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Message froM the assIstant secretary for 

ManageMent anD chIef fInancIal offIcer 

november 15, 2010 

In fiscal year 2010, the Department of the treasury built on the framework established during 

the preceding year to restore confidence in america’s financial system, ease the housing crisis, 

and provide the foundation for sustained economic recovery as treasury’s troubled asset relief 

Program and recovery act programs matured. 

challenges lie ahead as treasury works to implement myriad changes contained in major legislation 

enacted in 2010, including the broad health care reform provisions of the Patient Protection and 

Affordable Care Act; the sweeping financial reforms of the Dodd-Frank Wall Street Reform and 

Consumer Protection Act; and the new loan programs and tax law changes in the Small Business Jobs 

and Credit Act. these programs, once implemented, will have a significant, positive impact in the 

lives of millions of americans. 

In fiscal year 2010, the Department of the treasury demonstrated fiscal prudence and strong management reforms as we: 

•	 launched a new performance management process, led by the treasury Deputy secretary, to review bureau and Departmental 

office missions, goals, performance measures, and budget proposals 

•	 realized $23.1 billion in net income from troubled asset relief Program (tarP) operations, resulting in reducing the 

cumulative net cost of the program from $41.6 billion at the end of fiscal year 2009 to $18.5 billion at the end of fiscal year 2010 

•	 Identified $315 million in efficiency savings, rescissions, and new user fees in the fiscal year 2011 budget submission, to reduce 

the cost of treasury operations 

•	 supported our veterans by achieving the Department’s goal of spending at least 3 percent of its prime contracting dollars to 


support service-disabled, veteran-owned small businesses, while generating over $200 million in procurement savings
 

•	 Improved the effectiveness and efficiency of treasury’s execution of processes and procedures through the ongoing application of 

continuous improvement techniques 

•	 Implemented the President’s open government Directive, releasing approximately 80 data sets to the public 

•	 reformed treasury’s senior executive service performance management system to strengthen the Department’s performance 

culture 

the Department received an unqualified audit opinion on both our office of financial stability/tarP and treasury-wide fiscal 

year 2010 financial statements. treasury closed the material weakness on financial management practices at the Departmental level 

during fiscal year 2010, and made progress toward resolving the four material weaknesses remaining open as of september 30, 2010 

[Irs - Modernization Management (due to close by 2011), computer security (due to close by 2012), and unpaid tax assessments 

(due to close by 2015) and fMs - Preparation of the government-wide financial statements (due to close by 2014)]. 

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the complexity of systems enhancements is the major impediment to closing these weaknesses. treasury made significant progress 

in managing programs included in the government accountability office’s high-risk list and in addressing management and 

performance challenges identified by the Department’s Inspectors general. 

We will continue to devote special attention to these programs and challenges as we work to further improve the u.s. economy, help 

create jobs, and restore confidence in our financial system. 

and chief financial officer 

Dan tangherlini 

assistant secretary for Management 

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performance and accountability report | fiscal year 2010 

November 15, 2010 

INFORMATION MEMORANDUM FOR SECRETARY GEITHNER 

FROM: Eric M. Thorson 

Inspector General 

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

Fiscal Years 2010 and 2009 

INTRODUCTION 

I am pleased to transmit KPMG LLP’s report on the Department of the Treasury’s (the 

Department) financial statements as of and for the fiscal years (FY) ending September 30, 2010 

and 2009. 

The Chief Financial Officer’s Act of 1990, as amended, requires the Department of the Treasury 

Office of Inspector General or an independent auditor, as determined by the Inspector General, to 

audit the Department’s financial statements. Under a contract monitored by my office, KPMG 

LLP, an independent certified public accounting firm, performed an audit of the Department’s 

FY 2010 and 2009 financial statements. The contract required that the audit be performed in 

accordance with generally accepted government auditing standards issued by the Comptroller 

General of the United States; Office of Management and Budget Bulletin No. 07-04, Audit 

Requirements for Federal Financial Statements, as amended; and the GAO/PCIE Financial 

Audit Manual. 

RESULTS OF INDEPENDENT AUDIT 

In its audit of the Department, KPMG LLP 

•	 reported that the financial statements were fairly presented, in all material respects, in 

conformity with U.S. generally accepted accounting principles; 

•	 reported that two material weaknesses related to unpaid tax assessments and information 

systems security and a significant deficiency related to tax refund disbursements 

identified by the auditor of the Internal Revenue Service collectively represent a material 

weakness for the Department as a whole; 

•	 reported that weaknesses related to 1) financial management practices at the 

Departmental level, 2) financial accounting and reporting at the Office of Financial 

Stability, and 3) information system controls at the Financial Management Service 

represent significant deficiencies for the Department as a whole; 

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Page 2 

•	 reported an instance of noncompliance with laws and regulations related to the Internal 

Revenue Code Section 6325; 

•	 reported that the Department’s financial management systems did not substantially 

comply with the requirements of the Federal Financial Management Improvement Act of 

1996 related to Federal financial management system requirements and applicable 

Federal accounting standards; and 

•	 reported an instance of a potential Anti-deficiency Act violation related to certain 

transactions and activities of the Treasury Inspector General for Tax Administration. 

EVALUATION OF AUDITORS’ PERFORMANCE 

To ensure the quality of the audit work performed, we reviewed KPMG LLP’s approach and 

planning of the audit, evaluated the qualifications and independence of the auditors, monitored 

the progress of the audit at key points, reviewed and accepted KPMG LLP’s audit report, and 

performed other procedures that we deemed necessary. Additionally, we provide oversight of the 

audits of financial statements and certain accounts and activities conducted at 13 component 

entities of the Department. Our review, as differentiated from an audit performed in accordance 

with generally accepted government auditing standards, was not intended to enable us to express, 

and we do not express, an opinion on the financial statements or conclusions about the 

effectiveness of internal control or on whether the Department’s financial management systems 

substantially complied with the Federal Financial Management Improvement Act of 1996 or 

conclusions on compliance with laws and regulations. KPMG LLP is responsible for the attached 

auditors’ report dated November 15, 2010, and the conclusions expressed in that report. 

However, our review disclosed no instances where KPMG LLP did not comply, in all material 

respects, with generally accepted government auditing standards. 

I appreciate the courtesies and cooperation extended to KPMG LLP and my staff during the 

audit. Should you or your staff have questions, you may contact me at (202) 622-1090 or 

Marla A. Freedman, Assistant Inspector General for Audit, at (202) 927-5400. 

Attachment 

cc: Daniel Tangherlini 

Assistant Secretary for Management
 

and Chief Financial Officer 

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performance and accountability report | fiscal year 2010 

KPMG LLP 

2001 M Street, NW 

Washington, DC 20036-3389 

Independent Auditors’ Report 

Inspector General 

U.S. Department of the Treasury: 

We have audited the accompanying consolidated balance sheets of the U.S. Department of the 

Treasury (Department) as of September 30, 2010 and 2009, and the related consolidated statements 

of net cost, and changes in net position, combined statements of budgetary resources, and the 

statements of custodial activity (hereinafter referred to as “consolidated financial statements”) for the 

years then ended. The objective of our audits was to express an opinion on the fair presentation of 

these consolidated financial statements. These consolidated financial statements are incorporated in 

the accompanying U.S. Department of the Treasury Fiscal Year 2010 Performance and 

Accountability Report (PAR). 

We did not audit the amounts included in the consolidated financial statements related to the Internal 

Revenue Service (IRS) and the Office of Financial Stability (OFS), component entities of the 

Department. The financial statements of IRS and OFS were audited by another auditor whose reports 

thereon have been provided to us. Our opinion, insofar as it relates to the amounts included for IRS 

and OFS, is based solely on the reports of the other auditor. 

In connection with our fiscal year 2010 audit, we, and the other auditor, also considered the 

Department’s internal control over financial reporting and tested the Department’s compliance with 

certain provisions of applicable laws, regulations, contracts, and grant agreements that could have a 

direct and material effect on these consolidated financial statements. Our conclusions on internal 

control over financial reporting and compliance and other matters, insofar as they relate to IRS and 

OFS, are based solely on the reports of the other auditor. 

Summary 

As stated in our opinion on the consolidated financial statements, based on our audits and the reports 

of the other auditor, we concluded that the Department’s consolidated financial statements as of and 

for the years ended September 30, 2010 and 2009, are presented fairly, in all material respects, in 

conformity with U.S. generally accepted accounting principles. 

As discussed in Note 21, the Department implemented Statement of Federal Financial Accounting 

Standards No. 33, Pensions, Other Retirement Benefits, and Other Postemployment Benefits: 

Reporting the Gains and Losses from Changes in Assumptions and Selecting Discount Rates and 

Valuation Dates, effective October 1, 2009. 

As discussed in Note 29, the Department is a participant in significant legislation and transactions 

whose purpose is to assist in stabilizing the financial markets. 

KPMG LLP is a Delaware limited liability partnership, 

the U.S. member firm of KPMG International Cooperative 

(“KPMG International”), a Swiss entity. 

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Notes 1A, 1V, 8, 9, and 12 respectively, discuss the following matters: 

•	 The consolidated financial statements do not include the assets, liabilities, or results of 

operations of commercial entities in which the Department has a significant equity 

interest as it has determined that none of these entities meet the criteria for inclusion as a 

federal entity and are therefore not included in the consolidated financial statements. 

•	 The valuation of certain investments, loans, commitments, and asset guarantees is based 

on estimates. These estimates are inherently subject to substantial uncertainty arising 

from the likelihood of future changes in general economic, regulatory, and market 

conditions. In addition, there are significant uncertainties related to the potential effect of 

proposed transactions, such as the restructuring of American International Group, Inc., 

on the amounts that the Department will realize from its investments. As such, there will 

be differences between the net estimated value of these investments, loans, 

commitments, and asset guarantees at September 30, 2010, and the amounts that will 

ultimately be realized from these assets or be required to pay to settle these commitments 

and guarantees. Such differences may be material and will also affect the ultimate cost of 

these programs. 

Our, and the other auditor’s, consideration of internal control over financial reporting identified 

significant deficiencies that we consider to collectively be a material weakness and other 

deficiencies that we consider to be significant deficiencies, as defined in the Internal Control Over 

Financial Reporting section of this report, as follows: 

Material Weakness 

• Financial Systems and Reporting at the Internal Revenue Service (Repeat Condition) 

Significant Deficiencies 

•	 Financial Management Practices at the Departmental Level (Repeat Condition) 

•	 Financial Accounting and Reporting at the Office of Financial Stability
 

(Repeat Condition)
 

•	 Information System Controls at the Financial Management Service (Repeat Condition) 

The results of our tests, and the tests performed by the other auditor, of compliance with certain 

provisions of laws, regulations, contracts, and grant agreements disclosed an instance of 

noncompliance with Internal Revenue Code (IRC) Section 6325, that is required to be reported under 

Government Auditing Standards, issued by the Comptroller General of the United States, and Office 

of Management and Budget (OMB) Bulletin No. 07-04, Audit Requirements for Federal Financial 

Statements, as amended. In addition, the Department’s financial management systems did not 

substantially comply with the Federal Financial Management Improvement Act of 1996 (FFMIA) 

requirements related to compliance with Federal financial management system requirements 

(FFMSR) and applicable Federal accounting standards. Our, and the other auditor’s audit 

disclosed no instances in which the Treasury’s financial management systems did not 

substantially comply with the U.S. Standard General Ledger at the transaction level. 

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In other matters, the Department informed us of an instance of a potential Anti-deficiency Act 

violation related to certain transactions and activities of the Treasury Inspector General for Tax 

Administration (TIGTA). This matter is currently under review. 

The following sections discuss our opinion on the consolidated financial statements; our, and the 

other auditor’s, consideration of the Department’s internal control over financial reporting; our, and 

the other auditor’s tests of compliance with certain provisions of applicable laws, regulations, 

contracts, and grant agreements; and management’s and our responsibilities. 

Opinion on the Financial Statements 

We have audited the accompanying consolidated balance sheets of the Department of the Treasury 

as of September 30, 2010 and 2009, and the related consolidated statements of net cost, changes in 

net position, the combined statements of budgetary resources, and the statements of custodial 

activity, for the years then ended. 

We did not audit the amounts included in the consolidated financial statements related to the IRS, a 

component entity of the Department, which reflect total assets of $43.2 billion and $36.8 billion, net 

costs of operations of $13.4 billion and $12.5 billion, before applicable eliminating entries, 

budgetary resources of $13.4 billion and $12.8 billion, and custodial revenues of $2.3 trillion each as 

of and for the years ended September 30, 2010 and 2009, respectively. The financial statements of 

IRS as of and for the years ended September 30, 2010 and 2009, were audited by another auditor 

whose report dated November 5, 2010, has been provided to us, and our opinion, insofar as it relates 

to the amounts included for the IRS, is based solely on the report of the other auditor. 

In addition, we did not audit the amounts included in the consolidated financial statements related to 

the OFS, a component entity of the Department, which reflect total assets of $244.2 billion and 

$337.4 billion, net (income) and net costs of operations of ($23.1) billion and $41.6 billion, before 

applicable eliminating entries, and budgetary resources of $195.3 billion and $699.4 billion, as of 

and for the years ended September 30, 2010 and 2009, respectively. The financial statements of OFS 

as of and for the years ended September 30, 2010 and 2009, were audited by another auditor whose 

report dated November 5, 2010, has been provided to us, and our opinion, insofar as it relates to the 

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

In our opinion, based on our audits, and the reports of the other auditor, 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, 2010 and 2009, and its net costs, changes in net 

position, budgetary resources, and custodial activity for the years then ended, in conformity with 

U.S. generally accepted accounting principles. 

As discussed in Note 21, the Department implemented Statement of Federal Financial Accounting 

Standards No. 33, Pensions, Other Retirement Benefits, and Other Postemployment Benefits: 

Reporting the Gains and Losses from Changes in Assumptions and Selecting Discount Rates and 

Valuation Dates, effective October 1, 2009. 

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As discussed in Note 29, the Department is a participant in significant legislation and transactions 

whose purpose is to assist in stabilizing the financial markets. 

Notes 1A, 1V, 8, 9, and 12, respectively, discuss the following matters: 

•	 The consolidated financial statements do not include the assets, liabilities, or results of 

operations of commercial entities in which the Department has a significant equity 

interest as it has determined that none of these entities meet the criteria for inclusion as a 

federal entity and are therefore not included in the consolidated financial statements. 

•	 The valuation of certain investments, loans, commitments, and asset guarantees is based 

on estimates. These estimates are inherently subject to substantial uncertainty arising 

from the likelihood of future changes in general economic, regulatory, and market 

conditions. In addition, there are significant uncertainties related to the potential effect of 

proposed transactions, such as the restructuring of American International Group, Inc., 

on the amounts that the Department will realize from its investments. As such, there will 

be differences between the net estimated value of these investments, loans, 

commitments, and asset guarantees at September 30, 2010, and the amounts that will 

ultimately be realized from these assets or be required to pay to settle these commitments 

and guarantees. Such differences may be material and will also affect the ultimate cost of 

these programs. 

The information in the PAR in Part 1: Management’s Discussion and Analysis (MD&A), and the 

Required Supplemental Information section of Part 3: Annual Financial Report, is not a required part 

of the consolidated financial statements, but is supplementary information required by U.S. generally 

accepted accounting principles. We have applied certain limited procedures, which consisted 

principally of inquiries of management regarding the methods of measurement and presentation of 

this information. However, we did not audit this information and, accordingly, we express no opinion 

on it. 

Our audits, and the audits of the other auditor, were conducted for the purpose of forming an opinion 

on the consolidated financial statements taken as a whole. The information in the Message from the 

Secretary of the Treasury, Part 2: the Annual Performance Report, the Message from the Assistant 

Secretary for Management and Chief Financial Officer, and the Inspector General’s Transmittal 

Letter in Part 3, and Part 4: Other Accompanying Information is presented for purposes of additional 

analysis and is not required as part of the consolidated financial statements. This information has not 

been subjected to auditing procedures and, accordingly, we express no opinion on it. 

Internal Control Over Financial Reporting 

Our, and the other auditor’s, consideration of the internal control over financial reporting was for a 

limited purpose described in the Responsibilities section of this report, and was not designed to 

identify all deficiencies in the internal control over financial reporting that might be significant 

deficiencies, or material weaknesses and therefore, there can be no assurance that all deficiencies, 

significant deficiencies, or material weaknesses have been identified. This report also includes our 

consideration of the results of the other auditor’s testing of internal control over financial reporting 

that is reported on separately by the other auditor. The other auditor performed an examination of 

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internal control over financial reporting for the purpose of providing an opinion on the effectiveness 

of IRS’s and OFS’s internal controls. This report, insofar as it relates to the results of the other 

auditor, is based solely on the reports of the other auditor. 

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 

combination of deficiencies, in internal control, such that there is a reasonable possibility that a 

material misstatement of the Department’s consolidated 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. 

In our fiscal year 2010 audit, we, and the other auditor, identified the significant deficiencies in 

internal control over financial reporting, discussed below. The significant deficiency related to 

Financial Systems and Reporting at IRS is considered to be a material weakness. Because of the IRS 

material weakness in internal control discussed below, the other auditor’s opinion on IRS’ internal 

control stated that IRS did not maintain effective internal control over financial reporting as of 

September 30, 2010, and thus did not provide reasonable assurance that losses and misstatements 

material in relation to the IRS’s financial statements would be prevented or detected and corrected on 

a timely basis. The other auditor’s opinion on OFS’s internal control stated that OFS maintained, in 

all material respects, effective internal control over financial reporting as of September 30, 2010. 

MATERIAL WEAKNESS 

Financial Systems and Reporting at IRS (Repeat Condition) 

IRS continued to make progress in addressing its internal control deficiencies. However, material 

weaknesses related to unpaid tax assessments, and information security controls continued to exist in 

fiscal year 2010, in addition to a new significant deficiency related to tax refunds disbursements. 

The challenges IRS faces as a result of these deficiencies adversely affect IRS’s ability to 

(1) produce reliable financial statements without significant compensating procedures, and (2) make 

well-informed decisions. As IRS continues to increase the automation of accounting and reporting 

processes, the need for effective security over the data these systems process becomes increasingly 

critical. These weaknesses also significantly increase the risk that sensitive taxpayer information may 

be compromised. 

These deficiencies in internal control over financial reporting identified by the auditors of IRS’s 

financial statements are collectively considered a material weakness for the Department as a whole. 

These deficiencies are summarized as follows: 

•	 Serious internal control issues continue to affect IRS’s management of unpaid tax 

assessments. Specifically, a lack of adequate procedures and systemic limitations in the 

programs used resulted in the following issues: (1) IRS’s reported balances for taxes 

receivable and other unpaid assessments were not traceable from its general ledger 

system for tax administration-related transactions to individual transactions in underlying 

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source records, (2) IRS lacked a subsidiary ledger for unpaid tax assessments that would 

allow it to produce reliable, useful, and timely information with which to manage and 

report externally, and (3) IRS experienced errors and delays in recording taxpayer 

information, payments, and other tax assessment-related activities. (Material Weakness) 

•	 Internal control over IRS’s information system’s security continued to be ineffective, 

particularly as it relates to controls over access to mission-critical applications and 

processing sensitive information. As a result, IRS could not rely on the internal controls 

contained in its automated financial management system to provide reasonable assurance 

that (1) its financial statements taken as a whole, were fairly stated, (2) the information 

IRS relied on to make decisions on a daily basis were accurate, complete, and timely, 

and (3) proprietary financial and taxpayer information was appropriately safeguarded. 

(Material Weakness) 

•	 Weaknesses in IRS’s controls over manual tax refunds as well as processing of claims 

for the First-Time Home Buyer Credit that resulted in duplicate or otherwise erroneous 

tax refund disbursements. (Significant Deficiency) 

The other auditor noted that the material weaknesses and significant deficiency in internal control 

noted above may adversely affect any decision by IRS’s management that are based, in whole or in 

part, on information that is inaccurate because of these deficiencies. 

Additional details related to the material weakness identified above have been provided to IRS 

management by the auditors of IRS’s financial statements in their report dated November 5, 2010. 

Recommendations 

Recommendations to address the material weakness discussed above have been provided to IRS 

management by the auditors of IRS’s financial statements. We recommend that the Assistant 

Secretary for Management and Chief Financial Officer (ASM/CFO) provide effective oversight to 

ensure that corrective actions are taken by IRS to resolve this material weakness. 

SIGNIFICANT DEFICIENCIES 

Financial Management Practices at the Departmental Level (Repeat Condition) 

We identified the following two deficiencies that we collectively consider to be a significant 

deficiency at the Departmental level. Both are repeat deficiencies related to Department-wide control 

environment weaknesses. 

Department-wide Entity Level Controls Affecting Financial Reporting 

Due to expanded accounting and reporting requirements and related responsibilities, further 

improvements are needed in the current staffing structure and staff skills at the Departmental level. 

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The Office of Accounting and Internal Control (AIC), within the Office of the Deputy Chief 

Financial Officer (ODCFO) is responsible for establishing and maintaining financial policies that 

guide financial and budgetary reporting throughout the Department, and ensure the overall integrity 

of financial data reported at the Departmental level. In fiscal year 2010, the Department took several 

steps to improve its current staffing structure and staff skills, including outlining a human capital 

needs assessment, hiring new staff, and providing training to existing staff. However, we continue to 

note weaknesses in the internal control environment, as described below, that negatively impact 

financial management at the Departmental level. 

In fiscal year 2010, AIC supplemented its existing staff and realigned duties and responsibilities 

within AIC. Although these steps helped with AIC’s staffing structure and needs, delays in hiring 

these additional personnel limited the opportunity to fully train them on the Department’s unique 

accounting and reporting needs. As a result, key accounting functions and duties, as well as 

accounting decisions continue to be performed by a few key senior staff members, until the new staff 

members are fully trained on Treasury’s unique accounting transactions. With regard to budgetary 

accounting and issues identified Department-wide, there is limited senior staff within AIC who have 

the knowledge and experience to adequately respond to and address issues. The lack of accounting 

staff possessing the knowledge and experience necessary to address accounting and reporting issues 

and questions at the Departmental level increases the risk that a misstatement in the consolidated 

financial statements and related note disclosures will not be detected. 

Financial Accounting and Reporting 

The Department’s financial accounting and reporting policies, procedures, the related internal 

controls, and testing for effectiveness of internal control over financial reporting, need improvement 

in the following areas. 

•	 Management’s review procedures over the consolidated financial statements are not sufficient to 

ensure the accuracy and validity of reported amounts. We continued to identify incorrect 

amounts and disclosures in the draft consolidated financial statements that were significant, but 

not material, and that were not detected by AIC. While improvements were noted in the review 

and approval process for preparing its consolidated financial statements and related note 

disclosures, additional supervision and review is needed. Further, the documentation supporting 

the consolidated financial statements amounts were in certain instances inadequate or incomplete 

in areas such as the President’s Budget Reconciliation. For example, certain key documentation 

that supported reconciling items was not provided until requested or had to be prepared 

subsequently. 

•	 While the Department took steps in fiscal year 2010 to develop policies and procedures over 14 

accounting and reporting areas, policies and procedures related to certain other significant 

accounting areas need to be addressed. Written policies and procedures to account for and report 

various non-routine, complex, and unique transactions, such as accounting and reporting of 

custodial transactions, U.S. Mint’s Seigniorage, transfers to the General Fund, and non-entity 

transactions have not been documented. Further, AIC did not have written procedures for 

performing certain key financial statements analyses such as that for proprietary and budgetary 

relationships, and cumulative results of operations. In addition, while the policies and procedures 

developed in fiscal year 2010 identify management controls in the workflow diagrams, 

descriptions of the controls need to be included in the policies and procedures. Proper 

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documentation depicting processes and controls is a critical component of internal control 

because it presents management’s overall processes to gather, process, and report financial 

information and ensure their compliance with applicable laws and regulations. 

•	 The Department’s actions to ensure that the Secretary’s assurance statement on the effectiveness 

of internal control over financial reporting is supported by verifiable results continue to require 

further improvement. Specifically, components are not consistently complying with the 

Department’s guidance for conducting management’s assessment of the effectiveness of internal 

control over financial reporting. Several steps were taken in the current year to improve 

implementation. AIC provided additional guidance to components by publishing fiscal year 2010 

OMB Circular No. A-123, Management’s Responsibility for Internal Control (A-123) Guidance 

(FY 10 Guidance), which clarified and enhanced previous guidance in various key areas. AIC 

provided sample documentation to components to follow during their test work. While the FY 

2010 Guidance appeared to be clear in terms of instructions, our review revealed several 

instances where the components did not completely adhere to the requirements of the Guidance. 

Four of six components that we tested conducted some, but not all, test work as required by the 

FY 2010 Guidance. These issues may ultimately result in the Secretary’s assurance statement on 

the effectiveness of internal control over financial reporting not being supported. 

The Federal Managers’ Financial Integrity Act of 1982 (FMFIA) requires that agencies establish 

internal controls according to standards prescribed by the Comptroller General and specified in the 

Government Accountability Office’s (GAO) Standards for Internal Control in the Federal 

Government (Standards). The GAO Standards require that internal controls be documented in 

management directives, administrative policies or operating manuals; transactions and other 

significant events be clearly documented; and information be recorded and communicated timely 

with those who need it within a timeframe that enables them to carry out their internal control 

procedures and other responsibilities. The GAO defines “internal control” as an integral component 

of an organization’s management that provides reasonable assurance that the following objectives are 

achieved: effectiveness and efficiency of operations, reliability of financial reporting, and 

compliance with applicable laws and regulations. The GAO Standards also identify the control 

environment as one of the five key elements of control, which emphasizes the importance of 

conscientiousness in management’s operating philosophy and commitment to internal control. These 

standards cover controls such as human capital practices, supervisory reviews, policies, procedures, 

monitoring, and segregation of duties. 

A-123 states that monitoring the effectiveness of internal control should occur in the normal course 

of business. In addition, periodic reviews, reconciliations or comparisons of data should be included 

as part of the regular assigned duties of personnel. Periodic assessments should be integrated as part 

of management’s continuous monitoring of internal control, which should be ingrained in the 

agency’s operations. An effective, continuous monitoring program can level the resources needed to 

maintain effective internal controls throughout the year. 

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Recommendations 

We recommend that the ASM/CFO: 

Department-wide Entity Level Controls Affecting Financial Reporting 

1.	 Provide AIC staff the appropriate training and on-the job experience to ensure that they possess 

the necessary knowledge and skills needed for their respective positions. 

Financial Accounting and Reporting 

2.	 Develop a plan to enhance the quality of supervisory reviews performed on the consolidated 

financial statements and supporting documentation by responsible officials including those with 

programmatic oversight, to ensure that errors and inconsistencies are identified and corrected in 

a timely manner. 

3.	 Require that policies and procedures are developed in sufficient detail to support all of the 

significant accounting and reporting requirements at the Departmental level, and include nonroutine or complex accounting and reporting matters. These policies should be periodically 

updated (at least annually). 

4.	 Improve the monitoring process of the A-123 work conducted by components to ensure that the 

Department’s Guidance is fully implemented and complied with, and supports the Secretary’s 

assurance statement on the effectiveness of internal control over financial reporting. 

Financial Accounting and Reporting at the OFS (Repeat Condition) 

During fiscal year 2010, OFS resolved one significant deficiency and made progress in addressing their 

other significant deficiency. However, the remaining control issues along with other control deficiencies 

that the other auditor identified collectively represent a continuing significant deficiency in OFS’s 

internal control over its accounting and financial reporting processes. The OFS deficiencies also 

collectively constitute a significant deficiency for the Department and are summarized as follows: 

•	 While improvements were noted in OFS’s review and approval process for preparing its financial 

statements, notes, and MD&A, the other auditor identified incorrect amounts and inconsistent 

disclosures in OFS’s draft financial statements, notes, and MD&A that were significant, but not 

material, and were not detected by OFS. 

•	 The other auditor identified instances where OFS’s procedures related to its process for accounting 

for certain program transactions, preparing its financial statements, and its oversight and monitoring 

of financial-related services provided to OFS by asset managers and certain financial agents were 

not always followed or effectively implemented. 

