exploiting vulnerabilities in the 

Nation’s information and communication technology and services. Executive Order 13873 was

issued on May 15, 2019, to secure the supply technology and services chain by banning the 

import, use, or sale of technology or services designed, developed, manufactured, or supplied 

from persons or companies that are owned or controlled by governments defined as hostile to the 

United States.24 On May 13, 2020, this Executive Order was extended for one year.25 There are

risks that Treasury’s systems and resources already in use, including critical infrastructure,

contain components from sources that have yet to be designated as threats. Once a source is

24 Executive Order on Securing the Information and Communications Technology and Services Supply Chain (May 15, 2019). 25 Text of a Notice on the Continuation of the National Emergency on Securing the Information and Communications Technology and Services 

Supply Chain (May 13, 2020).
210 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | OTHER INFORMATION

designated as such, repairs and/or upgrades of key system components may no longer be 

available. Therefore, there is risk of disruption of critical operations. The Department will need to

monitor developments in this area closely and plan for the possibility that its current supply chain

may no longer be available. This is especially true during this global pandemic as companies 

continue to temporarily close manufacturing plants due to COVID-19 outbreaks or shipping is

disrupted by travel restrictions.

We continue to remind the Department that, in addition to Treasury’s own networks and

systems, management must be cognizant of, and mitigate, the risks posed by attacks made

against other agencies and Treasury contractors and subcontractors. Increased threats and risks

posed to third- parties’ networks and systems due to the opportunities that the COVID-19 

pandemic provides to potential attackers also poses increased risks to Treasury’s networks and 

systems. Treasury frequently enters into interconnection agreements with other Federal, State,

and local agencies, and service providers, to conduct its business. Management must exercise

due care when authorizing such internetwork connections and verify that third parties comply 

with Federal policies and standards including any guidance issued to address new and/or 

expanded threats and risks created by the COVID-19 pandemic. Management is also challenged

with ensuring that critical data and information maintained by third-party cloud service

providers are properly protected. There have been ongoing issues related to management of 

cloud systems reported in four consecutive Federal Information Security Modernization Act of 

2014 26 audits (fiscal years 2015, 2016, 2017, and 2018) with some recommendations yet to be 

implemented.

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 to

the Nation’s critical infrastructure. As such, effective public-private coordination is essential to

the Nation’s financial and national security. In this regard, The Office of Critical Infrastructure

Protection and Compliance Policy coordinates Treasury’s efforts to enhance the security and 

resilience of the financial services sector critical infrastructure and reduce operational risk

including risks associated with cybersecurity. Given the stress that the global COVID-19 

pandemic has placed on financial institutions and the financial sector, as a whole, it is important 

that the Department reassess cyber risks in these areas. That said, Treasury and other Federal

agencies have yet to fully implement the National Institute of Standards and Technology (NIST)

guidance to assist Federal agencies in managing cybersecurity risks.27 In 2018, GAO had reported 

that the extent of adoption of the NIST framework by critical infrastructure sectors was unknown 

since agencies were not measuring framework implementation. With respect to Treasury, GAO

had recommended that steps be taken to consult with respective sector partners to develop 

methods for determining the level and type of adoption by entities across the financial services

sector. In its April 23, 2020 letter28 regarding its top open recommendations, GAO noted that 

Treasury had established ongoing initiatives such as developing common terminology for cyber 

terms, but had not developed methods to determine the level and type of framework adoption; the 

recommendation remained open. GAO also noted in its April 23, 2020 letter that Treasury has not 

provided actions related to a July 2019 report29 to Treasury to develop a cybersecurity risk

management strategy that includes key elements identified in federal guidance and establish a 

process for conducting an organization-wide cybersecurity risk assessment.

26 Public Law 113-283 (December 18, 2014). 27 NIST, Framework for Improving Critical Infrastructure Cybersecurity (Version 1.0, February 12, 2014; superseded by Version 1.1; April 16,

2018).

28 GAO, Treasury Priority Recommendations (GAO-20-549PR; April 23, 2020) 29 GAO, Cybersecurity Risk Management (GAO-19-384 , July 25, 2019)
DEPARTMENT OF THE TREASURY 211 

OTHER INFORMATION | FY 2020 AGENCY FINANCIAL REPORT

The Department continues to report progress in its risk-based approach to cybersecurity, 

focusing efforts on identifying High Value Assets (HVA) 30 that would be of interest to attackers

seeking maximum impact, as well as, examining the security architectures of systems and

performing risk and vulnerability assessments. Fiscal Service had reported that, as a result of 

new assessments, it has increased the number of systems designated as HVA from six to eight.

The Department acknowledged that the presence of those systems results in an inherently

concentrated risk of cyber-attacks for Treasury. Additionally, a Cybersecurity Strategy Center

was established in October 2019 at Fiscal Service to maintain its cybersecurity strategy, drive 

execution of the cybersecurity programs, facilitate risk-based decision making for cybersecurity

initiatives, and to monitor progress of its cybersecurity portfolio. 

The Department also reported that it continues to leverage the Federal government-wide

Continuous Diagnostics and Mitigation program to enable automated monitoring of 

vulnerabilities, and is leveraging new investments to better protect Treasury data and users of 

Treasury’s IT services. In this regard, the Department noted that it continues to implement

higher security settings for websites, web services, and e-mail.

While addressing potential increases in cyber threats during the COVID-19 global pandemic,

Treasury will need to continue to balance cybersecurity demands while modernizing and 

maintaining IT systems. To this end, Treasury must ensure that cyber security is fully integrated

into to its IT investment decisions as discussed in challenge 6. This will also require a cadre of 

skilled IT resources that has been an ongoing issue to obtain as noted in challenge 2. 

Challenge 4: Anti-Money Laundering/ Terrorist Financing and Bank Secrecy Act

Enforcement (Repeat)

Over the past year, TFI has remained dedicated to countering the ability of financial networks that 

support terrorists, organized transnational crime, weapons of mass destruction proliferators, and 

other threats to international security through intelligence analysis, sanctions, and international 

private-sector cooperation. As previously reported, identifying, disrupting, and dismantling the 

financial networks that support rogue regimes, terrorist organizations, transnational criminal

organizations, and other threats to the national security of the United States and our allies

continues to be challenging as TFI’s role to counter these financial networks and threats has 

grown because its economic authorities are key tools to carry out U.S. policy. Additionally, 

criminals and other bad actors evolve and continue to develop more sophisticated money

laundering methods in an attempt to avoid detection. 

TFI’s authorities are key tools in implementing U.S. policy to pressure foreign countries and 

regimes, such as Russia and Iran, through the use of designations and economic sanctions. TFI

has significantly increased sanctions against Russia and Iran related to malign and terrorist

activities and human rights violations. TFI’s counter-terrorism designations disrupt the financial

networks that support terrorist organizations. Disrupting terrorist financing depends on a wholeof- government approach and requires collaboration and coordination within Treasury and with

other Federal agencies. Collaboration and coordination are key to successfully identifying and 

disrupting all of these financial networks and meeting TFI’s mission. This effort requires

30 High Value Assets are assets, information systems information, and data for which an unauthorized access, use, disclosure, disruption,

modification, or destruction could cause a significant impact to the U S.’ national security interests, foreign relations, economy, or to the public

confidence, civil liberties, or public health and safety.
212 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | OTHER INFORMATION

effective and efficient working relationships among components within TFI and the Intelligence 

Community. In an effort to effectively implement U.S. policy and disrupt these financial

networks, officials stated that TFI is moving towards a more collaborative approach to achieve its

mission.

Effective coordination and collaboration and TFI’s ability to effectively gather and analyze

intelligence information requires a stable cadre of experienced staff. Concerns over TFI’s ability

to meet mission critical objectives are heightened by multiple vacant key positions. These

vacancies include the Undersecretary for TFI, which has been vacant since October 2019, as well

as the Assistant Secretary for Terrorist Financing, who left this year. As noted in challenge 2, TFI

requested approximately 50 new positions for fiscal year 2021 to address this growing demand. 

Data security and information sharing are challenges for the Financial Crimes Enforcement

Network (FinCEN), which has experienced unauthorized disclosures of Bank Secrecy Act

information. FinCEN is required to maintain a highly secure database for financial institutions

to report suspicious activity. FinCEN has previously identified that the success of that system

depends on the financial sector’s confidence that those reports are adequately protected, but 

data breaches threaten to undermine that confidence. FinCEN is also required to maintain a 

government-wide data access service to make information available and useful to Federal,

State, local, and foreign law enforcement agencies and appropriate regulators and to support 

intelligence and counterintelligence activities and anti-money laundering initiatives. The

challenge for FinCEN is to ensure the Bank Secrecy Act data remains secure in order to

maintain the confidence of the financial sector while meeting the access needs of law

enforcement, regulatory, and intelligence partners.

Given the criticality of Treasury’s mission and its role to carry out U.S. policy, we continue to

consider anti-money laundering and combating terrorist financing programs and operations as

inherently high-risk. In addition, the COVID-19 global pandemic outbreak created additional 

challenges for TFI senior management. For example, many TFI employees regularly work with

classified information and with international organizations involving travel. Protocols for social

distancing and expanded telework are challenges for TFI to accomplish its mission.

Challenge 5: Efforts to Promote Spending Transparency and to Prevent and

Detect Improper Payments (Repeat)

Given the broad implications and critical roles assigned to Treasury by the Digital

Accountability and Transparency Act of 2014 (DATA Act), we note the renewed challenges 

facing the Department given the need to ensure transparency to the taxpayer and other

stakeholders on the use of funds distributed under economic relief packages enacted to address

individuals and industry sectors impacted by the COVID-19 global pandemic. As noted in

challenge 1, Treasury was tasked with responsibilities to administer over $2 trillion of 

emergency funding. DATA Act reporting is now seen as one of the means to ensure 

transparency into the use of Federal funds related to COVID-19 expenditures. In it April 2020 

memorandum, Implementation Guidance for Supplemental Funding Provided in Response to the

Coronavirus Disease 2019 (COVID-19)31 OMB requires that agencies leverage existing financial

accountability and transparency mechanisms. In part, OMB requires (1) tracking of COVID-19 

expenditures with usage of a Disaster Emergency Fund Code; (2) reporting financial assistance

recipient information within two weeks of issuance, with the exception of loans; and (3) 

31 OMB M-20-21, Implementation Guidance for Supplemental Funding Provided in Response to the Coronavirus Disease 2019 (April 10, 2020).
DEPARTMENT OF THE TREASURY 213 

OTHER INFORMATION | FY 2020 AGENCY FINANCIAL REPORT

reporting outlay information at the financial award transaction level. To further enhance

transparency, Treasury devoted significant resources and leveraged existing financial reporting 

systems to promote spending transparency and use of Federal financial data in order to

strengthen Government-wide decision-making. Treasury has also shifted from quarterly to

monthly reporting and certification beginning with the period ending June 2020, and plans to

add a program activity attribute beginning with the first quarter of fiscal year 2021. The speed in

which supplemental funding was distributed created new data management needs for Treasury

along with labor intensive ingestion of data associated with the application for, and issuance of, 

economic relief. The rapidly delivery of funds within short timeframes may create opportunities 

and risks for illicit activity by anyone attempting to misuse or abuse funds that were intended for 

COVID-19 relief. Considering the challenges and risks associated with ensuring economic relief

is deployed and used for intended purposes, Treasury must continue to address reporting and 

data quality issues noted in DATA Act audits and intensify efforts to reduce improper payments.

Given the data-centric aspects of the Foundations for Evidence-Based Policymaking Act of 2018 32

(Evidence Act), it is critical that data is of high quality to be useful. In accordance with the 

Evidence Act and OMB’s M-19-23,33 the Department is implementing Government-wide reforms

for making data accessible and useful for decision-making. Under Title I of the Evidence Act,

also known as Federal Evidence Building Activities, Federal agencies, among other things, must 

submit annually to Congress and OMB, an evidence-building plan for identifying and addressing 

policy questions relevant to programs, policies, and regulations. Under Title II of the Evidence 

Act, also known as the Open, Public, Electronic, and Necessary Government Data Act or the 

“OPEN Government Data Act,” Federal agencies must develop a strategic information resources

management plan that includes, among other things, an open data plan that requires agencies to

develop processes and procedures making data collection mechanisms created on or after

enactment to be available in an open format. The strategic information resources management 

plan and open data plan must be updated annually and made publicly available on agency 

websites. Federal agencies must also develop and maintain a data inventory to be included in the 

Federal Data Catalogue34 (www.Data.gov) developed and maintained by the General Services

Administration.

Since the law was enacted, Treasury leveraged the Department-wide Strategic Objective Annual 

Review (SOAR) that the Office of Strategic Planning and Performance Improvement (OSPPI)

leads to collaboratively identify a preliminary set of research questions as a primary means of 

gathering relevant policy questions for each of the Department’s strategic objectives. Treasury

also began working with Treasury’s Federally Funded Research Development Center to identify

existing research efforts that align closely with the Department’s research priorities. Under Phase

1 of its implementation efforts, Treasury’s Assistant Secretary for Management established an

Office of the Chief Data Officer and appointed an interim Chief Data Officer and interim Deputy 

Chief Data Officer. The Chief Data Officer’s goals are to ensure data is used as a strategic asset,

increase use of data in decision-making and evidence building, and increase coordination of data 

collection and use. Prior to the enactment of the Evidence Act, Treasury had already started

developing a data governance framework in alignment with Evidence Act Title II requirements.

At that time, Treasury’s Deputy Chief Financial Officer (CFO) began a Data Governance and 

Analytics project designed to identify a data governance structure, develop standards, and 

32 Public Law 115-435; (January 14, 2019). 33 OMB M-19-23, Phase 1 Implementation of the Foundations for Evidence-Based Policymaking Act of 2018: Learning Agendas, Personnel, and 

Planning Guidance.

34 A single public interface on-line as a point of entry for sharing data assets with the public.
214 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | OTHER INFORMATION

increase the department’s analytic capabilities through infrastructure and visualization

improvements. Since that time, the Executive Steering Committee, which includes the Deputy 

CFO, Chief Information Officer, and OSPPI, was expanded to include Treasury’s designated

Statistical Official and the Deputy Assistant Secretary for Privacy, Transparency, and Records.

Currently, this group is developing recommendations for the mission and goals of the Data

Governance Body, along with recommendations for initial broader membership. 

Detect Improper Payments 

In light of the continuing government-wide problem with improper payments (estimated at $175 

billion or 4 percent of all program outlays for fiscal year 2019),35 the Federal agencies intensified

efforts to reduce improper payments in major Federal programs. The DNP Initiative and Fiscal

Service’s DNP Business Center are chief components of efforts designed to prevent and detect

improper payments to individuals and entities.

The DNP Business Center provides two services to agencies: the DNP Portal and the DNP Data

Analytics Service. The DNP 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 DNP 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.36 Since our May 2016 report, that challenge continues to exist in obtaining better death

information.37 In October 2016, GAO reported that restrictions on the center’s access to SSA’s

full death data remained in place.38 Since the issuance of these three reports, the DNP Center’s

access to SSA’s full death data has not changed. In June 2020, GAO issued its initial report 

examining key actions the Federal Government has taken to address the COVID-19 pandemic 

and evolving lessons learned relevant to the nation’s response to the pandemic. In its report, GAO

recommended that Congress take legislative action to provide Treasury with access to the SSA’s

full set of death records, and require that Treasury use it, to help reduce improper payments. 39

In response to the Federal Improper Payments Coordination Act of 2015,

40 Fiscal Service entered

into agreements with DOD and the Department of State in 2016 to incorporate death data 

collected by these agencies into the DNP Business Center Working System, which began 

receiving data in September 2017. In November 2017, OMB designated six additional databases

for inclusion in the DNP Business Center Working System to help agencies address a broader 

range of improper payments beyond what can be detected through DNP Business Center's 

previously existing data sources.41 There have been legislative proposals in January 2017, 

February 2017, February 2018, and May 2019 to obtain authorization to use both the SSA's full

35 GAO, Payment Integrity: Federal Agencies’ Estimates of FY 2019 Improper Payments (GAO-20-344; March 2, 2020), percentage based on total 

Government outlays of 4.4 billion (https://www.fiscal.treasury.gov/files/reports- statements/mts/mts0919.pdf). 36 OIG, Fiscal Service Successfully Established the Do Not Pay Business Center But Challenges Remain (OIG-15-006; November 6, 2014). 37 OIG, Fiscal Service Faces Challenges in Obtaining Better Death Information for the Do Not Pay Business Center, but Alternatives Exist (OIG16-042; May 18, 2016). 38GAO, Improper Payments, Strategy and Additional Actions Needed to Help Ensure Agencies Use the Do Not Pay Working System as Intended 

(GAO-17-15; October 14, 2016). 39 GAO, COVID-19: Opportunities to Improve Federal Response and Recovery Efforts (GAO-20-625; June 25, 2020). 40 Public Law 114-109 (December 18, 2015). 41 The following databases were added: (1) Treasury’s Office of Foreign Assets Control’s SDN list (OFAC List), 

(2) the General Services Administration’s System for Award Management (SAM), (3) the Internal Revenue Service’s (IRS) Automatic 

Revocation of Exemption List, (4) the IRS’ Exempt Organizations Select Check, (5) the IRS’ e-Postcard database, and (6) the commercial 

database American InfoSource (AIS) Deceased Data. 
DEPARTMENT OF THE TREASURY 215 

OTHER INFORMATION | FY 2020 AGENCY FINANCIAL REPORT

death file as well as the National Directory of New Hires.42 Fiscal Service included legislative

proposals in its fiscal year 2021 budget justification that included, among other things, that 

Treasury is granted access to SSA’s full Death Master File for purposes of administering the DNP

Business Center and preventing, identifying, and recovering improper payments for Federal

agencies and federally funded state programs. 

The DNP Data Analytics Service supports agencies’ efforts to identify and prevent improper 

payments by identifying trends and patterns in agency payment and other information that may be 

indicative of improper payments. The results of these analyses are provided to agencies at no cost

for further study so they can prevent future improper payments. We assessed the services

provided to agencies by the DNP Data Analytics Service and found that performance metrics

developed by Fiscal Service to measure the effectiveness of the DNP Data Analytics Service need

to be strengthen.43

Altogether, the DNP Business Center works to identify and prevent improper payments in

federally funded programs by providing access to relevant data and analytic services. Fiscal

Service plans to leverage the DNP Initiative to assist programs making CARES Act payments in

the identification and prevention of improper payments and will continue to seek additional ways

to improve improper payment prevention and detection. In this regard, the DNP Business Center

has worked with Federal Communications Commission, the IRS, the Small Business

Administration (SBA), and SBA’s Office of Inspector General to match CARES Act payments

against DNP’s data sets to help prevent and identify improper payments. As of July 10, 2020, the 

DNP Business Center has screened over 27 million payments made under the CARES Act,

identifying over $600 million in improper payments as a result. Fiscal Service also meets

regularly with the PRAC, GAO, and other stakeholders to obtain feedback about COVID-19 

spending data to ensure that the data is available for oversight entities.

With its potential to reduce improper payments, the DNP Business Center is a major and 

important undertaking by Treasury and critical to ensuring that the more than $2 trillion in

COVID-19 economic support funds are properly spent. 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 DNP Business Center.

Challenge 6: Information Technology Acquisition and Project Management (Repeat)

The Federal Information Technology Acquisition Reform Act (FITARA), enacted in December

2014, was the first major overhaul of Federal IT management since the passage of the ClingerCohen Act of 1996 44 which was designed to improve the Federal Government’s acquisition and 

management of its resources to include IT investment. Among other things, it expanded the 

involvement of Chief Information Officers (CIO) of Federal agencies in IT decision making, 

including annual and multi-year planning, programming, budgeting, execution, reporting, 

management, governance, and oversight functions.4545 FITARA is intended to improve how 

Federal agencies acquire and manage IT, as well as, enable Congress to monitor progress and hold 

42 The National Directory of New Hires (NDNH) is a national database of wage and employment information operated by the Federal Office of

Child Support Enforcement (OCSE). OCSE uses the NDNH primarily to assist states administering programs that improve States’ abilities to locate 

parents, establish paternity, and collect child support. The information in this database is only available to authorized persons or entities for

authorized purposes. 43 OIG, Performance Metric Policy Needed for the Fiscal Service Do Not Pay Business Center’s Data Analytics Services (OIG-20-025;

January 28, 2020). 44 Public Law 104-106 (February 10, 1996). 45 Public Law 113-291 (December 19, 2014).
216 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | OTHER INFORMATION

Federal agencies accountable for reducing duplication and achieving cost savings. FITARA

includes specific requirements related to seven areas: (1) the Federal data center consolidation 

initiative, (2) enhanced transparency and improved risk management, (3) agency CIO authority 

enhancements, (4) portfolio review, (5) expansion of training and use of IT acquisition cadres, (6) 

government- wide software purchasing, and (7) maximizing the benefit of the Federal strategic

sourcing initiative.

While FITARA is intended for agencies to better manage their IT investments, implementation

continues to be a government-wide challenge. Since February 2015, GAO has included the 

management of IT acquisitions and operations on its high-risk list as cost overruns and schedule 

delays impact mission related outcomes government-wide.46 In its March 2019 high risk report, 

GAO acknowledged that the executive branch has undertaken numerous initiatives to better

manage the more than $90 billion that is invested annually in IT. However, GAO reported that 

more needed to be done to improve overall management of IT acquisitions and operations and 

recommended that, in general, agencies needed to improve CIOs’ authorities, establish action

plans to modernize and replace obsolete IT investment, and address weaknesses in IT

Dashboard47 reporting of IT investment risk and incremental development implementation.48 For

example, none of the 24 major Federal agencies, including Treasury, had IT management policies 

that fully addressed the role of their CIOs. Further, the majority of the agencies did not assess the 

CIO role in assessing agency IT workforce needs, and developing strategies and plans for 

meeting those needs.

The House Oversight and Reform Committee worked with GAO to develop a biannual scorecard

to assess Federal agencies’ efforts in implementing FITARA by assigning a grade from A to F 

based on self-reported data at the agency level. Agencies are scored on areas of CIO authority 

enhancements, transparency and risk management, portfolio review, data optimization, software

licensing and modernizing government technology. Since the first scorecard was issued in

November 2015 Treasury’s overall FITARA score has wavered between a D- and a C. Areas

needing most improvement were enhanced transparency and risk management (i.e. IT investment 

risk), improved cybersecurity, and data center optimization. The FITARA Enhancement Act of

201749 extended the sunset date for full implementation of the data center optimization

requirements of FITARA from October 1, 2018 to October 1, 2020. As of the end of calendar

year 2019, Treasury met its savings, uptime, and utilization targets, but did not achieve its other

targets in the data center optimization initiative.

In fiscal year 2020, Treasury reported $2 billion in non-IRS IT investment, which is expected to

increase in fiscal year 2021. Given this sizable investment, we are reporting the Department’sIT

acquisition and project management as an ongoing management and performance challenge 

distinct from challenge 3 that addresses cybersecurity concerns. Treasury’s non-IRS bureaus 

reported 21 major IT investments. Treasury’s CIO assessed 18 IT investments as having 

moderately low or low risk to accomplishing their goals. The remaining three IT investments,

which reside at Fiscal Service, were assessed as having medium risk50 to accomplishing their

goals: 

46 GAO, High- Risk Series, An Update (GAO-15-290; February 11, 2015). 47 IT Dashboard was launched in June 2009 to provide agencies and the public the ability to view details of Federal IT investments and track progress

over time. 48 GAO, High-Risk Series, Substantial Efforts Needed to Achieve Greater Progress on High-Risk Areas (GAO-19-157SP: March 2019). 49 Public Law 115-88 (November 21, 2017). 50 IT Dashboard, “the Agency CIO rates each investment based on his/her judgment using a set of pre-established criteria. As a rule the evaluation 

should reflect the CIO’s assessment of risk and the investment’s ability to accomplish goals.” Evaluation ratings are based on five-point risk scale as 

follows: 5=low risk, 4= moderately low risk, 3= medium risk, 2= moderately high risk, and 1=high risk.
DEPARTMENT OF THE TREASURY 217 

OTHER INFORMATION | FY 2020 AGENCY FINANCIAL REPORT

• Electronic Federal Tax Payment System (EFTPS),51

• Post Payment Services, and 

• Wholesale Securities Services (WSS).

During fiscal year 2020, some projects within EFTPS and WSS were behind schedule and over 

budget, while Post Payment Services had select projects that were over budget. Although projects

identified with medium overall risk in cost and scheduling require special attention from the 

highest level of agency management, they are not necessarily at risk for failure. We plan to

initiate an audit of these IT acquisitions. Overall, 82 percent of Treasury’s total IT projects were

on schedule and 57 percent were within budget. During fiscal year 2020, Treasury spent 32 

percent of its total IT spending on 40 major investments. A major WSS investment includes the 

Treasury Automated Auction Processing System (TAAPS), used by Fiscal Service for the 

announcement, auction, and issuance of marketable Treasury bills, notes, bonds, Treasury

inflation-protected securities, and floating rate notes. In fiscal year 2017, Fiscal Service started a 

multi-year project to modernize the TAAPS application software and associated technology 

components to ensure that critical auction processes continue to work flawlessly, remain secure,

and operate without service disruptions. However, in January 2020, Fiscal Service terminated its

TAAPS application software project due to contractor delays and problems involving (1) the 

application code quality issues; (2) project leadership that did not include sufficient IT support; 

and (3) governance bodies relying on representations that the project was succeeding, despite 

some warning signs. It was not until third party reviews were conducted that the full extent of the 

project’s challenges became clear.

An ongoing initiative to manage and monitor IT investments includes the government-wide

adoption of the Technology Business Management (TBM) framework as reported in the fiscal

year 2018 President’s Management Agenda: Modernizing Government for the 21stCentury 

(March 20, 2018). The goal is to improve outcomes through Federal IT spending transparency

with the adoption of TBM government-wide by fiscal year 2022. TBM is expected to improve IT

spending data accountability and transparency, empowering agency executive suite leadership

from across the enterprise to drive mission value and improve customer experience through 

technology. The TBM framework consists of layers that represent different views into IT costs

and performance, enabling greater transparency into the true cost of IT and its value to the 

business. Fiscal Service’s financial community was trained on TBM and has reduced 

uncategorized IT spending by 60 percent. In early fiscal year 2021, Fiscal Service expects to see

further reductions in IT portfolio spending. 

Other Matters of Concern

Although we are not reporting these as management and performance challenges, we are

highlighting three areas of concern: (1) coin redemption and (2) managerial cost accounting, 

and (3) internal control at BEP.

Coin Redemption 

The Mint continues to address internal control issues to ensure the integrity of U.S. coinage 

in its coin redemption program. Over the past several years, it has suspended and 

51 Renamed Tax Collections Services in fiscal year 2021.
218 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | OTHER INFORMATION

recommenced the program in an effort to address weaknesses in its program. Since our audit 

in 2018, the Mint updated its standard operating procedures for the coin redemption program 

and in May 2020 has drafted a Notice of Proposed Rule Making in an effort to implement

adequate internal controls over its program. Considering of the history of this program, we

will monitor the implementation of these controls to ensure they are sufficient to properly

safeguard U.S. coinage. 

Managerial Cost Accounting 

Managerial cost accounting continues to be a fundamental part of a financial performance

management system. It involves the accumulation and analysis of financial and nonfinancial 

data, resulting in the allocation of costs to organizational pursuits, such as performance goals, 

programs, activities, and outputs. We have reported concerns that were identified in our audit 

of the Departmental Offices’ OBT controls over its overhead52 process and compliance with

the Economy Act.53 Specifically, we identified internal control weaknesses within OBT’s

overhead process and composite methodology used during fiscal years 2015 through 2018 to

charge reimbursable customers. That is, OBT’s methodology to accumulate, allocate, and 

charge overhead costs to reimbursable customers was not appropriate and consistently

followed and the salaries and expenses directly charged to reimbursable customers through 

the composite methodology lacked adequate support. Therefore, we also concluded that OBT

violated the Economy Act and potentially augmented its fiscal year 2015 appropriation by 

recovering indirect costs in excess of actual costs from reimbursable customers. These

concerns, in turn, could also potentially be violations of the Anti-deficiency Act.

In response to our concerns, OBT management has implemented a new overhead process for 

fiscal years 2019 and 2020, and subsequently hired a consultant to review and improve the 

process. Based on the consultant’s recent report, OBT management implemented a number 

of the consultant’s recommendations to improve the process going forward, which we plan 

to review during our ongoing audit. 

Internal Control Issues at BEP

Internal control is a process put in place by management to safeguard assets, promote

accountability, and increase efficiency and effectiveness of operations. It helps an entity

report reliable information about its operations and comply with applicable laws and 

regulations. The fiscal year 2019 BEP financial statement audit54 identified 22 deficiencies in

internal control with nine of them collectively reported as two significant deficiencies related

to financial reporting and information technology controls. The remaining 13 deficiencies

related to entity level controls; property, plant, and equipment; inventory; human resources;

journal entries; financial reporting; and expenditures and were reported in a management 

letter.55 BEP management noted that control issues were largely due to resource constraints 

caused by turnover in the workforce and increased workloads for key accounting personnel. 

BEP management has begun addressing concerns by hiring additional personnel and 

identifying parties responsible for the issues noted. A reliable system of internal control over 

52 Overhead, also known as indirect costs, include items that are commonly recognized as elements of cost that may not have resulted in direct 

expenditures. It covers the cost of administrative expenses associated with financial management, human resources, information technology, general 

counsel and other support related to providing reimbursable services to customers. 53 Public Law 73-2 (March 20, 1933). 54 OIG, Audit of the Bureau of Engraving and Printing’s Financial Statements for Fiscal Years 2019 and 2018 (OIG- 20-031; April 20, 2020). 55 OIG, Management Letter for the Audit of the Bureau of Engraving and Printing’s Financial Statements for Fiscal Years 2019 and 2018

(OIG-20-032; April 20, 2020).
DEPARTMENT OF THE TREASURY 219 

OTHER INFORMATION | FY 2020 AGENCY FINANCIAL REPORT

financial reporting is vital for BEP’s management to accurately and reliably report on its

financial transactions and positions. Our office will continue to monitor BEP’s progress in

strengthening its financial management and reporting processes. As another matter, our office

has an ongoing corrective action verification of recommendations related to a 2013 audit

report that identified numerous deficiencies in BEP’s contracting practices.56 While this

verification is nearing completion, we noted that contract file management continues to be a 

systemic issue at BEP. We expect to issue our verification audit in early fiscal year 2021. 

Given our concerns, we also plan to initiate an audit of BEP’s transition from hard copy

contract files to an electronic filing system beginning in fiscal year 2017. 

We are available to discuss our views on the management and performance challenges and the 

other matters expressed in this memorandum in more detail.

cc: David Eisner

Assistant Secretary for Management

56 OIG, BEP’s Administration of the Burson-Marsteller Public Education Awareness Contract Was Deficient (OIG- 13-046; August 13, 2013).
220 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | OTHER INFORMATION

TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION MANAGEMENT CHALLENGES

 

 October 14, 2020

MEMORANDUM FOR SECRETARY MNUCHIN

FROM: J. Russell George

Inspector General

SUBJECT: Management and Performance Challenges Facing the Internal Revenue

Service for Fiscal Year 2021

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 most vulnerable areas in the Nation’s tax system. For Fiscal Year (FY) 2021, the

IRS’s top management and performance challenges, in order of priority, are:

1. Responding to the COVID-19 Pandemic;

2. Enhancing Security of Taxpayer Data and Protection of IRS Resources;

3. Implementing Tax Law Changes;

4. Addressing Emerging Threats to Tax Administration;

5. Supporting an Enhanced Taxpayer Experience;

6. Modernizing IRS Operations;

7. Improving Tax Reporting and Payment Compliance;

8. Reducing Fraudulent Claims and Improper Payments;

9. Increasing International Tax Compliance; and

10. Protecting Taxpayer Rights. 

The most significant change since the prior year is the onset of the Coronavirus Disease 2019

(COVID-19) pandemic, which has dramatically impacted the IRS and the taxpayers that it serves. 

As such, we have identified “Responding to the COVID-19 Pandemic” as the top challenge facing

the IRS. To address this challenge, the IRS has implemented laws and taken action to provide

relief to taxpayers experiencing financial hardship and to protect the health of its employees. 

Although no longer listed, achieving operational efficiencies should remain an area of continued

focus for the IRS. The IRS faces significant resource challenges. Its budget has been reduced

significantly in real terms since FY 2011, which has affected its ability to provide sufficient levels of

1

 31 U.S.C. § 3516(d) (2006).

DEPARTMENT OF THE TREASURY

WASHINGTON, D.C. 20005

 Inspector General

 For Tax

 Administration
DEPARTMENT OF THE TREASURY 221 

OTHER INFORMATION | FY 2020 AGENCY FINANCIAL REPORT

service and enforcement. Further, human capital remains a serious underlying issue that impacts

all 10 of the Major Management Challenges. Between FY 2010 and FY 2019, the IRS lost more

than 29,000 full-time positions, which included more than 14,600 key enforcement personnel.2The

following information detailing the management and performance challenges is being provided to

promote the economy, efficiency, and effectiveness of the IRS’s administration of the Nation’s tax

laws.

RESPONDING TO THE COVID-19 PANDEMIC

The Coronavirus Aid, Relief, and Economic Security (CARES) Act, the largest economic rescue

package in U.S. history, had a significant impact on the IRS and Federal tax administration. The

CARES Act contained numerous tax-related provisions impacting individuals and businesses and

appropriated approximately $750 million in additional funding to the IRS to administer and oversee

these provisions. 

TIGTA has implemented a multi-audit strategy to provide oversight of IRS’s relief and recovery

efforts. TIGTA is currently reviewing the IRS’s pandemic plan, designed to protect the health and

safety of IRS employees, as well as its response to health and safety incidents that occur during

the pandemic.

In addition, TIGTA is assessing the IRS’s processes designed to ensure that only eligible

taxpayers received financial relief through the tax provisions of the CARES Act. TIGTA reported

that significant coordination and efforts were taken by the IRS to expedite its analysis and

reprogramming of systems and to educate individuals on the Economic Impact Payment (EIP).3 

During our initial review in May 2020, TIGTA found that the IRS issued more than 157 million

payments totaling more than $264 billion and had correctly computed the payment amount for

approximately 98 percent of the payments processed. However, at the time of our review, we

found that the IRS had issued 1.2 million payments to prisoners and deceased individuals. TIGTA

is continuing to assess the accuracy of the EIPs, the assistance provided to individuals who did

not receive a payment, and the recovery efforts for any erroneous payments. TIGTA is also

reviewing the impact of the CARES Act provisions related to business taxpayers. 

The IRS also announced the “People First Initiative” in March 2020 as part of an effort to assist 

taxpayers facing the challenges of COVID-19. The initiative temporarily adjusted or suspended

key IRS compliance programs. The changes generally included postponing certain payments

related to installment agreements and offers in compromise; suspending liens and levies;

suspending passport certifications of seriously delinquent taxpayers; not referring new delinquent

accounts to private debt collection; and delaying new field, office, or correspondence

examinations. This initiative was implemented for the period March through July 15, 2020.

TIGTA works closely with the IRS to identify, investigate, and combat threats to tax administration. 

After passage of the CARES Act, TIGTA observed an increase in related illicit scams and

schemes with various objectives, such as manipulation of IRS online applications, theft of the

EIPs, and efforts to steal sensitive taxpayer information.

2

 IRS, Management’s Discussion and Analysis, Fiscal Year 2019.

3 TIGTA, Ref. No. 2020-46-041, Interim Results of the 2020 Filing Season: Effect of COVID-19 Shutdown on Tax 

Processing and Customer Service Operations and Assessment of Efforts to Implement Legislative Provisions (June

2020). 
222 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | OTHER INFORMATION

ENHANCING SECURITY OF TAXPAYER DATA AND PROTECTION OF IRS RESOURCES

Advances in technology have provided the IRS an opportunity to be more responsive to

taxpayers’ needs for its services. The IRS continues to work toward improving its public-facing

applications to ensure that taxpayers who want access to IRS’s online services have verified their

identities and can securely access IRS resources. TIGTA reported that the IRS is making

progress to comply with the National Institute of Standards and Technology guidelines on identity

proofing4 by developing and using a five-step process to determine the required assurance level

for each of its applications.5 However, the IRS may not complete its processes on all applications

as scheduled. The IRS is using compensating controls that include identity proofing and

authentication level of assurances based on superseded guidelines.

While identity verification and secure access are imperative to the function of IRS public-facing

applications, the IRS has to ensure that it does not surrender access to the data necessary to

investigate abuses of these portals. The IRS is currently exploring the possibility of outsourcing

identity proofing under a project that relies heavily on 

third-party verification, which creates the possibility that neither the IRS nor TIGTA would be able

to access authentication and validation logs.

TIGTA also evaluated the effectiveness of security controls and procedures over wireless

networks in use at IRS facilities and identified areas of improvement.6 We determined that

security weaknesses related to the wireless networks are not timely resolved and the IRS’s

inventory of wireless access points could be improved. An inaccurate inventory hinders the IRS’s

ability to timely detect the loss or potential theft of the access points. Further, we determined that

wireless access points are broadcasting a wireless network signal beyond IRS-controlled space,

which creates the potential risk of external entities detecting and attempting to access or hack the

IRS through the wireless networks. TIGTA detected the wireless signal outside of the IRScontrolled space in 21 (75 percent) of the 28 locations visited.

In addition to external threats, the IRS must ensure that its systems and data are protected

against internal threats. An audit trail can help protect against insider threats as it is a record of

events7 occurring on a computer system. TIGTA reported that the IRS continues to struggle with

ensuring that all applications are providing complete and accurate audit trails for monitoring and

identifying unauthorized access.8 TIGTA also found that the IRS could not provide an accurate

inventory of all applications that store or process taxpayer data and Personally Identifiable

Information. This inventory is critical to identify applications that need to be monitored for

potential unauthorized access by employees. We also noted that not all applications with audit

trail deficiencies were being monitored as required, which could allow unresolved deficiencies to

persist. 

IMPLEMENTING TAX LAW CHANGES

4

 Identity proofing is ensuring that users who interact with an entity over open networks, i.e., the Internet, are who they claim to be. 5 TIGTA, Ref. No. 2020-20-012, While Progress Is Being Made on Digital Identity Requirements, Completion Dates to Achieve Compliance With 

Identity Proofing Standards Have Not Been Established (Mar. 2020). 6 TIGTA, Ref. No. 2020-20-063, Improvements Are Needed to Ensure Wireless Networks Are Secure (Sept. 2020). 7 An event is any action that happens on a computer system. Examples include logging into a system, executing a program, and opening a file. 8 TIGTA, Ref. No. 2020-20-033, Most Internal Revenue Service Applications Do Not Have Sufficient Audit Trails to Detect Unauthorized Access to 

Sensitive Information (July 2020).
DEPARTMENT OF THE TREASURY 223 

OTHER INFORMATION | FY 2020 AGENCY FINANCIAL REPORT

Legislative developments related to tax reform and tax policy continue to present challenges for

the IRS. During the year, the IRS implemented many tax provisions in the Families First

Coronavirus Response Act9 and the CARES Act which were intended to provide relief to those

experiencing financial hardship. The IRS developed online assistance tools and a dedicated web

page and has expedited analysis and reprogramming of systems needed to provide EIPs to

taxpayers. In addition, the IRS identified other tax law and administrative changes affecting the

filing season. These changes affected tax forms, instructions, and publications.

In addition, the Taxpayer First Act,10 enacted on July 1, 2019, aims to expand and strengthen

taxpayer rights and to reform the IRS into a more taxpayer-friendly agency by requiring it to

develop a comprehensive customer service strategy, modernize its technology, and enhance its

cybersecurity. It also requires the IRS to propose an organizational redesign, with the goals of

improving efficiency, modernizing systems and business processes, and finding ways to better

serve taxpayers. In its FY 2021 budget justification, the IRS is requesting approximately $106

million for 262 full-time equivalents to implement this legislation.

Further, according to the IRS’s Strategic Plan,11 implementing the Tax Cuts and Jobs Act of

201712 is a high priority for the IRS. The provisions that affect individual taxpayers include the

repeal of the personal exemption, increase in the standard deduction, modification of itemized

deductions, increase in the Child Tax Credit, and creation of a new Other Dependent Credit. 

While the majority of the changes enacted in the Tax Cuts and Jobs Act of 2017 were effective

beginning in Tax Year 2018, some are effective beginning in later tax years.

ADDRESSING EMERGING THREATS TO TAX ADMINISTRATION

Identity theft tax refund fraud involves the use of another person’s name and Taxpayer

Identification Number13 to file a fraudulent tax return reporting false income and withholding in an

effort to receive a fraudulent tax refund. TIGTA has continually reported that new fraud patterns

are constantly evolving and, as such, the IRS needs to adapt its detection and prevention

processes. We reported that the IRS continues to evaluate and expand on successful fraud

detection initiatives, while also piloting new fraud detection initiatives.14 The actions taken on the

part of the IRS have been extremely effective in addressing the identity theft epidemic and

reducing its negative impact on tax administration. Specifically, the IRS’s multifaceted approach

has significantly reduced losses to the Government from the $5.2 billion reported for Processing 

Year 2010 that TIGTA first estimated in July 201215 to the IRS’s most recent estimated losses for

Processing Year 2018 of between $90 million and $380 million. However, the IRS has not yet

developed metrics to quantitatively measure its success in detecting and preventing identity theft

tax refund fraud, i.e., reporting the number of tax returns stopped and refunds protected, as

required by the Taxpayer First Act.

In addition to identity theft, telephone calls from criminals impersonating IRS agents also are near

the top of the IRS’s “Dirty Dozen”16 tax scams and remain an ongoing threat to taxpayers as con

9

 Pub. L. No. 116-127.

10 Pub. L. No. 116-25.

11 Internal Revenue Service Strategic Plan – FY 2018 – 2022, IRS Pub. 3744 (Rev. Apr. 2018). 12 Pub. L. No. 115-97.

13 A nine-digit number assigned to taxpayers for identification purposes. Depending upon the nature of the taxpayer, it can be an Employer 

Identification Number, a Social Security Number, or an Individual Taxpayer Identification Number.

14 TIGTA, Ref. No. 2020-40-040, Constantly Evolving Refund Fraud Patterns Require Continued Refinement and Development of Detection 

Initiatives (July 2020). 15 TIGTA, Ref. No. 2012-42-080, There Are Billions of Dollars in Undetected Tax Refund Fraud Resulting From Identity Theft (July 2012). 16 Compiled annually, the “Dirty Dozen” lists a variety of common scams that taxpayers may encounter.
224 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | OTHER INFORMATION

artists threaten taxpayers with arrest, deportation, and license revocation if the victim does not

pay a bogus tax bill. Since the fall of 2013, a significant amount of TIGTA’s Office of

Investigations’ workload has consisted of investigating impersonation scams in which more than

2.5 million intended victims have received unsolicited telephone calls from individuals falsely

claiming to be IRS or Department of the Treasury employees. The callers demand money from

the taxpayer under the pretense that they owe unpaid taxes. To date, more than 16,000 victims

reported that they have paid approximately $81 million to these criminals.