•	 OFS’s documentation was incomplete for certain areas of its asset valuation process. Specifically, 

some valuation methodology changes and the basis for certain assumptions derived from informed 

opinion that were used in valuing assets were not included in its written documentation. After the 

other auditor notified OFS that the documentation was incomplete, OFS was able to provide 

adequate additional information about its asset valuation process. 

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•	 OFS did not have adequate procedures to determine whether the tool and related guidance it used 

properly calculated valuations for certain assets with projected future disbursements. OFS’s use of 

the tool and related guidance resulted in errors in the valuation of such assets. 

OFS had other controls that reduced the risk of misstatements resulting from these deficiencies. For 

significant errors and issues that were identified, OFS revised the financial statements, notes, and 

MD&A, as appropriate. Properly designed and implemented controls over the accounting and financial 

reporting processes are key to providing reasonable assurance regarding the reliability of the balances 

and disclosures reported in the financial statements and related notes in conformity with generally 

accepted accounting principles. Misstatements may occur in other financial information reported by 

OFS and not be prevented or detected because of this significant deficiency. 

Additional details related to the significant deficiency identified above have been provided separately 

to OFS management by the auditors of the OFS’s financial statements. 

Recommendations 

Recommendations to address the significant deficiency discussed above will be provided to OFS 

management by the auditors of OFS’s financial statements. We recommend that the ASM/CFO 

provide effective oversight to ensure that corrective actions are taken by OFS to resolve this 

significant deficiency. 

Information System Controls at the FMS (Repeat Condition) 

FMS made progress in its efforts to address prior year weaknesses in the Information System (IT) 

controls and security programs it manages. Despite these improvements, current year tests conducted 

over IT general controls revealed that the necessary policies and procedures to detect and correct 

control and functionality weaknesses have not been consistently documented, implemented, or 

enforced. Specifically, issues were identified in the areas of (1) security management; (2) access; (3) 

change configuration; and (4) segregation of duties. These weaknesses could compromise FMS’s 

ability to ensure security over sensitive financial data and reliability of key systems and collectively 

serve to weaken the IT general control environment at FMS. 

Recommendation 

The detailed findings and related recommendations have been provided to FMS management in 

separate reports. We recommend that the ASM/CFO provide effective oversight and the resources 

necessary to ensure that information security requirements over financial systems are implemented at 

FMS. 

Compliance 

The results of certain of our tests, and the tests performed by the other auditor, of compliance as 

described in the Responsibilities section of this report, exclusive of those referred to in FFMIA, 

disclosed the following instance of noncompliance that is required to be reported herein under 

Government Auditing Standards and OMB Bulletin No. 07-04. 

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•	 Noncompliance with IRC Section 6325 - The IRC grants IRS the power to file a 

lien against the property of any taxpayer who neglects or refuses to pay all 

assessed Federal taxes. Under IRC Section 6325, IRS is required to release a 

Federal tax lien within 30 days after the date the tax liability is satisfied, or has 

become legally unenforceable, or the Secretary of the Treasury has accepted a 

bond for the assessed tax. Despite actions IRS has taken to date to improve its 

lien release process, instances continued to be identified where IRS did not 

timely release the applicable Federal tax lien within 30 days after taxpayers paid 

or were otherwise relieved of a tax liability (Repeat Condition). 

The results of our other tests, and the tests performed by the other auditor, of compliance as 

described in the Responsibilities section of this report, exclusive of those referred to in FFMIA, 

disclosed no other instances of noncompliance or other matters that are required to be reported herein 

under Government Auditing Standards and OMB Bulletin No. 07-04. 

The results of our tests of FFMIA, and the tests performed by the other auditor, disclosed instances 

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

Section 803(a) requirements (Repeat Condition) related to compliance with (1) federal financial 

management system requirements (FFMSR), and (2) applicable Federal accounting standards. Our, 

and the other auditor’s audit disclosed no instances in which the Treasury’s financial 

management systems did not substantially comply with the U.S. Standard General Ledger at 

the transaction level. 

Instances of noncompliance with FFMSR are summarized below: 

•	 Persistent deficiencies in IRS’s internal control over information security remain 

uncorrected. As a result of these deficiencies, IRS was (1) unable to rely upon these 

controls to provide reasonable assurance that its financial statements are fairly stated in 

the absence of effective compensating procedures, (2) unable to ensure the reliability of 

other financial management information produced by its systems, and (3) at increased 

risk of compromising confidential IRS and taxpayer information. 

An instance of noncompliance with Federal accounting standards is summarized below: 

•	 IRS’s automated systems for tax related transactions did not support the net taxes 

receivable amount on IRS’s balance sheet and other required supplemental information 

related to uncollected taxes - compliance assessments and tax write-offs - in accordance 

with Statement of Federal Financial Accounting Standards No. 7, Accounting for 

Revenue and Other Financing Sources and Concepts for Reconciling Budgetary and 

Financial Accounting. 

The Secretary of the Treasury also stated in his Letter of Assurance, included in Part 1: 

Management’s Discussion and Analysis, of the accompanying PAR that the Department cannot 

provide assurance that its financial management systems are in substantial compliance with FFMIA. 

IRS has established a remediation plan to address the conditions that led to its systems’ substantial 

noncompliance with the requirements of FFMIA. This plan outlines the actions to be taken to resolve 

these issues, and defines related resources and responsible organizational units. Many of the actions 

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detailed in the plan are long-term in nature and are tied to IRS’s systems modernization efforts. The 

Department’s remedial actions and related timeframes are presented in Appendix D: Material 

Weaknesses, Audit Follow-up, Financial Systems, and Recovery Act Risk Management, of the PAR. 

Recommendation 

We recommend that the ASM/CFO provide effective oversight to ensure that (1) IRS implements 

appropriate controls so that Federal tax liens are released in accordance with Section 6325 of the 

IRC; and (2) IRS implements its plan of action to solve financial management problems so as to 

enable resolving the identified instances of financial management systems’ noncompliance with the 

requirements of FFMIA. Detailed recommendations to address the noncompliance findings discussed 

above have been provided to IRS management by the auditors of the IRS’s financial statements. 

Other Matter 

The Department informed us of an instance of a potential Anti-deficiency Act violation related to 

certain transactions and activities of the TIGTA. Specifically, budgetary control weaknesses existing 

within the TIGTA may have allowed a potential violation of the Anti-deficiency Act. This matter is 

currently under review. 

Department’s Response to Internal Control and Compliance Findings 

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

the findings presented in this section of our report. Further, it has responded that it will take 

corrective action, as necessary, to ensure the matters presented are addressed by the respective 

component management within the Department. We did not audit the Department’s response and, 

accordingly, we express no opinion on it. 

* * * * * 

We noted certain additional matters involving internal control over financial reporting and its 

operation that we will report to the Department in a separate letter. 

Responsibilities 

Management’s Responsibilities. Management is responsible for the consolidated financial 

statements; establishing and maintaining effective internal control; and complying with laws, 

regulations, contracts, and grant agreements applicable to the Department. 

Auditors’ Responsibilities. Our responsibility is to express an opinion on the fiscal year 2010 and 

2009 consolidated financial statements of the Department based on our audits and the reports of the 

other auditor. We, and the other auditor, conducted our audits in accordance with the standards 

applicable to financial audits contained in Government Auditing Standards, issued by the 

Comptroller General of the United States; and OMB Bulletin No. 07-04, as amended. Those 

standards and OMB Bulletin No. 07-04 require that we plan and perform the audits to obtain 

reasonable assurance about whether the consolidated financial statements are free of material 

misstatement. An audit includes consideration of internal control over financial reporting as a basis 

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for designing audit procedures that are appropriate in the circumstances, but not for the purpose of 

expressing an opinion on the effectiveness of the Department’s internal control over financial 

reporting. Accordingly, we express no such opinion. 

An audit also includes: 

•	 Examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated 

financial statements; 

• Assessing the accounting principles used and significant estimates made by management; and 

• Evaluating the overall consolidated financial statement presentation. 

We believe that our audits, and the reports of the other auditor related to the amounts included for 

IRS and OFS, provide a reasonable basis for our opinion. 

In planning and performing our fiscal year 2010 audit, we considered the Department’s internal 

control over financial reporting, exclusive of the internal control over financial reporting related to 

IRS and OFS, by obtaining an understanding of the design effectiveness of the Department’s internal 

control, determining whether internal controls had been placed in operation, assessing control risk, 

and performing tests of controls as a basis for designing our auditing procedures 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 over financial 

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

internal control over financial reporting. Internal control over financial reporting related to IRS and 

OFS was considered by the other auditor whose reports thereon dated November 5, 2010, have been 

provided to us. We, and the other auditor, did not test all internal controls relevant to operating 

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

objective of our audit was not to express an opinion on the effectiveness of the Department’s internal 

control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of 

the Department’s internal control over financial reporting. The objective of the other auditor’s audits 

was to express an opinion on the effectiveness of the IRS’s and the OFS’s internal control over 

financial reporting. Because of the IRS material weakness in internal control, the other auditor’s 

opinion on the IRS’ internal control stated that IRS did not maintain effective internal control over 

financial reporting as of September 30, 2010. The other auditor’s opinion on OFS’s internal control 

stated that OFS maintained, in all material respects, effective internal control over financial reporting 

as of September 30, 2010. 

As part of obtaining reasonable assurance about whether the Department’s fiscal year 2010 

consolidated financial statements are free of material misstatement, we, and the other auditor, 

performed tests of the Department’s compliance with certain provisions of laws, regulations, 

contracts, and grant agreements, noncompliance with which could have a direct and material effect 

on the determination of the consolidated financial statement amounts, and certain provisions of other 

laws and regulations specified in OMB Bulletin No. 07-04, including the provisions referred to in 

Section 803(a) of FFMIA. We, and the other auditor, limited our tests of compliance to the 

provisions described in the preceding sentence, and we, and the other auditor, did not test compliance 

with all laws, regulations, contracts, and grant agreements applicable to the Department. However, 

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providing an opinion on compliance with laws, regulations, contracts, and grant agreements was not 

an objective of our audits and, accordingly, we, and the other auditor, do not express such an 

opinion. 

This report is intended solely for the information and use of the Department, the Department’s Office 

of Inspector General, OMB, the GAO, and the U.S. Congress and is not intended to be and should 

not be used by anyone other than these specified parties. 

November 15, 2010 

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151 

DEPARTMENT OF THE TREASURY
 

WASHINGTON, D.C.
 

ASSISTANT SECRETARY 

november 15, 2010 

kPMg llP 

2001 M street, n.W. 

Washington, Dc 20036 

ladies and gentlemen: 

on behalf of secretary geithner, I am responding to your draft audit report on the Department of the treasury’s fiscal year 2010 

consolidated financial statements. our bureaus and program offices all can be proud of the Department’s success in achieving an 

unqualified opinion on the Department’s financial statements for the eleventh consecutive year. We are also proud of the second 

unqualified opinion from the government accountability office (gao) on the office of financial stability’s financial statements. 

these successful results also are due in large part to the high level of professionalism, technical expertise, and partnership 

demonstrated by kPMg in conducting the audit. treasury appreciates your efforts during the audit process to provide timely, 

constructive advice on how to improve our financial reporting. treasury is equally appreciative of the expertise and commitment 

demonstrated by the other organizations involved in the audit process – the office of Inspector general, gao, and the firms that 

audited several of our bureaus. 

kPMg recognized treasury’s intensive efforts in fiscal year 2010 to resolve the material weakness on financial management practices 

at the departmental level by downgrading the weakness to a significant deficiency. the Department continued to make significant 

progress during the year to address previously identified financial and information management deficiencies. as reported by gao, 

the Internal revenue service made strides in improving its financial management by bringing its financial management systems into 

compliance with the United States Standard General Ledger and correcting several longstanding information security weaknesses.

 We acknowledge the Departmental level material weakness, significant deficiencies, and instances 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 quickly and aggressively. 

Dan tangherlini 

assistant secretary for Management 

and chief financial officer 

management's response to auditors' report 

part 3: annual financial report
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CONSOLIDATED BALANCE ShEETS 

As of September 30, 2010 and 2009 

(In Millions) 

ASSETS 2010 2009 

Intra-governmental Assets 

Fund Balance (Note 2) $ 437,026 $ 504,582 

Loans and Interest Receivable (Note 3) 552,853 410,591 

Troubled Asset Relief Program Asset Guarantee Program (Note 8) 815 0 

Advances to the Unemployment Trust Fund (Note 4) 34,111 7,981 

Due from the General Fund (Note 4) 13,655,637 11,992,719 

Accounts Receivable and Related Interest (Note 5) 361 298 

Other Intra-governmental Assets 3 5 

Total Intra-governmental Assets 14,680,806 12,916,176 

Cash, Foreign Currency, and Other Monetary Assets (Note 6) 375,282 341,308 

Gold and Silver Reserves (Note 7) 11,062 11,062 

Troubled Asset Relief Program Direct Loans and Equity Investments, Net and Asset Guarantee Program (Note 8) 144,692 239,657 

Investments in Government Sponsored Enterprises (Notes 4 and 9) 109,216 64,679 

Investments in International Financial Institutions (Note 10) 5,580 5,575 

Other Investments and Related Interest (Note 11) 12,639 13,565 

Credit Program Receivables and Direct Loans, Net (Note 12) 186,396 184,460 

Loans and Interest Receivable (Notes 4 and13) 124 127 

Reserve Position in the International Monetary Fund (Note 14) 12,938 13,469 

Tax, Other, and Related Interest Receivables, Net (Note 15) 36,976 30,408 

Inventory and Related Property, Net (Note 16) 697 598 

Property, Plant, and Equipment, Net (Note 17) 2,031 2,036 

Beneficial Interest in Trust (Notes 4 and 29) 20,805 23,472 

Other Assets 13 9 

Total Assets $ 15,599,257 $ 13,846,601 

Heritage Assets (Note 17) 

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

152 financial statements 

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153 

CONSOLIDATED BALANCE ShEETS
 

As of September 30, 2010 and 2009
 

(In Millions) 

LIABILITIES 2010 2009 

Intra-governmental Liabilities 

Federal Debt and Interest Payable (Notes 4 and 19) $ 4,587,802 $ 4,403,080 

Other Debt and Interest Payable (Note 20) 10,358 12,060 

Due to the General Fund (Notes 4, 6, and 27) 1,414,252 1,263,128 

Other Intra-governmental Liabilities (Note 22) 366 425 

Total Intra-governmental Liabilities 6,012,778 5,678,693 

Federal Debt and Interest Payable (Notes 4 and 19) 9,035,929 7,559,305 

Certificates Issued to the Federal Reserve (Note 6) 5,200 5,200 

Allocation of Special Drawing Rights (Note 6) 54,958 55,953 

Gold Certificates Issued to the Federal Reserve (Note 7) 11,037 11,037 

Refunds Payable (Notes 4 and 26) 4,146 4,040 

D.C. Pensions and Judicial Retirement Actuarial Liability (Note 21) 9,743 9,049 

Liabilities to Government Sponsored Enterprises (Note 9) 359,900 91,937 

Other Liabilities (Note 22) 4,470 3,331 

Total Liabilities 15,498,161 13,418,545 

Commitments and Contingencies (Note 31) 

NET POSITION 

Unexpended Appropriations: 

Earmarked Funds (Note 27) 200 200 

Other Funds 400,357 454,944 

Subtotal 400,557 455,144 

Cumulative Results of Operations: 

Earmarked Funds (Note 27) 41,426 41,653 

Other Funds (340,887) (68,741) 

Subtotal (299,461) (27,088) 

Total Net Position (Note 23) 101,096 428,056 

Total Liabilities and Net Position $ 15,599,257 $ 13,846,601 

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

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CONSOLIDATED STATEMENTS OF NET COST 

For the Years Ended September 30, 2010 and 2009 

(In Millions) 

COST OF TREASURY OPERATIONS: (Note 24) 

Financial Program: 

Gross Cost 

Less Earned Revenue 

Net Program Cost 

$ 

2010 

15,854 

(2,611) 

13,243 

$ 

2009 

15,313 

(2,258) 

13,055 

Economic Program: 

Gross Cost 

Less Earned Revenue 

Net Program Cost 

314,138 

(16,904) 

297,234 

210,490 

(14,785) 

195,705 

Security Program: 

Gross Cost 

Less Earned Revenue 

Net Program Cost 

344 

(4) 

340 

325 

(3) 

322 

Management Program: 

Gross Cost 

Less Earned Revenue 

Net Program Cost 

582 

(56) 

526 

569 

(60) 

509 

Total Program Gross Costs 

Total Program Gross Earned Revenues 

Total Program Cost before Changes in Actuarial Assumptions 

(Gains)/Losses on Pension, ORB, or OPEB Assumption Changes 

Total Net Cost of Treasury Operations (Note 24) 

330,918 

(19,575) 

311,343 

820 

312,163 

226,697 

(17,106) 

209,591 

0 

209,591 

Federal Costs: 

Federal Debt Interest 

Less Interest Revenue from Loans 

Net Federal Debt Interest Costs 

Other Federal Interest 

Net GSEs Non-Entity Revenue (Note 9) 

Other Federal Costs (Note 24) 

Total Net Federal Costs

412,855 

(22,258) 

390,597 

6 

(56,678) 

12,753 

346,678 

380,519 

(17,326) 

363,193 

0 

(61,983) 

12,131 

313,341 

Net Cost of Treasury Operations, Federal Debt Interest, Net GSEs Non-Entity Cost, and Other Federal Costs $ 658,841 $ 522,932 

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

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CONSOLIDATED STATEMENT OF ChANGES IN NET POSITION
 

For the Year Ended September 30, 2010
 

(In Millions) 

Combined Combined 

Earmarked All Other Consolidated 

CUMULATIvE RESULTS OF OPERATIONS Funds Funds Elimination Total 

Beginning Balances $ 41,653 $ ($68,741) $ 0 $ (27,088) 

Budgetary Financing Sources: 

Appropriations Used 527 501,912 0 502,439 

Non-exchange Revenue 56 229 (4) 281 

Donations and Forfeitures of Cash/Equivalent 324 0 0 324 

Transfers In/Out Without Reimbursement (27) 13 0 (14) 

Other 0 12 0 12 

Other Financing Sources (non-exchange): 

Donation/Forfeiture of Property 319 0 0 319 

Accrued Interest and Discount on Debt 0 11,086 0 11,086 

Transfers In/Out Without Reimbursement (79) 37 0 (42) 

Imputed Financing Sources 74 1,486 (552) 1,008 

Transfers to the General Fund and Other (Note 23) (65) (128,880) 0 (128,945) 

Total Financing Sources 1,129 385,895 (556) 386,468 

Net Cost of Operations (1,356) (658,041) 556 (658,841) 

Net Change (227) (272,146) 0 (272,373) 

Cumulative Results of Operations $ 41,426 $ (340,887) $ 0 $ (299,461) 

UNEXPENDED APPROPRIATIONS 

Beginning Balances $ 200 $ 454,944 $ 0 $ 455,144 

Budgetary Financing Sources: 

Appropriations Received (Note 23) 527 456,443 0 456,970 

Appropriations Transferred In/Out 0 92 0 92 

Other Adjustments 0 (9,210) 0 (9,210) 

Appropriations Used (527) (501,912) (502,439) 

Total Budgetary Financing Sources 0 (54,587) 0 (54,587) 

Total Unexpended Appropriations 200 400,357 0 400,557 

Net Position $ 41,626 $ 59,470 $ 0 $ 101,096 

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

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CONSOLIDATED STATEMENT OF ChANGES IN NET POSITION 

For the Year Ended September 30, 2009 

(In Millions) 

Combined Combined 

Earmarked All Other Consolidated 

CUMULATIvE RESULTS OF OPERATIONS Funds Funds Elimination Total 

Beginning Balances $ 37,586 $ 157 $ 0 $ 37,743 

Budgetary Financing Sources: 

Appropriations Used 408 667,745 0 668,153 

Non-exchange Revenue 263 234 (4) 493 

Donations and Forfeitures of Cash/Equivalent 257 0 0 257 

Transfers In/Out Without Reimbursement (16) (7) 2 (21) 

Other 10 2 0 12 

Other Financing Sources (non-exchange): 

Donation/Forfeiture of Property 127 0 0 127 

Accrued Interest and Discount on Debt 0 6,027 0 6,027 

Transfers In/Out Without Reimbursement (63) 29 (2) (36) 

Imputed Financing Sources 61 1,206 (474) 793 

Transfers to the General Fund and Other (Note 23) (31) (217,673) 0 (217,704) 

Total Financing Sources 1,016 457,563 (478) 458,101 

Net Cost of Operations 3,051 (526,461) 478 (522,932) 

Net Change 4,067 (68,898) 0 (64,831) 

Cumulative Results of Operations $ 41,653 $ (68,741) $ 0 $ (27,088) 

UNEXPENDED APPROPRIATIONS 

Beginning Balances $ 200 $ 271,768 $ 0 $ 271,968 

Budgetary Financing Sources: 

Appropriations Received (Note 23) 408 855,354 0 855,762 

Appropriations Transferred In/Out 0 11 0 11 

Other Adjustments 0 (4,444) 0 (4,444) 

Appropriations Used (408) (667,745) 0 (668,153) 

Total Budgetary Financing Sources 0 183,176 0 183,176 

Total Unexpended Appropriations 200 454,944 0 455,144 

Net Position $ 41,853 $ 386,203 $ 0 $ 428,056 

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

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157 

COMBINED STATEMENT OF BUDGETARY RESOURCES 

For the Year Ended September 30, 2010 

(In Millions) 

Non-Budgetary 

Budgetary Financing Total 

Budgetary Resources 

Unobligated balance, brought forward, Oct. 1 $ 401,626 $ 41,827 $ 443,453 

ESF Adjustment for Change in Accounting Policy (Notes 1 and 25) 14,135 0 14,135 

Unobligated balance, brought forward, Oct. 1, as adjusted 415,761 41,827 457,588 

Recoveries of prior year unpaid obligations 2,979 39,370 42,349 

Budget authority: 

Appropriations (Note 23) 569,010 0 569,010 

Borrowing authority (Note 25) 1 151,472 151,473 

Spending authority from offsetting collections: 

Earned: 

Collected 9,401 204,946 214,347 

Change in receivables from Federal sources 22 0 22 

Change in unfilled customer orders: 

Advance received (56) 0 (56) 

Without advance from Federal sources 2 (5,111) (5,109) 

Subtotal 578,380 351,307 929,687 

Non-expenditure transfers, net 361 0 361 

Temporarily not available pursuant to Public Law (142) 0 (142) 

Permanently not available (47,341) (189,421) (236,762) 

Total Budgetary Resources $ 949,998 $ 243,083 $ 1,193,081 

Status of Budgetary Resources 

Obligations incurred (Note 25): 

Direct $ 581,303 $ 219,264 $ 800,567 

ESF Adjustment for Change in Accounting Policy 14,135 0 14,135 

Direct, Adjusted 595,438 219,264 814,702 

Reimbursable 6,136 0 6,136 

Subtotal 601,574 219,264 820,838 

Unobligated Balance: 

Apportioned 267,581 20,961 288,542 

Exempt from apportionment 13,269 0 13,269 

Subtotal 280,850 20,961 301,811 

Unobligated balance not available 67,574 2,858 70,432 

Total Status of Budgetary Resources $ 949,998 $ 243,083 $ 1,193,081 

Change in Obligated Balance 

Obligated balance, net: 

Unpaid obligations, brought forward, Oct. 1 $ 108,210 $ 79,209 $ 187,419 

Uncollected customer payments from Federal sources, brought forward, Oct. 1 (168) (28,928) (29,096) 

Total unpaid obligated balance, net 108,042 50,281 158,323 

Obligations incurred, net 601,574 219,264 820,838 

Gross outlays (524,098) (209,612) (733,710) 

Recoveries of prior year unpaid obligations, actual (2,979) (39,370) (42,349) 

Change in uncollected customer payments from Federal sources (24) 5,111 5,087 

Obligated balance, net, end of period: 

Unpaid obligations 182,707 49,491 232,198 

Uncollected customer payments from Federal sources (192) (23,817) (24,009) 

Total, unpaid obligated balance, net, end of period (Notes 1 & 25) 182,515 25,674 208,189 

Net outlays 

Gross outlays 524,098 209,612 733,710 

Offsetting collections (9,345) (204,946) (214,291) 

Distributed offsetting receipts (169,303) (9,606) (178,909) 

Net Outlays $ 345,450 $ (4,940) $ 340,510 

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

financial statements 

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COMBINED STATEMENT OF BUDGETARY RESOURCES 

For the Year Ended September 30, 2009 

(In Millions) 

Non-Budgetary 

Budgetary Financing Total 

Budgetary Resources 

Unobligated balance, brought forward $ 260,173 $ 24,457 $ 284,630 

Recoveries of prior year unpaid obligations 8,097 (1) 8,096 

Budget authority: 

Appropriations (Note 23) 952,185 0 952,185 

Borrowing authority 493 548,242 548,735 

Spending Authority from Offsetting Collections 

Earned: Collected 11,681 272,768 284,449 

Change in receivables from Federal sources (44) 0 (44) 

Change in unfilled customer orders: 

Advance received (31) 0 (31) 

Without advance from Federal sources (134) 28,926 28,792 

Subtotal 964,150 849,936 1,814,086 

Non-expenditure transfers, net (43) 0 (43) 

Temporarily not available pursuant to Public Law 2 0 2 

Permanently not available (92,001) (179,736) (271,737) 

Total Budgetary Resources $ 1,140,378 $ 694,656 $ 1,835,034 

Status of Budgetary Resources 

Obligations incurred (Note 25): Direct $ 729,697 $ 652,829 $ 1,382,526 

Reimbursable 4,669 0 4,669 

Subtotal 734,366 652,829 1,387,195 

Unobligated Balance: Apportioned 349,889 19,612 369,501 

Exempt from apportionment 44,497 0 44,497 

Subtotal 394,386 19,612 413,998 

Unobligated balance not available 11,626 22,215 33,841 

Total Status of Budgetary Resources $ 1,140,378 $ 694,656 $ 1,835,034 

Change in Obligated Balance 

Obligated balance, net: 

Unpaid obligations, brought forward, Oct. 1 $ 57,314 $ 10 $ 57,324 

Uncollected customer payments from Federal sources, brought forward, Oct. 1 (346) (1) (347) 

Total unpaid obligated balance, net 56,968 9 56,977 

Obligations incurred, net 734,366 652,829 1,387,195 

Gross outlays (675,286) (573,630) (1,248,916) 

Recoveries of prior year unpaid obligations, actual (8,097) 1 (8,096) 

Change In uncollected customer payments from Federal source 178 (28,926) (28,748) 

Obligated balance, net, end of period: 

Unpaid obligations 108,297 79,209 187,506 

Uncollected customer payments from Federal sources (168) (28,926) (29,094) 

Total unpaid obligated balance, net, end of period 108,129 50,283 158,412 

Net Outlays 

Gross outlays 675,286 573,630 1,248,916 

Offsetting collections (9,369) (272,768) (282,137) 

Distributed offsetting receipts (40,114) (4,500) (44,614) 

Net Outlays $ 625,803 $ 296,362 $ 922,165 

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

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159 

STATEMENTS OF CUSTODIAL ACTIVITY 

For the Years Ended September 30, 2010 and 2009 

(In Millions) 

Sources of Custodial Revenue (Note 26): 

Revenue Received 

2010 2009 

Individual Income and FICA Taxes 

Corporate Income Taxes 

Estate and Gift Taxes 

Excise Taxes 

Railroad Retirement Taxes 

Unemployment Taxes 

Deposit of Earnings, Federal Reserve System 

Fines, Penalties, Interest and Other Revenue 

Total Cash Revenue Received 

Less Refunds 

Net Cash Revenue Received 

$ 1,988,760 

277,937 

19,751 

70,946 

4,648 

6,543 

75,845 

1,880 

2,446,310 

(469,937) 

1,976,373 

$ 2,036,557 

225,482 

24,677 

67,248 

4,711 

6,765 

34,318 

1,929 

2,401,687 

(437,972) 

1,963,715 

Non-Cash Custodial Transactions 

Beneficial Interest in Trust – Market Adjustment (Note 29) 