As of July 31, 2020, TIGTA’s commitment to protecting taxpayers has resulted in 198 individuals

being charged in Federal court for their roles in IRS impersonation scams. Ninety-seven of those

individuals have been sentenced and collectively received a total of more than 402 years’

imprisonment.

Threats and assaults directed at IRS employees, facilities, and infrastructure impede the effective

and safe administration of the Federal tax system and the IRS’s ability to collect tax revenue. 

Recent incidents involving taxpayers who threatened or assaulted IRS employees underscore the

dangers that these employees face each day. In August 2020, a taxpayer was indicted for making

an online bomb threat directed at an IRS facility in New York. If convicted, the taxpayer could

face 10 years’ imprisonment, followed by a period of supervised release.

SUPPORTING AN ENHANCED TAXPAYER EXPERIENCE

Providing taxpayers with quality customer service is a key component in the IRS’s mission. The

IRS continues to take action to assist victims of identity theft. The IRS established a single point

of contact to assist identity theft victims and resolve their cases efficiently. The IRS also sent

notifications to victims that provided instructions about the actions they can take to reduce the

burden of identity theft. While these are positive steps, TIGTA identified other areas that need

improvement to better assist identity theft victims.17 For instance, taxpayers eligible to obtain an

Identity Protection Personal Identification Number may not be aware of their eligibility due to a 

lack of IRS advertising for its Identity Protection Personal Identification Number Opt-In Program. 

In addition, the IRS did not issue notices to the parents or legal guardians of 133,864 dependents

that it identified as employment identity theft victims in Processing Year 2019.

Another area for improvement is the Free File Program. The Free File Program is a private-public

partnership between the IRS and Free File Inc. to provide online Federal tax preparation and

electronic filing to economically disadvantaged and underserved populations at no cost to the

individual or the Government. TIGTA recently reported that the complexity, confusion, and lack of

taxpayer awareness about the operation and requirements of the Free File Program are

contributing reasons why many eligible taxpayers do not participate in the Program.18 During

Processing Year 2019, only 2.5 million (2.4 percent) of the 104 million eligible taxpayers obtained

a free return filing through the Program. In contrast, more than 34.5 million taxpayers, who met

Free File Inc. members’ Free File Program criteria, used the members’ commercial software to file

their tax return. TIGTA estimates that more than 14 million taxpayers met the Free File Program

criteria and may have paid a fee to electronically file their Federal tax return in the 2019 Filing

Season.

17 TIGTA, Ref. No. 2020-45-070, Taxpayer First Act: Implementation of Identity Theft Victim Assistance Provisions (Sept. 2020). 18 TIGTA, Ref. No. 2020-40-009, Complexity and Insufficient Oversight of the Free File Program Result in Low Taxpayer Participation (Feb. 2020).
DEPARTMENT OF THE TREASURY 225 

OTHER INFORMATION | FY 2020 AGENCY FINANCIAL REPORT

Additionally, the IRS’s actions in response to the pandemic will continue to affect its ability to

provide timely customer service and tax return processing. The closure of the processing sites

resulted in significant backlogs of work. As of August 21, 2020, the IRS estimates it still has more

than 7.3 million pieces of unopened mail, as well as 4.3 million paper individual tax returns and

3.3 million paper business tax returns that need to be processed. In addition, the IRS has more

than 737,000 tax returns in its Error Resolution inventory. The IRS has reopened 211 (59

percent) of its 358 Taxpayer Assistance Centers with limited services, and 83 (78 percent) of its

107 toll-free lines.

MODERNIZING IRS OPERATIONS

Modernization is vital to the IRS’s core functions: serving taxpayers, processing tax returns and

payments, and enforcing the tax laws. To ensure that the IRS fulfills its mission over the long

term, the IRS will need to update legacy computing infrastructure and business operations. The

IRS budgeted $300 million for the modernization effort in FY 2019 and an equal amount in FY

2020. In April 2019, the IRS issued its Integrated Modernization Business Plan, which is a sixyear road map to improve the taxpayer experience by modernizing core tax administration

systems, IRS operations, and cybersecurity. However, Modernization efforts will not be complete

at the end of the six years, but the IRS believes it will be better positioned for future successes. 

According to the IRS, the Plan’s success is dependent on a number of legislative proposals and

regulatory authorities, which include the Direct Hire Authority for Information Technology

modernization positions (granted to Federal agencies in April 2019), Streamlined Critical Pay

(granted by the Taxpayer First Act), and funding for multiple fiscal years at somewhat predictable

intervals.

While legacy systems are critical for many organizations because they support key mission 

functionalities, the systems carry significant risks, including increased cybersecurity threats and

maintenance costs. TIGTA reported that the IRS’s management of its legacy systems can be

improved.19 Specifically, the IRS does not have an enterprise-wide definition or a complete and

accurate inventory of legacy systems, nor has it developed specific or long-term plans to address

updating, replacing or retiring most of its legacy systems. TIGTA also reported that the IRS

generally does not capture operations and maintenance costs at the system or subsystem levels,

only at the investment level. As a result, the IRS does not have sufficient and detailed cost data

that can be used in its decision-making processes to prioritize its legacy system modernization

efforts.

To help modernize operations, the IRS is planning to invest in cloud services. While the IRS

created an enterprise-wide cloud strategy that was approved and authorized in December 2017,

the strategy has not been updated to reflect current Federal and Department of the Treasury

guidance and requirements.20 Without an updated cloud strategy, the IRS may miss the

opportunity to deliver public value by increasing operational efficiency and responding faster to

taxpayer needs.

IMPROVING TAX REPORTING AND PAYMENT COMPLIANCE 

19 TIGTA, Ref. No. 2020-20-044, Legacy Systems Management Needs Improvement (Aug. 2020). 20 TIGTA, Ref. No. 2020-20-010, The Enterprise Cloud Program Developed a Strategy, but Work Remains to Achieve Cloud-Based Modernization 

Goals (Mar. 2020).
226 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | OTHER INFORMATION

One of the IRS’s key responsibilities is to ensure that taxpayers comply with the tax law. The

gross Tax Gap is the estimated difference between the amount of tax that taxpayers should pay

and the amount paid voluntarily and on time. The average annual gross Tax Gap is estimated to

be $441 billion for Tax Years 2011 through 2013, and approximately $39 billion (9 percent) is due

to nonfilers.21 According to the IRS, 

high-income nonfilers, although fewer in number, contribute to the majority of the nonfiler Tax

Gap.

In May 2020, TIGTA reported that the IRS was not working high-income nonfiler cases owing

billions of dollars.22 TIGTA’s analysis of Tax Years 2014 through 2016 data identified 879,415

high-income nonfilers who did not have a satisfied filing requirement with an estimated tax due of

$45.7 billion. The top 100 high-income nonfilers for 

Tax Years 2014 through 2016 have estimated tax due of approximately $9.9 billion, making up

22 percent of the $45.7 billion associated with the 879,415 high-income nonfilers.

TIGTA also reported that the IRS could better use Currency Transaction Reports (CTR)23 to

improve its compliance activities.24 The IRS considers CTR information useful to identify cash 

activity that may not be reported accurately on the income tax return. It may lead the examiner to

discover sources of unreported income. However, some subjects of the CTRs with significant

dollar amounts of cash transactions may not be filing income tax returns. TIGTA found that 5,266

subjects of the CTRs totaling more than $1.9 billion did not file income tax returns for Tax Year

2017; however, the IRS is not using the data to identify these nonfilers.

Large corporation (those with assets of $10 million or more) tax noncompliance contributes an

estimated $26 billion to the average annual underreporting Tax Gap. The IRS uses a computer

model, the Discriminant Analysis System (DAS), to systemically score the examination potential

for Form 1120, U.S. Corporation Income Tax Return, tax returns with total assets of $10 million or

more. Generally, the higher the score, the greater the audit potential. However, TIGTA reported

that the IRS could improve the DAS model to better identify returns with a higher likelihood of

potential tax adjustment.25 We analyzed 10,755 returns closed in the DAS workstream during

FYs 2015 through 2018 and found that 47 percent were closed with no change to the tax return. 

Although the IRS is updating the DAS model to improve the no-change rates, TIGTA found that it

is not leveraging all available examination information, such as the examination scope and

knowledge on productive issues, when developing new formulas, and it plans to test new formulas

only on returns that are nearly a decade old.

REDUCING 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 Payments Information Act of 200226 requires Federal agencies, including

21 Nonfilers are taxpayers who do not timely file a required tax return and timely pay the tax due for such delinquent returns. 22 TIGTA, Ref. No. 2020-30-015, High-Income Nonfilers Owing Billions of Dollars Are Not Being Worked by the Internal Revenue Service (May

2020).

23 Federal law requires financial institutions to report currency (cash or coin) transactions of more than $10,000 conducted by, or on behalf of, one 

person, as well as multiple currency transactions that aggregate to more than $10,000 in a single day. The Financial Crimes Enforcement Network 

Form 112, Currency Transaction Report, is used to report these transactions. 24 TIGTA, Ref. No. 2020-30-055, The Accuracy of Currency Transaction Report Data in IRS Systems Should Be Improved to Enhance Its 

Usefulness for Compliance Purposes (Sept. 2020). 25 TIGTA, Ref. No. 2020-30-031, The Large Case Examination Selection Method Consistently Results in High No-Change Rates (June 2020). 26 Pub. L. No. 107-300, 116 Stat. 2350.
DEPARTMENT OF THE TREASURY 227 

OTHER INFORMATION | FY 2020 AGENCY FINANCIAL REPORT

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 Earned Income Tax Credit

(EITC) has been identified as a high-risk program, and as such, the IRS must include the rate and

amount of improper payments in the Department of the Treasury’s annual Agency Financial

Report.

For FY 2019, in response to TIGTA recommendations, the IRS correctly rated the Additional Child

Tax Credit (ACTC), the American Opportunity Tax Credit (AOTC), and the Net Premium Tax

Credit (PTC) as also being susceptible to significant improper payments, i.e., high risk, similar to

the EITC.27 The IRS estimates it issued approximately $27.2 billion in potentially improper EITC,

ACTC, AOTC and Net PTC payments in FY 2019. This represents a significant loss to both the

Federal Government and taxpayers. TIGTA remains concerned about the IRS’s inability to

significantly reduce these payments.

Congress provided the IRS with tools to address taxpayers identified as submitting fraudulent or

reckless refundable credit claims. These tools include the authority to assess the erroneous

refund penalty, to require taxpayers to recertify that they meet refundable credit eligibility

requirements for credits claimed on a return filed subsequent to disallowance of a credit, and to

apply two-year or 10-year bans on taxpayers who disregard credit eligibility rules.

However, TIGTA reported that the IRS does not use the tools provided by Congress 

to the fullest extent possible to address erroneous credit payments.28 While the 

IRS assessed the erroneous refund penalty on 3,190 returns, TIGTA identified 494,555 taxpayers

with more than $2.6 billion in withholding and refundable 

credits that were disallowed for Tax Years 2015, 2016, and 2017 for which almost $534.7 million

in potential penalties was not assessed. In addition, TIGTA identified 289,059 returns processed

during Calendar Year 2018 for which the IRS did not verify the taxpayers’ eligibility before

recertifying them to receive a refundable credit. These taxpayers received more than $532 million

in refundable credits.

Since Calendar Year 2012, TIGTA has issued several reports addressing weaknesses in the

IRS’s Individual Taxpayer Identification Number (ITIN) program that increase the risk that

individuals filing questionable applications will be assigned an ITIN.29 While the IRS has made

some improvements, there are indications that there is a reduced emphasis on identifying

questionable ITIN applications.30 For example, the IRS does not require individuals to show they

have a tax filing need, i.e., provide a tax return prior to renewing their ITIN. The IRS renewed

38,597 ITINs between January 2017 and April 2019 for the purpose of filing a tax return that have

not been used on a tax return since being renewed.

INCREASING INTERNATIONAL TAX COMPLIANCE

27 TIGTA, Ref. No. 2020-40-025, Improper Payment Reporting Has Improved; However, There Have Been No Significant Reductions to the Billions

of Dollars of Improper Payments (Apr. 2020). 28 TIGTA, Ref. No. 2020-40-008, Authorities Provided by the Internal Revenue Code Are Not Effectively Used to Address Erroneous Refundable 

Credit and Withholding Credit Claims (Feb. 2020). 29 An ITIN is issued by the IRS to individuals who are required to have a Taxpayer Identification Number for Federal tax purposes but do not have

and are not eligible to obtain a Social Security Number. 30 TIGTA, Ref. No. 2020-40-064, Processes Do Not Ensure That Individual Taxpayer Identification Numbers Are Issued Only to Qualifying 

Individuals With a Tax Administration Need (Sept. 2020).
228 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | OTHER INFORMATION

Complexity and change in the international tax environment require that the IRS collaborate with

tax administrations of foreign countries to enforce compliance. The IRS must continue to focus

significant efforts on global tax cooperation and tax administration practices that can prevent and

resolve disputes among countries to increase certainty for taxpayers. In most cases, foreign

persons31 are subject to U.S. tax of 30 percent32 on their U.S. source income. The U.S. tax owed

is generally withheld from payments made to foreign persons by a withholding agent.33 

Withholding agents are required to file Forms 1042-S, Foreign Person’s U.S. Source Income

Subject to Withholding, to report on an individual taxpayer basis the income and withholding for

each foreign person. For Tax Year 2017, the IRS received 6.3 million Forms 1042-S from 49,618

withholding agents. These agents reported U.S. tax withholdings totaling more than $528 billion.

In response to our prior recommendations, the IRS has implemented processes to improve its

identification of reporting discrepancies for Federal tax withheld on U.S. source income paid to

foreign individuals. However, these processes did not identify some withholding tax

discrepancies. TIGTA reported that IRS processes did not identify 1,919 withholding agents with

reporting discrepancies totaling more than $182.7 million.34 Our review also identified 366

withholding agents that claimed $506 million more in credits for tax withheld than was reported on

the Forms 1042-S.

In addition, partnerships conducting business in the United States are required to withhold taxes

on certain income paid to foreign partners.35 The withholding serves as an incentive for foreign

partners to file the appropriate U.S. tax return. However, TIGTA reported that the IRS’s

compliance efforts in this area can be improved.36 TIGTA identified significant errors in the

database that the IRS uses to track withholding reported by partnerships, which limits the IRS’s

ability to verify withholding credits and accurately identify potential nonfilers.

Foreign individuals are also required to pay tax related to the sale of U.S. real estate. Specifically,

the Foreign Investment in Real Property Tax Act (FIRPTA) of 198037 imposes an income tax on

foreign persons selling U.S. real property interests. Buyers are required to withhold a percentage

of the anticipated taxes due on the amount realized from the sale. A foreign seller of U.S.

property can claim a credit for the tax withheld by the buyer. If the seller’s tax liability is less than

the amount of tax withheld, the seller gets a refund of the difference. TIGTA reported that the

IRS’s reconciliation processes do not effectively identify and address FIRPTA reporting and

payment noncompliance.38 TIGTA identified 2,988 buyers with discrepancies of more than

$688 million between the withholding reported on Forms 8288-A, Statement of Withholding on

Dispositions by Foreign Persons of U.S. Real Property Interests, filed during Processing Year

2017 and the withholding assessed to the buyer’s tax account. Extensive data inaccuracies in the

31 A foreign individual is any person that is not a U.S. person, including a nonresident alien, a foreign corporation, a 

foreign partnership, a foreign trust, or a foreign estate. 32 A reduced rate, including exemption, may apply when there is a tax treaty between the United States and the country of residence for the foreign 

individual.

33 A withholding agent is any U.S. or foreign entity (individual, corporation, partnership, etc.) that takes receipt of, has control or custody of, or 

disposes of or makes a payment of any income to a foreign individual that is subject to withholding. 34 TIGTA, Ref. No. 2020-40-021, Continued Efforts Are Needed to Address Billions of Dollars in Reporting and Payment Discrepancies Relating to 

Tax Withheld From Foreign Persons (June 2020). 35 A foreign partner can be a foreign corporation, foreign partnership, and any other person who is not a U.S. citizen. 36 TIGTA, Ref. No. 2020-30-026, Withholding Compliance Efforts for Partnerships With Foreign Partners Can Be Improved (June 2020). 37 Enacted as Subtitle C of Title XI (the Revenue Adjustments Act of 1980) of the Omnibus Reconciliation Act of 1980, Pub. L. No. 96-499, 94 Stat. 

2599, 2682 (Dec. 5, 1980).

38 TIGTA, Ref. No. 2020-40-014, Millions of Dollars in Discrepancies in Tax Withholding Required by the Foreign Investment in Real Property Tax

Act Are Not Being Identified or Addressed (Mar. 2020).
DEPARTMENT OF THE TREASURY 229 

OTHER INFORMATION | FY 2020 AGENCY FINANCIAL REPORT

FIRPTA database, incorrect and unclear guidelines, and employee errors contributed to these

discrepancies.

The IRS also has not established processes to use Form 1099-S, Proceeds from Real Estate

Transactions, to identify buyers that do not report and pay FIRPTA withholdings. TIGTA’s

analysis of Forms 1099-S for Tax Year 2017 identified approximately $22 million in FIRPTA

withholding that was not reported and paid to the IRS. Finally, employee errors resulted in 1,835

foreign individuals potentially receiving more than $60 million in FIRPTA withholding credits than

they were entitled.

PROTECTING TAXPAYER RIGHTS

The IRS must balance tax compliance activities to enforce the tax code while at the same time

upholding taxpayer rights. The IRS continues to dedicate significant resources and attention to

complying with the taxpayer rights provisions of the IRS Restructuring and Reform Act of 1998.39

The IRS Restructuring and Reform Act of 1998 requires TIGTA to audit certain taxpayer rights

provisions and report whether the IRS complied with those provisions. While overall compliance

has improved, TIGTA continues to identify areas in which the IRS can improve. For example,

during the review of the IRS’s compliance with the prohibition against referring to taxpayers as 

Illegal Tax Protesters or similar designations, TIGTA found that IRS employees used these

designations in some case narratives or case review comments.40 Also, during the audit to

determine whether the IRS improperly withheld information requested by taxpayers, we found that

for 15 (17 percent) of the 87 cases reviewed, the IRS did not follow Freedom of Information Act41

requirements when redacting information, even though managers had reviewed these cases for

accuracy.42

TIGTA also evaluated the IRS’s compliance with asset seizure legal provisions.43 TIGTA

reviewed 205 (60 percent) of the 342 seizures the IRS conducted from July 1, 2018, through June

30, 2019. TIGTA identified instances in which the IRS did not comply with a particular Internal

Revenue Code section or internal procedure and identified IRS procedures that are problematic

and result in potentially unfair outcomes.

Additionally, Collection Due Process hearing provisions are designed to give taxpayers an

opportunity for an independent review to ensure that the levy action that has been proposed or the

Notice of Federal Tax Lien that has been filed is warranted and appropriate. During the review of

the IRS Office of Appeals Collection Due Process Program, TIGTA identified some hearing

processing errors that were similar to errors identified in prior reports.44 We determined that the

IRS did not always classify taxpayer requests properly and, as a result, some taxpayers received

the wrong type of hearing. In addition, the Collection function did not timely forward misdirected

cases to the correct location, and taxpayer accounts had Collection Statute Expiration Date45

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., 19 U.S.C., 22 U.S.C., 26 U.S.C., 31 

U.S.C., 38 U.S.C. and 49 U.S.C.).

40 TIGTA, Ref. No. 2020-30-057, Fiscal Year 2020 Statutory Audit of Compliance With Legal Guidelines Prohibiting the Use of Illegal Tax Protester 

and Similar Designations (Sept. 2020). 41 5 U.S.C. § 552. 

42 TIGTA, Ref. No. 2020-10-038, Fiscal Year 2020 Mandatory Review of Compliance With the Freedom of Information Act (July 2020). 43 TIGTA, Ref. No. 2020-30-058, Fiscal Year 2020 Review of Compliance With Legal Guidelines When Conducting Seizures of Taxpayers’ Property

(Sept. 2020).

44 TIGTA, Ref. No. 2020-10-054, Review of the Independent Office of Appeals Collection Due Process Program (Aug 2020). 45 The Collection Statute Expiration Date is the expiration of the time period established by law to collect taxes.
230 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | OTHER INFORMATION

errors due to incorrectly input suspension start and stop dates. In some cases, TIGTA determined

that the incorrect Collection Statute Expiration Date allowed the IRS additional time to collect

delinquent taxes. 

CONCLUSION

This memorandum is provided as our annual summary of the major management and

performance challenges confronting the IRS in FY 2021. TIGTA’s Fiscal Year 2021 Annual Audit

Plan and Fiscal Year 2021 Inspections and Evaluations Program Plan contain our proposed

reviews. 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: Assistant Secretary for Management 

Deputy Chief Financial Officer

Commissioner of Internal Revenue
DEPARTMENT OF THE TREASURY 231 

OTHER INFORMATION | FY 2020 AGENCY FINANCIAL REPORT

RESPONSES TO INSPECTORS GENERAL IDENTIFIED CHALLENGES

Treasury Management Response to OIG Identified Challenges 

OIG Challenge 1: COVID-19 Pandemic Relief: Treasury has been instrumental in implementing and/or supporting other 

Federal agencies in implementation of economic relief provisions of The Coronavirus Aid, Relief, and Economic Security Act

(CARES Act). Some of these efforts include administering loans, loan guarantees, and other investments to businesses,

States, and municipalities; directing hundreds of billions of dollars to workers and households; and assisting the Small

Business Administration in carrying out the Payroll Protection Program. In addition to administering these programs and

activities, Treasury must manage the unprecedented oversight that CARES Act funding is subject to as it continues to

navigate through this challenging time. 

The COVID-19 pandemic created many challenges for the Nation in 2020. From the beginning, Treasury played a key role in

ensuring that the economic prosperity gained over the previous three years was not lost due to the pandemic. While

implementing the CARES Act, Treasury ensured that $275 billion in Economic Impact Payments were distributed to the

American public, and coordinated on policy development with the Small Business Administration to enable over $525 billion

in Paycheck Protection Program loans for small businesses. In addition, Treasury made available $500 billion for loans and

loan guarantees for passenger air carriers, cargo air carriers, businesses critical to maintaining national security, and

investments in programs of facilities established by the Federal Reserve to support lending to eligible businesses, states, or 

municipalities. We also made direct payments of nearly $150 billion to state, local and tribal governments for COVID-19

related expenses and provided $32 billion in financial assistance to air carriers and certain contractors to support employee 

payroll and benefits.

Treasury executed these programs with unprecedented speed and has managed these challenges with unprecedented

transparency. Our web site contains a wealth of information about the program we administer, including program rules and

guidance; forms and agreements; and reports about the entities that received funds, the amounts they received, and the

terms governing those arrangements. Treasury makes reports as required to Congress and USAspending.gov, routinely

responds to information requests from multiple oversight bodies, and has answered hundreds of letters and information

requests from members of Congress. Treasury has staff dedicated to meeting the needs of oversight bodies, and has

established the CARES Operations office within the Office of the Assistant Secretary for Management to carry out 

compliance, asset management, and reporting functions relating primarily to the loan and financial assistance programs

under Division A, Title IV of the CARES Act. Treasury recognizes the importance of transparency and oversight for CARES

Act funds, and has implemented specific and robust measures to meet the challenge. 

OIG Challenge 2: Operating in an Uncertain Environment: The COVID-19 outbreak presented unique complexities for 

Treasury to include, among other things, implementing measures for the health and safety of its workforce, as well as,

administering more than two trillion dollars in financial assistance. While facing these unforeseen challenges, Treasury

continues to face other ongoing challenges, including the recurring cycle of budget and debt ceiling stopgaps, recruiting

highly-skilled individuals to fill critical positions across the Department, and the potential impact of the Government-wide

Reform Plan on the administration of certain of the Department’s programs and operations. Legislation is pending

authorizing the potential transfer of the United States Secret Service (Secret Service), a high-profile component to Treasury,

and the transfer is dependent on legislative action.

The COVID-19 Pandemic created new operational complexities for Treasury and exacerbated ongoing operational challenges.

In June, the Department issued the Treasury Opening Up Playbook and Phased Reopening Guidelines. These documents
232 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | OTHER INFORMATION

provide a framework for ensuring the health and safety of Treasury’s approximately 100,000 employees and 600 offices 

during the pandemic. Treasury dramatically expanded the use of telework to keep employees who are capable of working

remotely safe. We also leveraged workspace modifications, employed new sanitation and hygiene protocols, utilized health

screenings, and purchased new personal protective equipment to protect the large segments of the workforce that require

access to the workplace to accomplish their mission, particularly in the areas of currency manufacturing, paper form

processing, and taxpayer services.

Recruiting and retaining a highly skilled workforce remains critical to achieving Treasury’s mission. In response to COVID19, a virtual onboarding process was launched in March 2020, which allowed Treasury Departmental Offices to onboard over 

200 new employees since the pandemic began. This included ongoing staffing growth in Terrorism and Financial

Intelligence and support for the Committee on Foreign Investment in the United States in recognition of their important

national security missions. Treasury also implemented process improvements and a new tracking tool to streamline the

processing of background investigations for new employees and contractors. Treasury also expanded support for employees 

through work schedule flexibilities, a Dependent Care Leave pilot, and providing timely training and resources on topics like

virtual teamwork, online collaboration tools, work-life balance, and self-care.

In anticipation of increased transaction reviews, the Office of Investment Security and the Office of the Assistant General 

Counsel for International Affairs have been aggressively hiring for approximately 35 positions. Treasury plans to decrease

reliance on contractors over time as new employees are hired. While management anticipates being close to filling 81

positions (including contractors) approved for fiscal year 2020, it requested another 39 positions as part of its fiscal year 2021

budget justification.

Legislation has been introduced in both the Senate and the House to return the Secret Service to Treasury consistent with

the key recommendations of a Protective Mission Panel from 2014 formed to improve operations, and the recommendation of 

two former career Secret Service Directors. A 2019 feasibility study determined a transfer back to Treasury could better 

align the Secret Service’s financial mission with that of its former parent department. Improved mission alignment under

Treasury could result in heightened focus on financial crimes investigations, resulting in enhanced protection for the

American public and businesses against criminals targeting our financial institutions and currency and greater consumer

confidence in the Nation’s financial institutions and integrity.

The Secret Service’s investigative mission, operations, and capabilities also align well with Treasury’s strategic priorities. 

Treasury is committed to both the protective and investigative mission of the Secret Service. Treasury’s most recent

Strategic Plan, in effect for the 2018 – 2022 timeframe, illustrates the potential synergies between the Secret Service and

Treasury. Of the five Strategic Goals outlined in the document, the Secret Service may closely map its activities to three: 

Boost U.S. Economic Growth, Promote Financial Stability, and Enhance National Security. Treasury and the Secret Service

have as a common goal the stability, security, and advancement of the Nation’s economy. Technological advancements in

recent decades, such as cryptocurrencies and the increasing interconnectedness of the international financial marketplace

resulted in more complex issues facing our country. Criminal organizations employ varied means to obtain financing, and

we continue to observe stronger links between financial and electronic crimes and the financing of terrorists and rogue state

actors.

Relocating the Secret Service to Treasury will most likely result in additional senior policy level attention, resulting in more

optimal levels of management attention and focus on the Secret Service, as well as enhanced programmatic and operational 

oversight. The Secret Service anticipates the expected impact of the transition on operational personnel will be minimal. 

Treasury and the Secret Service have been preparing for the transition through a series of meetings between IT, human

capital, planning, budget, and other staff to prepare for a smooth transfer.
DEPARTMENT OF THE TREASURY 233 

OTHER INFORMATION | FY 2020 AGENCY FINANCIAL REPORT

OIG Challenge 3: Cyber Threats: Attempted cyber-attacks against Federal agencies, including Treasury, and financial

institutions continue to increase in frequency and severity. As these threats continue to evolve and become more

sophisticated and subtle, they pose ongoing challenges for Treasury to fortify and safeguard its internal systems and

operations along with the financial sector it oversees. This is vital to the Nation’s national security and economic stability. 

While managing known risks is an ongoing challenge, Treasury must also be ready to reinforce and/or redirect cybersecurity

efforts when unforeseen events occur such as the COVID-19 global pandemic.

Treasury maintained an overall rating of “Managing Risk” on the OMB Cybersecurity Risk Management Assessment for all

four quarters of the fiscal year. Treasury implemented several programs and activities during FY 2020 to further strengthen

cyber security.

Treasury Cybersecurity established the Enterprise Cyber Risk Management (ECRM) program to manage the vulnerabilities

and threats that can be exploited to affect Treasury assets and cause disruption in the delivery of services. In FY 2020, the

program consolidated risks from multiple sources to create the centralized Risk Reporting Analytical Cybersecurity System,

managed threat advisories for 14 vulnerabilities, and developed the Supply Chain Risk Management (SCRM) program for 

Cybersecurity. Treasury implemented a new assessment methodology, the High Value Asset (HVA) Assessment, that

combines the Risk and Vulnerability Assessment (RVA) and the Security Architecture Reviews (SARs) into a single

assessment focused primarily within the boundary of the HVA. These reviews provide great value and Treasury has set

aside resources to increase the number of HVA assessments conducted annually. Additionally, Treasury created enhanced

risk profiles for all 19 Departmental HVAs. This allows Treasury senior leadership greater visibility into the risks

associated with the Department’s most critical systems by incorporating multiple metrics, including the application of 

common FY 2020 Treasury RVA/SAR assessment findings, to these systems in order to identify if protection measures have

been proactively put in place.

During FY 2020, Treasury completed the second year for Continuous Diagnostics and Mitigations (CDM) Dynamic and

Evolving Federal Enterprise Network Defense (DEFEND) activities across the Department. These activities help the

Department prioritize mitigation activities to drive efficiency by concentrating effort on resolving the most critical elements

first. Also, in adopting a “Defense-in-Depth and Breadth” approach for 24/7/365 Operations, the Department has

implemented layered controls and established an incident response capability that performs and mitigate emerging threats

or fraudulent access/transactions. 

Treasury’s Government Security Operations Center (GSOC) engineered a custom implementation of a new repository for all

consumed threat intelligence. This repository allows for automated ingest of indicator and cyber threat reporting from 

trusted sources. GSOC also developed a tool that leverages this repository for automation of actions removing the need for 

analysts to manually parse new threat information and then manually run historical queries against our Treasury network 

data to search for evidence of compromise related to that new information. GSOC also completely redefined its approach to

developing and categorizing its custom malware signatures to meet the demands of new technology solutions. Finally, GSOC

completely reengineered its email signature detection, malware detonation and Security Information and Event

Management (SIEM) alerting process. The new design delivers results in near real-time where the results of that analysis

are provided as SIEM alerts to the 24/7 operations detection team.

Fiscal Service continues to take several steps to address cyber threats. Some successes and ongoing efforts include

modifying current contracts to include clauses in support of the Executive Order on Securing the Information and

Communications Technology and Services Supply Chain, requiring all solicitations to adhere to Treasury’s security

requirements, and leveraging FedRAMP to accelerate the authorization of cloud-based systems and services. Fiscal Service

also works closely with public and private organization to ensure that the latest threat intelligence information is available

to the bureau for risk-based decision making. 
234 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | OTHER INFORMATION

OIG Challenge 4: Anti-Money Laundering/Terrorist Financing and Bank Secrecy Act Enforcement: Identifying, disrupting,

and dismantling the financial networks that support terrorists, organized transnational crime, weapons of mass destruction

proliferators, and other threats to international security, continue to a challenge for Treasury. This challenge is increased as

Treasury’s role to counter these financial networks and threats has grown and criminals and other bad actors evolve and

continue to develop more sophisticated money laundering methods to avoid detection. A specific challenge for FinCEN is to

ensure the Bank Secrecy Act data remains secure in order to maintain the confidence of the financial sector while meeting

the access needs of law enforcement, regulatory, and intelligence partners.

To address these challenges, all FinCEN systems are assessed for vulnerability and configuration compliance in near realtime by their participation in DHS’s Continuous Diagnostic and Mitigation (CDM) initiative. Additionally, an independent

third-party assessment team conducts security assessments annually (or whenever there is a significant change within an

application requiring a new accreditation) to test and validate that appropriate security controls are in place.

FinCEN has improved its SIEM capabilities by improving its anomaly detection and providing better forensic capabilities. 

FinCEN is also upgrading the query audit log technology that allows FinCEN to monitor logs that track user’s usage of Bank

Secrecy Act (BSA) data. The upgrade will provide FinCEN more advanced reporting capabilities. IT Systems (FinCEN

Portal, Query, SISS) are undergoing technical refresh efforts which are implementing new identity and access control 

mechanisms. The new security architecture allows for enhanced authentication processes such as One Time Passwords (onetime login code sent to email or phone) and system software adopting more of a “Zero-Trust”/”Verified Source” security

methodology.

OIG Challenge 5: Efforts to Promote Spending Transparency and to Prevent and Detect Improper Payments: Under the

Digital Accountability and Transparency Act of 2014 (DATA Act), the Department faces renewed challenges to ensure

transparency to the taxpayer and other stakeholders on the use of funds distributed under economic relief packages enacted 

to address individuals and industry sectors impacted by COVID-19. In addition, the effectiveness of the Department’s Do

Not Pay Business Center in detecting and preventing improper payments continues to be impacted by the need to obtain

better death information. 

Fiscal Service launched the FiscalData.Treasury.gov website in July 2020 to provide citizens with centralized access to

Fiscal Service published Treasury financial data. In addition, to the release of the DATA Act Information Model Schema 2.0, 

Fiscal Service updated the practices and procedures document in FY 2020 that expands upon the data standards used in

reporting. To increase the use of spending data on USAspending.gov, Fiscal Service Data Lab’s Your Guide to America’s

Finances (Your Guide) will be refreshed with FY 2020 data. Your Guide provides a high-level overview of the federal 

government’s revenue, spending, deficit, and debt. In addition, USAspending.gov search capabilities will be enhanced into

one comprehensive tool for users that is intuitive and easy to navigate. 

Treasury continues to make progress at the government-wide and Departmental level to identify reporting discrepancies and

improve overall DATA Act reporting quality. From an agency perspective, Treasury successfully implemented new 

government-wide reporting requirements as a result of OMB Memorandum M-20-21, Implementation Guidance for

Supplemental Funding Provided in Response to the Coronavirus Disease 2019 (COVID-19). Our successful implementation

allows the public to obtain valuable information on how tax dollars are supporting the economic recovery in relation to the

Department’s coronavirus response on a monthly basis.

In regard to the Do Not Pay (DNP) program, we received temporary access to SSA’s Full Death Master File (DMF) to support

EIP payment screening for deceased individuals. This allowed DNP to assist IRS in stopping over $600 million in improper

EIPs from being issued. Fiscal Service has requested legislative authority to receive access to the full Death Master File for 

improper payment purposes along with other proposals to further strengthen the Do Not Pay program. 
DEPARTMENT OF THE TREASURY 235 

OTHER INFORMATION | FY 2020 AGENCY FINANCIAL REPORT

OIG Challenge 6: Information Technology Acquisition and Project Management: While the Federal Information Technology

Acquisition Reform Act (FITARA), enacted in December 2014, was intended to help agencies to better manage their IT

investments, implementation continues to be a government-wide challenge. Specifically, Treasury faces challenges in the

areas of IT acquisition and project management.

In many areas of the FITARA scorecard Treasury has scored well, including data center consolidation, portfolio review,

modernizing government technology and software asset management. As of the July 2020 scorecard, Treasury’s overall score

has improved to a “B”. While the FITARA scorecard is a helpful tool for comparing agencies’ progress in implementing

FITARA, Treasury has achieved successes that, while not always captured by the scorecard, ultimately further the goals and

intent of FITARA. For example, Treasury increased its usage of Government-wide Acquisition Contracts and Best-in-Class

(BIC) Contracts, to become the leading agency to leverage BIC contracts for acquisition development and procurement in FY 

2020. 

To help facilitate the alignment of IT investment decisions with the Bureau of Fiscal Service’s strategy, several new

governance entities and metrics have been established. Specifically, Fiscal Service has begun publishing (via an IT Portfolio 

Dashboard) metrics related to the health, quality of service, and mission impact of specific IT initiatives. Furthermore,

Fiscal Service has established multiple IT architecture review boards responsible for ensuring the consistent and effective 

usage of key technologies and services. 

Lastly, Fiscal Service plans to improve the frameworks used to assess the Return On Investment (ROI) of proposed 

investments within the context of the Fiscal Service mission. These improvements will provide greater transparency into IT

investment decision making, greater accountability for those decisions, and a clearer alignment with Fiscal Service’s

strategic objectives. 

Matters of Concern

OIG Concern 1: Coin Redemption: The Mint’s internal control issues related to safeguarding and ensuring the integrity of 

U.S. coinage is a concern.

The Mint is aware of the potential impact that counterfeit coinage would have in both the bullion market and the Nation’s

circulating coin system. The Mint has meaningfully invested resources to develop the in-house expertise necessary to

identify counterfeit circulating coins and establish new security safeguards. Currently the percentage of coins deemed to be

counterfeit is minimal and well below the threshold that would undermine the integrity of our coinage system. Current

estimates are that roughly .05 percent of circulating quarters may be counterfeit. The Mint established a state-of-the-art

anti-counterfeiting lab and dedicated 3 FTEs to advance the Mint’s anti-counterfeiting capabilities and collaborate with

Secret Service and Customs and Border Patrol to refine counterfeit identification practices. The Mint’s collaboration with

Secret Service and CBP is expected to greatly increase the effectiveness of the latter agencies’ ability to prevent the

importation of counterfeit coins and/or their introduction into circulation. With respect to bullion coins, the Mint is currently

developing counterfeit-resistant features that are expected to be introduced in the American Eagle gold and silver bullion

coins in mid-year 2021.
236 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | OTHER INFORMATION

Under the authority of 31 U.S.C § 5120, the Mint established a program by which individuals and businesses may exchange

bent or partial coins for reimbursement. This is commonly referred to as the “mutilated coin redemption program”

(Program). In late 2018, after the discovery of anomalies in some materials submitted for reimbursement, the Mint

suspended the processing of applications and materials submitted to the Program. The Program remains suspended at this

time. The Mint is working with new technology to identify counterfeits and develop appropriate safeguards for the Program

to reduce the risk of fraudulent submissions. The Mint will publish for public comment proposed amendments to the

Program’s regulations that aim to deter fraudulent schemes on the program. Prior to resuming the Program, the Mint will

have revised internal controls and appropriate staffing in place to maintain continued integrity and sustainability of U.S.

coinage. 

OIG Concern 2: Managerial Cost Accounting: Managerial cost accounting is a fundamental part of a financial performance

management system. It involves the accumulation and analysis of financial and nonfinancial data, resulting in the

allocation of costs to organizational results. The OIG has concerns related to internal control weaknesses identified within

Departmental Offices’ overhead allocation process used to charge reimbursable customers.

OIG has provided input in recent years raising concerns about the overhead allocation methodology in Treasury’s

Departmental Offices. In response, Treasury hired an independent third party to evaluate the methodology used in the

FY 2020 overhead billing. That assessment was completed on August 27, 2020. While the vendor provided a few areas for 

improvement and maturity of the methodology, there was no finding that the FY 2020 methodology was invalid,

inappropriate or unreasonable. In fact, the difference between the original methodology and the revisions recommended by

the vendor reflect a net difference of 0.15%, or approximately $3,000. Treasury implemented the recommendations of the

vendor as part of the annual reconciliation process in FY 2020. The vendor concluded their report with a review of the

FY 2020 reconciliation

OIG Concern 3: Internal Control Issues at BEP: The Bureau of Engraving and Printing’s fiscal year 2019 financial

statement audit resulted in 22 internal control deficiencies identified with nine of them collectively reported as two

significant deficiencies related to financial reporting and information technology controls.

As a result of the FY 2019 BEP financial statement audit, BEP has initiated multiple actions to strengthen its financial

management, internal controls and reporting processes. For example, BEP hired external contractors to assist in expediting

the remediation of the audit findings, to provide financial support services, and to assist with conducting internal control 

reviews in accordance with requirements of the OMB Circular A-123. This partnership enabled BEP to successfully address

all of the findings and recommendations identified in the FY 2019 financial statement audit report. The corrective actions

undertaken included developing or updating standard operating procedures and related documentation, as well as providing

training to staff members as appropriate. As noted in the independent auditor’s report, BEP experienced significant

turnover in key positions which contributed to the conditions cited. To address this challenge, BEP has recently filled key 

managerial and staff positions within the Office of Financial Management, including hiring a Budget Officer and Accounting

Officer. BEP plans to continue filling vacancies in the CFO Directorate to address staffing challenges. Finally, BEP

continues to evaluate and improve upon the maintenance and repository of its contract files in response to the OIG’s ongoing 

corrective action verification of recommendations related to a FY 2013 audit report. BEP converted to a 100 percent

electronic contract file management system in accordance with Treasury guidance since that report was issued. Other

improvements include the expansion of file size limits and improved connectivity via automatic reconfigurations of system

settings. BEP is also aggressively hiring additional staff within the Office of the Chief Procurement Officer including staff

who will further enhance and maintain our contract file management.
DEPARTMENT OF THE TREASURY 237 

OTHER INFORMATION | FY 2020 AGENCY FINANCIAL REPORT

IRS Management Response to TIGTA Identified Challenges 

TIGTA Challenge 1: Responding to the COVID-19 Pandemic; After passage of the CARES Act, there was an increase in

related illicit scams and schemes with various objectives, such as manipulation of IRS online applications, theft of the EIPs,

and efforts to steal sensitive taxpayer information.

The Coronavirus Disease 2019 (COVID-19) pandemic and the passage of the CARES Act created numerous avenues for fraud

and false claims against the U.S. Treasury. Using its unique authority and financial expertise to investigate criminal

violations of the Internal Revenue Code, the IRS Criminal Investigation (CI) organization responded by investigating

violations such as identity theft, false claims, and the theft of Economic Impact Payments. IRS-CI Special Agents around

the country worked in concert with the Department of Justice as well as other federal law enforcement agencies and

participated on task forces investigating COVID-related frauds. As a result, the IRS identified and investigated several 

fraudulent schemes perpetrated by those taking advantage of the need for personal protective equipment and abusing

financial assistance provided by the government to both businesses and individuals.

In addition to its existing initiatives, the IRS-Nationally Coordinated Investigations Unit used data-driven methodologies 

extensively to identify and refer for criminal investigation numerous COVID-19 related fraud schemes and helped create a 

one-stop portal containing over five million COVID-specific documents in order to develop leads and avoid duplicate

investigative efforts.

TIGTA Challenge 2: Enhancing Security of Taxpayer Data and Protection of IRS Resources: The IRS must complete

improvements to its public-facing applications to ensure that taxpayers who want access to IRS’s online services have

verified their identities and can securely access IRS resources. In addition, the IRS must ensure that taxpayer data is secure

from internal and external threats. 

Advances in technology have provided the IRS an opportunity to be more responsive to taxpayers’ needs for its services. 

During 2020, the IRS continued improving its public-facing applications to ensure that taxpayers who access IRS’s online

services verify their identities to access IRS resources securely.