Accrual Adjustment 

Total Custodial Revenue 

(2,666) 

6,539 

1,980,246 

23,472 

(1,097) 

1,986,090 

Disposition of Custodial Revenue: 

Amounts Provided to Fund Non-Federal Entities 

Amounts Provided to Fund the Federal Government (Notes 26 ) 

Total Disposition of Cash Revenue 

387 

1,975,986 

1,976,373 

487 

1,963,228 

1,963,715 

Non-cash Revenue – Beneficial Interest in Trust – Market Adjustment 

Accrual Adjustment 

Total Disposition of Custodial Revenue 

Net Custodial Revenue $ 

(2,666) 

6,539 

1,980,246 

0 $ 

23,472 

(1,097) 

1,986,090 

0 

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

financial statements 

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the department of the treasury 

notes to the fInancIal stateMents 

table Of COntents 

1. Summary of Significant Accounting Policies ............................................... Page 161
 

2. Fund Balance ......................................................................... Page 176
 

3. Loans and Interest Receivable – Intra-governmental ........................................ Page 178
 

4. Due from the General Fund and Due to the General Fund .................................... Page 180
 

5. Accounts Receivable and Related Interest – Intra-governmental .............................. Page 182
 

6. Cash, Foreign Currency, and Other Monetary Assets ........................................ Page 183
 

7. Gold and Silver Reserves, and Gold Certificates Issued to the Federal Reserve Banks ............ Page 186
 

8. TARP Direct Loans and Equity Investments, Net and Asset Guarantee Program (GSEs) ........... Page 187
 

9. Investments in Government Sponsored Enterprises ........................................ Page 211
 

10. Investments in International Financial Institutions .......................................... Page 216
 

11. Other Investments and Related Interest................................................... Page 217
 

12. Credit Program Receivables and Direct Loans, Net ......................................... Page 218
 

13. Loans and Interest Receivable ........................................................... Page 222
 

14. Reserve Position in the International Monetary Fund........................................ Page 223
 

15. Tax, Other, and Related Interest Receivables, Net........................................... Page 225
 

16. Inventory and Related Property, Net...................................................... Page 226
 

17. Property, Plant, and Equipment, Net...................................................... Page 227
 

18. Non-Entity Assets ..................................................................... Page 228
 

19. Federal Debt and Interest Payable ........................................................ Page 229
 

20. Other Debt and Interest Payable ......................................................... Page 232
 

21. D.C. Pensions and Judicial Retirement Actuarial Liability .................................... Page 233
 

22. Liabilities............................................................................. Page 235
 

23. Net Position .......................................................................... Page 237
 

24. Consolidated Statement of Net Cost and Net Costs of Treasury Sub-organizations .............. Page 238
 

25. Additional Information Related to the Combined Statements of Budgetary Resources ........... Page 245
 

26. Collection and Disposition of Custodial Revenue ........................................... Page 249
 

27. Earmarked Funds ...................................................................... Page 251
 

28. Reconciliation of Net Cost of Operations to Budget ......................................... Page 255
 

29. Financial Stability and Stimulus Activities................................................. Page 256
 

30. Schedule of Fiduciary Activity ........................................................... Page 260
 

31. Commitments and Contingencies ........................................................ Page 262
 

Required Supplemental Information (Unaudited) ........................................... Page 266
 

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1. Summary of Significant Accounting Policies 

A. Reporting Entity 

the accompanying financial statements include the operations of the u.s. Department of the treasury (Department), one of 24 cfo 

act agencies of the executive branch of the united states government, and certain custodial activities managed on behalf of the 

entire u.s. government. the following paragraphs describe the activities of the reporting entity. 

the Department was created by act (1 stat.65) on september 2, 1789. Many subsequent acts affected the development of the 

Department, delegating new duties to its charge and establishing the numerous bureaus and divisions that now comprise the 

Department. as a major policy advisor to the President, the secretary 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 united states domestic and international economic and fiscal 

policy; governing the fiscal operations of the government; maintaining foreign assets control; managing the federal debt; collecting income 

and excise taxes; representing the united states on international monetary, trade, and investment issues; overseeing Departmental 

overseas operations; and directing the manufacturing of coins, currency, and other products for customer agencies and the public. 

the Department includes the Departmental offices (Do) and nine operating bureaus. for financial reporting purposes, Do 

is composed of: International assistance Programs (IaP), office of Inspector general (oIg), the special office of Inspector 

general for the troubled asset relief Program (sIgtarP), treasury forfeiture fund (tff), exchange stabilization fund (esf), 

community Development financial Institutions fund (cDfI), office of D.c. Pensions (DcP), treasury Inspector general for tax 

administration (tIgta), federal financing bank (ffb), office of financial stability (ofs), government sponsored enterprise 

Program (gses) and the Do policy offices. 

the nine operating bureaus are: bureau of engraving and Printing (beP); bureau of the Public Debt (bPD); financial crimes enforcement 

network (fincen); financial Management service (fMs); Internal revenue service (Irs); united states Mint (Mint); office of the 

comptroller of the currency (occ); office of thrift supervision1

 (ots); and the alcohol and tobacco tax and trade bureau (ttb). 

the Department’s financial statements reflect the reporting of its own entity activities, which include appropriations it receives to 

conduct its operations and revenue generated from those operations. they also reflect the reporting of certain non-entity (custodial) 

functions it performs on behalf of the u.s. government and others. non-entity activities include collecting federal revenue, 

servicing the federal debt, disbursing certain federal funds, and maintaining certain assets and liabilities for the u.s. government, as 

well as for other federal entities. the Department’s reporting entity does not include the “general fund” of the u.s. government, 

which maintains receipt, disbursement, and appropriation accounts for all federal agencies. 

transactions and balances among the Department’s entities have been eliminated from the consolidated balance sheets, the 

consolidated statements of net cost, and the consolidated statements of changes in net Position. 

following generally accepted accounting Principles (gaaP) for federal entities, the Department has not consolidated into its 

financial statements the assets, liabilities, or results of operations of any financial organization or commercial entity in which it holds 

either a direct, indirect or beneficial majority equity investment. even though some of the equity investments are significant, these 

entities meet the criteria of “bailed out” entities under paragraph 50 of the statement of federal financial accounting concepts 

(sffac) no. 2, which directs that such “bailout” investments should not be consolidated into the financial reports of the federal 

government, either in part or as a whole. 

on July 21, 2010, the President signed into law the Dodd-frank Wall street reform and consumer Protection act, which includes the enhancing 

financial Institution safety and soundness act of 2010 (the “act”). under the act, ots will be abolished and some of its functions will be transferred to 

the occ on July 21, 2011 (the “transfer date”). 

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In addition, the Department has made loans and investments in certain special Purpose Vehicles2 (sPV). sffac no. 2, paragraphs 

43 and 44, reference indicative criteria such as ownership and control over an sPV to carry out government powers and missions, 

as criteria in the determination about whether the sPV should be classified as a federal entity. the Department has concluded that 

the lack of control over the sPVs is the primary basis for determining that none of the sPVs meet the criteria to be classified as a 

federal entity. as a result, the assets, liabilities and results of operations of the sPVs are not included in the Department financial 

statements. the Department has recorded the loans and investments in private entities and investments in sPVs in accordance with 

credit reform accounting, as discussed below. additional disclosures regarding these sPV investments are included in note 8, see 

automotive Industry financing Program, term asset-backed loan facility and the Public-Private Investment Program. 

B. Basis of Accounting and Presentation 

the financial statements have been prepared from the accounting records of the Department in conformity with accounting 

principles generally accepted in the united states for federal entities, and the office of Management and budget (oMb) circular 

a-136, Financial Reporting Requirements, as amended. accounting principles generally accepted for federal entities are the standards 

prescribed by the federal accounting standards advisory board (fasab). fasab is recognized by the american Institute of 

certified Public accountants as the official accounting standards-setting body of the u.s. government. 

these financial statements are provided to meet the requirements of the Government Management Reform Act of 1994. they 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 2010 and fiscal year 2009 information. 

While these financial statements have been prepared from the books and records of the Department in accordance with the formats 

prescribed by oMb, these financial statements are in addition to the financial reports used to monitor and control budgetary 

resources which are prepared from the same books and records. 

Intra-governmental assets and liabilities are those due from or to other federal entities. Intra-governmental earned revenues are 

collections or accruals of revenue from other federal entities, and intra-governmental costs are payments or accruals of expenditures 

to other federal entities. 

the financial statements should be read with the realization that they are for a component of a sovereign entity, that liabilities 

not covered by budgetary resources cannot be liquidated without the 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. since the Department is a component of the u.s. 

government, a sovereign entity, the Department’s liabilities cannot be liquidated without legislation that provides resources or an 

appropriation. liabilities covered by budgetary resources are those liabilities for which congress has appropriated funds or funding is 

otherwise available to pay amounts due. liabilities not covered by budgetary or other resources represent amounts owed in excess of 

available, congressionally appropriated funds or other amounts, and there is no certainty that the appropriations will be enacted. the 

u.s. government, acting in its sovereign capacity, can abrogate liabilities of the Department arising from non-contractual activities. 

C. Investments 

Investments in Troubled Asset Relief Program (TARP) 

troubled asset relief Program (tarP) equity investments, including investments in preferred and common stock and warrants of public 

companies, are accounted for pursuant to the provisions of the federal credit reform act (fcra) and the associated fasab accounting 

2 the Department invested in sPV’s under the consumer and business lending Initiative, the automotive Industry financing Program and the PublicPrivate Investment Program. 

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standard sffas no. 2, Accounting for Direct Loans and Loan Guarantees, as amended. as additional consideration for investments made, 

the Department received common stock warrants, additional preferred shares (referred to as warrant preferred shares) or additional 

notes. the Department considered market risk in its calculation and determination of the estimated net present value of its direct loans, 

equity investments and asset guarantee program for budgetary purposes. similarly, market risk is considered in the valuations for financial 

reporting purposes (see note 8 for further discussion). the Department concluded that gaaP accounting for such investments using 

the concepts embedded in sffas no. 2 was appropriate analogous accounting guidance based on the similarity between the equity 

investments made by the Department and direct loans. consequently, tarP equity investments, including investments in preferred and 

common stock and warrants of public companies, are accounted for by the Department using credit reform accounting in accordance with 

sffas no. 2, and reported in accordance with fcra in these financial statements. In addition, the inclusion of market risk required by 

the emergency economic stabilization act (eesa) in the valuation calculation results in accounting for these investments at estimated 

fair value, which is consistent with the accounting for other equity investments held by the Department (i.e. investments in gses). 

the Department recognizes dividend revenue associated with equity investments when declared by the entity in which the 

Department has invested and when received in relation to any repurchases and restructuring. the Department reflects changes in 

the fair value of direct loans, equity investments, and asset guarantees in the subsidy cost on the statement of net cost annually, as 

required by fcra. the estimated values associated with these additional instruments are disclosed in note 8. 

Investments in Government Sponsored Enterprises (GSEs) 

the senior preferred stock liquidity preference (preferred stock) and associated common stock warrant (warrant(s)) in gses are presented 

at their fair value as permitted by oMb circular no. a-136. this circular includes language that generally requires agencies to value 

non-federal investments at acquisition cost, but permits the use of other measurement basis, such as fair value, in certain situations. 

Increases in the non-entity preferred stock liquidity preference occur when quarterly payments to the gses are made pursuant to 

the preferred stock purchase agreements (i.e., when a gse’s liabilities exceed its assets at the end of any quarter). as funds for these 

payments are appropriated directly to the Department, these payments are treated as entity expenses and reflected as such on the 

statement of net cost (snc) and cumulative results of operations. these payments also result in an increase to the non-entity 

investment in gses preferred stock, with a corresponding increase in Due to the general fund, as the Department holds the 

investment on behalf of the u.s. government general fund. 

Investments in International Financial Institutions 

the Department invests in Multilateral Development banks (MDb) to support poverty reduction, private sector development, and 

transition to market economies and sustainable economic growth and development, thereby advancing the united states’ economic, 

political, and commercial interests abroad. these investments are non-marketable equity investments valued at cost. 

Other Investments and Related Interest 

the esf holds most of the Department’s other investments. “other foreign currency Denominated assets” and “Investment 

securities” are considered “available for sale” securities and recorded at fair value as permitted by oMb circular no. a-136 

beginning in fiscal year 2009. these holdings are normally invested in interest bearing securities issued or held through foreign 

governments or monetary authorities. 

D. Tax and Other Non-Entity Receivables 

federal taxes receivable, net, and the corresponding liability, due to the Department are not accrued until related tax returns are 

filed or assessments are made by the Irs and agreed to by either the taxpayer or the court. additionally, the prepayments are netted 

against liabilities. accruals are made to reflect penalties and interest on taxes receivable through the balance sheet date. 

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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. the allowance reflects an estimate of the portion of total taxes receivable deemed to be uncollectible. 

compliance assessments are unpaid assessments which neither the taxpayer nor a court has affirmed the taxpayer owes to the federal 

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. compliance assessments and write-offs are not reported on the balance sheet. statutory 

provisions require the accounts to be maintained until the statute for collection expires. 

E. Inventory and Related Property 

Inventory and related property include inventory, operating materials and supplies, and forfeited property. the treasury values 

inventories at either standard cost, or lower of cost or latest acquisition cost, except for finished goods inventories, which are valued 

at weighted-average unit cost. these inventories were categorized based on the Department’s major activities and the services the 

Department provides to the federal government and the public. all operating materials and supplies are recorded as an expense 

when consumed in operations. 

forfeited property is recorded at estimated fair market value as deferred revenue, and may be adjusted to reflect the current fair 

market value at the end of the fiscal year. Property forfeited in satisfaction of a taxpayer’s assessed liability is recorded when title to 

the property passes to the u.s. government and a corresponding credit is made to the related taxes receivable. Direct and indirect 

holding costs are not capitalized for individual forfeited assets. 

Mortgages and claims on forfeited assets are recognized as a valuation allowance and a reduction of deferred revenue from forfeited assets 

when the asset is forfeited. the allowance includes mortgages and claims on forfeited property held for sale and a minimal amount of 

claims on forfeited property previously sold. revenue from the forfeiture of property is deferred until the property is sold or transferred to 

a state, local, or federal agency. revenue is not recognized if the forfeited property is ultimately destroyed or cannot be legally sold. 

F. Loans and Interest Receivable, Intra-governmental—Entity and Non-Entity 

Intra-governmental entity loans and Interest receivable from other federal agencies represent loans and interest receivable held by 

the Department. no credit reform subsidy costs were recorded for loans purchased from federal agencies or for guaranteed loans made 

to non-federal borrowers, because of outstanding balances guaranteed (interest and principal) by those agencies. 

Intra-governmental non-entity loans and Interest receivable from other federal agencies represent loans issued by the Department to 

federal agencies on behalf of the u.s. government. the Department acts as an intermediary issuing these loans, because the agencies 

receiving these loans will lend these funds to others to carry out various programs of the federal government. because of the Department’s 

intermediary role in issuing these loans, the Department does not record an allowance related to these intra-governmental loans. Instead, 

loan loss allowances and subsidy costs are recognized by the ultimate lender, the federal agency that issued the loans to the public. 

G. Advances to the Unemployment Trust Fund 

advances have been issued to the Department of labor’s unemployment trust fund from the general fund of the u.s. government to 

states for unemployment benefits. the bureau of the Public Debt accounts for the advances on behalf of the general fund. as outlined in 

42 usc §1323, these repayable advances bear an interest rate that is computed as the average interest rate, as of the end of the calendar 

month preceding the issuance date of the advance, for all interest bearing obligations of the united states then forming the public debt, 

to the nearest lower one-eighth of one percent. Interest on the repayable advances is due on september 30th of each year. advances will 

be repaid by transfers from the unemployment trust fund to the general fund when the secretary of the treasury, in consultation with 

the secretary of labor, has determined that the balance in the unemployment trust fund is adequate to allow repayment. 

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H. Receivable on Deposit of Earnings, Federal Reserve System 

reserve banks are required by the board of governors of the federal reserve system to transfer to the u.s. treasury excess earnings, 

after providing for the cost of operations, payment of dividends, and reservation of an amount necessary to equate surplus with capital 

paid in. In the event of losses, or a substantial increase in capital, a reserve bank will suspend its payments to the u.s. treasury 

until such losses or increases in capital are recovered through subsequent earnings. Weekly payments to the u.s. treasury may vary 

significantly. the receivable on Deposit of earnings, federal reserve system, represents the earnings due to the u.s. treasury as of 

september 30, but not collected by the u.s. treasury until after the end of the month. 

I. Property, Plant, and Equipment 

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 expenses as incurred. 

Internal use software encompasses software design, development, and testing of projects adding significant new functionality and longterm benefits. costs for developing internal use software are accumulated in work in development until a project is placed into service, 

and testing and final acceptance are successfully completed. once completed, the costs are transferred to depreciable property. 

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. 

the Department leases land and buildings from the general services administration (gsa) to conduct most of its operations. 

gsa charges a standard level users fee which approximates commercial rental rates for similar properties. therefore, gsa-owned 

properties are not included in the Department’s PP&e. 

the Department’s bureaus are diverse both in size and in operating environment. accordingly, the Department’s capitalization 

policy provides minimum capitalization thresholds which range from $25,000 to $50,000. the Department also uses a capitalization 

threshold range for bulk purchases: $250,000 to $500,000 for non manufacturing bureaus and $25,000 to $50,000 for manufacturing 

bureaus. bureaus determine the individual items that comprise bulk purchases based on Departmental guidance. In addition, the 

Department’s bureaus may expense bulk purchases if they conclude that total period costs would not be materially distorted and the 

cost of capitalization is not economically feasible. 

Depreciation is expensed on a straight-line basis over the estimated useful life of the asset with the exception of leasehold 

improvements and capital leases. leasehold improvements are depreciated over the term of the lease or the useful life of the 

improvement, whichever is shorter. capital leases are depreciated over the estimated life of the asset or term of the lease, depending 

on the conditions met for capitalization. service life ranges (2-50 years) are high due to the Department’s diversity of PP&e. 

construction in progress and internal use software in development are not depreciated. 

Heritage Assets 

the Department owns the treasury complex (Main treasury and treasury annex)— a multi-use heritage asset. the buildings housing 

the united states Mint facilities in Denver, san francisco, and West Point, are also considered multi-use heritage assets. Multi-use 

heritage assets are assets of historical significance for which the predominant use is general government operations. all acquisition, 

reconstruction, and betterment costs for the treasury buildings are capitalized as general PP&e and depreciated over their service life. 

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J. Non-Entity Government-Wide Cash 

non-entity government-wide cash is held in depositary institutions and federal reserve accounts. agencies can deposit funds that 

are submitted to them directly into either a federal reserve treasury general account (tga) or a local tga depositary. the 

balances in these tga accounts are transferred to the federal reserve bank of new york (frbny)’s tga at the end of each day. 

operating cash of the u.s. government represents balances from tax collections, customs duties, other revenue, federal debt 

receipts, and other various receipts net of cash outflows for budget outlays and other payments held in the federal reserve banks, 

foreign and domestic financial institutions, and in u.s. treasury tax and loan accounts. outstanding checks are netted against 

operating cash until they are cleared by the federal reserve system. 

the tga is maintained at the frbny and functions as the government’s checking account for deposits and disbursements of public 

funds. the treasury tax and loan (tt&l) program includes about 9,000 depositories that accept tax payments and remit them the 

day after receipt to frbny’s tga. certain tt&l depositories also hold non-entity government-wide cash in interest bearing 

accounts. cash in the tga and the tt&l program is restricted for government-wide operations. 

u.s. treasury tax and loan accounts include funds invested through the term Investment option program and the repo program. 

under the term Investment option program treasury auctions funds for a set term, usually in the range of one day to three weeks. 

under the repo program, the Department invests funds through overnight reverse repurchase agreements. however, under both 

programs, the Department reserves the right to call the funds prior to maturity under special circumstances. these investments 

programs where suspended in fiscal year 2010. 

the supplementary financing Program (sfP) account is maintained at frbny. sfP is a temporary program announced by the 

Department and the federal reserve on september 17, 2008, to provide emergency cash for federal reserve initiatives aimed at 

addressing the ongoing crisis in financial markets. the program consists of a series of treasury bills, apart from the Department’s 

current borrowing program. 

K. Federal Debt 

Debt and associated interest are reported on the accrual basis of accounting. Interest costs are recorded as expenses when incurred, 

instead of when paid. certain treasury securities are issued at a discount or premium. these discounts and premiums are amortized 

over the term of the security using an interest method for all long- term securities and the straight-line method for short-term 

securities. the Department also issues treasury Inflation-Protected securities (tIPs). the principal for tIPs is adjusted daily over 

the life of the security based on the consumer Price Index for all urban consumers. 

L. Loan Commitments 

the ffb recognizes loan commitments when the ffb and the other parties fully execute the promissory notes and reduces loan 

commitments when the ffb issues loans or when the commitments expire. Most obligations of the ffb give a borrower the 

contractual right to a loan or loans immediately or at some point in the future. the ffb limits the time available for a loan under an 

obligation, where applicable. 

M. Pension Costs, Other Retirement Benefits, and Other Post-Employment Benefits 

the Department recognizes the full costs of its employees’ pension benefits. however, the liabilities associated with these costs are 

recognized by the office of Personnel Management (oPM) rather than the treasury. 

Most employees of the Department hired prior to January 1, 1984, participate in the civil service retirement system (csrs), to 

which the Department contributes a fixed percentage of pay. 

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on January 1, 1987, the federal employees’ retirement system (fers) went into effect pursuant to Public law 99-335. employees 

hired after December 31, 1983, are automatically covered by fers and social security. a primary feature of fers is that it offers 

a savings plan to which the Department automatically contributes 1 percent of base pay and matches any employee contributions 

up to an additional 4 percent of base pay. for most employees hired after December 31, 1983, the Department also contributes the 

employer’s matching share for social security. for the fers basic benefit, the Department contributes 11.2 percent for regular fers 

employees. 

similar to federal retirement plans, oPM, rather than the treasury, reports the liability for future payments to retired employees 

who participate in the federal employees health benefits Program (fehbP) and federal employees group life Insurance (feglI) 

Program. the Department reports the full cost of providing other retirement benefits (orb). the Department also recognizes an 

expense and 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, the Department’s bureaus, occ and ots, 

separately sponsor certain benefit plans for their employees. occ sponsors a defined life insurance benefit plan for current and retired 

employees. additionally, ots provides the financial Institution retirement fund (fIrf) private defined retirement benefit plan 

to certain employees as well as certain health and life insurance benefits for all retired employees that meet eligibility requirements. 

effective January 1, 1993, ots adopted sfas no. 106 to account for its share of the cost of life insurance. 

N. Special Drawing Rights (SDRs) 

the esf was established for use by the secretary of the treasury to account for the purchase or sale of foreign currencies, to hold 

special Drawing rights (sDrs) holdings, and to provide financing to foreign governments. sDrs transactions of the esf require the 

explicit authorization of the secretary of the treasury. 

the International Monetary fund (IMf) has authority to cancel, in part or in whole, sDrs created under previous allocations. 

Decisions of the IMf to cancel sDrs are adopted by the IMf’s board of governors on a basis of proposal by the IMf Managing 

Director, with concurrence by the IMf executive board. the same majority requirements as those for allocations apply to the 

executive board’s concurrence and to the board of governor’s decision on an sDrs cancellation proposal. 

Allocations and Holdings 

allocations of sDrs are recorded as assets and liabilities. the liabilities represent the amount that is payable in the event of 

liquidation of, or u.s. withdrawal from, the sDrs department of the IMf, or cancellation of the sDrs. 

sDrs holdings represent transactions resulting from esf sDrs activities. these activities are primarily the result of IMf allocations. 

other transactions reported in this account are recorded as incurred. they include sDrs acquisitions and sales, interest received on 

sDrs holdings, interest charges on sDrs allocations, and valuation adjustments. the u.s. government receives remuneration in 

sDrs from the IMf. this is based on claims on the IMf, represented by the u.s. reserve Position. the allocations and holdings are 

revalued monthly based on the sDrs valuation rate calculated by the IMf. 

Certificates 

the SDRs Act of 1968 authorized the secretary of the treasury to issue certificates, not to exceed the value of sDrs holdings, to the 

federal reserve banks in return for interest-free dollar amounts equal to the face value of certificates issued. the certificates may be 

issued to finance the acquisition of sDrs from other countries or to provide resources for financing other esf operations. certificates 

issued are to be redeemed by the treasury at such times and in such amounts as the secretary may determine. certificates issued to 

federal reserve banks are reported at their face value. It is not practical to estimate the fair value of certificates issued to federal 

reserve banks, since these certificates contain no specific terms of repayment. 

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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 u.s. Department of labor (Dol), which pays valid claims and subsequently seeks reimbursements from the 

treasury for these paid claims. generally, the Department reimburses Dol within two to three years once funds are appropriated. 

these future workers’ compensation estimates are generated by applying actuarial procedures developed to estimate the liability for 

feca benefits. the actuarial liability estimates for feca benefits include the expected liability for death, disability, medical, and 

miscellaneous costs for approved compensation cases. 

P. Annual, Sick, and Other Leave 

annual and compensatory leave earned by the Department’s employees, but not yet used, is reported as an accrued liability. the 

accrued balance is adjusted annually to current pay rates. any portion of the accrued leave, for which funding is not available, is 

recorded as an unfunded liability. sick and other leave are expensed as taken. 

Q. Revenue and Financing Sources 

the Department’s activities are financed either through exchange revenue it receives from others or through non-exchange revenue 

and financing sources (such as appropriations provided by the congress and penalties, fines, and certain user fees collected). user fees 

primarily include Irs reimbursable costs to process installment agreements and accompanying photocopy and reproduction charges. 

exchange revenues are recognized when earned; i.e., goods have been delivered or services have been rendered. non-exchange 

revenues are recognized when received by the respective treasury collecting bureau. appropriations used are recognized as financing 

sources when related expenses are incurred or assets are purchased. revenue from reimbursable agreements is recognized when the 

services are provided. the Department also incurs certain costs that are paid in total or in part by other federal entities, such as 

pension costs. these subsidized costs are recognized on the consolidated statement of net cost, and the imputed financing for these 

costs is recognized on the consolidated statement of changes in net Position. as a result, there is no effect on net position. other 

non-exchange financing sources such as donations and transfers of assets without reimbursements also are recognized for the period in 

which they occurred on the consolidated statement of changes in net Position. 

the Department recognizes revenue it receives from disposition of forfeited property as non-exchange revenue on the consolidated 

statement of changes in net Position. the costs related to the forfeiture fund program are reported on the consolidated statement 

of net cost. 

In accordance with sffas no. 30, Inter-Entity Cost Implementation Amending SFFAS 4, Managerial Cost Accounting Standards and 

Concepts, the material imputed inter-departmental financing sources currently recognized by the Department include the actual cost 

of future benefits for the federal pension plans that are paid by other federal entities, the federal employees health benefits Program 

(fehbP), and any un-reimbursed payments made from the treasury Judgment fund on behalf of the Department. 

R. Custodial Revenues and Collections 

non-entity revenue reported on the Department’s statement of custodial activity includes cash collected by the Department, 

primarily from taxes. It does not include revenue collected by other federal agencies, such as user fees and other receipts, which are 

remitted for general operating purposes of the u.s. government or are earmarked for certain trust funds. the statement of custodial 

activity is presented on the “modified accrual basis.” revenues are recognized as cash is collected. the “accrual adjustment” is 

the net increase or decrease, during the reporting period, in net revenue related-assets and liabilities, mainly taxes receivable. the 

balance sheets include an estimated amount for taxes receivable and payable to the general fund of the u.s. government at 

september 30, 2010 and september 30, 2009. 