The IRS has progressed toward meeting National Institute of Standards and Technology (NIST) Special Publication (SP) 

800-63-3 guidelines on identity proofing by developing and using a five-step process to determine the required assurance

level for each of its applications. The IRS completed the first five steps in the Digital Identity Risk Assessment (DIRA)

process, to enhance IRS compliance with the NIST guidelines for identity proofing for all existing public-facing applications. 

Moreover, the IRS has completed and approved, as needed, Digital Identity Acceptance Statements for each DIRA. In

addition, the IRS uses a federated approach in their Secure Access registration process employing Credential Service

Providers to comply with NIST SP 800-63-3. The Secure Access registration process includes ways in which states,

territories, and federal agencies that issue identifications can assist the IRS with identity proofing users of its public-facing

applications that require Identity Assurance Level 2.

Finally, the IRS plans to review and revise the current Privacy Impact Management System to clearly identify applications

that store, process, and/or transact federal tax information for the purpose of detecting improper cyber activities and to

reconstruct events for potential criminal investigations. This inventory will be updated at least annually.

TIGTA Challenge 3: Implementing Tax Law Changes: The IRS faces continuing challenges due to legislative developments 

related to tax reform and tax policy.

The passage of the Taxpayer First Act (TFA), signed July 1, 2019, created a new congressional mandate for the IRS. The 

IRS has not had a major reorganization of this magnitude since the implementation of the Internal Revenue Service
238 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | OTHER INFORMATION

Restructuring and Reform Act of 1998. The TFA requires the submission of a comprehensive proposal to Congress for three

areas: Comprehensive taxpayer service strategy; Proposal to update the IRS organizational structure; and Comprehensive

training strategy. The TFA also includes another 41 provisions designed to improve taxpayer service and ensure the IRS

continues to enforce the tax law in a fair and impartial manner.

The IRS developed robust and effective TFA strategies that reflect taxpayers’ input. The IRS engaged with a wide range of 

stakeholders and staff with first-hand insights into how the IRS can evolve. This engagement, along with extensive research

and analysis of best practices, set the foundation for the Taxpayer Experience Strategy, Training Strategy, and Organization

Redesign Plan.

In preparation for the 2020 filing season, the IRS updated its processes and procedures to address new legislative

requirements. These updates included making extensive revisions to Form 1040, U.S. Individual Income Tax Return, and its

related schedules and making obsolete three of the six Form 1040 schedules that were new for TY 2018. In addition, the IRS

developed the Form 1040-SR, U.S. Tax Return for Seniors. The IRS will continue its efforts to implement various actions

required to meet the intent of theses and future tax laws.

TIGTA Challenge 4: Addressing Emerging Threats to Tax Administration: Because fraud patterns are constantly evolving,

the IRS needs to continuously adapt its processes to detect and prevent tax scams involving identity theft and telephone calls

from criminals impersonating IRS agents.

The Security Summit, which is a public-private sector partnership between the IRS, state revenue departments, software

developers, tax professionals, and financial services groups, continued to implement measures to combat tax-related identity

theft. Security Summit members continue to meet regularly to discuss action items, emerging issues, and new initiatives in

combating identity theft and refund fraud. An important Security Summit initiative has been the Identity Theft Tax Refund 

Fraud Information Sharing and Analysis Center, commonly referred to as the ISAC. This is an important platform for the

IRS and its partners in their day-to-day efforts to combat identity theft by helping them gain timely data on emerging

trends.

The IRS continued to explore programs and processes to further improve the detection and prevention of tax-related identity

theft. For example, the IRS completed an analysis to determine whether the reduction of the risk of tax-related identity

theft resulting from the use of the Form W-2 Verification Code justifies the cost to fully implement the Form W-2 

Verification Code Program. The analysis takes into consideration the reduced benefit of the program as a result of the

accelerated receipt of W-2s as required by the Protecting Americans from Tax Hikes Act (PATH). The PATH Act requires

employers to file third-party income information to the IRS by January 31 and requires the IRS to delay refund issuance on 

returns claiming the Earned Income Tax Credit/and the Additional Child Tax Credit until February 15th. These changes

allow the IRS additional time to perform document matching. The IRS found that these PATH Act requirements do help to

mitigate the tax-related identity theft risk as intended by the Form W-2 Verification Code Program.

TIGTA Challenge 5: Supporting an Enhanced Taxpayer Experience: IRS needs to improve its customer service to better

assist identity theft victims and to increase awareness and understanding the Free File Program and timely tax return

processing. In addition, IRS must continue to resolve the significant backlog of work resulting from the closure of the

processing sites due to the COVID-19 pandemic, which has impacted its ability to provide timely customer service and tax

return processing.

To protect taxpayers from identity theft from known incidents, such as data breaches, the IRS proactively identifies those

accounts that require additional review and quickly works with preparers to ensure prompt reporting.
DEPARTMENT OF THE TREASURY 239 

OTHER INFORMATION | FY 2020 AGENCY FINANCIAL REPORT

To further improve taxpayer protections, during FY 2020 the IRS expanded the Identity Protection Personal Identity

Number (IP PIN) Opt-in program by adding 10 more locations, bringing the total number of eligible locations to 20. This

expansion of the IP PIN Opt-in program moves the IRS a step closer to fully implementing TFA Section 2005, which requires

the expansion of the IP PIN Opt-in program to all taxpayers. The IP PIN is a six-digit number that helps the IRS verify a 

taxpayer’s identity and accept their electronic or paper tax return and prevents someone else from filing a tax return with

the taxpayer’s Social Security Number. In FY 2020, more than 70,000 taxpayers within the 20 locations obtained an IP PIN.

In preparation for the 2021 filing season, the IRS will use various means to publicize this program, to include creation of a 

how-to video for taxpayers, updating publications, such as Publication 5367, Identity Protection PIN Opt-In Program for 

Taxpayers, and using traditional and social media platforms to generate nationwide publicity for the IP PIN. Finally, the

IRS will leverage its relationships with tax professionals and service providers, states, congressional offices, and businesses

to provide them with information they may share with stakeholders.

Additionally, the IRS worked to make the Free File program more taxpayer friendly and to protect taxpayers. Following the

changes made to Free File for the 2020 filing season, IRS Free File online products saw a 50 percent usage increase, with

more than 4.1 million taxpayers using one of the free online partner products, compared to 2.7 million in FY 2019.

TIGTA Challenge 6: Modernizing IRS Operations: The IRS’s reliance on legacy computing infrastructure and business

operations pose significant risks to the IRS’s ability to deliver its mission. These legacy systems carry significant risks,

including increased cybersecurity threats and maintenance costs. In addition, successful implementation of IRS’s Integrated

Modernization Business Plan is dependent on several legislative proposals and regulatory authorities, as well as funding for

multiple fiscal years at somewhat predictable intervals.

The IRS Integrated Modernization Business Plan, published in April 2019, describes a six-year modernization roadmap for 

achieving IRS enterprise modernization goals. In FY 2020, the IRS delivered 19 new or expanded capabilities, which

provided a solid foundation to continue accelerating modernization progress in FY 2021. Modernization accomplishments

included a Next Generation Infrastructure that provides a more efficient, scalable and flexible architecture by implementing

advanced IT infrastructure tools and technologies which will further automate and modernize the technology infrastructure

and convert legacy code to modern programming languages.

In FY 2020, the IRS deployed a set of components via an automation tool to provision virtual servers with the latest patches,

security compliance, and server domains. This reduced provision times from five days (120 hours) to 28 minutes. In

addition, the IRS delivered a strategy to reduce the legacy application code footprint that will reduce dependency on obsolete 

legacy development languages. The IRS also began building out the cloud infrastructure for the Enterprise Case

Management program and developing capabilities around user authentication and authorization, roles and permissions, the

creation and assignment of cases, and end-to-end monitoring. This set of capabilities will be critical to stabilizing the cost of 

operations and maintenance and further enhancing the agency’s security posture. The IRS will continue to execute its

systems modernization plan as the level of funding permits.

TIGTA Challenge 7: Improving Tax Reporting and Payment Compliance: Improving taxpayers’ compliance with the tax law

to reduce the Tax Gap remains a serious and persistent challenge.

The IRS continues to be extremely active in the enforcement area through a variety of activities, including investigations of 

tax noncompliance and the millions of notices sent each year to taxpayers when issues are discovered on their returns, such

as failing to report income from Forms W-2 or 1099. The IRS will continue its focus to reduce the tax gap through its various

compliance programs.
240 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | OTHER INFORMATION

TIGTA Challenge 8: Reducing Fraudulent Claims and Improper Payments: IRS faces ongoing challenges to significantly

reduce the improper payments from refundable credits

The IRS’s Automated Questionable Credit program has added three sub rules (automated controls) derived from a research

effort to point to selections with the greatest potential for revenue protection. The IRS’s Return Integrity & Compliance

Services examination program uses filters to identify the potential non-compliant taxpayers, including those with the

recertification indicator to select for audit.

In FY 2021, the IRS plans a balanced compliance strategy by selecting recertification cases along with cases from other 

project codes that are identified by our filters to ensure coverage across all programs.

TIGTA Challenge 9: Increasing International Tax Compliance: Complexity and change in the international tax

environment require that the IRS collaborate with tax administrations of foreign countries to enforce compliance. The IRS

must continue to focus significant efforts on global tax cooperation and tax administration practices that can prevent and

resolve disputes among countries to increase certainty for foreign persons subject to U.S. taxes on U.S. source income.

New patterns and trends emerging in complex international tax avoidance schemes and cross-border transactions have

heightened the IRS’s concern regarding the lack of tax compliance by individuals and entities with an international

footprint. As international tax and money laundering crimes have increased, the IRS continues to protect the integrity of the

U.S. tax system by helping the American taxpayer understand and meet their tax responsibility and enforce the law with

integrity and fairness, worldwide.

The partnership initiative of the Joint Chiefs of Global Tax Enforcement (J5), between the criminal tax authorities of the

United States, the United Kingdom, Canada, Australia, and the Netherlands continued to play a major role in combatting

international tax and financial crimes through proactive collaboration using each country’s collective resources. On January

23, 2020, the IRS participated in the J5’s first major operational activity, the J5 Global Day of Action. The J5 coordinated 

this global enforcement activity with the goal of stopping suspected facilitation of offshore tax evasion in the J5 nations. The 

action occurred as part of a series of J5 investigations into an international financial institution located in Central America

that facilitates its clients use of a sophisticated system to conceal and transfer wealth.

To further its goal to address global tax administration concerns, through expanded partnerships with foreign governments

and international organizations, the IRS is expanding partnerships through interactions with two international

organizations, the Organization for Economic Cooperation and Development (OECD) and the Inter-American Center of Tax

Administrations (CIAT). At the OECD, the IRS is an active member of the Forum on Tax Administration (FTA). The FTA’s 

key aim is to improve taxpayer service and tax compliance by helping tax administrations increase the efficiency, 

effectiveness and fairness of tax administration and reduce the costs of compliance. The IRS supports CIAT’s efforts to

promote international cooperation and the exchange of experiences and know-how, thus contributing to the strengthening of 

the tax administrations of all CIAT’s member countries. CIAT is a regional tax organization focusing primarily, but not 

exclusively, on countries in North, Central, and South America and the Caribbean.

 
DEPARTMENT OF THE TREASURY 241 

OTHER INFORMATION | FY 2020 AGENCY FINANCIAL REPORT

TIGTA Challenge 10: Protecting Taxpayer Rights: The IRS must balance its tax compliance activities against the rights of 

taxpayers to receive fair and equitable treatment.

The IRS continues to balance tax compliance activities against taxpayers’ rights to receive fair and equitable treatment. For 

example, the IRS provides taxpayers with the Taxpayer Bill of Rights in many notices and in in-person interviews to inform 

them about their rights with respect to examinations, appeals, collections, and refunds. In addition, in FY 2020, the IRS

revised its policy and procedures regarding the handling of mis-directed Collection Due Process and Equivalent Hearing 

requests to ensure taxpayer accounts had correct Collection Statute Expiration Dates.

 
242 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | OTHER INFORMATION

SECTION C: SUMMARY OF FINANCIAL STATEMENT AUDIT AND

MANAGEMENT ASSURANCES

The following tables summarize the results of Treasury’s financial statement audit, as well as management’s assurances

regarding conformance with the Federal Managers’ Financial Integrity Act of 1982 (FMFIA) and compliance with the

Federal Financial Management Improvement Act of 1996 (FFMIA). 

SUMMARY OF FINANCIAL STATEMENT AUDIT

Audit Opinion: Unmodified

Restatement: No

Beginning Ending

Material Weakness Balance New Resolved Consolidated Balance 

Total Material Weaknesses 0 0 0 0 0 

SUMMARY OF MANAGEMENT ASSURANCES

EFFECTIVENESS OF INTERNAL CONTROL OVER FINANCIAL REPORTING (FMFIA SECTION 2)

Statement of Assurance: Unmodified

Beginning Ending

Material Weakness Balance New Resolved Consolidated Reassessed Balance 

Total Material Weaknesses 0 0 0 0 0 0 

EFFECTIVENESS OF INTERNAL CONTROL OVER OPERATIONS (FMFIA SECTION 2)

Statement of Assurance: Unmodified

Beginning Ending

Material Weakness Balance New Resolved Consolidated Reassessed Balance 

Total Material Weaknesses 0 0 0 0 0 0 

CONFORMANCE WITH FMFIA SECTION 4 

Statement of Assurance: Federal systems conform, except for instances of non-conformance, to financial management system 

requirements

Beginning Ending

Non-Conformances Balance New Resolved Consolidated Reassessed Balance 

Fiscal Service's Cash Management 

Information Systems 1 1 0 0 0 0 1 

Fiscal Service's Federal Debt Information 

Systems 1 1 0 0 0 0 1 

IRS's Unpaid Tax Assessments 1 1 0 0 0 0 1 

IRS's Financial Reporting Systems 1 1 0 0 0 0 1 

Total non-conformances 4 0 0 0 0 4 1 Refer to Independent Auditors’ Report in Part 2 of this report. 
DEPARTMENT OF THE TREASURY 243 

OTHER INFORMATION | FY 2020 AGENCY FINANCIAL REPORT

COMPLIANCE WITH FFMIA SECTION 803(a) 

Agency Auditor

1. Federal Financial Management System Requirements Lack of compliance noted Lack of compliance noted

2. Applicable Federal Accounting Standards No lack of compliance noted No lack of compliance noted

3. U.S. Standard General Ledger (USSGL) at Transaction Level No lack of compliance noted No lack of compliance noted

FMFIA AND FFMIA REQUIREMENTS

The FMFIA requires agencies to establish and maintain internal control to ensure that federal programs operate efficiently,

effectively, and in compliance with laws and regulations. The Secretary must evaluate and report annually on (a) whether 

there is reasonable assurance that the Agency’s controls are achieving their intended objectives, and (b) material weaknesses

in the Agency’s controls (FMFIA Section 2). Additionally, the Secretary must evaluate and report separately on whether the

Agency’s financial management systems comply with government-wide requirements (FMFIA Section 4). The FFMIA

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

financial management systems requirements. The requirements of the FMFIA serve as an umbrella under which other 

reviews, evaluations, and audits should be coordinated and considered to support management’s assertion about the

effectiveness of internal control over operations, reporting, and compliance with laws and regulations.

As of September 30, 2020, we had no material weaknesses under Section 2 or Section 4 of the FMFIA. However, we have

four instances of non-conformance with the federal financial management systems requirements of Section 4 of the FMFIA. 

These non-conformances also constitute a lack of compliance with federal financial management system requirements, as

reported above under FFMIA Section 803(a). 

Fiscal Service has two non-conformances related to the deficiencies in its cash management and federal debt management

information systems. The IRS has two non-conformances related to the deficiencies in unpaid tax assessments and financial

reporting systems. Refer to the section in Part 1 entitled Systems, Controls and Legal Compliance and the section in Part 2 

entitled Independent Auditors’ Report for additional information on the non-conformances. 
244 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | OTHER INFORMATION

SECTION D: PAYMENT INTEGRITY

Our FY 2020 Payment Integrity reporting includes information required by the Payment Integrity Information Act of 2019

(PIIA); Executive Order 13520, Reducing Improper Payments and Eliminating Waste in the Federal Government; Appendix

C to OMB Circular A-123, Requirements for Payment Integrity Improvement; and OMB Circular A-136. PIIA rescinded the

Improper Payments Information Act of 2002 (IPIA), the Improper Payments Elimination and Recovery Act of 2010 (IPERA), 

and Improper Payments Elimination and Recovery Improvement Act of 2012 (IPERIA), however many of the requirements

for reporting Payment Integrity information remain in place. Additional information on current and prior year reported 

improper payments, including information on risk assessments and recovery auditing, can be found at

https://paymentaccuracy.gov/. 

For FY 2020, in compliance with OMB Circular A-123, Appendix C, we are reporting improper payment estimates for three

refundable tax credits1 – the EITC, AOTC, and ACTC – which are “susceptible to significant improper payments.” However, 

we have long held that these refundable tax credits are not “payments” as intended under the improper payments

legislation. Furthermore, any refunds that result from overclaims of these refundable tax credits are not the result of 

weaknesses in internal controls. As such, it is our position that refundable tax credit refunds that result in overclaims

should not be reported under the improper payments framework. Rather they are more appropriately addressed in the tax

gap (see Part 3, Section A: Tax Gap and Tax Burden, of this report), which is how we manage noncompliance.

As discussed in the following sections, we do not consider refundable tax credit overclaims to be “payments” as defined under

PIIA as the tax system is a collection system rather than a payment system. Whereas a payment system is generally

designed to implement internal controls that provide for appropriate verification and validation prior to payments being

made, the statutory structure and design for administering

refundable tax credit refunds prevents the IRS from verifying or 

validating such amounts prior to making the refund. 

Consequently, refundable tax credit overclaims are not the result

of internal control weaknesses that we can remediate internally

but are, in fact, the result of factors beyond our control under

current law and existing authority. Even if we could obtain

legislative changes and invest in additional resources and

verification solutions that would ultimately reduce overclaims,

the benefits derived would be marginal relative to the cost of 

doing so.

REFUNDABLE TAX CREDITS PROVIDE RELIEF TO

TAXPAYERS

Tax credits reduce a taxpayer’s tax liability dollar-for-dollar. 

Nonrefundable tax credits can only reduce a taxpayer’s liability

to zero, whereas refundable tax credits can reduce a taxpayer’s

1 In FY 2019, net Premium Tax Credits (PTC) was determined to be susceptible to significant improper payments. However, Treasury notified OMB that it will

delay the annual reporting of improper payments for PTC for FY 2020. The notification was made pursuant to OMB’s June 17, 2020 memorandum, Risk Based

Financial Audits and Reporting Activities in Response to COVID-19, which OMB issued in response to the significant new demands placed upon agencies in

connection with implementing the CARES Act and other COVID-19 related programs. 

2 The data for “Reduced Severity of Poverty’ is from Center on Budget and Policy Priorities (CBPP), Policy Basics: The Earned Income Tax Credit and CBPP, Policy

Basics: The Child Tax Credits, both dated December 10, 2019.

DEPARTMENT OF THE TREASURY

In Tax Year 2018, it is estimated that American taxpayers 

claimed RTCs totaling 

$104 BILLION

Over 25 million taxpayers received more than $63 billion in EITC

Nearly 20 million taxpayers received more than $35 billion in ACTC

Nearly 7 million taxpayers received more than $6 billion in refundable AOTC

17.5

6.4

10.6

5.5

ALL PERSONS CHILDREN

TY 2018 Earned Income Tax Credit and Child 

Tax Credit Anti-Poverty Impact 2

Reduced Severity of Poverty Lifted Out of Poverty

28.1 million people

11.9 million people
DEPARTMENT OF THE TREASURY 245 

OTHER INFORMATION | FY 2020 AGENCY FINANCIAL REPORT

tax liability below zero, and thus result in a refund to the taxpayer.

Over the years, refundable tax credits have been used by Congress to achieve certain economic and social objectives, from 

reducing poverty to increasing higher education affordability. Refundable tax credits provide meaningful benefits to the lowincome population, because many low-income families are ineligible for other tax-based assistance due to their lack of tax

liability. The EITC, AOTC, and ACTC (hereafter referred to collectively as “RTCs”) are three of the most widely claimed

refundable tax credits (refer to Part 3, Section A for a brief description of each refundable tax credit). 

While refundable tax credits, like many other tax deductions and credits, are used to achieve certain economic and social

objectives, they differ from other social benefit programs in a number of significant ways. Unlike most benefit programs,

which have heavy pre-clearance certification and high administrative costs, RTCs are an integral part of the tax system in

which the IRS relies on taxpayers to self-certify eligibility for the credit claimed and generally have significantly lower 

administrative costs. Conversely, other social benefit programs generally require upfront validation of recipient eligibility,

thereby incurring higher administrative costs. 

RTC OVERCLAIMS ARE CAUSED BY FACTORS INHERENT TO THE TAX SYSTEM

The IRS reported that in TY 2018, there were approximately 52

million claims for RTCs, totaling more than $104 billion. For the

same year, the EITC was credited with lifting approximately 5.6

million people out of poverty, including approximately 3 million

children; while the ACTC was credited with lifting approximately 4.3

million people out of poverty, including roughly 2.3 million children.3 

Although a noteworthy outcome, RTCs, like other items taxpayers

declare on their tax returns, such as income and deductions, are

subject to self-reporting errors, giving rise to overclaims of tax

refunds. 

As noted below, RTC overclaims are caused by factors associated with

how the tax system operates (such as the limited ability to correct tax

returns after filing, and statutory requirement to pay tax refunds 

within the prescribed timeframe) and are often beyond our control

under current law and existing authority. RTCs are administered

through the tax system and refunds of credits are provided through

the tax refund process. As such, the disbursement of these credits is

inherently tied to and constrained by the statutory requirements of 

tax administration. Accordingly, the administration of RTCs relies on 

taxpayer self-assessment of eligibility during the tax filing process. 