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S. Tax Assessments, Abatements, and Refunds Payable 

under Internal revenue code section 6201, the Department is authorized and required to make inquiries, determinations, and 

assessments of all taxes which have not been duly paid (including interest, additions to the tax, and assessable penalties) under the 

law. unpaid assessments result from taxpayers filing returns without sufficient payment, as well as from tax compliance programs such 

as examination, under-reporter, substitute for return, and combined annual wage reporting. the Department also has authority to 

abate the paid or unpaid portion of an assessed tax, interest, and penalty. abatements occur for a number of reasons and are a normal 

part of the tax administration process. abatements may result in claims for refunds or a reduction of the unpaid assessed amount. 

refunds payable arise in the normal course of tax administration when it is determined that taxpayers have paid more than the actual 

taxes that they owe. amounts that the Department has concluded to be valid refunds owed to taxpayers are recorded as a liability 

(refunds Payable on the balance sheet), with a corresponding receivable from the general fund. this receivable is included on the 

balance sheet in the line entitled “Due from the general fund.” 

T. Permanent and Indefinite Appropriations 

Permanent and indefinite appropriations are used to disburse tax refunds, income tax credits, and child tax credits. these 

appropriations are not subject to budgetary ceilings established by congress. therefore, refunds payable at year end are not subject 

to funding restrictions. refund payment funding is recognized as appropriations are used. Permanent indefinite authority for refund 

activity is not stated as a specific amount and is available for an indefinite period of time. although funded through appropriations, 

refund activity, in most instances, is reported as a custodial activity of the Department, since refunds are, in substance, a custodial 

revenue-related activity resulting from taxpayer overpayments of their tax liabilities. 

the Department also receives two permanent and indefinite appropriations related to debt activity. one is used to pay interest on 

the public debt securities; the other is used to redeem securities that have matured, been called, or are eligible for early redemption. 

these accounts are not annual appropriations and do not have refunds. Debt activity appropriations are related to the Department’s 

liability and are reported on the Department’s balance sheet. Permanent indefinite authority for debt activity is available for an 

indefinite period of time. 

the Department receives permanent indefinite appropriations annually to fund increases in the projected subsidy costs of credit 

programs as determined by the reestimation process required by the fcra. 

additionally, the Department receives other permanent and indefinite appropriations to make certain payments on behalf of the 

u.s. government. these appropriations are provided to make payments to the federal reserve banks 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 the result of 

certain claims and judgments rendered against the united states. 

U. Income Taxes 

as an agency of the federal government, the Department is exempt from all income taxes imposed by any governing body, whether 

it is a federal, state, commonwealth, local, or foreign government. 

V. Use Of Estimates 

the Department has made certain estimates and assumptions relating to the reporting of assets, liabilities, revenues, expenses, 

and the disclosure of contingent liabilities to prepare these financial statements. actual results could differ from these estimates. 

significant transactions subject to estimates include loan receivables; investments in non-federal securities and related impairment; 

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tax receivables; loan guarantees; depreciation; liability for liquidity commitment to gses; imputed costs; actuarial liabilities; cost and 

earned revenue allocations; contingent legal liabilities; and credit reform subsidy costs. 

the loan receivables mentioned above include mortgage-backed securities (Mbs) issued by the gses and gse obligations obtained 

under the programs of the housing finance agency (hfa) Initiative, which include securities issued under the new Issue bond 

Program (nIbP), and participation interests in liquidity facilities obtained under the temporary credit and liquidity Program 

(tclP). other loan receivables exist as part of tarP. Investments in non-federal securities have been made in the gses and other 

domestic public entities. 

the Department recognizes the sensitivity of credit reform modeling to slight changes in some model assumptions and uses regular 

review of model factors, statistical modeling, and annual re-estimates to reflect the most accurate cost of the credit programs to 

the u.s. government. the Department currently accounts for the gse Mbs purchase program and the two programs of the hfa 

Initiative (the nIbP and tclP) under the provisions of credit reform and the use of estimates is dictated by the federal credit 

reform act (note 12). additionally, all tarP credit activity, including investments in common and preferred stock and warrants 

of public companies, loans, and loan guarantees or guaranty-like insurance activities, are also subject to credit reform subsidy cost 

estimates. (notes 8 and 12) 

the forecasted cash flows used to determine these amounts as of september 30, 2010, are sensitive to slight changes in model 

assumptions, such as general economic conditions, specific stock price volatility of the entities in which the Department has an 

equity interest, estimates of expected default, and prepayment rates. forecasts of financial results have inherent uncertainty. the 

tarP Direct loans and equity Investments, net, and asset guarantee Program line items as of september 30, 2010, are reflective 

of relatively illiquid, troubled assets whose values are particularly sensitive to future economic conditions and other assumptions. 

additional discussion related to sensitivity analysis can be found in the Management’s Discussion and analysis section of this 

Performance and accountability report. 

the gse Preferred stock Purchase agreements (PsPas) provide that the Department will increase its 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, individually, exceed its respective assets. based on u.s. gaaP, these contingent liquidity 

commitments, predicated on the future occurrence of any shareholders’ deficits of the gses at the end of any reporting quarter, are 

potential liabilities of the Department. the Department performs annual valuations, as of september 30th, of the preferred stock 

and warrants to attempt to provide a “sufficiently reliable” estimate of the outstanding commitments in order for the Department to 

record the remaining liability in accordance with sffas 5. 

the valuations incorporated various forecasts, projections and cash flow analyses to develop an estimate of potential liability. any 

changes in valuation, including impairment, are recorded and disclosed in accordance with sffas no. 7, Accounting for Revenue 

and Other Financing Sources. since the valuation is an annual process, the change in valuation of the preferred stock and warrants are 

deemed usual and recurring. accordingly, since the costs of preferred stock and warrants are exchange transactions, any changes in 

valuation are recorded as a non-entity exchange transaction that is either an expense or revenue. Dividends are also recorded as nonentity exchange transactions and are accrued when declared; therefore, no accrual is made for future dividends. the gses contingent 

liability is assessed annually and recorded at the gross estimated amount, without considering the increase in preferred stock liquidity 

preference, future dividend payments, or future commitment fees, due to the uncertainties involved. note 9 discusses the results of 

the valuation and the liability recorded as of september 30, 2010. 

estimation of such complex and long duration contingencies is subject to uncertainty, and it is possible that new developments 

adversely impact ultimate amounts required to be funded by treasury under the senior Preferred stock Purchase agreements. 

specifically, the occurrence of future shareholder deficits, which ultimately determines our gse contingent liability, are most 

sensitive to future changes in the housing price index. 

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It is possible that the results of operations, cash flows or financial position of treasury, could be materially affected in future periods by 

adverse changes in the outlook for the key assumptions underlying management’s estimates. 

W. Credit Risk 

credit risk is the potential, no matter how remote, for financial loss from a failure of a borrower or counterparty to perform in 

accordance with underlying contractual obligations. the Department takes on possible credit risk when it makes direct loans or 

credits to foreign entities or becomes exposed to institutions which engage in financial transactions with foreign countries (note 11). 

given the history of the Department with respect to such exposure and the financial policies in place in the u.s. government and 

other institutions in which the united states participates, the Department expectation of credit losses is nominal. 

the Department also takes on credit risk related to committed but undisbursed direct loans, its liquidity commitment to the gses, 

its Mbs portfolio; its gse obligations obtained under the hfa Initiative (the nIbP and tclP); investments, loans, and asset 

guarantees of the tarP, and its terrorism risk Insurance Program. except for the terrorism risk Insurance Program, these activities 

focus on the underlying problems in the credit markets, and the ongoing instability in those markets exposes the Department to 

potential costs and losses. the extent of the risk assumed by the Department is described in more detail in the notes to the financial 

statements, and, where applicable, is factored into credit reform models and reflected in fair value measurements (notes 8, 9 & 12). 

In addition, for eesa programs, the statute requires that the budgetary costs of the troubled assets and guarantees of troubled assets 

be calculated by adjusting the discount rate for market risks. Within the tarP programs, the Department has invested in many 

assets that would traditionally be held by private investors and their valuation would inherently include market risk. thus, for all 

tarP direct loan, asset guarantee, and equity purchase programs, the Department calculates a Market risk adjusted Discount rate 

(MraDr). therefore, the Department’s cost estimates for the tarP programs are adjusted for unexpected loss and the estimated 

risk of expected cash flows. under sffas no. 2, including market risk in the cash flow estimates is consistent with the type of assets 

being valued. the inclusion of the MraDr is the mechanism for providing the fair value of the assets. 

X. Earmarked Funds 

the Department has accounted for revenues and other financing sources for earmarked funds separately from other funds. earmarked 

funds are financed by specifically identified revenues, often supplemented by other financing sources, which remain available over 

time. these specifically identified revenues and other financing sources are required by statute to be used for designated activities or 

purposes. sffas no. 27, Identifying and Reporting Earmarked Funds, defines the following three criteria for determining an earmarked 

fund: (1) a statute committing the federal government to use specifically identified revenues and other financing sources not used 

in the current period for future use to finance the designated activities, benefits, or purposes; (2) explicit authority for the earmarked 

fund to retain revenues and other financing sources not used in the current period for future use to finance the designated activities, 

benefits, or purposes; and (3) a requirement to account for and report on the receipt, use, and retention of the revenues and other 

financing sources that distinguished the earmarked fund from the federal government’s general revenues. 

Y. Allocation Transfers 

the Department is a party to allocation transfers with other federal agencies as both a transferring (parent) entity and/or a receiving 

(child) entity. allocation transfers are legal delegations by one department of its authority to obligate budget authority and outlay 

funds to another department. a separate fund account (allocation account) is created in the u.s. treasury as a subset of the parent 

fund account for tracking and reporting purposes. all allocation transfers of balances are credited to this account, and subsequent 

obligations and outlays incurred by the child entity are charged to this allocation account as they execute the delegated activity on 

behalf of the parent. beginning in fiscal year 2007, 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. 

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the Department allocates funds, as the parent, to the Department of energy. oMb allows certain exceptions to allocation reporting 

for certain funds. accordingly, the Department has reported certain funds for which the Department is the child in the allocation 

transfer, but in compliance with oMb guidance (a-136, III.4.2, section 5, for three exceptions), will report all activities relative 

to these allocation transfers in the Department’s financial statements. also, the Department receives allocation transfers, as the 

child, from the agency for International Development, general services administration, and Department of transportation. the 

Department had no significant allocation transfers to report in fiscal years 2010 and 2009. 

Z. Credit Reform Accounting 

the authoritative guidance for the credit reform portion of these statements is contained primarily in sffas no. 2, Accounting for 

Direct Loans and Loan Guarantees, as amended by sffas no. 18, Amendments to Accounting Standards for Direct Loans and Loan 

Guarantees, and sffas no. 19, Technical Amendments to Accounting Standards for Direct Loans and Loan Guarantees. this guidance 

was promulgated as a result of the Federal Credit Reform Act of 1990 (fcra). 

the fcra requires that the ultimate costs of a credit program be calculated, and the budgetary resources obtained, before the direct 

loan obligations are incurred. the cost of loan guarantee programs is the net present value of the estimated future cash flows from 

payments (for claims and interest rate subsidies). the primary purpose of the fcra, which became effective on october 1, 1991, is 

to more accurately measure the cost of federal credit programs and to place the cost of such credit programs on a basis equivalent with 

other federal spending. 

sffas no. 2, which generally mirrors the requirements of the fcra, established guidance for estimating the cost of direct and 

guaranteed loan programs, asset guarantees, as well as for recording direct loans and liabilities for loan guarantees for financial 

reporting purposes. sffas no. 2 states that the actual and expected costs of federal credit programs should be fully recognized in 

both budgetary and financial reporting. to accomplish this, agencies first predict or estimate the future performance of direct and 

guaranteed loans when preparing their annual budgets. the data used for these budgetary estimates are reestimated after the fiscal 

year-end to reflect changes in actual loan performance and actual interest rates in effect when the loans were issued. the data used 

for these estimates were reestimated at the fiscal year-end to reflect adjustments for market risks, asset performance and other key 

variables and economic factors. the reestimated data are then used to report the cost of the loans disbursed under the direct or 

guaranteed loan program as a “Program cost” in the agencies’ statement of net cost. 

the fcra establishes budgetary and financing control for each credit program through the use of the program, financing and subsidy 

receipt accounts for direct loans obligated after september 30, 1991. these accounts are classified as either budgetary or nonbudgetary in the combined statements of budgetary resources. the budgetary accounts include the program accounts and receipt 

accounts. the non-budgetary accounts consist of the credit reform financing accounts. 

the program account is a budget account that receives and obligates appropriations to cover the subsidy cost of a direct loan 

or guarantee and disburses the subsidy cost to the financing account. the program account also receives appropriations for 

administrative expenses. the financing account is a non-budgetary account that records all of the cash flows resulting from credit 

reform direct loans, loan guarantees, or asset guarantees. It disburses loans, collects repayments and fees, makes claim payments, 

holds balances, borrows from bPD, earns or pays interest, and receives the subsidy cost payment from the program account. 

the general fund receipt account is a budget account used for the receipt of amounts paid from the financing account when 

there is a negative subsidy or negative modification from the original estimate or a downward reestimate. they are available for 

appropriations only in the sense that all general fund receipts are available for appropriations. any assets in this account are nonentity assets and are offset by Intra-governmental liabilities. at the end of the fiscal year, the fund balance transferred to the u.s. 

treasury through the general fund receipt account is no longer included in the Department’s fund balance reporting. 

the Department accounts for the following programs in accordance with fcra and the provisions under the fasab accounting 

standard sffas no. 2, as amended: 

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TARP Direct Loans, Equity Investments and Asset Guarantee Program 

the fcra provided for the use of program, financing, and general fund receipt accounts to separately account for activity related to 

loans and guarantees. these accounts are classified as either budgetary or non-budgetary in the statement of budgetary resources. 

the budgetary accounts include the program and general fund receipt accounts, and the non-budgetary accounts consist of the credit 

reform financing accounts. 

as discussed previously, the Department accounts for the cost of purchases of troubled assets and guarantees of troubled assets, and 

any cash flows associated with authorized activities in accordance with section 123(a) of the eesa and the fcra for budgetary 

accounting and sffas no. 2 for financial reporting, except for the treasury housing Programs under tarP (see note 8). 

the authoritative guidance for financial reporting is primarily contained in the sffas no. 2, as amended by the sffas no. 

18, Amendments to Accounting Standards for Direct Loans and Loan Guarantees, and the sffas no. 19, Technical Amendments to 

Accounting Standards for Direct Loans and Loan Guarantees. 

In accordance with sffas no. 2, the Department maintains program accounts which receive appropriations and obligate funds 

to cover the subsidy cost of direct loans, equity investments and asset guarantees, and disburses the subsidy cost to the Department 

financing accounts. the financing accounts are non-budgetary accounts that are used to record all of the cash flows resulting from 

the Department direct loans, equity investments and asset guarantees.3 cash flows include disbursements, repayments, repurchases, 

fees, recoveries, interest, dividends, proceeds from the sale of stock and warrants, borrowings from treasury, negative subsidy and the 

subsidy cost received from the program accounts. 

the financing arrangements specifically for the tarP activities are provided for in the eesa as follows: (1) borrowing for program 

funds under section 118 that constitute appropriations when obligated or spent, which are reported as “appropriations” in these 

financial statements; (2) borrowing by financing accounts for non-subsidy cost under the fcra and section 123; and (3) the 

troubled assets Insurance financing fund (taIff) under section 102(d). 

the Department uses general fund receipt accounts to record the receipt of amounts paid from the financing accounts when 

there is a negative subsidy or negative modification (a reduction in subsidy cost due to changes in program policy or terms that 

change estimated future cash flows) from the original estimate or a downward reestimate. amounts in the general fund receipt 

accounts are available for appropriations only in the sense that all general fund receipts are available for appropriations. any 

assets in these accounts are non-entity assets and are offset by intra-governmental liabilities. at the end of the fiscal year, the fund 

balance transferred to the u.s. treasury through the general fund receipt account is closed and therefore no longer included in the 

Department’s fund balance reporting. 

the sffas no. 2 requires that the actual and expected costs of federal credit programs be fully recognized in financial reporting. 

the Department calculated and recorded an initial estimate of the future performance of direct loans, equity investments, and asset 

guarantees. the data used for these estimates were reestimated at the fiscal year-end to reflect adjustments for market risk, asset 

performance, and other key variables and economic factors. the reestimate data was then used to estimate and report the “subsidy 

cost” in the statement of net cost. a detailed discussion of the Department subsidy calculation and reestimate assumptions, process 

and results is provided in note 8. 

GSE MBS Purchase Program 

the Department purchases mortgage-backed pass-through securities through the government sponsored enterprise Mortgagebacked securities (gse Mbs) Purchase Program. the purchase authority under this Program expired December 31, 2009. consistent 

with the fcra, these securities are treated as direct loans, and the value of the Department’s position and the associated credit 

for the asset guarantee Program, the Department has established the troubled assets Insurance financing fund, which is the program’s financing 

account under the fcra, as required by section 102(d) of the eesa. 

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subsidy requirements are determined based on the net present value of the securities’ forecasted future cash flows. the Department 

estimates nominal future cash flows using a financial model that incorporates each security’s payment characteristics together with 

assumptions about the future prepayment, default, and loss severity performance of underlying loan collateral and the gses’ ability to 

uphold their guarantee. nominal cash flow forecasts are discounted at interest rates of treasury securities with comparable maturities 

using the office of Management and budget’s credit subsidy calculator. cash flows are estimated under the assumption that all 

securities will be held to maturity. 

security-level data used as the basis for cash flow model forecasts are obtained directly from treasury’s program custodian. 

assumptions about security and program performance are drawn from widely available market sources as well as information published by the gses. key inputs to the cash flow forecast include: 

•	 security characteristics such as unpaid principal balance, pass-through coupon rate, weighted-average loan age, and weightedaverage maturity 

•	 forecast prepayment rates and default rates 

State and Local Housing Finance Agency Initiative 

under the housing and economic recovery act of 2008 (hera), the Department, together with the federal housing finance 

agency (fhfa), fannie Mae, freddie Mac, and the Department of housing and urban Development announced in october 2009 

an initiative to provide support to state and local housing finance agencies (hfas). hfas have historically played a central role 

in providing a safe, sustainable path to homeownership for working families in all 50 states and many localities across the country. 

this initiative is designed to support low mortgage rates and expand resources for low and middle income borrowers to purchase or 

rent homes, making them more affordable over the long term. In December 2009, several transactions closed as part of the hfa 

Initiative’s two separate hfa programs: (1) the new Issue bond Program (nIbP) and (2) the temporary credit and liquidity 

Program (tclP). 

security-level data used as the basis for the nIbP cash flow model forecasts are obtained directly from the Department’s program 

custodian. assumptions about security and program performance are drawn from information published in the fiscal year 2009 fha 

actuarial review of the Mutual Mortgage Insurance fund and default and recovery reports published by Moody’s and s&P. key 

inputs to the nIbP cash flow forecast include: 

•	 security characteristics such as issued bond balance, coupon rate, credit rating, maturity date, and principal and interest payment 

schedules 

•	 forecast prepayment, and loss rates 

•	 expected escrow conversion & return rates 

no tclP disbursements have occurred as of september 30, 2010. In accordance with oMb circular a-11, the Department did not 

perform a fiscal year 2010 subsidy reestimate for tclP since there was no disbursement as of september 30, 2010. 

AA. Fiduciary Activities 

In accordance with sffas no. 31, Accounting for Fiduciary Activities, fiduciary type activities and related transactions will no longer 

be reported by the Department in its proprietary financial statements. fiduciary activities are the collection or receipt, and the 

management, protection, accounting, investment, and disposition by the federal government of cash or other assets in which nonfederal individuals or entities have an ownership interest that the federal government must uphold. fiduciary cash and other assets 

are not assets of the federal government. While these activities are no longer reported in the proprietary financial statements, they 

are required to be reported on schedules in the notes to financial statements (note 30). 

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AB. Related Parties 

the primary “related parties” with whom the Department conducts business are other federal agencies, mainly through the normal 

lending activities of the bPD and the federal financing bank. these activities are disclosed in these financial statements. the 

Department utilizes the services of the federal reserve to execute a variety of transactions on behalf of the bPD and the exchange 

stabilization fund. the federal reserve is serving as the Department’s fiscal agent in executing these transactions and receives fees 

for its services. the Department also consults with the federal reserve on matters affecting the economy, such as the structuring of 

bailout financing for american International group and other companies affected by the current economic situation. however, these 

actions do not involve transactions between the Department and the federal reserve. 

finally, the secretary of the treasury serves on the fhfa oversight board, and consults with the Director of fhfa in matters 

involving fannie Mae and freddie Mac. this provides the Department a voice in the fhfa’s actions as the conservator for fannie 

Mae and freddie Mac, and thus some influence over major decisions involving fannie Mae and freddie Mac. the Department has no 

transactions with fhfa; transactions and balances arising from transactions with fannie Mae and freddie Mac are accounted for and 

disclosed in these financial statements. 

AC. Reclassifications 

certain fiscal year 2009 balances on the balance sheet and notes to the financial statements have been reclassified to conform to 

fiscal year 2010 presentations. In fiscal year 2010, certain balance sheet amounts were aggregated and reclassified, whereas in fiscal 

year 2009 they were reported disaggregated. amounts related to the tarP program were disaggregated in fiscal year 2009. the 

changes to aggregate and reclassify amounts were made to conform to how tarP is presented on the ofs stand-alone and financial 

report of the u.s. government levels. In fiscal year 2010, the cDfI direct loans began to be disclosed in the credit reform footnote. 

the change impacted the reclassification of the balance sheet, and disclosures in notes 12 and 13. 

AD. Accounting Policy Change 

effective fiscal year 2010, as a result of a new united states standard general ledger (ussgl), the Department changed its 

budgetary accounting and reporting policy related to esf foreign currency investments. the change in accounting policy permits 

the Department to present the revaluations of esf investments as well as other esf assets not readily convertible to cash as a 

budgetary resource that is permanently not available without affecting outlays. esf investments includes cash and cash equivalents, 

foreign currency Denominated assets (fcDa) (representing long-term investments in interest bearing securities issued by or 

held through foreign governments) and special Drawing rights (sDr) allocations (international reserve assets) and Monetization 

(sDr certificates) (collectively “esf Investments” henceforth). the new ussgl 4295, Revaluation of Foreign Currency in the 

Exchange Stabilization Fund permits the Department to report those assets that are not readily convertible to cash (such as fcDas, 

sDr revaluations (gains/losses) and other sDr additions including sDr allocations and sDr Monetizations) as part of budgetary 

resources in the statement of budgetary resources (sbr) Permanently Not Available and report these as a component of status of 

budgetary resources in the sbr Unobligated Balance Not Available line, respectively. 

In order to facilitate this change, the Department’s current year sbr unobligated balance, brought forward, as well as unpaid 

obligations, brought forward, beginning balances, have been adjusted for changes in esf investments balances accumulated 

through september 30, 2009, to allow fiscal year 2010 to reflect only current year activity. using guidance provided in sffas no. 

21 – Reporting Corrections of Errors and Changes in Accounting Principles, the Department considers this to represent a change from 

one generally accepted accounting principle to another more preferable. note 25 - additional Information related to the combined 

statements of budgetary resources, explains the effect of the policy change on the sbr beginning balances. this change in 

accounting policy and resulting budgetary beginning balance adjustments does not impact the Department’s proprietary accounts. 

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2. funD balanCe 

fund balance with treasury is the aggregate amount of the Department’s accounts with the u.s. government’s central accounts from 

which the Department is authorized to make expenditures and pay liabilities. It is an asset because it represents the Department’s 

claim to the u.s. government’s resources. fund balance with treasury 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. 

appropriated funds consist of amounts appropriated annually by congress to fund the operations of the Department. appropriated 

funds include clearing funds, which represent reconciling differences with the Department balances. 

revolving funds are used for continuing cycles of business-like activity, in which the fund charges for the sale of products or services 

and uses the proceeds to finance its spending, usually without requirement for annual appropriations. a public enterprise revolving 

fund is an account that is authorized by law to be credited with offsetting collections from the public and those monies are used to 

finance operations. the Working capital fund is a fee-for-service fund established to support operations of Department components. 

also included are the financing funds for credit reform. 

Deposit funds represent amounts received as an advance that are not accompanied by an order and include non-entity collections 

that do not belong to the federal government. 

trust funds include both receipt accounts and expenditure accounts that are designated by law as a trust fund. trust fund receipts are 

used for specific purposes. 

special funds include funds designated for specific purposes including the disbursement of non-entity monies received in connection 

with the Presidential election campaign. 

Fund Balance With Treasury 

as of september 30, 2010 and september 30, 2009, fund balances consisted of the following (in millions): 

2010	 2009 

Appropriated Funds $ 402,036 $ 455,983 

Revolving Funds 34,096 47,897 

Clearing Funds 21 93 

Deposit Funds 132 146 

Trust Funds 84 5 

Special Funds 656 455 

Other Funds (Receipt Fund and Suspense Funds) 1 3 

Total Fund Balances	 $ 437,026 $ 504,582 

Status Of Fund Balance With Treasury 

Portions of the unobligated balance unavailable include amounts appropriated in prior fiscal years that are not available to fund new 

obligations. however, it can be used for upward and downward adjustments for existing obligations in future years. the obligated 

balance not yet Disbursed represents amounts designated for payment of goods and services ordered but not received or goods and 

services received but for which payment has not yet been made. 

since the following line items do not post to budgetary status accounts, the following adjustments are required to reconcile the 

budgetary status to non-budgetary fund balance with treasury as reported in the accompanying balance sheets: 

•	 adjustments for non-budgetary funds are receipt, clearing, and deposit funds that represent amounts on deposit with treasury 

that have no budget status 

note 2. fund balance 

part 3: annual financial report
performance and accountability report | fiscal year 2010 

177

•	 adjustments for borrowing authority – borrowing authority is in budgetary status but not in fund balance with treasury 

•	 adjustments for Intra-treasury Investments – budgetary resources have investments included; however, the money has been 

moved from the fund balance with treasury asset account to Investments 

•	 adjustments for Imprest funds – Imprest funds represent monies moved from fund balance with treasury to cash and other 

Monetary assets with no change in the budgetary status 

•	 adjustments for IMf – Monies moved from fund balance with treasury to other Monetary assets related to IMf accounts that 

have no budgetary resources and are with the federal reserve bank of new york. they also include the IMf reserve Position 

based on sDrs 

•	 adjustments for esf – esf investments and related balances that meet criteria for reporting as part of budgetary resources are 

reported on the sbr, however, they are not a component of fund balance with treasury as they represent invested funds and 

thus have to be excluded from total status of fund balance reported in this note. Prior to fiscal year 2010, the esf budgetary 

resources balances were adjusted in note 2 to show resources net of the esf investments and related balances that are not 

components of fund balance. the change in presentation for fiscal year 2010 was facilitated by the change in accounting policy 

discussed further in note 1aD, and note 25 

•	 adjustment for unavailable for obligations reduced the budgetary resources; however, did not impact the fund balance with 

treasury 

as of september 30, 2010 and september 30, 2009, the status of fund balances consisted of the following (in millions): 

2010	 2009 

Unobligated Balance – Available $ 301,811 $ 382,047 

Unobligated Balance – Unavailable 70,432 33,841 

Obligated Balance not yet Disbursed 208,189 158,324 

Subtotal $ 580,432 $ 574,212 

Adjustment for Non-Budgetary Funds 161 241 

Adjustment for Borrowing Authority (23,477) (51,510) 

Adjustment for Intra-Treasury Investments (7,026) (8,554) 

Adjustment for Imprest Funds (4) (4) 

Adjustment for IMF (13,081) (13,513) 

Adjustment for ESF (103,788) 0 

Adjustments for Temporary Reduction 90 30 

Authority Unavailable for Obligation 3,727 3,680 

Adjustment for Indian Trust Funds (8) 0 

Total Status of Fund Balances $ 437,026 $ 504,582 

for fiscal year 2009, the above balances only include unobligated balances related to the esf insurance program that began in fiscal 

year 2008, and expired on september 18, 2009. otherwise, esf does not have fund balance with treasury. accordingly, while other 

esf balances are included on the statement of budgetary resources (sbr), they are not a component of fund balance with treasury. 

the esf balances displayed on the sbr include components of cash, foreign currency, and other monetary assets. 

as of september 30, 2010 and september 30, 2009, the Department did not have any budgetary authority in fund balance with 

treasury that was specifically withheld from apportionment by oMb. the balances in non-entity funds, such as certain deposit funds 

(e.g. seized cash), are being held by the Department for the public or for another federal entity, such as the general fund of the u.s. 

government. such funds have an offsetting liability equal to fund balance. see note 14 regarding restrictions related to the line of 

credit held on the u.s. Quota in the International Monetary fund. 

unused funds in expired appropriations returned to the u.s. treasury were $166 million and $126 million for the fiscal years ending 

september 30, 2010 and september 30, 2009, respectively. 

note 2. fund balance 

part 3: annual financial report
the department of the treasury 

178 

3. lOans anD interest reCeivable – intra-gOvernmental 

Entity Intra-Governmental 

the ffb issues the below loans to federal agencies for their own use or to private sector borrowers, whose loans are guaranteed by 

the federal agencies. When a federal agency has to honor its guarantee because a private sector borrower defaults, the federal agency 

that guaranteed the loan must obtain an appropriation or use other resources to repay the ffb. loan principal and interest are backed 

by the full faith and credit of the u.s. government, except for loans to the u.s. Postal service. the ffb has not incurred and does 

not expect to incur any credit-related losses on its loans and accordingly, has not recorded an allowance for uncollectible intragovernmental loans. 

as of september 30, 2010 and september 30, 2009, intra-governmental loans (issued by the ffb) and interest receivable consisted of 

the following (in millions): 

Loans Interest 2010 Loans Interest 2009 

Receivable Receivable Total Receivable Receivable Total 

Department of Agriculture $ 31,264 $ 53 $ 31,317 $ 28,438 $ 52 $ 28,490 

National Credit Union Administration 10,101 15 10,116 18,384 22 18,406 

United States Postal Service 12,000 41 12,041 10,200 37 10,237 

General Services Administration 1,973 35 2,008 2,037 36 2,073 

Department of Energy 2,931 4 2,935 908 0 908 

Department of Housing and Urban Development 0 0 0 587 71 658 

Department of Defense 417 4 421 546 6 552 

Department of Education 614 4 618 453 2 455 

Other Agencies 8 0 8 12 0 12 

Subtotal-Entity $ 59,308 $ 156 $ 59,464 $ 61,565 $ 226 $ 61,791 

note 3. loans and interest receivable - intra-governmental 

part 3: annual financial report
performance and accountability report | fiscal year 2010 

Non-Entity Intra-Governmental 

bPD accounts for and reports on the principal borrowings from and repayments to the general fund of the u.s. government for 

approximately 87 funds managed by other federal agencies, as well as the related interest due to the general fund. these agencies are 

statutorily authorized to borrow from the general fund, through bPD, to make loans for a broad range of purposes, such as education, 

housing, farming, and small business support. 