However, the eligibility rules for many of these credits are often complex and difficult to understand by taxpayers and tax

practitioners. Taxpayer self-assessments include information about eligible dependents, residency, custodial arrangements,

income, and other variables. For many of these variables, the IRS does not have access to independent information to

validate taxpayer submissions, if that information exists at all. For example, “qualifying child” errors account for the most

significant EITC overclaims in terms of dollars; failure to meet the “residency test” and the “relationship test” are the two

primary factors that result in these overclaims. There are no comprehensive data bases showing where Americans live and

3 These amounts are from CBPP, Policy Basics: The Earned Income Tax Credit and CBPP, Policy Basics: The Child Tax Credits, both dated December 10, 2019.

These two programs combined lift more persons out of poverty than the sum of persons in each program.

QUOTEINSPECTOR.COM

Primary Causes of RTC Overclaims 

• Complex statutory eligibility rules

• Inability to verify taxpayer-provided

information prior to refunding due to lack

of independent data sources

• Lack of correctable error authority

• Statutory requirement to issue tax refunds

within 45 days of the filing deadline

without paying interest
246 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | OTHER INFORMATION

how they are related that IRS can use to automatically verify taxpayer claims. Complicating matters, the IRS is implicitly

required by statute and directly required by regulation and policy to make tax refunds on the basis of tax returns as filed,

subject only to certain basic verifications. In addition, the IRS is required by statute to pay interest on refunded amounts if

those refunds are not issued within 45 days of the return filing deadline. As a result, the IRS does not have the time or 

resources needed to verify all of the variables on a return. In many instances, the IRS lacks the statutory authority to

address return deficiencies immediately at the point of filing and instead addresses overclaims through a potentially lengthy

audit process after the RTC is claimed and paid (refer to Part 3, Section A subsection on Refundable Tax Credits and the

Challenges of Compliance). 

RTC CLAIMS SHOULD NOT BE CONSIDERED PAYMENTS

RTC refunds are a fundamental part of the U.S. income tax system, and only result when a taxpayer’s liability is reduced

below zero. We believe that RTC refunds are not true “payments” as intended by the improper payment statute. PIIA

defines a payment as “any transfer or commitment for future transfer of federal funds, such as cash, securities, loans, loan

guarantees, and insurance subsidies to any non-federal person or entity, that is made by a federal agency, a federal 

contractor, a federal grantee, or a governmental or other organization administering a federal program or activity.” 4 Tax

refunds are reimbursements of amounts overpaid by the taxpayer and are not considered “payments” as intended by

improper payment statutes. Similarly, the IRC also considers RTC refunds to be amounts overpaid, stating that if the RTC

amount allowed exceeds the tax imposed, the excess amount of RTC should be considered an overpayment. As such, since

there is no basis to distinguish between tax refunds from RTC refunds, our position is that RTC refunds should also not be

considered a “payment” and accordingly, we do not consider RTC overclaims to be improper payments as intended by PIIA. 

RTCs are an inherent part of the tax system which relies heavily on 

voluntary reporting. Payment systems are generally designed to provide for 

appropriate verification and validation that payments are authorized, paid to

the right entity, and paid in the correct amount. Inherent in these payment

systems is the reliance on this verification and validation before payment is

made. By contrast, the U.S. income tax system is fundamentally different 

from a payment program in numerous significant ways. The tax system is a 

collection system in which the individual taxpayer self-certifies information

used to calculate income tax withholdings. Tax filers then voluntarily

declare the amount of tax liability due and pay any remaining balances or 

request that any excess amounts withheld be refunded. The IRS issues

refunds primarily on the basis of the tax return as submitted. 

INTERNAL CONTROL ISSUES ARE NOT THE ROOT CAUSE OF RTC

OVERCLAIMS

PIIA’s enactment was intended to reduce the U.S. Government’s wasteful

spending by increasing accountability of agencies for preventing and

recovering improper payments. Improper payment reporting requirements

link the reduction of improper payment rates with agency efforts to establish or enhance internal controls for ensuring

payments are accurately calculated and made to the correct recipient. Appendix C to OMB’s Circular A-123 states that

agencies should approach improper payments with an internal control framework that is integrated with enterprise risk

4 Pub. L. No. 116-117, 375 Stat. 3351.

DEPARTMENT OF THE TREASURY

Estimated Error Rates Have Remained 

Steady Despite Efforts to Reduce Error 

Rates 

EITC estimated error rates have ranged from

22.8% to 27.2% between FY 2006 and FY 

2020, with an average annual error rate

estimate of 24.7%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

2006 2008 2010 2012 2014 2016 2018 2020

Historical EITC Payment Error 

Rates
DEPARTMENT OF THE TREASURY 247 

OTHER INFORMATION | FY 2020 AGENCY FINANCIAL REPORT

management for purposes of managing payment integrity risk and reducing improper payment rates.5 However, as we have

determined repeatedly through qualitative risk assessments, RTC overclaims are not primarily rooted in internal control

deficiencies, but instead are the result of factors beyond Treasury’s control (e.g. statutory design and limitations). Audits by

the Government Accountability Office (GAO) and TIGTA have concluded that RTC overclaims are largely due to the

statutory design and complexity of the RTCs, not internal control weaknesses, financial management deficiencies, or 

reporting failures. 

The IRS utilizes a variety of compliance tools and activities in an attempt to reduce identified RTC errors rates, which are

summarized in the Corrective Action Section of this report. However, without statutory or structural changes to the design

of these programs, the IRS is unlikely to significantly resolve refund related issues and reduce error rates. As evidenced in

the chart above, EITC reported estimated error rates have remained within the same range since we began reporting them

in accordance with improper payment guidelines.

Improving the integrity of refundable credit programs will take actions beyond our control. We have proposed various

legislative changes aimed at providing more effective tools for managing RTCs. These legislative proposals are outlined in

the Corrective Action Section of this report. While these statutory changes would help reduce RTC overclaims to some

degree, without independent data sources through which the IRS can verify taxpayer-provided information and additional

time and resources for the IRS to address any issues identified, a meaningful reduction in the estimated error rate is

unlikely.

REDUCING RTC ERRORS DIVERTS VALUABLE RESOURCES FROM OTHER TAX GAP ELEMENTS

In the case of RTCs, much of the information necessary to validate

the accuracy of a refund prior to issuance is not available. Other

than the IRS’s ability to run various automated checks of certain

data on the tax return prior to payment of a refund, the IRS does not 

have the ability to validate that the refund is in the proper 

amount. Rather, the IRS must deploy a variety of enforcement tools,

including audits, to verify the information on the tax return and

then collect any additional tax due. If the IRS significantly

increased the amount of resources allocated to auditing these

returns, it would run the risk of not providing an appropriate level 

of enforcement in other less compliant (higher potential revenue)

areas. The IRS does not have the resources to audit every return

claiming RTCs, and the adjustments that could feasibly be attained

through this process would be small relative to the amount of 

improper payments estimated for the RTCs.

Due to the limited IRS resources, the amount of revenue protected 

and collected through the current level of enforcement activities on 

RTC returns is small relative to the estimated amount of improper

payments. To reduce overclaim rates to less than 10 percent, to meet PIIA compliance standards, the IRS estimated that it

would need additional or reallocated resources of $2.5 billion, equal to nearly half the IRS’s current total enforcement 

budget, to audit 4.2 million additional RTC returns in the pre-refund environment. If the IRS must reallocate enforcement 

resources to be compliant with PIIA, a substantial loss in enforcement revenue, estimated at $6.4 billion, would result

5 OMB, M-18-20, Transmittal of Appendix C to OMB Circular A-123, Requirements for Payment Integrity Improvement, Part 3(B)(1).

DEPARTMENT OF THE TREASURY

RTCs Within The Tax Gap 

Tax credits account for approximately 10% of the

gross tax gap (with EITC representing 6%,

refundable and non-refundable child tax credits

representing 2% and refundable and nonrefundable education credits representing 1%). 
248 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | OTHER INFORMATION

because the IRS would divert resources from more valuable programs and tax gap elements to audits of RTC returns. 

Moreover, such enforcement actions would place substantial burden on low-income taxpayers through increased audits and

delayed refunds, violating the IRS requirement of enforcing the tax law with integrity and fairness. 

As such, we have long held that focusing enforcement resources on the larger tax gap is a more efficient and cost effective 

way to minimize the tax gap and maximize tax collections. We further support the reporting of RTC overclaims within the

Tax Gap Analysis to reflect better how the IRS approaches taxpayer compliance relative to the U.S. tax system.

PAYMENT REPORTING 

Improper Payment Estimate 

PIIA requires agencies each year to identify programs and activities vulnerable to significant improper payments, to

annually report an estimated improper payment rate for these programs and activities, and to report on steps taken to

reduce such payments. The total estimated FY 2020 RTC claims, improper payment rates, and estimated amounts of 

improper payments are provided in the Improper Payment Reduction Outlook table below. Similar to prior years, the

improper payment amount includes the overclaims that were paid and later recovered through the IRS post-refund 

enforcement activities. 

IMPROPER PAYMENT REDUCTION OUTLOOK ($ IN MILLIONS)

Program

FY 2020 

Outlays(1)

FY 2020 Proper 

Payment 

Amount

FY 2020 

Proper 

Payment 

Rate 

FY 2020 

Improper 

Payment 

Amount (2) (3)

FY 2020 

Improper 

Payment 

Rate (4)

EITC $68,195.15 $52,152.21 76.47% $16,042.94 23.53% 

AOTC $8,924.84 $6,602.12 73.97% $2,322.72 26.03% 

ACTC $39,176.27 $34,671.53 88.50% $4,504.74 11.50% 

Total $116,296.26 $93,425.86 $22,870.40 

(1) FY 2020 Outlays: Consistent with prior improper payment estimates, this table reports estimated claims instead of outlays. FY 2020 estimated totals are

based on outlays reported in the FY 2021 President's Budget plus imputed tax expenditures adjusted to reflect claims. 

(2) FY 2020 Improper Payment Amount: The estimated amount of net improper payments equals the estimated improper payment rate multiplied by the

estimated claims. 

(3) The total FY 2020 Improper Payment Amounts reported were made directly by the government.

(4) FY 2020 Improper Payment Rate: The FY 2020 estimated improper payment rate was estimated using a statistically valid random sample of TY 2016 individual

income tax returns that claimed the EITC, AOTC, or ACTC. Like the FY 2019 improper payment rate estimates, the FY 2020 estimated improper payment

estimate does not subtract projected recovered improper payments prior to calculating the rate. 

 

Improper Payment Root Cause(s) 

Agencies are required to categorize improper payments using one or more of the following root causes: program design or 

structural issue, inability to authenticate eligibility, failure to verify, administrative or process errors, medical necessity,

insufficient documentation to determine, and other. The inability to authenticate eligibility root cause is divided into two

sub-categories: (1) inability to access data, and (2) data needed does not exist. Based on these root cause categories, the IRS

identified the two primary root causes for EITC, AOTC, and ACTC overclaims as: (1) inability to authenticate eligibility – 

data needed does not exist, and (2) other. The overclaims categorized under the “other” root cause category were categorized 

under the “program design or structural issue” root cause in previous years. Per OMB instruction, these overclaims are now 

categorized as “other” because the statutory limits and program design enables many potential causes for overclaims.
DEPARTMENT OF THE TREASURY 249 

OTHER INFORMATION | FY 2020 AGENCY FINANCIAL REPORT

For both the EITC and ACTC, qualifying child errors account for the highest dollar amount of overclaims. Income

misreporting, specifically self-employment income misreporting, accounts for the second highest amount of overclaim dollars,

with filing status errors being the third largest contributor to overclaims. For AOTC, errors associated with reporting of 

qualifying tuition and expenses or credit eligibility account for the largest share of overclaims. 

The chart below illustrates the distribution of RTC improper payments by root causes.

IMPROPER OVERPAYMENT ROOT CAUSE CATEGORY ($ IN MILLIONS)

Inability to Authenticate Eligibility: Data Needed Does Not Exist

Approximately $20.1 billion, or 88 percent, of all RTC overclaims resulted from the inability to authenticate eligibility

because the data needed does not exist. This root cause includes errors associated with the inability to authenticate

qualifying child eligibility requirements due to relationship and residency requirements and the exceptions to the age

requirement (full-time student and disability). Inability to authenticate eligibility is the primary root cause for both EITC

and ACTC overclaims and is the secondary root cause for AOTC overclaims. This root cause includes errors that the IRS can

only uncover through the audit process since no data exists to support automated compliance checks. For the AOTC, most of 

the errors in this category are related to eligibility criteria that are not reported on a Form 1098-T, Tuition Statement. 

Authentication is difficult because the IRS relies primarily on the self-claimed information from taxpayers and there is a 

lack of internal and external databases available with information that would help the IRS make a determination of 

eligibility.

Another major cause of error in this category is taxpayer income misreporting related to 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, and data on marital status and living arrangements are not available. 

Finally, this category includes a small amount of error related to rules for all taxpayers claiming these refundable credits

related to valid SSNs, residency of non-citizens, and when the taxpayer qualifies as a qualifying child of another taxpayer,

none of which can be authenticated by the IRS at the time of filing.

Improper payments reported under this root cause category are essentially beyond Treasury’s control. Although we have

proposed several legislative changes, without the availability of a third-party database to authenticate eligibility, or

additional time and resources for the IRS to address any issues identified during audit before refunds are made, the IRS is

unable to reduce the overclaims reported in this root cause category. 

$15,080.4 

$962.6 

$859.4 

$1,463.3 

$4,234.5 

$270.3 

Inability to Authenticate Eligibility: Data Needed Does Not Exist Other

EITC AOTC ACTC

88% of RTC Overclaims

12% of RTC Overclaims
250 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | OTHER INFORMATION

Other 

Nearly $2.7 billion, or 12 percent, of all RTC overclaims are categorized as “other”. These overclaims are not caused by any

lack of internal controls or factors with the Department’s controls. Instead, these overclaims are classified as the “other” root 

cause category because statutory limits and program design enables many potential causes for overclaims. Errors

categorized as the “other” root cause occur when information needed to confirm payment accuracy is not available at the time

the return is processed. These errors relate to certain income misreporting, tiebreaker errors, and joint return errors of 

qualifying children. Although Form W-2 payer information is now available to the IRS sooner due to integrity provisions of 

the Protecting Americans from Tax Hikes Act (PATH Act), payer information does not exist in all cases and may not be

available to the IRS until after the filing season. Thus, the IRS is unable to match wages fully and other income sources

against the return at the time of filing. 

A very small portion of errors are attributable to tiebreaker errors, where more than one taxpayer claims the same

qualifying child. The IRS processes returns as they are filed and is unaware that two returns will claim the same qualifying

child at the time the first return is filed, or who is actually qualified in a tiebreaker situation. In addition, 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

or she files a joint return for a reason other than claiming a refund. Since returns are filed at various times, the IRS cannot

identify these situations until both returns have been filed.

Errors categorized as “other” are the primary root cause for refundable AOTC overclaims, and the secondary root cause for 

EITC and ACTC overclaims. For AOTC, the main error types are claims that do not have an associated Form 1098-T 

reported to the IRS and misreporting of qualified education expenses. Although educational institutions send Form 1098-T 

to the IRS, this data is either not available to confirm eligibility during return processing or the data may be inconsistent

with what the taxpayer reports. Other errors include taxpayers that claim students for more than the four-year statutory

limit. For such instances, the IRS does not have congressional authority to disallow the claim.

Corrective Actions 

The IRS’s strategy with respect to overclaims is to intervene early to ensure compliance with the law. In FY 2020, the IRS

addressed overclaims through its compliance programs, as well as through expansive outreach and education efforts to

taxpayers and preparers. The table below illustrates the corrective actions implemented by the IRS to address the root 

causes identified for the RTCs. 

RTC CORRECTIVE ACTION CATEGORIES

Improper Payment Root Causes

Examination Closures

Math Error Notices

Document Matching

Amended Returns

Two and 10 Year Bans

Identify Theft and Fraud

Criminal Investigations

Soft Notices

Return Preparer Initiatives

Outreach and Education

Software Developer 

Working Group

Inability to Authenticate Eligibility: 

Data Needed Does Not Exist X X X X X X X X X X 

Other X X5 X X X X X X X 

(5) Applicable to EITC and AOTC only.
DEPARTMENT OF THE TREASURY 251 

OTHER INFORMATION | FY 2020 AGENCY FINANCIAL REPORT

In addition to the compliance activities described above, the following efforts contributed to the IRS’s strategy of identifying

and reducing EITC, ACTC, and AOTC overclaims in FY 2020:

Corrective Actions

Base 

Enforcement 

Efforts

Delivered key compliance activities including 179,160 audits, 242,639 misreported income

cases, and an estimated 488,243 math error adjustments, protecting revenue of nearly $2.4

billion.

Two and 10-

Year Bans

Imposed 1,233 two-year bans and 214 10-year bans for cases where the IRS determined

during an audit that the taxpayer intentionally disregarded the rules and regulations or 

committed fraud.

Identity Theft 

and Fraud

Detected and stopped over 617,949 fraudulent returns from being processed through our

fraud detection filters, preventing over $3.1 billion in erroneous refunds.

Criminal 

Investigations

Continued to stop fraudulent EITC refund claims through our Criminal Investigation (CI)

division indictments. CI issued 59 new EITC Questionable Refund Program scheme

indictments and secured 61 convictions. CI also issued 66 new EITC Return Preparer 

indictments and secured 57 convictions.

Soft Notices Sent 66,832 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 2020 Refundable Credits Return Preparer Strategy, IRS completed

activities associated with a suite of progressive preparer treatments, addressing 18,514 EITC,

ACTC, and AOTC preparers selected through our risk-based scoring model, before and during

the filing season.

- The IRS closed 687 pre-filing season Due Diligence Visits (DDVs) with a penalty

rate of 93 percent and nearly $34 million in proposed penalties. Criminal

Investigation and revenue agents completed 141 educational Knock-and-Talk Visits

(KTV) visits. The IRS also mailed 28,861 educational letters before the FY 2020

filing season.

- The IRS closed 296 correspondence DDVs with a penalty rate of 97 percent and over

$18 million in proposed penalties. The IRS also mailed 10,436 educational letters

and successfully made 505 calls to preparers during the 2020 filing season.

- The analysis of the FY 2020 Refundable Credits Return Preparer Strategy revealed 

that, in addition to the penalties proposed above, the preparer treatments protected 

approximately $403 million (nearly $288 million in EITC, nearly $81 million in

ACTC7 and nearly $34 million in AOTC).

Return Preparer 

Penalties

The IRS sent 99 warning letters and 1,950 electronic alerts to warn preparers who did not 

attach Form 8867, Paid Preparer's Due Diligence Checklist, to TY 2019 taxpayer returns. 

IRS subsequently proposed over $850,000 in penalties to 23 EITC, ACTC and AOTC return

preparers for failure to exercise due diligence by attaching the form, as authorized by IRC

§6695(g) and Treas. Reg. §1.6695–2.

7 Includes Child Tax Credit and Credit for Other Dependents.
252 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | OTHER INFORMATION

Return Preparer 

Outreach and 

Education

The IRS focused its outreach and education efforts on return preparers to educate them on 

refundable credits and due diligence requirements. Over 12,400 preparers received a 

certificate of completion for the English and Spanish interactive Due Diligence Training

module. Additionally, over 8,550 preparers attended a webinar entitled Understanding Paid

Preparer Due Diligence prior to filing season; and nearly 15,000 preparers attended virtual

seminars ‘Be Tax Ready – Understanding Eligibility Rules for EITC, CTC, ODC, AOTC and

Head of Household’ and ‘Keys to Mastering Due Diligence Requirements and Audits’ at the

2020 National Tax Forums.

Servicewide 

Refundable 

Credit Strategy

The IRS continued activities to evaluate potential new solutions identified to address

overclaims.

Software 

Developer 

Working Group

The IRS continued its partnership with members of key tax software associations to reduce

refundable credits errors and assist preparers in meeting their due diligence requirements.

Taxpayer 

Outreach and 

Education

IRS conducted its EITC outreach campaign, including the fourteenth annual EITC Awareness

Day, which centered on EITC underserved populations and included focused compliance

messages. Through collaboration with IRS national, state, and local partners as well as

Congressional and government officials, the IRS held 240 nationwide events, resulting in

media coverage that helped spread the word about EITC. The IRS also issued a news release

to over 363,000 and 59,800 subscribers in English and Spanish, respectively, and issued two

tax tips to over 749,000 subscribers. Social media outreach continued with Twitter EITC

messages reaching over 3.6 million people. Also, for the year, over 642,000 taxpayers visited

the EITC Assistant on IRS.GOV, a tool that allows taxpayers to determine whether they

qualify for the credit.

Protecting 

Americans 

Against Tax 

Hikes (PATH) 

Integrity 

Provisions 

The IRS continued applying tools provided by the PATH Act to refundable credit returns as

follows:

- Held taxpayers’ refunds until February 15 of the filing year on returns claiming

EITC and/or ACTC as directed in Section 201(b), using the time to identify

fraudulent returns.

- Rejected amended and late filed original returns filed by taxpayers retroactively

claiming EITC for any prior year in which he/she did not have a valid social security

number as directed in Section 204.

Legislative 

Proposals 

The FY 2021 budget request included the following legislative proposals that may improve

compliance and reduce erroneous payments:

- Provide greater flexibility to address correctable errors to help IRS deny certain

erroneous EITC, ACTC, and AOTC claims before refunds are paid.