Loans Interest 2010 Loans Interest 2009 

Receivable Receivable Total Receivable Receivable Total 

Department of Education 

Department of Agriculture 

Department of Homeland Security 

Small Business Administration 

Department of Labor 

Department of Housing and Urban Development 

Export Import Bank of the U.S. 

Railroad Retirement Board 

Department of Energy 

Department of Veterans Affairs 

Department of Transportation 

Overseas Private Investment Corporation 

Department of Defense 

Agency for International Development 

Department of the Interior 

Federal Communications Commission 

$ 373,717 

56,598 

18,504 

11,752 

6,290 

4,775 

7,254 

3,481 

2,601 

1,650 

3,076 

1,403 

518 

478 

308 

88 

$ 0 

0 

0 

0 

0 

0 

0 

54 

21 

0 

0 

0 

0 

0 

183 

0 

$ 373,717 

56,598 

18,504 

11,752 

6,290 

4,775 

7,254 

3,535 

2,622 

1,650 

3,076 

1,403 

518 

478 

491 

88 

$ 234,918 

55,627 

19,004 

10,873 

6,371 

4,425 

3,805 

3,359 

2,131 

1,545 

2,477 

1,006 

391 

477 

316 

46 

$ 12 

2 

0 

0 

0 

0 

0 

58 

18 

0 

0 

0 

0 

0 

328 

0 

$ 234,930 

55,629 

19,004 

10,873 

6,371 

4,425 

3,805 

3,417 

2,149 

1,545 

2,477 

1,006 

391 

477 

644 

46 

Other Agencies 638 0 638 1,610 1 1,611 

Subtotal Non-Entity $ 493,131 $ 258 $ 493,389 $ 348,381 $ 419 $ 348,800 

Total Intra-governmental Loans and Interest 

Receivable Entity and Non-Entity $ 552,853 $ 410,591 

note 3. loans and interest receivable - intra-governmental 179

part 3: annual financial report
the department of the treasury 

180 

4. Due frOm the general funD anD Due tO the general funD 

the Department is responsible for managing various assets and liabilities on behalf of the u.s. government as a whole. Due from 

the general fund represents amounts required to fund liabilities managed by the Department on behalf of the u.s. government. 

liabilities managed by the Department are comprised primarily of the federal debt. Due to the general fund represents assets held for 

the general fund of the u.s. government. 

as of september 30, 2010 and september 30, 2009, Due from and Due to the general fund, included the following non-entity assets 

and liabilities (in millions): 

Liabilities Requiring Funding from the General Fund 2010 2009 

Federal Debt and Interest Payable (Note 19) $ 9,035,929 $ 7,559,305 

Federal Debt and Interest Payable - Intra-governmental (Note 19) 4,587,802 4,403,080 

Refunds Payable (Note 26) 4,146 4,040 

Adjustment for Eliminated Liabilities 27,760 26,294 

Total Due from the General Fund $ 13,655,637 $ 11,992,719 

Assets to be Distributed to the General Fund 2010 2009 

Fund Balance $ 249 $ 202 

Advances to the Unemployment Trust Fund 34,111 7,981 

Cash Held by the Treasury Department (Note 6) 303,797 269,311 

Foreign Currency 3 26 

Custodial Gold without certificates and Silver held by the U.S. Mint 25 25 

Loans and Interest Receivable - Intra-governmental (Note 3) 493,389 348,800 

Loans and Interest Receivable (Note 13) 124 127 

Investments in Government Sponsored Enterprises (Note 9) 109,216 64,679 

Credit Reform Downward Subsidy Reestimate 25,579 118,139 

Accounts Receivable - Intra-governmental 350 285 

Tax and Other Non-Entity Receivables 36,927 30,353 

Beneficial Interest in Trust (Note 29) 20,805 23,472 

Miscellaneous Assets 5 3 

Adjustment for Eliminated Assets 389,672 399,725 

Total Due to the General Fund $ 1,414,252 $ 1,263,128 

note 4. due from the general fund and due to the general fund 

part 3: annual financial report
performance and accountability report | fiscal year 2010 

181 

the adjustment for eliminated liabilities mainly represents investments in u.s. government securities held by the Department’s 

reporting entities that were eliminated against federal Debt and Interest Payable Intra-governmental. the adjustment for 

eliminated assets mainly represents loans and interest payable owed by reporting entities that are consolidated with the Department, 

which were eliminated against loans and Interest receivable Intra-governmental held by the bPD. 

advances have been issued to the Department of labor’s unemployment trust fund from the general fund of the u.s. government 

to states for unemployment benefits. 

the non-entity credit reform Downward subsidy reestimates represents amounts for the downward subsidy reestimates for the 

Department’s credit programs including tarP equity Investments and Direct loan. 

Downward subsidy reestimates indicates that too much subsidy will be or has been paid to the credit reform financing account. the 

downward reestimates are not available to the Department and they are returned to the u.s. government general fund receipt 

account (gfra) in the fiscal year following the accrual of the reestimates. generally, during the year, these gfras contain prior 

year reestimates. at year-end, the prior year funds are “swept” by the general fund. also at year-end, the Department accrues the 

current year’s reestimates, including downward reestimates, as applicable. for the downward reestimates, in the loan financing funds, 

the Department records an intra-governmental accrual adjustment that records a transfer out to the non-entity fund, a reduction 

of subsidy allowance or loan guarantee liability, and an account payable to the gfra non-entity fund. In the loan program funds, 

the Department records a reduction of loan subsidy expense and the associated impact on the net cost. the non-entity gfras 

contain a corresponding intra-governmental account receivable in anticipation of the receipt of the downward reestimates in the 

following year and a Downward reestimate liability for non-entity asset due to the general fund. for consolidated financial 

statement presentation, the Department is required to eliminate the financing fund’s intra-governmental payable due to the gfra 

and the gfra’s intra-governmental receivable due from the financing funds; since both are included in the Department’s reporting 

entity. the Downward reestimate liability for non-entity asset Due to the general fund is reflected on the balance sheet’s intragovernmental liability Due to the general fund line (see notes 8 and 12 for disclosure of credit program’s reestimates). 

on the balance sheet, the Department reported $437,026 million in fund balance as of september 30, 2010 ($504,582 million as 

of september 30, 2009). however, only $249 million is reported as Due to the general fund of the u.s. government ($202 million 

as of september 30, 2009). the balance represents non-entity funds held by the Department on behalf of the general fund of the 

u.s. government, and are administered for programs such as the Presidential election campaign and Payments for legal service 

corporation. the fund balance is not available for general use of the Department. 

on the balance sheet, the Department reported $36,976 million in tax, other, and related Interest receivables as of september 30, 

2010 ($30,408 million as of september 30, 2009). however, only $36,927 million is reported as Due to the general fund of the u.s. 

government ($30,353 million as of september 30, 2009). the difference is attributable to the exclusion of amounts which will be 

paid to others outside the u.s. government, and miscellaneous entity receivables (see notes 5 and 15). 

note 4. due from the general fund and due to the general fund 

part 3: annual financial report
the department of the treasury 

182 

5.	 aCCOunts reCeivable anD relateD interest— 

intra-gOvernmental 

Intra-governmental accounts receivable and interest mainly represents non-entity payments made by the Department under the 

Contract Disputes Act ($350 million of the $361 million and $285 million of the $298 million displayed on the balance sheet for 2010 

and 2009, respectively). other federal agencies are required to reimburse the Department for payments made on their behalf, related 

to the Contract Disputes Act and the No Fear Act. these amounts are a receivable on the Department’s balance sheet, specifically 

the financial Management service, and a payable on the other federal agencies’ balance sheet until reimbursement is made. the 

remaining amount displayed as intra-governmental accounts receivable and interest is related to miscellaneous intra-governmental 

transactions. 

note 5. accounts receivable and related interest—intra-governmental 

part 3: annual financial report
performance and accountability report | fiscal year 2010 

183 

6. Cash, fOreign CurrenCy, anD Other mOnetary assets 

cash, foreign currency, and other monetary assets held as of september 30, 2010 and september 30, 2009 were as follows (in 

millions): 

Entity: 2010 2009 

Cash $ 16 $ 23 

Foreign Currency and Foreign Currency Denominated Assets 13,439 13,701 

Other Monetary Assets: 

Special Drawing Right Holdings 57,439 57,961 

Other 144 44 

Subtotal – Entity 71,038 71,729 

Non-Entity: 

Operating Cash of the U.S. Government 303,576 269,052 

Foreign Currency 3 26 

Miscellaneous Cash held by all Treasury sub-components 665 501 

Subtotal - Non-Entity 304,244 269,579 

Total Cash, Foreign Currency, and Other Monetary Assets $ 375,282 $ 341,308 

non-entity operating cash and other cash of the u.s. government held by the Department disclosed above consisted of the 

following (in millions): 

2010 2009 

Operating Cash of the U.S. Government $ 2,032 $ 2,063
 

Operating Cash - Federal Reserve Bank Account 307,850 273,269 


Subtotal 309,882 275,332 

Outstanding Checks (6,306) (6,280) 

Total Operating Cash of the U.S. Government 303,576 269,052 

Other Cash 297 366 

Subtotal 303,873 269,418 

Amounts Due to the Public (76) (107) 

Total Cash Due to the General Fund (See Note 4) $ 303,797 $ 269,311 

Entity 

Cash, Foreign Currency, and Other Monetary Assets 

entity cash, foreign currency, and other monetary assets primarily include foreign currency Denominated assets (fcDa), special 

Drawing rights (sDrs), securities Purchased under agreement to resell, and forfeited cash. sDrs and fcDa are valued as of 

september 30, 2010 and september 30, 2009, using current exchange rates plus accrued interest. “other” includes u.s. dollars 

restricted for use by the International Monetary fund (IMf), which are maintained in two accounts at the federal reserve bank of 

new york (frbny). 

the foreign currency holdings are normally invested in interest bearing securities issued by or held through foreign governments or 

monetary authorities. fcDa with original maturities of three months or less, classified as cash equivalents, were valued at $10,588 

million as of september 30, 2010 ($11,311 million as of september 30, 2009). other fcDas having terms of less than or equal to a 

year but greater than three months are classified as available for sale. as of september 30, 2010, fcDa with maturities greater than 

three months were valued at $2,849 million ($2,379 million as of september 30, 2009). 

note 6. cash, foreign currency, and other monetary assets 

part 3: annual financial report
the department of the treasury 

184 

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. 

the special Drawing rights act of 1968 authorizes the secretary of the treasury to issue certificates, not to exceed the value of 

sDr holdings, to the federal reserve banks in return for interest free dollar amounts equal to the face value of certificates issued. 

the certificates may be issued for the purpose of financing the acquisition of sDrs from other countries or for financing exchange 

stabilization activities. certificates issued are to be redeemed by the Department at such times and in such amounts as the secretary 

of the treasury may determine. as of september 30, 2010, the value of the certificates issued to the federal reserve amounted to 

$5,200 million ($5,200 million as of september 30, 2009). 

on a daily basis, the IMf calculates the value of the sDr using the market value, in terms of the u.s. dollar, from the amounts of 

each of four freely usable weighted currencies, as defined by the IMf. these currencies are the u.s. dollar, the european euro, the 

Japanese yen, and the british pound sterling. the Department’s sDr holdings (assets resulting from various sDr related activities 

including remuneration received on interest earned on the u.s. reserve position – see note 14) and allocations from the IMf 

(liabilities of the u.s. coming due only in the event of a liquidation of, or u.s. withdrawal from the sDr Department of the IMf, or 

cancellation of sDrs) are revalued monthly based on the sDr valuation rate calculated by the IMf. 

Pursuant to the IMf articles of agreement, sDrs allocated to or otherwise acquired by the united states are permanent resources 

unless: 

a. cancelled by the board of governors based on an 85 percent majority decision of the total voting power of the executive board 

of the IMf, 

b. the sDr Department of the IMf is liquidated, 

c. the IMf is liquidated, or 

d. the united states chooses to withdraw from the IMf or terminate its participation in the sDr Department. 

except for the payment of interest and charges on sDr allocations to the united states, the payment of the Department’s 

commitment related to sDr allocations is conditional on events listed above, in which the united states has a substantial or 

controlling voice. allocations of sDrs were made 1970, 1971, 1972, 1979, 1980, 1981, and 2009. 

at the g-20 leaders’ summit in london in april 2009, President obama and his g-20 counterparts called for a general sDr 

allocation equivalent to $250,000 million to provide supplemental liquidity to address the consequences of the global economic and 

financial crisis and to support global recovery. IMf members endorsed this proposal and the allocation was made on august 28, 2009 

to all IMf members in proportion to their IMf quotas. In august 2009, IMf members also adopted the fourth amendment to the 

IMf articles of agreement providing for a one-time sDr allocation that was made on september 9, 2009 in proportionally greater 

amounts to members that joined the fund after 1981 and never received an sDr allocation. as a result of the general and special 

sDr allocations, the united states received sDr 30,416 million, which was the equivalent of $47,283 million as of september 30, 

2009. 

note 6. cash, foreign currency, and other monetary assets 

part 3: annual financial report
performance and accountability report | fiscal year 2010 

as of september 30, 2010, the total amount of sDr holdings of the united states was the equivalent of $57,410 million, and the 

amount of cumulative sDr allocations to the united states was the equivalent of $54,958 million. as of september 30, 2009, 

the total amount of sDr holdings of the united states was the equivalent of $57,945 million and the amount of cumulative sDr 

allocations to the united states was the equivalent of $55,953 million. 

During fiscal year 2010, the united states received remuneration on its reserve position in the IMf, at the prevailing rates, in the 

amount of $23 million equivalent of sDrs ($40 million equivalent of sDrs during fiscal year 2009). the sDr amount was credited 

to the exchange stabilization fund, which transferred to the treasury general account a counterpart amount of dollars plus $0.0029 

million ($0.0038 million in fiscal year 2009) in interest. 

Securities Purchased Under Agreement to Resell 

the frbny enters into transactions to purchase foreign-currency-denominated government-debt securities under agreements to 

resell for which the accepted collateral is the debt instruments, denominated in euro, and issued or guaranteed in full by belgium, 

france, germany, Italy, the netherlands, and spain. Maturities of the securities will not exceed 10.5 years. the duration of 

individual repo transactions will not exceed 90 days. esf’s investment in reverse repurchase agreements involves a pledge of 

securities account with euroclear, the custodian/tri-party agent for such operations, to facilitate intra-day clearance of transactions. 

these agreements are subject to daily margining requirements. 

Non-Entity 

Cash, Foreign Currency, and Other Monetary Assets 

non-entity cash, foreign currency, and other monetary assets include the operating cash of the u.s. government, managed by 

the Department. also included is foreign currency maintained by various u.s. disbursing offices. It also includes seized monetary 

instruments, undistributed cash, and offers in compromises which are maintained as the result of the Department’s tax collecting 

responsibilities. 

the operating cash of the u.s. government represents balances from tax collections, other revenues, federal debt receipts, and 

other various receipts net of checks outstanding, which are held in the federal reserve banks, foreign and domestic financial 

institutions, and in u.s. treasury tax and loan accounts at commercial banks. 

operating cash of the u.s. government is either insured (for balances up to $0.25 million), as of september 30, 2010, by the fDIc 

or collateralized by securities pledged by the depository institutions and held by the federal reserve banks, or through securities held 

under reverse repurchase agreements. 

Supplementary Financing Program 

the supplementary financing Program (sfP) is a temporary program announced on september 17, 2008, by the Department and the 

federal reserve, to provide emergency cash for federal reserve initiatives aimed at addressing the ongoing crisis in financial markets. 

as of september 30, 2010, there were a total of 8 outstanding cash management bills earmarked for sfP that totaled $199,962 

million (a total of 5 outstanding cash management bills earmarked for sfP that totaled $164,945 million as of september 30, 2009). 

note 6. cash, foreign currency, and other monetary assets 185 

part 3: annual financial report
the department of the treasury 

186 

7.	 gOlD anD silver reserves, anD gOlD CertifiCates issueD tO the 

feDeral reserve banks 

the Department is responsible for safeguarding most of the u.s. government’s gold and silver reserves in accordance with 31 usc 

§5117. the gold and silver reserves are in the custody of the u.s. Mint and frbny. 

the majority of gold reserves being held by the Department are offset by a liability for gold certificates issued by the secretary of 

the treasury to the federal reserve banks as provided in 31 usc §5117. since 1934, gold certificates have been issued in nondefinitive or book-entry form to the federal reserve banks. the Department’s liability incurred by issuing the gold certificates, as 

reported on the balance sheet, is limited to the gold being held by the Department at the legal standard value established by law. 

upon issuance of gold certificates to the federal reserve banks, the proceeds from the certificates are deposited into the operating 

cash of the u.s. government. all of the Department’s certificates issued are payable to the federal reserve banks. the u.s. Mint 

also holds 100,000 fto ($4 million) of gold reserves without certificates. 

the gold and silver bullion reserve (deep storage and working stock) are reported at the values stated in 31 u s c §§ 5116 - 

5117 (statutory rates) which are $42.2222 per fine troy ounce (fto) of gold and no less than $1.292929292 per fto of silver. 

accordingly, the silver is valued at $1.292929292 per fto. as of september 30, 2010 and september 30, 2009, the gold and silver 

reserves consisted of the following (in millions): 

9/30/10 9/30/10 

FTOs Statutory Rate Statutory value Market Rate Market value 

Gold 248,046,116 $ 42.2222 $ 10,473 $ 1,307.00 $ 324,196 

Gold Held by Federal Reserve Banks 13,452,784 $ 42.2222 568 $ 1,307.00 17,583 

Subtotal - Gold 261,498,900 11,041 341,779 

Silver 16,000,000 $ 1.292929292 21 $ 22.07 353 

Total Gold and Silver Reserves $ 11,062 $ 342,132 

9/30/09 9/30/09 

FTOs Statutory Rate Statutory value Market Rate Market value 

Gold 248,046,116 $ 42.2222 $ 10,473 $ 995.75 $ 246,992 

Gold Held by Federal Reserve Banks 13,452,784 $ 42.2222 568 $ 995.75 13,396 

Subtotal - Gold 261,498,900 11,041 260,388 

Silver 16,000,000 $ 1.292929292 21 $ 16.45 263 

Total Gold and Silver Reserves $ 11,062 $ 260,651 

note 7. gold and silver reserves, and gold certificates issued to the federal reserve banks 

part 3: annual financial report
performance and accountability report | fiscal year 2010 

187 

8.	 trOubleD asset relief prOgram (tarp) DireCt lOans anD 

equity investments, net anD asset guarantee prOgram 

Direct Loan, Equity Investments and Asset Guarantee Program 

the Department administers a number of programs designed to help stabilize the financial system and restore the flow of credit to 

consumers and businesses. the Department has made direct loans, equity investments, and entered into asset guarantees. the table 

below recaps tarP programs by title and type: 

Program Program Type 

Capital Purchase Program Equity Investment/Subordinated Debentures 

American International Group, Inc. Investment Program Equity Investment 

Targeted Investment Program Equity Investment 

Automotive Industry Financing Program Equity Investment and Direct Loan 

Consumer and Business Lending Initiative: 

•	 Term Asset-Backed Securities Loan Facility Subordinated Debentures 

•	 SBA 7(a) Security Purchase Program Direct Loan 

•	 Community Development Capital Initiative Equity Investment 

Public-Private Investment Program Equity Investment and Direct Loan 

Asset Guarantee Program Asset Guarantee 

the Department applies the provisions of sffas no. 2 to account for direct loans, equity investments, and the asset guarantee 

program. this standard requires measurement of the asset or liability at the net present value of the estimated future cash flows. the 

cash-flow estimates for each transaction reflect the actual structure of the instruments. for each of these instruments, analytical cash 

flow models generate estimated cash flows to and from the Department over the estimated term of the instrument. further, each 

cash-flow model reflects the specific terms and conditions of the program, technical assumptions regarding the underlying assets, risk 

of default or other losses, and other factors as appropriate. the models also incorporate an adjustment for market risk to reflect the 

additional return required by the market to compensate for variability around the expected losses reflected in the cash flows (the 

“unexpected loss”). 

the adjustment for market risk requires the Department to determine the return that would be required by market participants to 

enter into similar transactions or to purchase the assets held by the Department. accordingly, the measurement of the assets attempts 

to represent the proceeds expected to be received if the assets were sold to a market participant. the methodology employed for 

determining market risk for equity investments generally involves a calibration to market prices of similar securities that results in 

measuring equity investments at fair value. the adjustment for market risk for loans is intended to capture the risk of unexpected 

losses, but not intended to represent fair value , i.e. the proceeds that would be expected to be received if the loans were sold to a 

market participant. the Department uses market observable inputs, when available, in developing cash flows and incorporating the 

adjustment required for market risk. for purposes of this disclosure, the Department has classified the various investments as follows, 

based on the observability of inputs that are significant to the measurement of the asset: 

Quoted Prices for Identical Assets: the measurement of assets in this classification is based on direct market quotes for the 

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

Significant Observable Inputs: the measurement of assets in this classification is primarily derived from market observable data, 

other than a direct market quote, for the asset. this data could be market quotes for similar assets for the same entity. 

Significant Unobservable Inputs: the measurement of assets in this classification is primarily derived from inputs which 

generally represent management’s best estimate of how a market participant would assess the risk inherent in the asset. these 

unobservable inputs are used because there is little to no direct market activity. 

note 8. tarp direct loans and equity investments, net and asset guarantee program 

part 3: annual financial report
the department of the treasury 

188 

the table below displays the assets held by the observability of inputs significant to the measurement of each value (in millions): 

As of September 30, 2010 

Investment

 Quoted Prices for 

Identical Assets 

Significant 

Observable Inputs 

Significant 

Unobservable Inputs 

2010 

Total 

Capital Purchase Program $ 14,899 $ 0 $ 33,334 $ 48,233 

American International Group Investment Program* 0 0 26,138 26,138 

Targeted Investment Program 0 0 1 1 

Automotive Industry Financing Program 0 0 52,709 52,709 

Consumer and Business Lending Initiative, which includes TALF, SBA 7(a) 

securities and CDCI 0 0 966 966 

Public-Private Investment Program 0 0 14,405 14,405 

Asset Guarantee Program 2,240 815 0 3,055 

Total TARP Program $ 17,139 $ 815 $ 127,553 $ 145,507 

As of September 30, 2009 

Quoted Prices for Significant Significant 2009 

Investment Identical Assets Observable Inputs Unobservable Inputs Total 

Capital Purchase Program $ 37,231 $ 0 $ 104,440 141,671 

American International Group Investment Program 0 0 13,152 13,152 

Targeted Investment Program 0 40,341 0 40,341 

Automotive Industry Financing Program 0 0 42,284 42,284 

Consumer and Business Lending Initiative, which includes TALF 0 0 444 444 

Asset Guarantee Program 0 0 1,765 1,765 

Total TARP Program $ 37,231 $ 40,341 $ 162,085 239,657 

* Does not give effect to the proposed restructuring as discussed under American International Group, Inc. Investment Program in this note.
 

Note: Reported on the balance sheet as of September 30, 2010, $815 million is intra-governmental and $144,692 million is with the public for a combined total of $145,507 million.
 

the following provides a description of the methodology used to develop the cash flows and incorporate the market risk into the 

measurement of the Department assets. 

Financial Institution Equity Investments4 

the estimated values of preferred equity investments are the net present values of the expected dividend payments and repurchases. the 

model assumes that the key decisions affecting whether or not institutions pay their preferred dividends are made by each institution 

based on the strength of their balance sheet. the model assumes a probabilistic evolution of each institution’s asset-to-liability ratio (the 

asset-to-liability ratio is based on the estimated fair value of the institution’s assets against its liabilities). each institution’s assets are 

subject to uncertain returns and institutions are assumed to manage their asset to liability ratio in such a way that it reverts over time to 

a target level. historical volatility is used to scale the likely evolution of each institution’s assets-to-liabilities ratio. 

In the model, when equity decreases, i.e. the asset-to-liability ratio falls, institutions are increasingly likely to default, either because 

they enter bankruptcy or are closed by regulators. the probability of default is estimated based on the performance of a large sample 

of u.s. banks over the period 1990-2009. at the other end of the spectrum, institutions call their preferred shares when the present 

value of expected future dividends exceeds the call price; this occurs when equity is high and interest rates are low. Inputs to the model 

include institution specific accounting data obtained from regulatory filings, an institution’s stock price volatility, historical bank 

failure information, as well as market prices of comparable securities trading in the market. the market risk adjustment is obtained 

through a calibration process to the market value of certain trading securities of financial institutions within the tarP programs. the 

Department estimates the values and projects the cash flows of warrants using an option-pricing approach based on the current stock 

price and its volatility. Investments in common stock which are exchange traded are valued at the quoted market price. 

4 this consists of equity investments made under cPP, cDcI, and tIP. 

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AIG Investment 

the method used to measure aIg preferred shares is broadly analogous to the approach used to measure financial institution 

preferred shares. however, greater uncertainty exists for the valuation of preferred shares for aIg. first, the size of the Departments’ 

holding of preferred shares relative to aIg’s total balance sheet makes the valuation extremely sensitive to assumptions about the 

recovery ratio for preferred shares should aIg enter default. second, no comparable traded preferred shares exist. therefore, the 

Department based the aIg valuation on the observed market values of publicly traded junior subordinated debt, adjusted for the 

Departments’ position in the capital structure. further, based on certain publicly available third party sources, assumptions about 

payouts in different outcomes and the probability of some outcomes were made. finally, an external asset manager provided estimated 

fair value amounts, premised on public information, which also assisted the Department in its measurement. these different factors 

were all used in determining the best estimate for the aIg assets. the adjustment for market risk is incorporated in the data points 

the Department uses to determine the measurement for aIg as all points rely on market data. 

Asset Guarantees Program 

for fiscal year 2009, the value of the asset guarantee program reflects the net present value of estimated default-claim payments by the 

Department, net of income from recoveries on defaults, fees (including equity received), or other income. Default-claim payments 

were based on estimated losses on the guaranteed assets. key inputs into these estimates are forecasted gross domestic product, 

unemployment rates, and home price depreciation, in a base scenario and a stress scenario. During fiscal year 2010, an agreement 

was entered into to terminate the guarantee of the Department to pay for any defaults. after the termination, the Department still 

holds some of the trust preferred securities (initially received as the guarantee fee) issued by citigroup and the potential to receive 

$800 million (liquidation preference) of additional citigroup trust preferred securities from the fDIc, see further discussion below 

under the heading of asset guarantee Program. as such, as of september 30, 2010, the value of the instruments within the agP is 

the value of the trust preferred securities held and the estimated cash flows associated with the contingent right to receive additional 

trust preferred securities. on september 30, 2010, the Department entered into an agreement to sell5

 the trust preferred securities 

held within agP, and the value of the trust preferred securities is approximately the sales price and the contingent right is valued in 

a similar manner as the financial institutions preferred equity investments noted above. 

Investments in Special Purpose Vehicles 

the Department has made certain investments in financial instruments issued by special purpose vehicles (sPVs). generally, the 

Department estimates the cash flows of the sPV and then applies those cash flows to the waterfall governing the priority of payments 

out of the sPV. 

for the loan associated with the term asset-backed securities loan facility (talf), the Department model derives the cash flows to 

the sPV, and ultimately the Department, by simulating the performance of underlying collateral. loss probabilities on the underlying 

collateral are calculated based on analysis of historical loan loss and charge off experience by credit sector and subsector. historical 

mean loss rates and volatilities are significantly stressed to reflect recent and projected performance. simulated losses are run through 

cash flow models to project impairment to the talf-eligible securities. Impaired securities are projected to be purchased by the sPV, 

requiring additional funding by the Department. simulation outcomes consisting of a range of loss scenarios are probability-weighted 

to generate the expected net present value of future cash flows. 

for the Public-Private Investment Program (PPIP) investments and loans made in the Public Private Investment funds (PPIf), the 

Department model derives cash flows to the sPV by simulating the performance of the collateral supporting the residential mortgagebacked securities (rMbs) and commercial mortgage backed securities (cMbs) held by the PPIf (i.e. performance of the residential 

and commercial mortgages). the simulated cash flows are then run through the waterfall of the rMbs/cMbs to determine the cash 

flows to the sPV. once determined, the cash flows are run through the waterfall of the PPIf to determine the expected cash flows to 

see further discussion of sale under asset guarantee Program below. 

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the Department through both the equity investments and loans. Inputs used to simulate the cash flows are unemployment forecast, 

home price appreciation/depreciation forecast, the current term structure of interest rates, historical pool performance as well as 

estimates of net income and value of commercial real estate supporting the cMbs. 

SBA 7(a) Securities 

the valuation of sba 7(a) securities is based the discounted estimated cash-flows of the securities. 

Auto Industry Financing Program (AIFP) Investments and Loans 

the valuation of equity investments was performed in a manner that is broadly analogous to the methodology used for financial 

institution equity investments, with reliance on publicly traded securities to benchmark the assumptions of the valuation exercise. 

aIfP loans with potential value is valued using rating agency default probabilities. 

as part of the general Motors (gM) bankruptcy proceedings, the Department received a 60.8 percent stake in the common equity of 

general Motors company (new gM). because the unsecured bond holders in general Motors corporation (old gM) received 10 

percent of the common equity ownership and warrants in new gM, the expected recovery rate implied by the current trading prices 

of the old gM bonds provides the implied value of the new gM equity. the Department used this implied equity value to account 

for its equity stake in new gM. the adjustment for market risk is incorporated in the data points the Department uses to determine 

the measurement for gM as all points rely on market data. 

for gMac, Inc. (gMac – currently known as ally financial) trust preferred equity instruments, the Department estimates the 

value based on comparable publicly traded securities adjusted for factors specific to gMac, such as credit rating. for investments in 

gMac’s common equity and mandatorily convertible preferred stock, which is valued on an “if-converted” basis, the Department 

uses certain valuation multiples such as price-to-earnings and price-to-tangible book value to estimate the value of the shares. the 

multiples are based on those of comparable publicly-traded entities. the adjustment for market risk is incorporated in the data points 

the Department uses to determine the measurement for gMac as all points rely on market data. 

the Department values direct loans using an analytical model that estimates the net present value of the expected principal, interest, 

and other scheduled payments taking into account potential defaults. In the event of an institution’s default, these models include 

estimates of recoveries, incorporating the effects of any collateral provided by the contract. the probability of default and losses 

given default are estimated by using historical data when available, or publicly available proxy data, including credit rating agencies 

historical performance data. the models also incorporate an adjustment for market risk to reflect the additional return on capital that 

would be required by a market participant. 

Subsidy Cost 

the recorded subsidy cost of a direct loan, equity investment, or asset guarantee is based on the estimated future cash flows calculated 

as discussed above. the Department actions, as well as changes in legislation, that change these estimated future cash flows change 

subsidy costs and are recorded as modifications. the cost of a modification is recognized as a modification expense, included in 

subsidy cost, when the direct loan, equity investment, or asset guarantee is modified. During fiscal year 2010, modifications occurred 

within the capital Purchase Program, the asset guarantee Program, and the automotive Industry financing Program. During the 

fiscal year ended september 30, 2009, modifications occurred within the capital Purchase Program; consumer and business lending 

Initiative; the american International group, Inc. Investment Program; and the automotive Industry financing Program. see 

detailed discussion related to each program and related modifications below. total net modification cost for the fiscal year ended 

september 30, 2010 was $47.9 million. for the fiscal year ended september 30, 2009, net modification costs were $412.1 million. 

the following table recaps gross loan or equity investment, subsidy allowance, and net loan or equity investment by tarP program. 

Detailed tables providing the net composition, subsidy cost, modifications and reestimates, along with a reconciliation of subsidy cost 

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allowances as of and for the fiscal year ended september 30, 2010 and september 30,2009, are provided at the end of this note for 

Direct loans and equity Investments, detailed by program, and for the asset guarantee Program separately. 

Descriptions and chronology of significant events by program are after the summary table. 

(in millions) As of September 30, 2010 

Gross Direct Loans Subsidy Net Direct Loans 

TARP Program or Equity Investment Allowance or Equity Investment 

Capital Purchase Program (CPP) $ 49,779 $ (1,546) $ 48,233 

American International Group, Inc. Investment Program (AIG)* 47,543 (21,405) 26,138 

Targeted Investment Program (TIP) 0 1 1 

Automotive Industry Financing Program (AIFP) 67,238 (14,529) 52,709 

Consumer and Business Lending Initiative (CBLI), which includes TALF, SBA 7(a) 

securities and CDCI 908 58 966 

Public-Private Investment Program (PPIP) 13,729 676 14,405 

Total TARP Program $ 179,197 $ (36,745) $ 142,452 

(in millions) As of September 30, 2009 

Gross Direct Loans Subsidy Net Direct Loans 

TARP Program or Equity Investment Allowance or Equity Investment 

Capital Purchase Program (CPP) $ 133,901 $ 7,770 $ 141,671 

American International Group, Inc. Investment Program (AIG) 43,206 (30,054) 13,152 

Targeted Investment Program (TIP) 40,000 341 40,341 

Automotive Industry Financing Program (AIFP) 73,762 (31,478) 42,284 

Consumer and Business Lending Initiative (CBLI), which includes TALF 100 344 444 

Public-Private Investment Program (PPIP) 0 0 0 

Total TARP Program $ 290,969 $ (53,077) $ 237,892 

* Does not give effect to the proposed restructuring as discussed under American International Group, Inc. Investment Program in this note. 

Capital Purchase Program 

In october 2008, the Department began implementation of the tarP with the capital Purchase Program (cPP), designed to help 

stabilize the financial system by assisting in building the capital base of certain viable u.s. financial institutions to increase the 

capacity of those institutions to lend to businesses and consumers and support the economy. under this program, the Department 

purchased senior perpetual preferred stock from qualifying u.s. controlled banks, savings associations, and certain bank and savings 

and loan holding companies (Qualified financial Institution or QfI). the senior preferred stock has a stated dividend rate of 5.0 

percent through year five, increasing to 9.0 percent in subsequent years. the dividends are cumulative for bank holding companies 

and subsidiaries of bank holding companies and non-cumulative for others and payable when and if declared by the institution’s 

board of directors. under the original terms of the senior preferred stock the QfI may not redeem the shares within the first three 

years of the date of the investment, unless it had received the proceeds of one or more Qualified equity offerings (Qeo)6

 which 

results in aggregate gross proceeds to the QfI of not less than 25.0 percent of the issue price of the senior preferred stock. QfIs that 

are sub-chapter s corporations issued subordinated debentures in order to maintain compliance with the Internal revenue code. 

the maturity of the subordinated debentures is 30 years and interest rates are 7.7 percent for the first five years and 13.8 percent for 

the remaining years. 

a Qualified equity offering is defined as the sale by the QfI after the date of the senior preferred stock investment of tier 1 perpetual preferred stock or 

common stock for cash. 

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In february 2009 and May 2009, the united states congress passed the american recovery and reinvestment act of 2009 and the 

helping families save their homes act of 2009, respectively. these acts contained amendments to the eesa (eesa amendments) 

which require the secretary to allow QfIs to repay at any time, subject to regulatory approval, regardless of whether the 25.0 percent 

or greater Qeo was accomplished. the ability of a QfI to repay the Department investment prior to year three or a 25.0 percent 

Qeo was not considered in the original subsidy cost estimate. therefore, a modification cost of $77.7 million was recorded for the 

fiscal year ended september 30, 2009 as a result of these amendments. 

In addition to the senior preferred stock, the Department received warrants, as required by section 113(d) of eesa, from public QfIs 

to purchase a number of shares of common stock. the warrants have an aggregate exercise price equal to 15.0 percent of the total 

senior preferred stock investment. the exercise price per share used to determine the number of shares of common stock subject to 

the warrant was calculated based on the average closing prices of the common stock on the 20 trading days ending on the last day 

prior to the date the QfIs application was preliminarily approved for participation in the program. the warrants include customary 

anti-dilution provisions. Prior to December 31, 2009, in the event a public QfI completed one or more Qeos with aggregate gross 

proceeds of not less than 100.0 percent (100.0 percent Qeo) of the senior perpetual preferred stock investment, the number of 

shares subject to the warrants was reduced by 50.0 percent. as of December 31, 2009, a total of 38 QfIs reduced the number of shares 

available under the warrants as a result of this provision. as of september 30, 2009, 19 QfIs had reduced shares pursuant to the 

provision. the warrants have a 10 year term. subsequent to December 31, 2009, the Department may exercise any warrants held in 

whole or in part at any time. 

the Department received warrants from non-public QfIs for the purchase of additional senior preferred stock (or subordinated 

debentures if appropriate) with a stated dividend rate of 9.0 percent (13.8 percent interest rate for subordinate debentures) and 

a liquidation preference equal to 5.0 percent of the total senior preferred stock (additional subordinate debenture) investment. 

these warrants were immediately exercised and resulted in the Department holding additional senior preferred stock (subordinated 

debentures) (collectively referred to as “warrant preferred stock”) of non-public QfIs. the Department did not receive warrants 

from financial institutions considered community Development financial Institutions (cDfIs). a total of 35 and 20 institutions 

considered cDfIs were in the cPP portfolio as of september 30, 2010 and 2009, respectively. 

the eesa amendments previously discussed also allow the secretary to liquidate warrants associated with repurchased senior 

preferred stock at the market price. In addition, a QfI, upon the repurchase of its senior preferred stock, also has the contractual right 

to repurchase the common stock warrants at the market price. 

the following table provides key data points related to the cPP. In addition, 106 and 38 QfIs have not declared and paid one or 

more dividends to the Department under cPP as of september 30, 2010 and 2009, respectively (dollars in millions): 

2010 2009 

Number of Institutions Participating 707 685 

Outstanding Beginning Balance, Investment in CPP Institutions $ 133,901 $ 0 

Purchase Price, current year Investments 278 204,619 

Repayments and Sales of Investments (81,462) (70,718) 

Write-offs and Losses (2,575) 0 

Transfers to CDCI (363) 0 

Outstanding Ending Balance, Investment in CPP Institutions $ 49,779 $ 133,901 

Interest and Dividend Collections $ 3,100 $ 6,800 

Net Proceeds from Sales and Repurchases of Assets in Excess of Cost $ 6,700 $ 2,900 

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the task of managing the investments in cPP banks may require that the Department enter into certain agreements to exchange 

and/or convert existing investments in order to achieve the best possible return for taxpayers. In the fiscal year ended september 30, 

2009, the Department entered into an exchange agreement with citigroup under which the Department exchanged $25,000 million, 

at $3.25 per share, of its investment in senior preferred stock for 7,700 million common shares of citigroup. this exchange 

transaction was not considered in the original subsidy cost estimate for cPP. as a result, the Department recorded a modification 

cost of $1,800 million for the fiscal year ended september 30, 2009. In april 2010, the Department began a process of selling the 

citigroup common stock. as of september 30, 2010, the Department had sold approximately 4,000 million shares for total proceeds 

of $16,100 million resulting in proceeds from sales in excess of cost of approximately $3,000 million. as of september 30, 2010, the 

Department continues to hold approximately 3,700 million shares of citigroup common stock with an estimated fair value of $14,300 

million, based on the september 30, 2010 closing price of $3.91 per share. Included in shares held as of september 30, 2010, is 

approximately 77.2 million shares which were sold prior to or on september 30, 2010, but did not settle until october 2010. Proceeds 

from these sales were $302.7 million resulting in proceeds from sales in excess of cost of $51.9 million. 

In addition to the above transaction the Department has entered into other transactions with various financial institutions including, 

exchanging existing preferred shares for a like amount of non tax-deductible trust Preferred securities, shares of mandatorily 

convertible preferred securities and selling preferred shares to acquiring financial institutions. generally the transactions are entered 

into with financial institutions in poor financial condition with a high likelihood of failure. as such, in accordance with sffas 

no. 2, these transactions are considered workouts and not modifications. the changes in cost associated with these transactions are 

captured in the year-end reestimates. 

During fiscal year 2010, certain financial institutions participating in cPP which are in good standing became eligible to exchange 

their Department-held stock investments to preferred stock under the community Development capital Initiative (cDcI) of the 

consumer and business lending Initiative Program (cblI). the exchange of stock is treated as a repayment of cPP investments 

from the participating financial institution and a distribution for the cDcI. see further discussion of the cblI and cDcI below. 

this was not considered in the formulation estimate for the cPP program. as a result, the Department recorded a modification cost 

savings of $31.9 million in the cPP program for this option during fiscal year 2010. 

Failed institutions 

In november 2009, a cPP participant, cIt group, filed for chapter 11 bankruptcy. the Department had invested $2,300 million in 

senior preferred stock of cIt group and received a warrant for the purchase of common stock. In fiscal year 2010, as a result of the 

bankruptcy proceedings, the Department wrote off the $2,300 million investment in cIt group and will not recover any amounts 

associated with it. In addition, during fiscal year 2010, four other financial institutions within the cPP portfolio either filed for 

bankruptcy or were closed by their regulators. the Department had invested approximately $396.3 million into these institutions. 

the Department does not anticipate recovery on these investments and therefore the value of these shares are reflected at zero as 

of september 30, 2010. the ultimate amount received, if any, from the investments in institutions that filed for bankruptcy and 

institutions closed by regulators will depend primarily on the outcome of the bankruptcy proceedings and of the receivership. 

American International Group, Inc. Investment Program (AIG) 

the Department provides assistance to certain systemically significant financial institutions on a case-by-case basis in order to 

provide stability to institutions that are critical to a functioning financial system and are at substantial risk of failure as well as to 

prevent broader disruption to financial markets. 

In november 2008, the Department invested $40,000 million in aIg’s cumulative series D perpetual cumulative preferred 

stock with a dividend rate of 10.0 percent compounded quarterly. the Department also received a warrant for the purchase of 

approximately 53.8 million shares (adjusted to 2.7 million shares after a 20:1 reverse stock split) of aIg common stock. on april 17, 

2009, aIg and the Department restructured their november 2008 agreement. under the restructuring, the Department exchanged 

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$40,000 million of cumulative series D preferred stock for $41,600 million of non-cumulative 10.0 percent series e preferred stock. 

the amount of series e preferred stock is equal to the original $40,000 million, plus approximately $733.0 million in undeclared 

dividends as of the february 1, 2009, scheduled quarterly dividend payment date, $15.0 million in dividends compounded on the 

undeclared dividends, and an additional $855.0 million in dividends from february 1, 2009, but not paid as of april 17, 2009. aIg’s 

restructured agreement kept the quarterly dividend payment dates of May 1, august 1, november 1, and february 1, as established 

by the original november 2008 agreement. the original subsidy cost estimate did not consider this restructuring which resulted in a 

modification cost of $127.2 million being recorded. the Department requested and received an appropriation for this additional cost 

in the fiscal year ended september 30, 2009. 

In addition to the exchange, the Department agreed to make available an additional $29,800 million capital facility to allow aIg 

to draw additional funds if needed to assist in aIg’s restructuring. the Department investment related to the capital facility consists 

of series f non-cumulative perpetual preferred stock with no initial liquidation preference, and a warrant for the purchase of 3,000 

shares (adjusted to 150 shares after a 20:1 reverse stock split of aIg common stock). this liquidation preference increases with any 

draw down by aIg on the facility. the dividend rate applicable to these shares is 10.0 percent and is payable quarterly, if declared, 

on the outstanding liquidation preference. for the fiscal year ended september 30, 2010 and september 30, 2009, $4,300 million 

and $3,200 million, respectively, has been funded by the Department to aIg under this additional capital facility. consistent with 

sffas no.2, the unused portion of the aIg capital facility is not recognized as an asset as of september 30, 2010 and 2009. 

according to the terms of the preferred stock, if aIg misses four dividend payments, the Department may appoint to the aIg board 

of directors, the greater of two members or 20.0 percent of the total number of directors of the company. the ability to appoint 

such directors shall remain in place until dividends payable on all outstanding shares of the series e Preferred stock have been 

declared and paid in full for four consecutive quarterly dividend periods, subject to revesting for each and every subsequent missed 

dividend payment. on april 1, 2010, the Department appointed two directors to the company’s board as a result of non-payments of 

dividends. the additional two directors increased the total number of aIg directors to twelve. 

on september 30, 2010, the Department, federal reserve bank of new york and aIg announced plans for a restructuring of the 

federal government’s investments in aIg. the restructuring plan provides for, among other items, the conversion of currently 

outstanding series e & f preferred stock to 1,092 million shares of aIg common stock. under the plan the current undrawn portion 

of series f will be available to aIg for the repayment of certain amounts owed to the federal reserve bank of new york and for 

general corporate liquidity. the plan is still subject to a number of conditions which must be met in order to close. the Department’s 

management believes that implementation of this plan would not result in additional losses on the aIg investment. see additional 

discussion regarding the proposed restructuring plan within the Management’s Discussion and analysis section of the Performance 

and accountability report. 

Targeted Investment Program 

the targeted Investment Program (tIP) was designed to prevent a loss of confidence in financial institutions that could result 

in significant market disruptions, threatening the financial strength of similarly situated financial institutions, impairing broader 

financial markets, and undermining the overall economy. the Department considered institutions as candidates for the tIP on a 

case-by-case basis, based on a number of factors including the threats posed by destabilization of the institution, the risks caused by a 

loss of confidence in the institution, and the institution’s importance to the nation’s economy. 

In fiscal year 2009, the Department invested $20,000 million in each of bank of america and citigroup under tIP. under each 

agreement, the Department purchased $20,000 million of perpetual preferred stock with an annual cumulative dividend rate of 8 

percent and received a warrant for the purchase of common stock. In December 2009, bank of america and citigroup repaid the 

amounts invested by the Department along with dividends through the date of repayment. the amounts remaining within the tIP 

subsidy cost allowance represent the estimated value of the citigroup warrant still held by the program. 

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During fiscal year 2010, the Department received $1,100 million in dividends under the tIP and proceeds of $1,200 million from 

the auction of the bank of america warrants. In fiscal year 2009, the Department received $1,900 million in dividends under this 

program. 

Automotive Industry Financing Program 

the automotive Industry financing Program (aIfP) was designed to prevent a significant disruption of the american automotive 

industry, which could have had a negative effect on the economy of the united states. 

General Motors (GM) 

In fiscal year 2009, the Department provided $49,500 million to gM through various loan agreements including the initial loan for 

general and working capital purposes and the final loan for debtor in possession (DIP) financing while gM was in bankruptcy. the 

Department assigned its rights in these loans (with the exception of $986.0 million which remained in gM for wind down purposes 

and $7,100 million that would be assumed) and previously received common stock warrants to a newly created entity (general 

Motors company). general Motors company used the assigned loans and warrants to credit bid for substantially all of the assets 

of gM in a sale pursuant to section 363 of the bankruptcy code. upon closing of the section 363 sale, the credit bid loans and 

warrants were extinguished and the Department received $2,100 million in 9.0 percent cumulative perpetual preferred stock and 60.8 

percent of the common equity interest in general Motors company. In addition, general Motors company assumed $7,100 million 

of the DIP loan, simultaneously paying $400 million (return of warranty program funds), resulting in a balance of $6,700 million. the 

assets received by the Department as a result of the assignment and section 363 sale are considered recoveries of the original loans for 

subsidy cost estimation purposes. recovery of the $986.0 million remaining in gM is subject to the final outcome of the bankruptcy 

proceedings. During fiscal year 2010, the Department had received the remaining $6,700 million as full repayment of the DIP loan 

assumed. In addition as of september 30, 2010 the Department had received $188.8 million in dividends and $343.1 million in 

interest on general Motors company preferred stock and the loan prior to repayment, respectively. the Department received $34.1 

million in dividends on the preferred stock and no interest on the loan during the fiscal year ended september 30, 2009. on october 

27, 2010, the Department signed a letter agreement with gM agreeing to sell the preferred stock to gM. gM will repurchase the 

preferred stock for 102 percent of the liquidation amount. 

the Department has not yet determined whether to sell any of its shares of general Motors company common stock in connection 

with the company’s proposed initial public offering. Due to the uncertainty as to the market price that would result from the initial 

public offering, the potential effect on the value of the Department’s investment in general Motors company is unknown and could 

be significantly different from the september 30, 2010 financial statement value. 

GMAC LLC Rights Offering 

In December 2008, the Department agreed, in principal, to lend up to $1,000 million to gM for participation in a rights offering by 

gMac (now known as ally financial, Inc.) in support of gMac’s reorganization as a bank holding company. the loan was secured 

by the gMac common interest acquired in the rights offering. the loan agreement specified that at any time, at the option of the 

lender (the Department), the unpaid principal and accrued interest was exchangeable for the membership interest purchased by gM 

during the rights offering. the loan was funded for $884.0 million. In May 2009, the Department exercised its exchange option under 

the loan and received 190,921 membership interests, representing approximately 35.36 percent of the voting interest at the time, in 

gMac in full satisfaction of the loan. In addition, during the fiscal year ended september 30, 2009, the Department received $9.1 

million in interest while the loan was outstanding. the conversion to gMac shares was not considered in the original subsidy cost. 

as a result, a modification was recorded reducing the estimated subsidy cost by approximately $1,600 million for the fiscal year ended 

september 30, 2009. as of september 30, 2010 the Department continues to hold the gMac shares obtained in this transaction 

(see further discussion of Department’s gMac holdings under gMac, Inc. in this note). 

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Chrysler Holding LLC (Chrysler) 

In fiscal year 2009, the Department invested approximately $5,900 million in chrysler. specifically, $4,000 million was for general 

and working capital purposes (general Purpose loan) and $1,900 million was for DIP financing while chrysler was in bankruptcy 

(DIP loan). upon entering bankruptcy, a portion of chrysler was sold to a newly created entity (new chrysler). under the 

terms of the bankruptcy agreement, $500.0 million of the general purpose loan was assumed by the new chrysler (see discussion 

under chrysler exit for discussion of note terms). In fiscal year 2010, the Department received approximately $1,900 million 

and subsequently wrote-off the remaining $1,600 million of the general Purpose loan. recovery of the DIP loan is subject to 

the bankruptcy process associated with the chrysler assets remaining after the sale to new chrysler. During fiscal year 2010 the 

Department received $40.2 million in recoveries on the DIP loan. the Department did not receive any interest on these loans during 

the fiscal year 2010. During fiscal year 2009, the Department had received $52.1 million in interest payments from these loans. 

Chrysler Exit 

In May 2009, the Department committed to make a loan to new carco acquisition llc (chrysler group llc), the company that 

purchased certain assets of chrysler. the final terms of the credit agreement resulted in a loan to new chrysler for approximately 

$7,100 million. this amount consists of a commitment to fund up to $6,600 million of new funding and $500 million of assumed 

debt7

 from the Department January 2, 2009 general Purpose loan with chrysler, described above. the loan was secured by a first 

priority lien on the assets of chrysler group llc. funding of the loan was available in two installments or tranches (b and c), each 

with varying availability and terms. the following describes the terms of tranches b and c. 

the maximum funding under tranche b was $2,000 million and was funded on the closing date of the agreement. Interest on 

tranche b is generally8

 3-Month eurodollar plus 5.0 percent margin. tranche b is due and payable on December 10, 2011, provided 

that the chrysler group llc may elect to extend the maturity of up to $400.0 million of tranche b to the tranche c maturity date. 

If so elected, the applicable margin will increase from 5.0 percent to 6.5 percent. 

the maximum funding under tranche c is approximately $4,640 million, of which approximately $2,580 million was funded on 

the closing date. Interest on tranche c is 3-Month eurodollar plus 7.91 percent margin. on June 10, 2016, the tranche c loan 

is due to be prepaid to the extent the funded amount is greater than 50.0 percent of the closing date commitment amount, taking 

into consideration amounts previously prepaid as a voluntary prepayment. the remaining balance of the tranche c loan is due and 

payable on June 10, 2017. 

Interest on both the tranche b and tranche c was payable in-kind through December 2009 and added to the principal balance of 

the respective tranche. subsequently, interest is paid quarterly beginning on March 31, 2010. In addition, additional in-kind interest 

is being accrued in the amount of $17.0 million per quarter. such amount will be added to the tranche c loan balance subject to 

interest at the appropriate rate. 

the Department also obtained other consideration, including a 9.85 percent equity interest in chrysler group llc and additional 

notes9

 with principal balances of $288.0 million and $100.0 million.10 as of september 30, 2009, the Department had funded 

approximately $4,600 million under this facility, which was outstanding as of september 30, 2010 and 2009. During fiscal year 2010, 

the Department received $381.8 million in interest payments. no interest was due for payment in the fiscal year ended september 30, 

2009. for the fiscal year ended september 30, 2010, the Department has recognized $344.4 million of in-kind interest that has been 

capitalized. no in-kind interest was recognized in the fiscal year ended september 30, 2009. 

7 the assumed debt contains the same terms as the tranche c loan with respect to mandatory prepayment, interest and maturity. 

8 for both tranche b and c, an alternative base rate (defined in agreement) is available at the option of the Department in certain situations defined in 

the agreement. 

9 the additional notes bear the same interest rate and maturity as the tranche c loan. 

10 Interest begins to accrue on this note after certain events, defined in the credit agreement, have taken place. 

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Chrysler Financial 

In January, 2009, the Department loaned $1,500 million to chrysler lb receivables trust (chrysler trust), a special purpose entity 

created by chrysler financial, to finance the extension of new consumer auto loans. on July 14, 2009, the loan and additional note 

of $15.0 million were paid in full. In fiscal year 2009, the Department received $7.4 million in interest payments while this loan was 

outstanding. 