-Increase oversight of paid tax return preparers to help promote high quality services

and improve voluntary compliance.

Refundable 

Credit Summit 

The IRS hosted its annual summit attended by over fifty stakeholders including

representatives from various tax professional industries, federal agencies, consumer advocacy

groups, and non-governmental organizations. The objective was to share information on IRS

current compliance and outreach activities and to solicit input on ways to increase

participation, improve administration and reduce overclaims with respect to refundable

credits. The FY 2020 Summit focused primarily on the Refundable Credits Return Preparer 

Strategy and paid preparer due diligence requirements.
DEPARTMENT OF THE TREASURY 253 

OTHER INFORMATION | FY 2020 AGENCY FINANCIAL REPORT

Enterprise 

Research 

The IRS assessed the results of the FY 2020 enterprise research strategy and developed the

FY 2021 strategy in partnership with internal organizations to better focus compliance and

outreach activities using research data.

BARRIERS

A number of factors continue to serve as barriers to reducing RTC improper payments. These include:

• Complexity and lack of data to verify statutory eligibility requirements: Only taxpayers know whether or not they meet 

the eligibility requirements for the RTCs claimed, and a third-party database is not available to independently validate

the data submitted on returns. The only tool available to the IRS to verify eligibility is an audit of the tax return after 

filing. The IRS currently performs such audits - EITC claimants account for more than 40 percent of audits conducted

on individual taxpayers. However, due to resource constraints, only a small number of returns can be audited each year. 

• Lack of correctable error authority: The IRS has limited ability to make automatic changes to a return (which would

require congressional authorization) and must rely on lengthy deficiency procedures. 

• High turnover of eligible taxpayers: The IRS estimates that approximately one-third of the EITC applicants change

each year. This changing population of taxpayers who claim the EITC increases the difficulty of improving EITC

compliance and creates challenges to the IRS’s education, outreach, and enforcement efforts. 

• Unscrupulous and/or incompetent return preparers: Unregulated tax return preparers contribute to RTC noncompliance, fraud, and improper payments. The IRS, in coordination with the Treasury, proposed legislation to provide

the IRS and Treasury with the authority to regulate all paid return preparers. In the interim, to remediate this barrier,

the IRS will continue its voluntary training and certificate of completion program for unenrolled return preparers, as

well as provide tools to help taxpayers locate qualified preparers. 

• Fraud: Fraudulent tax returns and identity theft continue to be a major barrier to reducing RTC overclaims. To 

mitigate fraudulent RTC claims, the IRS uses the Electronic Fraud Detection System to identify schemes and suspicious

patterns. Tax returns identified as questionable are then routed to the IRS employees for review before refunds are

issued. 

None of these factors, on their own, 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 RTCs. Additionally, statutory requirements further constrain the IRS’s ability to ensure that RTC

claims are valid before they are processed and paid. 

Since RTCs are administered through the IRC, they are claimed by taxpayers during the filing and processing of their tax

returns. The IRS is required by statute to pay interest on refunded amounts if those refunds are not issued within 45-days

of the return filing deadline. This interest period was unaffected by the PATH Act provision that required the IRS to hold

EITC refunds until February 15 of the filing season.

In FY 2017, the changes enacted under the PATH Act to accelerate the filing of wage and non-employee compensation

information allowed the IRS to use the data to address refund fraud and improper payments. However, delays and

extensions granted for filing the forms limits the IRS’s ability to use the information at the time of filing or within a 

reasonable period thereafter in which a taxpayer would expect their refund. The IRS continues to face challenges when 

attempting to validate the RTC claims of filers with non-wage income that may not have a third-party reporting

requirement. The requirements, expectations, and data accessibility relative to the timely payment of refunds constrain the

IRS’s ability to conduct up-front verification of claims. These conditions distinguish RTCs and their administration through
254 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | OTHER INFORMATION

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. 

 
DEPARTMENT OF THE TREASURY 255 

OTHER INFORMATION | FY 2020 AGENCY FINANCIAL REPORT

SECTION E: FRAUD REDUCTION REPORT

BACKGROUND

The Payment Integrity Information Act (PIIA) of 2019 mandates agencies to take steps to improve financial and

administrative controls and procedures to assess and mitigate fraud risks, and to improve federal agencies’ development and

use of data analytics for identifying, preventing, and responding to fraud, including those arising from improper payments. 

Each agency is required to report its progress in implementing: (1) the financial and administrative controls; (2) the fraud

risk principle in the GAO Standards for Internal Control in the Federal Government (Green Book); and (3) management of 

fraud risk in accordance with OMB Circular A-123. 

In response to Fraud Reduction and Data Analytics Act of 2015, the predecessor legislation to the PIIA, GAO issued the

Framework for Managing Fraud Risks in Federal Programs in July 2015, based on leading practices for mitigating fraud

risks and enhancing program integrity. The objective of fraud risk management is to proactively facilitate a program’s

mission by continuously and strategically mitigating the likelihood and impact of fraud. Whether an act is in fact fraud is a 

determination made through the judicial or other adjudicative system, and is beyond management’s professional 

responsibility for assessing risk.1

FRAUD RISK MANAGEMENT

All of Treasury’s bureaus and offices (or components) have a shared responsibility in preventing, detecting, and responding

to potential fraud, including improper payments. Treasury’s components have ownership and responsibility for managing

fraud risk. The Office of Risk Management is responsible for providing expertise and guiding principles to assist Treasury’s

components in the management of fraud risk. The Office of the Deputy Chief Financial Officer establishes Treasury-wide

guidance designed to ensure that financial, programmatic, and administrative internal controls provide an appropriate level 

of assurance towards operational and fiscal effectiveness and efficiency. The Office of the Procurement Executive (OPE) is

responsible for establishing Treasury-wide policies and procedures for the use of the purchase card in program management

and oversight. The OIG Office of Investigations (OI) is responsible for receiving and assessing complaints and investigating

potential fraud cases.

First Line of Defense 

Treasury’s components are the first line of defense to prevent, detect, and respond to potential fraud. They are the risk

owners for their programs and have responsibility for mitigating fraud risk and enhancing program integrity, by designing

and implementing processes and controls that effectively prevent and detect potential fraud, both internal and external to

Treasury. Components must establish policies, procedures, techniques, and mechanisms to assess and manage risk and

internal control requirements to manage and respond to fraud risk. Employees who encounter incidents of fraud, waste and

abuse have a responsibility to report the incidents to their respective OIGs.

Mechanisms used by individual components to manage fraud risk include:

• Many components ensure key duties and responsibilities are effectively segregated among different people to reduce the

risk of error, waste, or fraud, and systems have controls to limit access and ensure no one individual can control all

aspects of a transaction.

• All Treasury components provide in-depth training and monthly audits of all purchase and travel card transactions.

1 GAO-14-704, Standards for Internal Control in the Federal Government.
256 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | OTHER INFORMATION

• The Bureau of the Fiscal Service (Fiscal Service) established an enterprise fraud risk management program (EFRMP) in

June 2019. The EFRMP was established with 5 goals and 15 objectives as shown in the figure below. 

The EFRMP program manager executes priority tasks supporting these goals. Specifically, Fiscal Service has developed 

its first enterprise fraud risk profile, conducted a fraud risk assessment of a program area (TreasuryDirect), spread

fraud awareness through communities of practice and developed a knowledge management SharePoint Portal.

• The Fiscal Service EFRMP also holds quarterly Enterprise Fraud Forums across the bureau to discuss prevention, 

detection, and response strategies for fraud activities and events. The Forum meetings bring together representatives 

from all business areas that manage fraud, including the senior leadership and security program offices. 

• The Fiscal Service Security Program Office manages centralized fraud risks as part of its role in countering fraud,

waste, and abuse for the Fiscal Service. The Fiscal Service also evaluates fraud risk through an “assessable unit risk

assessment” coordinated by the Internal Control Branch, consistent with OMB Circular A-123, Management’s

Responsibility for Enterprise Risk Management and Internal Controls, and the PIIA. Results from the assessable unit

risk assessment are factored into the enterprise fraud risk profile analysis. EFRMP works closely with Fiscal’s Office of 

Enterprise Risk Management to incorporate any material fraud risks the EFRMP identifies into the Bureau’s enterprise

risk profile

• The IRS implemented programs to reduce issuance of fraudulent refunds and to review fraud trends and patterns to

inform fraud prevention techniques and uses predictive and forensic analytics to detect and prevent fraudulent activity.

• The IRS created the Fraud Enforcement Office and selected a former Criminal Investigation executive to lead IRS’s

efforts to detect and deter tax fraud while strengthening the National Fraud Program. In addition, this executive will

serve as principal advisor to IRS Division Commissioners and Deputy Commissioners on all issues involving Tax Fraud

Enforcement strategic plans, programs and policy.
DEPARTMENT OF THE TREASURY 257 

OTHER INFORMATION | FY 2020 AGENCY FINANCIAL REPORT

• The IRS conducted an analysis of COVID-19 impacts to the IRS Fraud Risk Profile. The analysis, including discussions

with the Risk Working Group and Executive Risk Committee, promoted cross-functional awareness of how COVID-19

may create opportunities and/or incentives for fraud; served as an input into the IRS’s Enterprise Risk Assessment; and

will serve as input into a future update of the IRS’s Fraud Risk Profile.

At the government-wide level the Treasury Do Not Pay (DNP) program benefits multiple agencies in achieving fraud

reduction. The DNP program focuses on identifying, preventing and detecting improper payments. Many of the tools and

data analytics implemented through DNP also serve as a first line of defense against potential fraud, or as a supplement to

other component-specific detection activities. The DNP’s primary method for detecting improper payments—which could be

due to fraud—is to match payment data to eligibility data. For example, Treasury disbursed payments are automatically

matched to death data. If DNP’s tools detect a payment to a deceased individual, DNP can help agencies stop future

payments to that individual or quickly move to reclaim payments. Data matching is used both in the DNP’s online portal as

well as in its analytical reports, and the data matching can be performed at different phases of the payment life cycle. For 

instance, DNP can continuously monitor a list of payees against lists of vendors excluded from working with the federal 

government so that an agency can take appropriate steps if a contractor has been debarred. In FY 2020, DNP data matching

helped ensure that no Treasury program disbursements were improper.

The DNP analytics team also conducts payment integrity checks for customer agencies to detect anomalies through its

Agency Insight Reports, which include an analysis of an agency’s Treasury-disbursed Payment Automation Manager data. 

The results of the analysis are provided to the agency for review. The agency must then make a determination regarding

whether the high-risk payments or trends identified by DNP correspond to actual improper payments. The agency is also

responsible for following up on any payments or trends that they believe are due to potential fraud.

Internal Controls

Through Treasury’s OMB Circular A-123 internal control assessments, controls are monitored and evaluated to provide

assurances that our components are effectively preventing, detecting, and responding to potential fraud. Our Treasury

Implementation Guide for OMB Circular A-123, Appendix A incorporates GAO’s Green Book Principle 8, Assess Fraud Risk. 

Each year components evaluate their adherence to this principle during their assessments of internal control. For FY 2020,

all components reported that they met the requirements of Principle 8.

All of Treasury’s components are required to integrate the GAO definition for fraud, and consider risks for fraudulent

financial reporting, misappropriation of assets, and corruption during their risk assessment process. Additionally, leading

practices for mitigating fraud risk are required to be incorporated into the design of Treasury components’ internal control

systems to prevent, detect, and respond to fraud.

OPE developed Treasury’s Charge Card Management Plan for Government-wide Commercial Purchase Cards to incorporate

management controls in accordance with OMB Circular A-123, Appendix B, Improving the Management of Government

Charge Card Programs. The purchase card program includes a variety of risk management controls designed to meet 

program objectives including the reduction of fraud, waste, and abuse.

We also assess fraud risk during Treasury’s improper payment reporting and recovery activities as part of OMB Circular A123, Appendix C, Requirements for Payment Integrity Improvement. Through Treasury’s improper payment reporting

efforts, Treasury’s components identify the programs deemed most susceptible to significant improper payments, based on 

total program disbursements and inherent risks to the integrity of the program. Additional assessments are performed on 

those susceptible programs to identify improper payments and determine potential instances of fraud. Additional

information on Payment Integrity can be found in Part 3, Section D, of this report.
258 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | OTHER INFORMATION

Enterprise Risk Management 

Fraud risk is addressed in the course of the Office of Risk Management’s (ORM’s) general risk advisory work. Treasury’s

leadership team provides an opportunity to discuss potential fraud and other types of risks during regular meetings led by

the Chief Risk Officer or Deputy Chief Risk Officer. The ORM conducts regular Enterprise Risk Management Council

meetings with the component-level risk management contacts to discuss various risk topics, including fraud risk. Fraud risk

is considered when components develop and update their annual risk profiles to share with the ORM. 

Investigations 

Complaints are received by the OIG’s OI from Treasury components, the public, and other government agencies by

telephone, facsimile, U.S. mail, electronic mail, online complaint forms, referrals from other law enforcement agencies, and

referrals from prosecutorial offices (U.S. Attorney’s Offices and District or State Attorney’s Offices). The following factors are

used to determine if a complaint is investigated:

• The impact on Treasury’s programs and operations; 

• Alleged participation in the fraud, waste, or abuse by Treasury employees or contract employees; 

• Financial loss to Treasury or the government; and

• Criminal allegations or activity that would be accepted for prosecution by the U.S. Attorney’s Offices or State Attorney’s

Offices. 

The OI investigates subjects that are not employees of Treasury if there is a loss to Treasury from fraudulent activities that

are prosecutable. The OI also investigates all criminal activity alleged against Treasury employees, particularly senior 

Treasury employees. 
DEPARTMENT OF THE TREASURY 259 

OTHER INFORMATION | FY 2020 AGENCY FINANCIAL REPORT

SECTION F: REAL PROPERTY

Treasury’s real property portfolio consists of Treasury owned property, General Services Administration (GSA) owned

property, as well as Treasury leased space and GSA leased space. Our real property portfolio also includes operations and

maintenance costs for our owned property and leased space. Detailed information related to our real property portfolio can

be found on GSA’s Federal Real Property Public Data Set website https://www.gsa.gov/policy-regulations/policy/realproperty-policy/asset-management/federal-real-property-profile-frpp/federal-real-property-public-data-set.

 
260 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | OTHER INFORMATION

SECTION G: CIVIL MONETARY PENALTIES INFLATION ADJUSTMENT

The Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (2015 Act) amended the Federal Civil

Penalties Inflation Adjustment Act of 1990 (Inflation Adjustment Act), to improve the effectiveness of civil monetary

penalties (CMPs) and to maintain their deterrent effect. The 2015 Act requires agencies to annually adjustment the level of 

civil monetary penalties for inflation and report annually in AFRs. The 2015 Act requires that agencies make annual

inflation adjustments based on annual OMB guidance and publish the latest penalty levels in the Federal Register no later

than January 15 each year. The Inflation Adjustment Act and the 2015 Act exclude penalties under the IRC and the Tariff 

Act of 1930. The table below depicts the covered CMPs that are under our purview.

 

Statutory Authority Penalty (Name or

Description)

Year 

Enacted 

Latest Year of

Adjustment (via

Statute or

Regulation)

Current Penalty 

Level ($

Amount or

Range)(1)

Sub-Agency

Bureau/

Entity 

Location for Penalty 

Update Details

50 USC App. 16(b)(1) 

Trading with the Enemy Act,

Section 16(b)

Sanctions violation 1917 2020 $90,743 DO (OFAC)

85 Federal Register

19884 (April 9, 2020)

https://www.govinfo.g

ov/content/pkg/FR2020-04-09/pdf/2020-

07509.pdf

50 USC 1705 

International Emergency

Economic Powers Act, Section

206

Sanctions violation 1977 2020 

The greater of

$307,922 or

twice the value

of the

underlying

transaction

DO (OFAC) Same as above

18 USC 2339B(b) 

Antiterrorism and Effective

Death Penalty Act of 1996

Sanctions violation 1996 2020

The greater of

$81,283 or twice

the amount of

which a financial

institution was

required to

retain

possession or

control

DO (OFAC) Same as above

21 USC 1906(b) 

Foreign Narcotics Kingpin

Designation Act, Section 807

Sanctions violation 1999 2020 $1,529,991 DO (OFAC) Same as above

19 USC 3901-3913 

Clean Diamond Trade Act Sanctions violation 2003 2020 $13,910 DO (OFAC) Same as above

15 USC 6701 note 

Terrorism Risk Insurance Act, as

amended

Civil Penalty 2002 2020 $1,419,442

DO (Federal

Insurance

Office)

85 Federal Register

10063 (February 21, 

2020) 

https://www.govinfo.g

ov/content/pkg/FR2020-02-21/pdf/2020-

02712.pdf 

12 USC 1829b(j) 

Bank Secrecy Act, as amended

Recordkeeping Violations

for Funds Transfers 1988 2020 $21,410 FinCEN

85 Federal Register

9370 (February 19, 

2020)

https://www.govinfo.g

ov/content/pkg/FR-
DEPARTMENT OF THE TREASURY 261 

OTHER INFORMATION | FY 2020 AGENCY FINANCIAL REPORT

Statutory Authority Penalty (Name or

Description)

Year 

Enacted 

Latest Year of

Adjustment (via

Statute or

Regulation)

Current Penalty 

Level ($

Amount or

Range)(1)

Sub-Agency

Bureau/

Entity 

Location for Penalty 

Update Details

2020-02-19/pdf/2020-

02526.pdf

12 USC 1955 

Bank Secrecy Act, as amended

Willful/Grossly Negligent

Recordkeeping Violations 1988 2020 $21,410 FinCEN Same as above

31 USC 5318(k)(3)(C) 

Bank Secrecy Act, as amended

Failure to Terminate

Correspondent Relationship

with Foreign Bank

2001 2020 $14,482 FinCEN Same as above

31 USC 5321(a)(1) 

Bank Secrecy Act, as amended

General Civil Penalty

Provision for Willful

Violations of Bank Secrecy 

Act Requirements 

1986 2020 $58,328 to

$233,313 FinCEN Same as above

31 USC 5321(a)(5)(B)(i) 

Bank Secrecy Act, as amended

Foreign Financial Agency

Transaction - Non-Willful

Violation of Transaction

2004 2020 $13,481 FinCEN Same as above

31 USC 5321(a)(5)(C)(i)(l) 

Bank Secrecy Act, as amended

Foreign Financial Agency

Transaction - Willful

Violation of Transaction

2004 2020 $134,806 FinCEN Same as above

31 USC 5321(a)(6)(A) 

Bank Secrecy Act, as amended

Negligent Violation by

Financial Institution or NonFinancial Trade or Business1986 2020 $1,166 FinCEN Same as above

31 USC 5321(a)(6)(B) 

Bank Secrecy Act, as amended

Pattern of Negligent Activity

by Financial Institution or

Non-Financial Trade or

Business 

1992 2020 $90,743 FinCEN Same as above

31 USC 5321(a)(7) 

Bank Secrecy Act, as amended

Violation of Certain Due

Diligence Requirements, 

Prohibition on

Correspondent Accounts for

Shell Banks, and Special

Measures

2001 2020 $1,448,191 FinCEN Same as above

31 USC 5330(e) 

Bank Secrecy Act, as amended

Civil Penalty for Failure to

Register as Money

Transmitting Business 

1994 2020 $8,606 FinCEN Same as above

12 USC 93(b) 

Section 5239(b) of the Revised

Statutes

Tier 1 Violation of Various

Provisions of the National

Bank Act

1978 2020 $10,245 OCC

84 Federal Register

71735 (December 30, 

2019) 

https://www.govinfo.g

ov/content/pkg/FR2019-12-30/pdf/2019-

28053.pdf

12 USC 93(b) 

Section 5239(b) of the Revised

Statutes

Tier 2 Violation of Various

Provisions of the National

Bank Act

1978 2020 $51,222 OCC Same as above

12 USC 93(b) 

Section 5239(b) of the Revised

Statutes

Tier 3 Violation of Various

Provisions of the National

Bank Act

1978 2020 $2,048,915 OCC Same as above

12 USC 164 

Section 5213 of the Revised

Statutes

Tier 1 Violation of Reporting

Requirements 1869(2) 2020 $4,098 OCC Same as above
262 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | OTHER INFORMATION

Statutory Authority Penalty (Name or

Description)

Year 

Enacted 

Latest Year of

Adjustment (via

Statute or

Regulation)

Current Penalty 

Level ($

Amount or

Range)(1)

Sub-Agency

Bureau/

Entity 

Location for Penalty 

Update Details

12 USC 164 

Section 5213 of the Revised

Statutes

Tier 2 Violation of Reporting

Requirements 1869(2) 2020 $40,979 OCC Same as above

12 USC 164 

Section 5213 of the Revised

Statutes

Tier 3 Violation of Reporting

Requirements 1869(2) 2020 $2,048,915 OCC Same as above

12 USC 481 

Section 5240 of the Revised

Statutes

Refusal of Affiliate to

Cooperate in Examination

(National Banks) 