Auto Supplier Support Program 

In april 2009, under the auto supplier support Program, the Department committed $5,000 million in financing for the auto 

supplier Program as follows: $3,500 million for gM suppliers and $1,500 million for chrysler suppliers. these commitments were 

subsequently reduced to $2,500 million for gM suppliers and $1,000 million for chrysler suppliers per the loan agreement. under 

the program, suppliers were able to sell their receivable to a sPV, created by the respective automaker, at a discount. the Department 

provided approximately $413.1 million of funding to this program during fiscal year 2009. the bankruptcy of chrysler and gM 

did not impact this program, as both companies were allowed to continue paying suppliers while in bankruptcy. the Department 

received $5.9 million in interest during fiscal year 2009.the $413.1 million was repaid in fiscal year 2010 along with approximately 

$9.0 million in interest and $101.1 million in fees and other income. 

Auto Warranty Program 

In april 2009 and May 2009, the Department loaned approximately $280.0 million to chrysler and $360.6 million to gM, 

respectively, to capitalize sPVs created by chrysler and gM to finance participation in the Warranty commitment Program 

(warranty program). the Department also received additional notes as consideration for its loans in an amount equal to 6.67 percent 

of the funded amounts. the warranty program covered all warranties on new vehicles purchased from chrysler and gM during the 

period in which chrysler and gM were restructuring. In fiscal year 2009, the Department received all principal amounts due on the 

auto Warranty Program loans from both gM and chrysler and terminated the warranty program. Interest in the amount of $3.1 

million was received by the Department from chrysler during the fiscal year ended september 30, 2009. no interest was received 

in connection with the gM repayment. the gM additional note was assigned to the general Motors company as part of the 

bankruptcy proceedings and extinguished as part of the credit bid for the assets of old gM. In fiscal year 2010, the chrysler additional 

note was written off with the remaining portion of the chrysler general Purpose loan. 

GMAC Inc. (GMAC-currently known as Ally Financial) 

In December 2008, the Department purchased preferred membership interests for $5,000 million that were converted to senior 

preferred stock with an 8.0 percent annual distribution right (dividends) from gMac. under the agreement, gMac issued warrants 

to the Department to purchase, for a nominal price, additional preferred equity in an amount equal to 5.0 percent of the preferred 

equity purchased. these warrants were exercised at closing of the investment transaction. the additional preferred stock provided for 

a 9.0 percent annual distribution right. During fiscal year 2009, the Department received $265.2 million in dividends associated with 

these preferred and warrant preferred shares. on December 30, 2009, this preferred stock (including the warrant preferred shares) was 

exchanged for 105.0 million shares of gMac’s series f-2 fixed rate cumulative Mandatorily convertible Preferred stock (series 

f-2) shares (described below). this exchange was not considered in the original subsidy estimate for gMac; therefore the Department 

recorded a modification cost of $1,500 million in fiscal year 2010. 

In May 2009, the Department published a non-binding term sheet to invest $13,100 million to support gMac, subject to definitive 

documentation and gMac’s capital needs. In fiscal year 2009, the Department invested $7,500 million (150.0 million shares) in 

9.0 percent Mandatorily convertible Preferred stock in gMac to support its ability to originate new loans to chrysler dealers 

and consumers, and help address gMac’s capital needs. the preferred stock have a liquidation preference of $50 per share and are 

convertible in whole or in part, at any time, at the option of gMac, subject to the approval of the federal reserve. In addition, the 

Department received warrants to purchase an additional 7.5 million shares of Mandatorily convertible Preferred stock, which were 

exercised upon closing of the transaction. In December 2009, 97.5 million shares (which include the warrant preferred shares) were 

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exchanged for gMac’s series f-2 shares (discussed below) and the remaining 60 million were converted to 259,200 shares of gMac 

common stock. 

In addition to the exchanges and conversions discussed above, on December 30, 2009, the Department entered into the following transactions with gMac to assist it in complying with the requirements of the federal reserve board’s supervisory capital 

assessment Program: 

1.	 Purchased $2,540 million (2.54 million shares with a face value of $1,000) of 8.0 percent trust Preferred securities and 

received a warrant for an additional $127 million of the trust Preferred securities, which was immediately exercised. gMac 

issued $2,747 million of subordinate debentures to a trust, established by gMac, which in turn issued the trust preferred 

securities. the trust preferred securities pay cumulative cash distributions of 8 percent. gMac may defer payments on the 

debentures (and the trust may defer distributions on the trust preferred securities) for a period of up to 20 consecutive quarters, 

but such distributions will continue to accrue through any such deferral period. gMac has not elected to defer payments. 

the trust Preferred securities have no stated maturity date, but must be redeemed upon the redemption or maturity of the 

debentures (february 15, 2040). 

2.	 Purchased $1,250 million (25 million shares) of gMac’s series f-2, $50 liquidation preference per share. the series f-2 is 

convertible into gMac common stock at the option of gMac subject to the approval of the federal reserve and consent by 

the Department or pursuant to an order by the federal reserve compelling such conversion. the series f-2 is also convertible 

at the option of the Department upon certain specified corporate events. absent an optional conversion, the series f-2 will 

automatically convert to common stock after seven years from the issuance date. the initial conversion rate is .00432 and 

is subject to a “reset” such that the conversion price will be adjusted in 2011, if beneficial to the Department, based on the 

market price of private capital transactions occurring in 2010 and certain anti-dilution provisions. the series f-2 have a stated 

dividend rate of 9 percent, payable when and if declared by the board of directors. the series f-2 may be redeemed by gMac, 

subject to certain limitations and restrictions. the Department also received a warrant to purchase $62.5 million (1.25 million 

shares) of additional series f-2, which was immediately exercised. 

as a result after the December 30, 2009 transaction, the Department has the following investments in gMac, as of september 30, 

2010: 

Investment Amount / 


Percent Ownership
 

Number of Shares (dollars in millions)
 

8% Trust Preferred Securities 

Purchased 

Received from warrant exercise 

Total Trust Preferred Securities 

2,540,000 

127,000 

2,667,000 

$

$ 

2,540 

127 

2,667 

Series F-2 Mandatorily Convertible Securities 

Purchased/exchanged for 

Received from warrant exercise 

Total Series F-21 

227,500,000 

1,250,000 

228,750,000 

$

$ 

11,375 

63 

11,438 

Common Stock2 450,121 56.3% 

1 / These shares are convertible into 988,200 shares of GMAC common stock, which if combined with common stock currently held by the Department would represent approximately 80.5% 

ownership of GMAC. 

2 / Includes shares received upon conversion of GMAC Rights Loan discussed above. 

the Department received $1,200 million and $430.6 million in dividends from gMac in fiscal year 2010 and 2009, respectively. 

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Consumer and Business Lending Initiative (CBLI) 

the consumer and business lending Initiative is intended to help unlock the flow of credit to consumers and small businesses. three 

programs were established to help accomplish this. the term asset-backed securities loan facility was created to help jump start 

the market for securitized consumer and small business loans. the sba 7(a) securities Purchase Program was created to provide 

additional liquidity to the sba 7(a) market so that banks are able to make more small business loans. the community Development 

capital Initiative was created to provide additional low cost capital to small banks to encourage more lending to small businesses. 

each program is discussed in more detail below. 

Term Asset-Backed Securities Loan Facility 

the term asset-backed securities loan facility (talf) was created by the federal reserve board to provide low cost funding to 

investors in certain classes of asset backed securities (abs). the Department agreed to participate in the program by providing 

liquidity and credit protection to the federal reserve board. 

under the talf, the federal reserve bank of new york (frbny), as implementer of the talf program, originated loans on a nonrecourse basis to purchasers of certain aaa rated abs secured by consumer and commercial loans and commercial mortgage backed 

securities. generally abs issued after January 1, 2009 are eligible collateral under the talf program. In addition, sba securities 

issued after January 1, 2008 and cMbs issued prior to January 2009 and originally aaa rated are eligible collateral. talf loans 

have a term of three or five years and are secured solely by eligible collateral. haircuts (a percentage reduction used for collateral 

valuation) are determined based on the riskiness of each type of eligible collateral and the maturity of the eligible collateral pledged 

to the frbny. the “haircuts” provide additional protection to the Department by exposing the talf borrowers to some risk of loss. 

Interest rates charged on the talf loans depend on the weighted average maturity of the pledged collateral, the collateral type and 

whether the collateral pays fixed or variable interest. the program ceased issuing new loans on June 30, 2010. as of september 30, 

2010, approximately $29,700 million of loans due to the frbny remained outstanding. 

as part of the program, the frbny has entered into a put agreement with the talf, llc, a special purpose vehicle created by 

the frbny. In the event of a talf borrower default, the frbny will seize the collateral and sell it to the talf, llc under this 

agreement. the talf, llc receives a monthly fee equal to the difference between the talf loan rate and the frbny’s fee (spread) 

as compensation for entering into the put agreement. the accumulation of this fee will be used to fund purchases. In the event there 

are insufficient funds to purchase the collateral, the Department originally committed to invest up to $20,000 million in non-recourse 

subordinated notes issued by the talf, llc. on July 19, 2010, the Department’s commitment was reduced to $4,300 million. the 

subordinated notes bear interest at 1-Month lIbor plus 3.0 percent and mature 10 years from the closing date, subject to extension. 

the Department disbursed $100.0 million upon creation of the talf, llc and the remainder can be drawn to purchase collateral in 

the event the spread is not sufficient to cover purchases. any amounts needed in excess of the Department commitment and the fee 

would be provided through a loan from the frbny. upon wind-down of the talf, llc (collateral defaults, reaches final maturity or 

is sold), the cash balance will be disbursed according to the following payment priority: 

1. frbny principal balance 

2. the Department principal balance 

3. frbny interest 

4. the Department interest 

5. remaining cash balance – 90.0 percent to the Department, 10.0 percent to the frbny 

During fiscal year 2009, subsequent to the initial cost estimates prepared for the talf, certain changes were made to the terms of 

the program, including increasing the term to five years and the addition of different types of acceptable collateral. these program 

changes resulted in a modification, for fiscal year 2009, increasing the original cost estimate by $8.0 million. 

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the talf, llc is owned, controlled, and consolidated by the frbny. the credit agreement between the Department and the 

talf, llc provides the Department with certain rights consistent with a creditor but would not constitute control. as such, talf, 

llc is not a federal entity and the assets, liabilities, revenue and cost of talf, llc are not included in the Department’s financial 

statements. 

as of september 30, 2010 and 2009, no talf loans were in default and consequently no collateral was purchased by the talf, llc. 

SBA 7(a) Security Purchase Program 

In March 2010, the Department began the purchase of securities backed by small business administration 7(a) loans (7(a) 

securities) as part of the unlocking credit for small business Initiative. under this program the Department purchases 7(a) 

securities collateralized with 7(a) loans (these loans are guaranteed by the full faith and credit of the united states government) 

packaged on or after July 1, 2008. generally, the Department entered into a trade to purchase 7(a) securities with actual settlement 

and delivery to occur one to three months in the future. as of september 30, 2010, the Department has entered into trades to 

purchase $356.3 million (excluding purchased accrued interest) of these securities. of this amount, $240.7 million has settled with 

the remaining trades to be settled by December 30, 2010. During fiscal year 2010, the Department received $3.5 million in interest 

and principal payments on these securities. 

Community Development Capital Initiative 

In february 2010, the Department announced the community Development capital Initiative (cDcI) to invest lower cost capital 

in community Development financial Institutions (cDfIs). under the terms of the program, the Department purchases senior 

preferred stock (or subordinated debt) from eligible cDfI financial institutions. the senior preferred stock has an initial dividend rate 

of 2 percent. cDfIs may apply to receive capital up to 5 percent of risk-weighted assets. to encourage repayment while recognizing 

the unique circumstances facing cDfIs, the dividend rate will increase to 9 percent after eight years. 

for cDfI credit unions, the Department purchased subordinated debt at rates equivalent to those offered to cDfI financial 

institutions and with similar terms. these institutions may apply for up to 3.5 percent of total assets — an amount approximately 

equivalent to the 5 percent of risk-weighted assets available to banks and thrifts. 

cDfIs participating in the cPP, subject to certain criteria, were eligible to exchange, through september 30, 2010, their current cPP 

preferred shares (subordinated debt) for cDcI preferred shares (subordinated debt). these exchanges were treated as a disbursement 

from cDcI and a repayment to cPP. 

as of september 30, 2010, the Department has invested $570.1 million ($363.3 million was a result of exchanges from cPP) in 84 

institutions under the cDcI. 

Public-Private Investment Program 

the PPIP is part of the Department’s efforts to help restart the market and provide liquidity for legacy assets. under this program, the 

Department made equity investment in and loans to investment vehicles (referred to as Public Private Investment funds or “PPIfs”) 

established by private investment managers. the equity investment was used to match private capital and equaled approximately 

50.0 percent of the total equity invested. the loan is, at the option of the investment manager, equal to 50.0 percent or 100.0 percent 

of the total equity (including private equity). as of september 30, 2010, all PPIfs have elected to receive loans up to 100 percent of 

total equity. the loans bear interest at 1-Month libor, plus 1.0 percent, which accrues monthly and is payable on the 10th business 

day of the month following the accrual period. the maturity date of the loan is the earlier of 10 years or the termination of the PPIf. 

the loan can be prepaid, subject to compliance with the priority of payments discussed below, without penalty. the PPIf will terminate in eight years from the commencement of the fund. the governing documents of the funds allow for two one-year extensions, 

subject to approval of the Department. the loan agreements also require purchased security cash flows from securities received by the 

PPIfs to be distributed in accordance with a priority of payments schedule (waterfall) designed to help ensure secured parties are paid 

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before equity holders. specifically, security cash flows collected are disbursed as follows (steps 7 through 10 are at the discretion of the 

PPIf), 

1.	 to pay administrative expenses, excluding certain tax expenses of the Partnership; 

2.	 to pay interest or margin due on permitted interest rate hedges; 

3.	 to pay current period interest due to the lender; 11 

4.	 to pay amounts due to an interest reserve account if the total deposit in the interest reserve account is less than the required 

interest reserve account; 

5.	 to pay principal on the loan required when the minimum asset coverage ratio test is not satisfied as of the prior month end; 

6.	 to pay other amounts due on permitted interest rate hedges not paid in accordance with step 2 above; 

7.	 for investment in temporary Investments, prepayments of the loan and/or investment in eligible assets during the investment 

period, which is three years from the Initial closing Date (the “Investment Period”); 

8.	 for distribution to partners after step 1 through 7 not to exceed the lesser of: (a) cumulative consolidated net interest income 

for the preceding twelve months or (b) 8 percent on the funded capital commitments, so long as no event of default is then 

continuing and the appropriate asset coverage ratio requirement is satisfied; 

9.	 to pay the loan not to exceed the lesser of (a) prepayment on the loan as scheduled or (b) an amount which reduces the 

loan to zero, provided that dollar for dollar credit is given for any optional prepayments of the loan made during the related 

collection period on any date prior to the applicable determination date; and 

10. remaining amounts to be used or distributed in accordance with the limited partnership agreement after repayment of the 


loan.
 

the loan is subject to certain affirmative and negative covenants as well as a financial covenant, the asset coverage test. the asset 

coverage test generally requires that the asset coverage ratio be equal to or greater than 150 percent. the asset coverage ratio is 

a percentage obtained by dividing total assets of the PPIf by the principal amount of the loan and accrued and unpaid interest on the 

loan. failure to comply with the test could require accelerated repayment of loan principal (see step 7 above) and prohibit the PPIf 

from borrowing additional funds under the loan agreement. 

as a condition of its investment, the Department also received a warrant from the PPIfs entitling the Department to 2.5 percent 

of investment proceeds (excluding those from temporary investments) otherwise allocable to the non-Department partners. the 

warrant payment will be distributed by the PPIf to the Department following the return of 100 percent of the non-Department 

partner’s capital contributions to the PPIf. 

the PPIfs pay a management fee to the fund manager from the Department’s share of investment proceeds. During the Investment 

Period, the management fee is equal to 0.20 percent per annum of the Department’s capital commitment as of the last day of the 

applicable quarter. thereafter, the management fee will be equal to 0.20 percent per annum of the lesser of (a) the Department’s 

capital commitment as of the last day of the applicable quarter and (b) the Department Interest Value as of the last day of the quarter. 

the PPIfs are allowed to purchase commercial mortgage-backed securities (cMbs) and non-agency residential mortgage-backed 

securities (rMbs) issued prior to January 1, 2009 that were originally rated aaa or an equivalent rating by two or more nationally 

recognized statistical rating organizations without external credit enhancement and that are secured directly by the actual mortgage 

loans, leases or other assets (eligible assets) and not other securities. the PPIfs may invest in the aforementioned securities for a 

period of three years using proceeds from capital contribution, loans, and amounts generated by previously purchased investments 

(subject to the requirements of the waterfall). the PPIfs are also permitted to invest in certain temporary securities, including bank 

deposits, u.s. treasury securities, and certain money market mutual funds. at least 90 percent of the assets underlying any eligible 

asset must be situated in the united states. 

11	 the lender is the Department 

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as of september 30, 2010 the total market value of the eligible assets held by all PPIfs was approximately $19,300 million. the 

approximate split between rMbs and cMbs was 82 percent rMbs and 18 percent cMbs. 

on January 4, 2010, the Department entered into a Winding-up and liquidation agreement with one of the PPIfs. Prior to the 

signing of the agreement, the Department had invested $356.3 million ($156.3 million equity investment and $200.0 million loan) 

in the fund. upon final liquidation, the Department received $377.4 million representing return of the original investment, interest 

on the loan and return on the equity investment and warrant. 

as of september 30, 2010, the Department had signed definitive limited partnership and loan agreements with eight investment 

managers, committing to disburse up to $22,100 million. During fiscal year 2010, the Department disbursed $4,900 million as equity 

investment and $9,200 million as loans to PPIfs. as of september 30, 2009, no investment managers had made any investments 

under PPIP and the Department had not disbursed any funds. During fiscal year 2010, the Department received (excluding amounts 

repaid in liquidation discussed above) $56.0 million in interest on loans and $151.8 million (net of management fees of $7.2 million) 

of income on the equity investments. In addition, the Department received $72.0 million in loan principal repayments. 

Asset Guarantee Program 

the asset guarantee Program (agP) provided guarantees for assets held by systemically significant financial institutions that faced 

a risk of losing market confidence due in large part to a portfolio of distressed or illiquid assets. the agP was applied with extreme 

discretion in order to improve market confidence in the systemically significant institution and in financial markets broadly. 

section 102 of the eesa required the secretary to establish the agP to guarantee troubled assets originated or issued prior to 

March 14, 2008, including mortgage-backed securities, and established the troubled assets Insurance financing fund (taIff). In 

accordance with section 102(c) and (d) of the eesa, premiums from financial institutions are collected and all fees are recorded by 

the Department in the taIff. In addition, section 102(c) (3) of the eesa requires that the original premiums assessed are “set” at a 

minimum level necessary to create reserves sufficient to meet anticipated claims. 

the Department completed its first transaction under the agP in January 2009, when it finalized the terms of a guarantee agreement 

with citigroup. under the agreement, the Department, the federal Deposit Insurance corporation (fDIc), and the federal reserve 

bank of new york (frbny) (collectively the usg Parties) provided protection against the possibility of large losses on an asset pool 

of approximately $301,000 million of loans and securities backed by residential and commercial real estate and other such assets, 

which remained on citigroup’s balance sheet. the Department’s guarantee was limited to $5,000 million. 

as a premium for the guarantee, citigroup issued $7,000 million of cumulative perpetual preferred stock (subsequently converted 

to trust Preferred securities with similar terms) with an 8.0 percent stated dividend rate and a warrant for the purchase of common 

stock; $4,000 million and the warrant were issued to the Department, and $3,000 million was issued to the fDIc. the Department 

received $265.2 million and $174.8 million during the fiscal years ending september 30, 2010 and september 30, 2009, respectively, 

in dividends on the preferred stock received as compensation for this arrangement. these dividends have been deposited into the 

taIff. the Department had also invested in citigroup through cPP and the tIP. 

as of september 30, 2009, the net present value of the estimated cash inflows from the preferred stock and warrant received by the 

Department from citigroup as a premium was greater than the estimated net present value of future claims payments, resulting in an 

asset of $1,765 million, after reestimates. 

In December 2009, the usg Parties and citigroup agreed to terminate the guarantee agreement. under the terms of the termination 

agreement the Department cancelled $1,800 million of the preferred stock previously issued to the Department. In addition, the 

fDIc agreed to transfer to the Department $800 million of their trust preferred stock holding plus dividends thereon contingent on 

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citigroup repaying its previously issued fDIc guaranteed debt. the contingent receipt of additional preferred shares from the fDIc 

is included in the subsidy calculation for agP, based on the expected value. termination of the agreement was not considered in the 

formulation estimates of the guarantee and therefore the termination resulted in a negative modification cost (reduction of cost) of 

$1,400 million recorded in fiscal year 2010. on september 29, 2010, the Department exchanged its existing trust Preferred securities 

for securities containing market terms to facilitate a sale. on september 30, 2010, the Department agreed to sell its trust Preferred 

securities it held for $2,246 million. the trust Preferred securities are valued at approximately the sales price in the financial 

statements. the sale settled on october 5, 2010. 

In January 2009, the usg Parties and bank of america signed a summary of terms (term sheet) pursuant to which the usg 

Parties agreed to guarantee or lend against a pool of up to $118,000 million of financial instruments consisting of securities backed by 

residential and commercial real estate loans and corporate debt and related derivatives. In May 2009, prior to completing definitive 

documentation, bank of america notified the usg Parties of its desire to terminate negotiations with respect to the guarantee 

contemplated in the term sheet. all parties agreed that bank of america received value for entering into the term sheet with the 

usg Parties and that the usg Parties should be compensated for out-of-pocket expenses and a fee equal to the amount bank of 

america would have paid for the guarantee from the date of the signing of the term sheet through the termination date. under the 

terms of the settlement, the u.s. treasury received $276.0 million for its role in the guarantee agreement. all the Department funds 

received for the settlement were deposited in the taIff and subsequently paid to the treasury general fund. the $276 million 

received by the Department pursuant to the settlement is reflected in the Department statement of net cost as a reduction of the 

agP subsidy cost in the fiscal year ended september 30, 2009. 

Subsidy Reestimates 

the purpose of reestimates is to update original program subsidy cost estimates to reflect actual cash flow experience as well as 

changes in forecasts of future cash flows. forecasts of future cash flows are updated based on actual program performance to date, 

additional information about the portfolio, additional publicly available relevant historical market data on securities performance, 

revised expectations for future economic conditions, and enhancements to cash flow projection methods. financial statement 

reestimates for all programs were performed using actual financial transaction data through september 30, 2010 and 2009. Market 

and security specific data publicly available as of september 30, 2010, was used for the cPP, agP, tIP, aIg, cDcI, aIfP, and sba 

programs in the reestimate calculations for fiscal year 2010. security specific data through June 30, 2010, with market prices through 

september 30, 2010, was used for the PPIP and talf programs in the reestimate calculations for fiscal year 2010. Market and 

security specific data publicly available as of september 30, 2009, was used for the cPP, agP, tIP, and aIfP direct loans and data 

through august 31, 2009, was used for the equity portion of aIfP, aIg, and talf programs in the reestimate calculations for the 

fiscal year ending september 30, 2009. 

the Department using security specific data available as of september 30, 2010 and, in its determination, there were no significant 

changes to the portfolio characteristics or performance of the PPIP and talf programs that would require a revision to the 

reestimates for fiscal year 2010. for fiscal year 2009, the Department assessed the key inputs of the reestimates using data publicly 

available as of september 30, 2009, and in its determination, there were no significant changes to the key inputs for the three 

programs for which august 31, 2009, data was used that required a revision to the reestimates. 

net downward reestimates for the fiscal years ended september 30, 2010 and september 30, 2009 totaled $30,318 million and 

$109,748 million, respectively. Descriptions of the reestimates with approximate amounts, by the Department Program, are as follows: 

CPP 

the net upward reestimate for the cPP of $3,900 million for the fiscal year ending september 30, 2010 is the net result of a decrease 

in the price of citigroup common stock that was partially offset by an increase in the estimated value of the other investments within 

the cPP, due to improved market conditions during the year. 

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the $70,700 million in repurchases during the fiscal year ending september 30, 2009 accounted for $9,700 million of the $72,400 

million in downward reestimates in the cPP for the fiscal year ending september 30, 2009. Projected repurchases of $30,000 million 

for fiscal year 2010 accounted for approximately $5,400 million, with the $57,300 million balance in downward reestimates in the 

cPP for the fiscal year ending september 30, 2009 primarily due to improved market conditions from when the original estimate was 

made in December 2008. 

AIG 

the $12,000 million in downward reestimates for the aIg Investment Program for the fiscal year ending september 30, 2010 are due 

to an increase in the estimated value of aIg assets and subordinated debt and improvements in market conditions over the fiscal year. 

the $1,100 million in downward reestimates for the aIg Investment Program in the fiscal year ending september 30, 2009 was 

primarily due to improvements in market conditions from when the equities were purchased resulting in a reduction in the projected 

costs of the programs. 

TIP 

the $1,900 million in net downward reestimates in the tIP in fiscal year 2010 included $2,200 million in downward reestimates due 

to the repurchase of the program’s investments by the two institutions participating in the program. that downward reestimate amount 

was partially offset by a $300 million upward reestimate from a slight reduction in the estimated value of outstanding warrants. 

the $21,500 million in downward reestimates in the tIP in the fiscal year ending september 30, 2009 was primarily due to improved 

market conditions from when the original estimates were made in December 2008 and January 2009. approximately $2,300 million 

was due to a $20,000 million repurchase forecast for fiscal year 2010. 

AIFP 

the $19,300 million in downward reestimates for the aIfP direct loan and equity investments for the fiscal year ending september 

30, 2010 was due to $1,800 million in payments exceeding projections, a reduction in estimated defaults due to improvements in the 

domestic automotive industry, and an increase in the bond prices and valuations used to estimate the cost of the remaining aIfP 

investments. 

the approximately $10,600 million in downward reestimates for the direct loans-aIfP in the fiscal year ending september 30, 

2009 was primarily the result of the post bankruptcy improved financial position of one of the major companies participating in the 

program. the $2,700 million in downward reestimates for the aIfP equity programs in the fiscal year ending september 30, 2009 

were primarily due to improvements in market conditions from when the equities were purchased resulting in a reduction in the 

projected costs of the programs. 

CBLI 

the talf and sba programs within the cblI had a total upward reestimate of less than $100 million for the fiscal year ending 

september 30, 2010. the talf program had a $24 million upward reestimate mostly due to a projected reduction in the size of the 

portfolio and higher than projected repayments. the sba program had a downward reestimate of less than $1 million due to an 

increase in projected interest rates and a reduction in market risks. the cDcI program had $7.3 million in upward reestimates for 

the fiscal year. 

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the $200 million in downward reestimates for the talf in the fiscal year ending september 30, 2009 was due to projected improved 

performance of the securities within the program versus the original estimate. 

PPIP 

the $1,000 million in downward reestimates for the PPIP debt and equity programs for the fiscal year ending september 30, 2010 

was the net of a $1,200 million upward reestimate in the PPIP debt program and $2,200 million in downward reestimates for the 

PPIP equity programs mostly due to the use of actual portfolio data for reestimates rather than the proxy data used in developing the 

baseline estimates and changes in market risks. 