1864(2) 2020 $10,245 OCC Same as above

12 USC 504 

Section 29 of the Revised

Statutes

Tier 1 Violation of Various

Provisions of the Federal

Reserve Act

1978 2020 $10,245 OCC Same as above

12 USC 504 

Section 29 of the Revised

Statutes

Tier 2 Violation of Various

Provisions of the Federal

Reserve Act

1978 2020 $51,222 OCC Same as above

12 USC 504 

Section 29 of the Revised

Statutes

Tier 3 Violation of Various

Provisions of the Federal

Reserve Act

1978 2020 $2,048,915 OCC Same as above

12 USC 1817(j)(16) 

Section 7(j)(16) of the Federal

Deposit Insurance Act

Tier 1 Violation of Change in

Bank Control Act 1978 2020 $10,245 OCC Same as above

12 USC 1817(j)(16) 

Section 7(j)(16) of the Federal

Deposit Insurance Act

Tier 2 Violation of Change in

Bank Control Act 1978 2020 $51,222 OCC Same as above

12 USC 1817(j)(16) 

Section 7(j)(16) of the Federal

Deposit Insurance Act

Tier 3 Violation of Change in

Bank Control Act 1978 2020 $2,048,915 OCC Same as above

12 USC 1818(i)(2) 

Section 8(i)(2) of the Federal

Deposit Insurance Act

Tier 1 Violation of Law,

Unsafe or Unsound

Practice, or Breach of

Fiduciary Duty

1978 2020 $10,245 OCC Same as above

12 USC 1818(i)(2) 

Section 8(i)(2) of the Federal

Deposit Insurance Act

Tier 2 Violation of Law,

Unsafe or Unsound

Practice, or Breach of

Fiduciary Duty

1978 2020 $51,222 OCC Same as above

12 USC 1818(i)(2) 

Section 8(i)(2) of the Federal

Deposit Insurance Act

Tier 3 Violation of Law,

Unsafe or Unsound

Practice, or Breach of

Fiduciary Duty

1978 2020 $2,048,915 OCC Same as above

12 USC 1820(k)(6)(A)(ii) 

Section 10(k)(6)(A)(ii) of the

Federal Deposit Insurance Act

Violation of PostEmployment Restrictions 2004 2020 $337,016 OCC Same as above

12 USC 1832(c) 

Section 2 of Public Law 93-100

Violation of Withdrawals by

Negotiable or Transferable

Instrument for Transfers to

Third Parties (National

Banks) 

1973 2020 $2,976 OCC Same as above

12 USC 1832(c) 

Section 2 of Public Law 93-100

Violation of Withdrawals by

Negotiable or Transferable

Instrument for Transfers to

Third Parties (Federal

Savings Associations)

1973 2020 $2,705 OCC Same as above
DEPARTMENT OF THE TREASURY 263 

OTHER INFORMATION | FY 2020 AGENCY FINANCIAL REPORT

Statutory Authority Penalty (Name or

Description)

Year 

Enacted 

Latest Year of

Adjustment (via

Statute or

Regulation)

Current Penalty 

Level ($

Amount or

Range)(1)

Sub-Agency

Bureau/

Entity 

Location for Penalty 

Update Details

12 USC 1884 

Section 5 of the Bank

Protection Act of 1968

Violation of the Bank

Protection Act 1968 2020 $297 OCC Same as above

12 USC 1972(2)(F) 

Section 106(b)(2)(F) of the Bank

Holding Company Act

Amendments of 1970

Tier 1 Violation of AntiTying Provisions Regarding

Correspondent Accounts,

Unsafe or Unsound

Practices, or Breach of

Fiduciary Duty

1978 2020 $10,245 OCC Same as above

12 USC 1972(2)(F) 

Section 106(b)(2)(F) of the Bank

Holding Company Act

Amendments of 1970

Tier 2 Violation of AntiTying Provisions Regarding

Correspondent Accounts,

Unsafe or Unsound

Practices, or Breach of

Fiduciary Duty

1978 2020 $51,222 OCC Same as above

12 USC 1972(2)(F) 

Section 106(b)(2)(F) of the Bank

Holding Company Act

Amendments of 1970

Tier 3 Violation of AntiTying Provisions Regarding

Correspondent Accounts,

Unsafe or Unsound

Practices, or Breach of

Fiduciary Duty

1978 2020 $2,048,915 OCC Same as above

12 USC 3110(a) 

Section 16(a) of the

International Banking Act of

1978

Violation of Various

Provisions of the

International Banking Act

(Federal Branches and

Agencies)

1991 2020 $46,825 OCC Same as above

12 USC 3110(c) 

Section 16(c) of the

International Banking Act of

1978

Tier 1 Violation of Reporting

Requirements of the

International Banking Act

(Federal Branches and

Agencies)

1991 2020 $3,747 OCC Same as above

12 USC 3110(c) 

Section 16(c) of the

International Banking Act of

1978

Tier 2 Violation of Reporting

Requirements of the

International Banking Act

(Federal Branches and

Agencies)

1991 2020 $37,458 OCC Same as above

12 USC 3110(c) 

Section 16(c) of the

International Banking Act of

1978

Tier 3 Violation of Reporting

Requirements of the

International Banking Act

(Federal Branches and

Agencies)

1991 2020 $1,872,957 OCC Same as above

12 USC 3909(d)(1) 

Section 910(d)(1) of the

International Lending

Supervision Act of 1983

Violation of International

Lending Supervision Act 1983 2020 $2,549 OCC Same as above

15 USC 78u-2(b) 

Section 21B(b) of the Securities

Exchange Act of 1934

Tier 1 (natural person)

Violation of Various

Provisions of the Securities

Act, the Securities Exchange

Act, the Investment

Company Act, or the

Investment Advisers Act

1990 2020 $9,639 OCC Same as above
264 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | OTHER INFORMATION

Statutory Authority Penalty (Name or

Description)

Year 

Enacted 

Latest Year of

Adjustment (via

Statute or

Regulation)

Current Penalty 

Level ($

Amount or

Range)(1)

Sub-Agency

Bureau/

Entity 

Location for Penalty 

Update Details

15 USC 78u-2(b) 

Section 21B(b) of the Securities

Exchange Act of 1934

Tier 1 (other person)

Violation of Various

Provisions of the Securities

Act, the Securities Exchange

Act, the Investment

Company Act, or the

Investment Advisers Act

1990 2020 $96,384 OCC Same as above

15 USC 78u-2(b) 

Section 21B(b) of the Securities

Exchange Act of 1934

Tier 2 (natural person)

Violation of Various

Provisions of the Securities

Act, the Securities Exchange

Act, the Investment

Company Act, or the

Investment Advisers Act

1990 2020 $96,384 OCC Same as above

15 USC 78u-2(b) 

Section 21B(b) of the Securities

Exchange Act of 1934

Tier 2 (other person)

Violation of Various

Provisions of the Securities

Act, the Securities Exchange

Act, the Investment

Company Act, or the

Investment Advisers Act

1990 2020 $481,920 OCC Same as above

15 USC 78u-2(b) 

Section 21B(b) of the Securities

Exchange Act of 1934

Tier 3 (natural person)

Violation of Various

Provisions of the Securities

Act, the Securities Exchange

Act, the Investment

Company Act, or the

Investment Advisers Act

1990 2020 $192,768 OCC Same as above

15 USC 78u-2(b) 

Section 21B(b) of the Securities

Exchange Act of 1934

Tier 3 (other person)

Violation of Various

Provisions of the Securities

Act, the Securities Exchange

Act, the Investment

Company Act, or the

Investment Advisers Act

1990 2020 $963,837 OCC Same as above

15 USC 1639e(k) 

Section 129E(k) of the Truth in

Lending Act

First Violation - Violation of

Appraisal Independence

Requirements

2010 2020 $11,767 OCC Same as above

15 USC 1639e(k) 

Section 129E(k) of the Truth in

Lending Act

Subsequent Violations - 

Violation of Appraisal

Independence

Requirements

2010 2020 $23,533 OCC Same as above

42 USC 4012a(f)(5) 

Section 102(f)(5) of the Flood

Disaster Protection Act of 1973

Flood Insurance 1994 2020 $2,226 OCC Same as above

12 USC 1464(v) 

Section 5(v) of the Home

Owners' Loan Act

Tier 1 Reports of Condition - 

Savings Associations 1989 2020 $4,098 OCC Same as above

12 USC 1464(v) 

Section 5(v) of the Home

Owners' Loan Act

Tier 2 Reports of Condition - 

Savings Associations 1989 2020 $40,979 OCC Same as above

12 USC 1464(v) 

Section 5(v) of the Home

Owners' Loan Act

Tier 3 Reports of Condition - 

Savings Associations 1989 2020 $2,048,915 OCC Same as above
DEPARTMENT OF THE TREASURY 265 

OTHER INFORMATION | FY 2020 AGENCY FINANCIAL REPORT

Statutory Authority Penalty (Name or

Description)

Year 

Enacted 

Latest Year of

Adjustment (via

Statute or

Regulation)

Current Penalty 

Level ($

Amount or

Range)(1)

Sub-Agency

Bureau/

Entity 

Location for Penalty 

Update Details

12 USC 1467(d) 

Section 9(d) of the Home

Owners' Loan Act

Refusal of Affiliate to

Cooperate in Examination 1989 2020 $10,245 OCC Same as above

12 USC 1467a(r) 

Section 10(r) of the Home

Owners' Loan Act

Tier 1 Late/Inaccurate

Reports (Savings and Loans) 1989 2020 $4,098 OCC Same as above

12 USC 1467a(r) 

Section 10(r) of the Home

Owners' Loan Act

Tier 2 Late/Inaccurate

Reports (Savings and Loans) 1989 2020 $40,979 OCC Same as above

12 USC 1467a(r) 

Section 10(r) of the Home

Owners' Loan Act

Tier 3 Late/Inaccurate

Reports (Savings and Loans) 1989 2020 $2,048,915 OCC Same as above

27 USC 218 

Federal Alcohol Administration

Act, as amended; Section 207 

of the Alcohol Beverage

Labeling Act of 1988, P.L. 100-

690 

Violation 1988 2019(3) $21,039 TTB

84 Federal Register

14614 (April 11, 2019) 

https://www.govinfo.g

ov/content/pkg/FR2019-04-11/pdf/2019-

07220.pdf

31 USC 333 

Prohibition of Misuse of

Department of the Treasury

Names, Symbols, etc.

Misuse of Treasury name or

symbol 1994 2020 $8,116 DepartmentWide

85 Federal Register

10063 (February 21, 

2020) 

https://www.govinfo.g

ov/content/pkg/FR2020-02-21/pdf/2020-

02712.pdf 

31 USC 333 

Prohibition of Misuse of

Department of the Treasury

Names, Symbols, etc.

Misuse of Treasury name or

symbol in broadcast or

telecast

1994 2020 $40,576 Department

Wide Same as above

31 USC 3802 

Program Fraud Civil Remedies

Act

Program Fraud Civil

Remedies Act 1986 None(4)

Up to $5,000 for

each claim plus

2 times the

amount of the

claim

Department

Wide N/A(4)

(1) Current penalty level amounts represent the maximum penalty amounts.

(2) For purposes of calculating the appropriate inflation factor, OMB’s guidance issued February 24, 2016 uses the calendar year 1914 CMP CatchUp Adjustment Multiplier for all penalties enacted prior to 1914.

(3) We are in the process of updating the regulation for the 2020 inflation adjustments to this CMP. Our 2020 update has been delayed due to

unanticipated priorities and challenges related to COVID-19.

(4) We issued regulations at 31 CFR Part 16 implementing the Program Fraud Civil Remedies Act of 2006. We have not imposed penalties under

this statute. We are currently drafting regulations to update the penalty level for inflation adjustments. 
266 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | OTHER INFORMATION

SECTION H: GRANTS PROGRAMS

The summary table below shows the total number and balances of federal grants and cooperative agreements that we

awarded for which closeout has not yet occurred and the period of performance has elapsed by more than two years.

CATEGORY 2-3 Years 3-5 Years More than 5 Years

Number of Grants/Cooperative Agreements with Zero Dollar

Balances - 220 - 

Number of Grants/Cooperative Agreements with Undisbursed

Balances 92 57 - 

Total Amount of Undisbursed Balances $ 159,429.68 $ 629,325.37 $ - 

 
DEPARTMENT OF THE TREASURY 267 

OTHER INFORMATION | FY 2020 AGENCY FINANCIAL REPORT

APPENDIX: GLOSSARY OF ACRONYMS

Abbreviation Description 

2015 Act Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 

ACTC Additional Child Tax Credit 

AFR Agency Financial Report 

AGI Adjusted Gross Income

AML/CFT Anti-Money Laundering and Combating the Financing of Terrorism

AOTC American Opportunity Tax Credit

APG Agency Priority Goal

APR Annual Performance Report 

ARC Administrative Resource Center

ARRA American Recovery and Reinvestment Tax Act of 2009

ASM Assistant Secretary for Management

BEP Bureau of Engraving and Printing

BIC Best-In-Class

BSA Bank Secrecy Act

CARES Act Coronavirus Aid, Relief, and Economic Security Act

CCF Corporate Credit Facilities, LLC 

CDFI Community Development Financial Institutions

CDM Continuous Diagnostic Monitoring

CEG G-7 Cyber Expert Group

CFIUS Committee on Foreign Investment in the United States

CFO Chief Financial Officer 

CI Criminal Investigation

CIFS Critical Individual Filing Season

CIO Chief Information Officer 

Civil Service Fund Civil Service Retirement and Disability Trust Fund

CMP Civil Monetary Penalties

CMS Case Management System

Compliance Framework FFMIA Compliance Determination Framework 

COVID-19 Coronavirus Disease 2019

CPFF Commercial Paper Funding Facility II LLC 

CPI Consumer Price Index

CRO Chief Risk Officer 

CSRS Civil Service Retirement System

CTC Child Tax Credit

CTR Currency Transition Reports 

D.C. District of Columbia

D.C. Federal Pension Fund D.C. Teachers’, Police Officers’, and Firefighters’ Federal Pension Fund

DAIMS DATA Act Information Model Schema

DAS Discriminant Analysis System

DASHR/CHCO Office of the Deputy Assistant Secretary for Human Resources and Chief Human

Capital Officer 
268 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | OTHER INFORMATION

Abbreviation Description 

DATA Act Digital Accountability and Transparency Act

DDV Due Diligence Visits 

DFF Departmental Franchise Fund

DHS Department of Homeland Security

DMF Death Master File

DNP Do Not Pay 

DO Departmental Offices 

DOD Department of Defense 

DOJ Department of Justice

DOL Department of Labor

DOT Department of Transportation

ECRM Enterprise Cyber Risk Management Program

EFRMP Enterprise Fraud Risk Management Program 

EFTPS Electronic Federal Tax Payment System

EIN Employer Identification Number 

EIP Economic Impact Payment 

EIS Environmental Impact Statement

EITC Earned Income Tax Credit

ERM Enterprise Risk Management 

ESA Exchange Stabilization Agreement 

ESF Exchange Stabilization Fund

Evidence Act Foundations for Evidence-Based Policymaking Act of 2018

Fannie Mae Federal National Mortgage Association

FARS Financial Analysis and Reporting System

FASAB Federal Accounting Standards Advisory Board

FATF Financial Action Task Force 

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

Federal Reserve Board or Board Federal Reserve Board of Governors

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

FFRCA Families First Coronavirus Response Act of 2020

FFMIA Federal Financial Management Improvement Act of 1996

FHFA Federal Housing Finance Agency

FICA Federal Insurance Contributions Act

FinCEN Financial Crimes Enforcement Network
DEPARTMENT OF THE TREASURY 269 

OTHER INFORMATION | FY 2020 AGENCY FINANCIAL REPORT

Abbreviation Description 

FIRPTA Foreign Investment in Real Property Tax Act

FIRRMA Foreign Investment Risk Review Modernization Act

Fiscal Service Bureau of the Fiscal Service

FISMA Federal Information Security Management Act

FITARA Federal Information Technology Acquisition Reform Act

FMFIA Federal Managers’ Financial Integrity Act

FOMC Federal Open Market Committee

FR Financial Report of the U.S. Government 

FR System Federal Reserve System

FRB Federal Reserve Bank

FRBB Federal Reserve Bank of Boston

FRBNY Federal Reserve Bank of New York

FRDAA Fraud Reduction and Data Analytics Act of 2015 

Freddie Mac Federal Home Loan Mortgage Corporation

FRN Floating Rate Note

FSA Fiscal Service Administration

FSD Fiscal Service Debt 

FSM Funds Management Branch

FSSCC Financial Services Sector Coordinating Council

FSU Fiscal Service Umbrella 

FTO Fine Troy Ounce

FY Fiscal Year

G Fund Government Securities Investment Fund

G-7 Group of Seven 

G-20 Group of 20

GAAP Generally Accepted Accounting Principles

GAO U.S. Government Accountability Office 

GDP Gross Domestic Product 

General Fund General Fund of the U.S. Government

GERD General Ethiopian Renaissance Dam

GLN General Lockbox Network

GPRA Government Performance and Results Act of 1993

GSA General Services Administration

GSE Government Sponsored Enterprise

HERA Housing and Economic Recovery Act

HFA Housing Finance Agency

HHS Department of Health and Human Services

HIPF Health Insurance Provider Fee

HR Human Resources 

HVA High Value Assets

IAM Identity Access Management

IAP International Assistance Programs
270 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | OTHER INFORMATION

Abbreviation Description 

IMF International Monetary Fund

Inflation Adjustment Act Federal Civil Penalties Inflation Adjustment Act of 1990 

IPERA Improper Payments Elimination and Recovery Act 

IPERIA Improper Payments Elimination and Recovery Act Improvement Act of 2012

IPIA Improper Payments Information Act of 2002

IRC Internal Revenue Code

IRS Internal Revenue Service

ISIS Islamic State of Iraq and Syria

IT Information Technology 

ITIN Individual Taxpayer Identification Number

Judicial Retirement Fund District of Columbia Judicial Retirement and Survivors’ Annuity Fund

MDB Multilateral Development Bank

MLF Municipal Liquidity Facility LLC 

MMLF Money Markey Mutual Fund Liquidity Facility

MSELF Main Street Extended Loan Facility

MSF Main Street Facilities LLC 

MSNLF Main Street New Loan Facility 

MSPLF Main Street Primary Loan Facility

NAB New Arrangements to Borrow 

NAFA North American Framework Agreement 

NIBP New Issue Bond Program 

NIST National Institute of Standards and Technology 

NOELF Main Street Nonprofit Organization Expanded Loan Facilities

NONLF Main Street Nonprofit Organization New Loan Facility

NRP National Research Program

OAS International Assistance Programs

OASM Office of the Assistant Secretary for Management

OBT Office of Budget and Travel 

OCC Office of the Comptroller of the Currency

OCCIP Office of Cybersecurity and Critical Infrastructure Protection

ODCP Office of D.C. Pensions 

OFAC Office of Foreign Assets Control

OFP Office of Fiscal Projections 

OFR Office of Financial Research

OFS Office of Financial Stability

OI Office of Investigation

OIA Office of Intelligence and Analysis

OIG Office of the Inspector General

OMB Office of Management and Budget

OPE Office of the Procurement Executive

OPEB Other Post-Employment Benefits

OPM Office of Personnel Management
DEPARTMENT OF THE TREASURY 271 

OTHER INFORMATION | FY 2020 AGENCY FINANCIAL REPORT

Abbreviation Description 

OPM Funds Civil Service Fund and Postal Benefits Fund

ORB Other Retirement Benefits

ORM Office of Risk Management 

OSPPI Office of Strategic Planning and Performance Improvement 

OTA Office of Technical Assistance

OTC Over-the-Counter

P.L. Public Law

PATH Act Protecting Americans from Tax Hikes Act

PCA Private Collection Agencies

PDC Private Debt Collection

PICoE Payment Integrity Center of Excellence

PIIA Payment Integrity Information Act of 2019

PIK Payment-In-Kind

PIO Performance Improvement Officer 

PMCCF Primary Market Corporate Credit Facility

PMIAA Program Management Improvement Accountaility Act

Postal Benefits Fund Postal Service Retiree Health Benefits Fund

PP&E Property, Plant, and Equipment

PPP Paycheck Protection Program 

PRAC Pandemic Response Accountability Committee

PSP Payroll Support Program 

PTC Premium Tax Credit

PTIN Preparer Tax Identification Number

QPR Quarterly Performance Review

QSMO Quality Service Management Organization

RTC Refundable Tax Credits

RRTA Railroad Retirement Tax

SAR Security Architecture Review

SBA Small Business Administration

SBLF Small Business Lending Fund

SBR Statement of Budgetary Resources 

SCRM Supply Chain Risk Management Program

SDR Special Drawing Rights

Secret Service United States Secret Service

Secretary Secretary of the Treasury

SFFAS Statement of Federal Financial Accounting Standards

SIEM Security Information and Event Management

SIGPR Special Inspector General for Pandemic Recovery 

SIGTARP Special Inspector General for the Troubled Asset Relief Program

SLGS State and Local Government Series 

SMCCF Secondary Market Corporate Credit Facility

SOAR Strategic Objective Annual Review
272 DEPARTMENT OF THE TREASURY

FY 2020 AGENCY FINANCIAL REPORT | OTHER INFORMATION

Abbreviation Description 

SOMA System Open Market Account

SPSPA Senior Preferred Stock Purchase Agreements

SSA Social Security Administration

SSN Social Security Number

TAAPS Treasury Automated Auction Processing System

TALF Term Asset-Backed Securities II LLC 

TARP Troubled Asset Relief Program

TBM Technology Business Management

TCJA Tax Cuts and Jobs Act

TEIS Treasury Enterprise Infrastructure Solutions

TEOAF Treasury Executive Office of Asset Forfeiture 

TFA Taxpayer First Act

TFF Treasury Forfeiture Fund

TFI Terrorism and Financial Intelligence

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

TRIP Terrorism Risk Insurance Program

TSP Thrift Savings Plan

TTB Alcohol and Tobacco Tax and Trade Bureau

TY Tax Year

U.S. United States

U.S. Mint United States Mint

USA Patriot Act United and Strengthening America by Providing Appropriate Tools Required to

Intercept and Obstruct Terrorism Act of 2001

USC United States Code

USMCA United States – Mexico – Canada Agreement 

USPS United States Postal Service

USSS United States Secret Service

USVSST United States Victims of State Sponsored Terrorism Fund

WSS Wholesale Securities Services
 

 
WWW.TREASURY.COM