AGP 

the agP had a net $100 million downward reestimate for the fiscal year ended september 30, 2010. the reestimate amounts 

exclude an estimated cost savings of $1,400 million that resulted from the cancellation of the $5,000 million guarantee because this 

transaction was reflected in the subsidy modifications during fiscal year 2010. 

the $1,200 million in downward reestimates for the agP in the fiscal year ending september 30, 2009 was primarily due to 

improvements in market conditions from when the guarantee was committed in January 2009. the improved market conditions 

resulted in an increase in the projected agP asset due to the net present value of the estimated cash inflows from the preferred 

stock and warrants received by the Department from citigroup as a premium being greater than the estimated value of future claim 

payments associated with the $5,000 million asset guarantee. 

the following detailed tables provide the net composition, subsidy cost, modifications and reestimates, a reconciliation of subsidy 

cost allowances, budget subsidy rates, and subsidy by component for each tarP direct loan, equity investment or the asset guarantee 

program for the fiscal years ended september 30, 2010 and 2009: 

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TROUBLED ASSET RELIEF PROGRAM DIRECT LOANS AND EQUITY INvESTMENTS (dollars in millions): 

2010 

As of September 30, 2010 TOTAL CPP AIG TIP AIFP CBLI PPIP 

Direct Loans and Equity Investment Programs: 

Direct Loans and Equity Investments Outstanding, Gross $ 179,197 $ 49,779 $ 47,543 $ 0 $ 67,238 $ 908 $ 13,729 

Subsidy Cost Allowance (36,745) (1,546) (21,405) 1 (14,529) 58 676 

Direct Loans and Equity Investments Outstanding, Net $ 142,452 $ 48,233 $ 26,138 $ 1 $ 52,709 $ 966 $ 14,405 

New Loans or Investments Disbursed 23,373 277 4,338 0 3,790 811 14,157 

Obligations for Loans and Investments not yet Disbursed 36,947 0 22,292 0 2,066 4,339 8,250 

Reconciliation of Subsidy Cost Allowance: 

Balance, Beginning of Period $ 53,077 $ (7,770) $ 30,054 $ (341) $ 31,478 $ (344) $ 0 

Subsidy Cost for Disbursements and Modifications 7,533 (16) 4,293 0 2,644 275 337 

Interest and Dividend Revenue 6,977 3,131 0 1,143 2,475 0 228 

Net Proceeds from Sales and Repurchases of Assets in 

Excess of Cost 8,013 6,676 0 1,237 99 0 1 

Net Interest Expense on Borrowings (4,690) (2,018) (981) (161) (1,309) (20) (201) 

Write-offs (3,934) (2,334) 0 0 (1,600) 0 0 

Balance, End of Period, Before Reestimates 66,976 (2,331) 33,366 1,878 33,787 (89) 365 

Subsidy Reestimates (30,231) 3,877 (11,961) (1,879) (19,258) 31 (1,041) 

Balance, End of Period $ 36,745 $ 1,546 $ 21,405 $ (1) $ 14,529 $ (58) $ (676) 

Reconciliation of Subsidy Cost: 

Subsidy Cost for Disbursements $ 6,067 $ 16 $ 4,293 $ 0 $ 1,146 $ 275 $ 337 

Subsidy Cost for Modifications 1,466 (32) 0 0 1,498 0 0 

Subsidy Reestimates (30,231) 3,877 (11,961) (1,879) (19,258) 31 (1,041) 

Total Direct Loans and Equity Investment Programs 

Subsidy Cost (Income) $ (22,698) $ 3,861 $ (7,668) $ (1,879) $ (16,614) $ 306 $ (704) 

TROUBLED ASSET RELIEF PROGRAM LOANS, EQUITY INvESTMENTS AND ASSET GUARANTEE PROGRAM BUDGET SUBSIDY RATES: 

As of September 30, 2010 AGP CPP AIG TIP AIFP CBLI PPIP 

Budget Subsidy Rates, Excluding Modifications and Reestimates (See Note below): 

Interest Differential (25.62%) 37.70% 30.39% 11.72% 

Defaults 16.36% 13.78% 3.93% 0.00% 

Fees and Other Collections (3.00%) (0.38%) 0.00% (0.41%) 

Other 18.03% (20.85%) (0.41%) (10.34%) 

Total Budget Subsidy Rate N/A 5.77% N/A N/A 30.25% 33.91% 0.97% 

Subsidy Cost (Income) by Component (in millions): 

Interest Differential $ (71) $ 1,415 $ 1,429 $ 246 $ 1,880 

Defaults 45 2.907 522 32 0 

Fees and Other Collections (8) 0 (15) 0 (55) 

Other 50 (29) (790) (3) (1,488) 

Total Subsidy Cost, Excluding Modifications and Reestimates N/A $ 16 $ 4,293 N/A $ 1,146 $ 275 $ 337 

Note: The rates reflected in the “Budget Subsidy Rate” table above are fiscal year 2010 budget execution rates by program. The subsidy rates disclosed pertain only to the 

current year’s cohorts. These rates cannot be applied to the direct loans disbursed during the current reporting year to yield the subsidy cost (income). The subsidy cost 

(income) for new loans reported in the current year could result from disbursements of loans from both current year cohorts and prior year cohorts. The subsidy cost (income) 

reported in the current year also includes modifications and re-estimates. Therefore, the Total Subsidy Cost, Excluding Modifications and Reestimates will not equal the 

New Loans or Investments Disbursed multiplied by the Budget Subsidy Rate. 

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Troubled AsseT relief ProgrAm loAns And equiTy invesTmenTs (dollars in millions): 

2009 

As of september 30, 2009 ToTAl CPP Aig TiP AifP Cbli PPiP 

direct loans and equity investment Programs: 

Direct Loans and Equity Investments Outstanding, Gross $ 290,969 $ 133,901 $ 43,206 $ 40,000 $ 73,762 $ 100 $ 0 

Subsidy Cost Allowance (53,077) 7,770 (30,054) 341 (31,478) 344 0 

direct loans and equity investments outstanding, net $ 237,892 $ 141,671 $ 13,152 $ 40,341 $ 42,284 $ 444 $ 0 

new loans or investments disbursed $ 363,826 $ 204,618 $ 43,206 $ 40,000 $ 75,902 $ 100 $ 0 

obligations for loans and investments not yet 

disbursed $ 51,681 $ 0 $ 26,629 $ 0 $ 5,152 $ 19,900 $ 0 

reconciliation of subsidy Cost Allowance: 

Balance, Beginning of Period $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 

Subsidy Cost for Disbursements and Modifications 152,179 57,386 31,552 19,540 43,797 (96) 0 

Interest and Dividend Collections 9,329 6,790 0 1,862 677 0 0 

Net Proceeds from Sales and Repurchases of Assets in 

Excess of Cost 2,916 2,901 0 0 15 0 0 

Net Interest Income (Expense) on Borrowings (2,773) (2,428) (373) (276) 309 (5) 0 

Balance, End of Period, Before Reestimates 161,651 64,649 31,179 21,126 44,798 (101) 0 

Subsidy Reestimates (108,574) (72,419) (1,125) (21,467) (13,320) (243) 0 

balance, end of Period $ 53,077 $ (7,770) $ 30,054 $ (341) $ 31,478 $ (344) $ 0 

reconciliation of subsidy Cost: 

Subsidy Cost (Income) for Disbursements $ 151,767 $ 55,520 $ 31,425 $ 19,540 $ 45,386 $ (104) $ 0 

Subsidy Cost (Income) for Modifications 412 1,866 127 0 (1,589) 8 0 

Subsidy Reestimates (108,574) (72,419) (1,125) (21,467) (13,320) (243) 0 

Total direct loans and equity investment Programs 

subsidy Cost (income) $ 43,605 $ (15,033) $ 30,427 $ (1,927) $ 30,477 $ (339) $ 0 

Troubled AsseT relief ProgrAm loAns, equiTy invesTmenTs And AsseT guArAnTee ProgrAm budgeT subsidy rATes: 

As of september 30, 2009 AgP CPP Aig TiP AifP Cbli PPiP 

Budget Subsidy Rates, Excluding Modifications and Reestimates (See Note below): 

Interest Differential 0.00% 5.97% (45.52%) 9.31% 6.97% 5.87% 

Defaults 43.62% 25.60% 123.56% 48.38% 54.21% 0.00% 

Fees and Other Collections (53.23%) 0.00% 0.00% 0.00% 0.00% 0.00% 

Other (5.37%) (4.58%) 4.74% (8.84%) (3.13%) (110.10%) 

Total budget subsidy rate (14.98%) 26.99% 82.78% 48.85% 58.05% (104.23%) n/A 

subsidy Cost (income) by Component (in millions): 

Interest Differential $ 0 $ 12,279 $ (17,280) $ 3,724 $ 5,446 $ 6 

Defaults 2,181 52,655 46,906 19,352 42,384 0 

Fees and Other Collections (2,662) 0 0 0 0 0 

Other (270) (9,414) 1,799 (3,536) (2,444) (110) 

Total subsidy Cost (income), excluding modifications 

and reestimates $ (751) $ 55,520 $ 31,425 $ 19,540 $ 45,386 $ (104) n/A 

Note: The rates reflected in the “Budget Subsidy Rate” table above are weighted rates for the program. To compensate for the weighting of the various risk category subsidy 


rates, the “by component” dollar amounts reflected were computed as a ratio of the component rate to the total weighted subsidy rate multiplied by the subsidy cost 


(income) for the program. Therefore, the Total Subsidy Cost (Income), Excluding Modifications and Reestimates will not equal the New Loans or Investments Disbursed
 

multiplied by the Budget Subsidy Rate. 


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TROUBLED ASSET RELIEF PROGRAM ASSET GUARANTEE PROGRAM (in millions): 

2009 

the department of the treasury 

As of September 30, 2010 

Asset Guarantees Outstanding: 

Outstanding Principal Amount of Guaranteed Loans, Face Value 

Amount of Outstanding Principal Guaranteed 

$ 

$ 

0 

0 

$ 301,000 

$ 5,000 

Asset Guarantee Program: 

Intra-governmental Portion (See Note below) 

Portion held by the Department, net 

Total Asset Guarantee Program 

$ 

$ 

815 

2,240 

3,055 

$ 0 

1,765 

$ 1,765 

Reconciliation of Asset Guarantee Program 

Balance, Beginning of Period 

Subsidy Income for Disbursements and Modifications 

Dividend Revenue 

$ (1,765) 

(1,418) 

265 

$ 0 

(751) 

175 

Net Interest Income on Borrowings 

Balance, End of Period, Before Reestimates 

Subsidy Reestimates 

Balance, End of Period $ 

(50) 

(2,968) 

(87) 

(3,055) $ 

(15) 

(591) 

(1,174) 

(1,765) 

Reconciliation of Subsidy Cost (Income): 

Subsidy Income for Disbursements 

Subsidy Income for modifications 

Subsidy Reestimates 

Cancellation Fees Collected 

Total Asset Guarantee Program Subsidy Income 

$ 

$ 

0 

(1,418) 

(87) 

0 

(1,505) 

$ 

$ 

(751) 

0 

(1,174) 

(276) 

(2,201) 

Note: The net present value of the future cash flows for the Asset Guarantee Program consists of (i) $800 million of Citigroup trust preferred securities, plus dividends 

thereon, that the FDIC agreed to transfer to the Department contingent on Citigroup repaying previously issued FDIC guaranteed debt and (ii) additional Citigroup trust 

preferred securities valued at $2,240, for a total of $3,055. 

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The Department Housing Programs Under TARP 

fiscal year 2010 has seen an expansion of programs designed to provide stability for both the housing market and homeowners. these 

programs assist homeowners who are experiencing financial hardships to remain in their homes while they get back on their feet or 

relocate to a more sustainable living situation. these programs fall into three initiatives: 

1) Making home affordable Program (Mha); 

2) housing finance agency (hfa) hardest-hit fund, and 

3) federal housing administration (fha)-refinance Program. 

under Mha, the initial programs rolled out in the fiscal year 2009 were the home affordable Modification Program (haMP) 

including the home Price Decline Protection Program (hPDP). 

Mha includes haMP, fha-haMP, second lien Program (2MP), Department/fha second lien Program (fha 2lP) 

(extinguishment of 2nd lien portion of the program), and rural Development (rD-haMP). the haMP includes first lien 

modifications, the hPDP, the Principal reduction alternative Waterfall Program (Pra), the unemployment Program (uP), and 

the home affordable foreclosure alternatives Program (hafa). the haMP first lien modification program provides for one-time, 

monthly and annual incentives to servicers, borrowers, and investors who participate in the program, whereby the investor and the 

Department share the costs of modifying qualified first liens. the hPDP provides incentives to investors to partially offset losses 

from home price declines. In fiscal year 2010, additional programs have been introduced under haMP to complement the first lien 

modification program and hPDP. the Principal reduction alternative Waterfall Program (Pra) offers mortgage relief to eligible 

homeowners whose homes are worth significantly less than the remaining amounts outstanding under their first-lien mortgage. the 

unemployment Program (uP) offers assistance to unemployed homeowners through temporary forbearance of a portion of their 

mortgage payments. the uP will not have a financial impact on the Department because no incentives are paid by the Department. 

finally, the home affordable foreclosure alternatives Program (hafa) is designed to assist eligible borrowers unable to retain their 

homes through a haMP modification by simplifying and streamlining the short sale and deed in lieu of foreclosure processes and 

providing incentives to borrowers, servicers and investors to pursue short sales and deeds in lieu. 

fiscal year 2010 has also seen the introduction of additional programs under Mha. these programs include the fha-haMP which 

provides the same incentives as haMP for federal housing administration (fha) guaranteed loans. the 2MP provides additional 

incentives to servicers to extinguish second liens on first lien loans modified under haMP. the fha 2lP provides for incentives 

to servicers for extinguishment of second liens for borrowers who refinance their fha-insured first lien mortgages under the fharefinance Program. the rD-haMP Program provides haMP incentives for usDa guaranteed mortgages. 

all Mha disbursements are made to servicers either for themselves or for the benefit of borrowers and investors. furthermore, all 

payments are contingent on borrowers remaining current on their mortgage payments. servicers have until December 31, 2012 to 

enter into mortgage modifications with borrowers. 

Included in the Department housing Program cost are fees paid to fannie Mae and freddie Mac. fannie Mae provides direct 

programmatic support as a third party agent on behalf of the Department. freddie Mac provides compliance oversight as a third party 

agent on behalf of the Department, and the servicers work directly with the borrowers to modify and service the borrowers’ loans. 

the housing finance agency (hfa) hardest-hit fund was implemented in 2010 and provides targeted aid to families in the states 

hit hardest by the housing market downturn and unemployment. states that meet the criteria for this program consist of alabama, 

arizona, california, florida, georgia, Illinois, Indiana, kentucky, Michigan, Mississippi, nevada, new Jersey, north carolina, ohio, 

oregon, rhode Island, south carolina, tennessee, and Washington D.c. approved states develop and roll out their own programs 

with timing and types of programs offered targeted to address the specific needs and economic conditions of their state. states have 

until December 31, 2017 to enter into agreements with borrowers. 

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the fha-refinance Program is a joint initiative with the Department of housing and urban Development (huD) which is 

intended to encourage refinancing of existing underwater (i.e. the borrower owes more than the home is worth) mortgage loans not 

currently insured by fha into fha-insured mortgages. huD will pay a portion of the amount refinanced to the investor and the 

Department will pay incentives to encourage the extinguishment of second liens associated with the refinanced mortgages. the 

Department established a letter of credit to fund the Department portion of any claims associated with the fha-insured mortgages. 

homeowners can refinance into fha-guaranteed mortgages through December 31, 2012 and the Department will honor its share of 

claims against the letter of credit through 2020. as of september 30, 2010, no loans had been refinanced under this program as the 

joint initiative was entered into late in the fiscal year. however, in fiscal year 2010, the Department paid $3 million to establish the 

letter of credit. 

the table below recaps payments and accruals (included in other liabilities) as of september 30, 2010 and september 30, 2009. as 

noted above, the uP is structured so that there is no financial impact on the Department. although in operation on september 

30, 2010 the Pra, fha-haMP, 2lP and rD-haMP had not been in operation for a period long enough to have fiscal year 2010 

financial activity. 

Commitments Payments Accruals 

(in millions) 9/30/2010 9/30/2010 9/30/2009 9/30/2010 9/30/2009 

MHA $ 29,900 $ 0 $ 0 $ 0 $ 0 

HAMP (1st Lien) 0 473.592 0.946 175.415 1.361 

HPDP 0 8.755 0 107.914 0 

PRA* 0 0 0 0 0 

UP** 0 N/A N/A N/A N/A 

HAFA*** 0 1.627 0 N/A 0 

FHA HAMP 0 0 0 0.024 0 

2MP 0 0.011 0 0.005 0 

2LP* 0 0 0 0 0 

RD-HAMP* 0 0 0 0 0 

HFA Hardest Hit Fund 7,600 56.120 0 0 0 

FHA - Refinance 8,100 3.015 0 0 0 

Totals $ 45,600 $ 543.120 $ 0. 946 $ 283.358 $ 1.361 

* No fiscal year 2010 activity with financial impact
 

** No fiscal financial impact
 

*** HAFA payments are made in the month earned and not accrued
 

for fiscal year 2010 and 2009, cost for the Department housing Programs under tarP totaled $825 million and $2 million, 

respectively. 

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9. investments in gOvernment spOnsOreD enterprises (gses) 

the federal national Mortgage association (fannie Mae) and the federal home loan Mortgage corporation (freddie Mac) are 

stockholder-owned gses. congress established these gses to support the supply of mortgage loans. a key function is to package 

purchased mortgages into securities. these securities are subsequently sold to investors. 

Increasingly difficult conditions in the housing market challenged the soundness and profitability of gses, thereby undermining the 

entire housing market. this led congress to pass the housing and economic recovery act of 2008 on July 30, 2008 (hera). this 

act created the new federal housing finance agency (fhfa), with enhanced regulatory authority over the gses, and provided the 

secretary of the treasury with certain authorities intended to ensure the financial stability of the gses, if necessary. on september 7, 

2008, fhfa placed the gses under conservatorship and the Department entered into a senior Preferred stock Purchase agreement 

(sPsPa) with each gse. these actions were taken to preserve the gses’ assets, ensure a sound and solvent financial condition, and 

mitigate systemic risks that contributed to current market instability. 

the actions taken by the Department thus far are temporary, as defined by section 1117 of hera, and are intended to provide 

financial stability until fannie Mae and freddie Mac can return to normal operations or until the administration and congress 

address how they should be structured going forward. as of september 30, 2010, there are no plans to bring these organizations into 

the government; rather, the purpose of these financial arrangements is to maintain the solvency of the gses so they can continue 

to fulfill their vital roles in the home mortgage market while the administration and congress deliberate what, if any, structural 

changes should be made. the fhfa director may terminate the conservatorship if safe and solvent conditions can be established. 

Per sffas no. 2, Entity and Display, these entities meet the criteria of “bailed out” entities under paragraph 50. accordingly, the 

Department has not consolidated them into the financial statements, but includes “disclosure of the relationship(s) with the bailed 

out entities and any actual or potential material costs or liabilities” in the consolidated financial statements. Draws under the 

sPsPas are designed to ensure that the gses maintain positive net worth as a result of any net losses from operations and also meet 

taxpayer dividend requirements under the sPsPas. While this construction is somewhat circular in the event that dividends exceed 

net income and draws are made to fund dividends, the sPsPas were structured to ensure any investments made on behalf of the 

taxpayers were fully and fairly accounted for. 

under the sPsPas, the Department initially received from each gse: (1) 1,000,000 shares of non-voting variable liquidation 

preference senior preferred stock with a liquidation preference value of $1,000 per share and (2) a non-transferrable warrant for the 

purchase, at a nominal cost, of 79.9 percent of common stock on a fully-diluted basis. the warrants expire on september 7, 2028. 

the senior preferred stock accrues dividends at 10 percent per year, payable quarterly. this rate will increase to 12 percent if, in any 

quarter, the dividends are not paid in cash, until all accrued dividends have been paid. Dividends of $12,142 million and $4,336 

million were received for the fiscal years ended september 30, 2010 and september 30, 2009. In addition, beginning on March 31, 

2011, the gses are scheduled to begin paying the Department a periodic commitment fee on a quarterly basis unless the payment is 

waived. this fee is to be initially set by December 31, 2010, based on mutual agreement between the Department and each gse, in 

consultation with the chairman of the federal reserve board. the fee is to be established for five-year periods, and may be waived by 

the Department for one year at a time, if warranted by adverse mortgage market conditions. It may be paid in cash or may be added to 

the liquidation preference. 

the initial agreements, which had no expiration date, provided that the Department would disburse funds to the gses, if at the 

end of any quarter the fhfa determines that the liabilities of either gse exceed its assets. the maximum amount available to each 

gse under this agreement was originally $100,000 million and in May 2009 was raised to $200,000 million. In December 2009, the 

Department amended the sPsPas to replace the $200,000 million per gse funding commitment cap with a formulaic cap that will 

allow continued draws for three years at amounts that will automatically adjust upwards quarterly by the cumulative amount of any 

losses realized by either gse and downward by the cumulative amount of any gains, but not below $200,000 million, and will become 

fixed at the end of the three years. at the conclusion of the three year period, the remaining commitment will then be fully available 

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to be drawn per the terms of the agreements (referred to hereafter as the “adjusted caps”). Draws against the funding commitment 

of the sPsPas do not result in the issuance of additional shares of senior preferred stock; instead, the liquidation preference of the 

initial 1,000,000 shares is increased by the amount of the draw. 

actual payments to the gses for fiscal years ended september 30, 2010 and september 30, 2009 were $52,600 million and $95,600 

million, respectively. additionally, $359,900 million has been accrued as a contingent liability as of september 30, 2010 ($91,937 

million as of september 30, 2009). the amount accrued is the total estimated contingent liability under the sPsPas. this accrued 

contingent liability is based on the projected draws under the sPsPas. It is undiscounted and does not take into account any of the 

offsetting dividends which may be received as a result of those draws. 

Accounting Treatment 

Entity Transactions – the estimated contingent liability to the gses accrued pursuant to the sPsPas will be funded through the 

Department’s direct appropriations. therefore, they are reflected at their gross amount as “entity” costs on the Department’s 

statements of net cost and cumulative results of operations, without considering the increase in senior Preferred stock 

liquidity preference/fair value adjustments, future dividend receipts from the gses, or any future commitment fees. 

Non-Entity Transactions – as actual payments are made to the gses, they result in increases to the u.s. government’s liquidation preference in the gses’ preferred stock, and thus represent general fund exchange revenue reported on the Department’s 

statement of net cost as “gse non-entity revenue.” the associated valuation losses and dividends are likewise general fund 

costs and revenues. 

over time, the Department’s entity expense for the accrued contingent liability under the sPsPas will be offset in part by the 

general fund’s exchange revenues recognized when actual draw payments are made to the gses. 

Investments in GSEs 

as of september 30, 2010 and september 30, 2009, the Department’s investments in the gses consisted of the following 

(in millions): 

Gross Investment Cumulative valuation 9/30/10 

GSEs Investment as of 9/30/10 Gain/(Loss) Fair value 

Fannie Mae Senior Preferred Stock $ 85,941 $ (29,450) $ 56,491 

Freddie Mac Senior Preferred Stock 63,924 (12,759) 51,165 

Fannie Mae Warrants Common Stock 3,104 (2,097) 1,007 

Freddie Mac Warrants Common Stock 2,264 (1,711) 553 

Total GSEs Investment $ 155,233 $ (46,017) $ 109,216 

Gross Investment Cumulative valuation 9/30/09 

GSEs Investment as of 9/30/09 Gain/(Loss) Fair value 

Fannie Mae Senior Preferred Stock $ 45,740 $ (20,658) $ 25,082 

Freddie Mac Senior Preferred Stock 51,524 (23,273) 28,251 

Fannie Mae Warrants Common Stock 3,104 3,603 6,707 

Freddie Mac Warrants Common Stock 2,264 2,375 4,639 

Total GSEs Investment $ 102,632 $ (37,953) $ 64,679 

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Senior Preferred Stock and Warrants for Common Stock 

In performing the calculations for the valuations of the senior preferred stock and warrants for common stock, the Department relied 

on the gses’ public filings and press releases concerning its financial statements, monthly summaries, quarterly credit supplements, 

independent research regarding high yield bond and preferred stock trading, independent research regarding the gses’ common 

stock trading, and other information pertinent to the valuations. 

a complicating issue for the valuation of the senior preferred stock is the interaction between liquidity payments and the ongoing 

liquidation preference of the stock and the amount of dividends associated with that liquidation preference. the projections assume 

that a hypothetical buyer would acquire the dividend stream related to the existing balance of the liquidation preference on the 

transaction date, as well as the commitment fee payment that if agreed upon by the Department and fhfa could begin on March 31, 

2011. this stream of dividend payments was then discounted to address certain issues unique to the senior preferred stock. 

the valuation of the warrants are impacted by the nominal exercise price and the large number of potential exercise shares, 

the market trading of the common stock that underlies the warrants, the principal market, and the market participants. other 

discounting factors are the holding period risk related directly to the amount of time that it will take to sell the exercise shares 

without depressing the market and the other activity under the sPsPa. 

Contingent Liability 

as part of the valuation exercise, the Department prepared a series of long-range projections through 2031 to determine what the 

implied amount of the contingent liability to the gses under the sPsPas would be and as a result has estimated the contingent 

liability to be $359,900 million as of september 30, 2010 as a result of their projected equity deficits stemming from near term losses 

and contractual dividend requirements. the valuation analysis resulted in total sPsPa estimates ranging from a “baseline” scenario 

of $508,100 million to an “extreme case” scenario of $610,000 million, as of september 30, 2010 ($91,937 million to $206,700 as of 

september 30, 2009 of which $76,937 million was recorded as contingent). as future payments under the sPsPa are deemed to be 

probable, the baseline scenario was used to record the contingent liability as of september 30, 2010. sffas 5 provides that when a 

probable contingent liability is a range of amounts and no amount within the range is a better estimate than any other amount, the 

estimated contingent liability should be based on the minimum value in the range, as was done for fy 2009. the recorded contingent 

liability is the total estimated payments for the life of the agreements under the adjusted caps, minus actual payments made through 

the end of the fiscal year. such accruals are adjusted as new information develops or circumstances change. 

In performing the calculations for the valuation and contingent liability estimates, the Department relied on the gses’ public filings 

and press releases concerning its audited and unaudited financial statements, monthly summaries, quarterly credit supplements, 

september 2010 forecast for the years 2010 through 2013 (as released by fhfa on october 21, 2010), and interviews with the gses’ 

management. the gse managers were not able to provide the Department with a forecast of needed draws under the sPsPas after 

December 31, 2013; however, they did provide the Department with general guidance as to the key assumptions that were used for 

subsequent periods. the forecasts after 2013 generally assume similar operating assumptions on the guarantee business and assume a 

gradual wind-down of the retained portfolios (and corresponding net interest income) through 2022, as directed under the provisions 

of the sPsPas for the gses to reduce the investment portfolios by 10 percent per annum. 

note 9. investments in government sponsored enterprises (gses) 

part 3: annual financial report
the department of the treasury 

214 

as of september 30, 2010 the summarized aggregated financial condition of the gses was as follows:

 (in millions) Combined 

As of September 30, 2010 

Combined total assets 

of which are: 

- investment securities 

- mortgage loans 

$ 5,518,352 

474,437 

4,782,405 

Combined total liabilities 

of which is: 

- long term debt 

$ 5,520,857 

5,248,221 

Combined net deficit $ (2,505) 

For the nine months ended September 30, 2010 

Combined net interest income 

Combined provision for loan losses 

Net interest income (loss) after provision for loan losses 

$ 

$ 

24,312 

(35,082) 

(10,770) 

Financial Guarantees not consolidated on GSE balance sheets September 30, 2010 $ 116,091 

Regulatory Capital - minimum capital surplus (deficit) as of September 30, 2010 $ (198,999) 

the above information was taken directly from the quarterly reports filed with the securities and exchange commission (sec), 

which are publicly available on the sec’s website (www.sec.gov) and also the gse investor relations websites. 

the Department also relied upon economic and demographic data from the 2010 annual report of the board of trustees of the 

federal old-age and survivors Insurance and federal Disability Insurance trust funds, the standard and Poor’s (s&P)/case-shiller 

June 2010 housing Price Index, and the federal housing finance agency’s house Price Index. the following paragraph summarizes 

information obtained from these sources. 

In the near term, the price of u.s single-family homes is the predominant variable affecting the value of the sPsPas in determining 

delinquencies, default rates, and severity rates. the prices of u.s. homes depend on numerous factors, including tax incentives, 

interest rates, vacant homes, new construction, and unemployment rates. although housing prices have risen recently, they are still 

significantly down from the peak experienced in prior years. 

both gses reported very low early delinquencies on additions to their credit books in 2009 and the first half of 2010. this favorable 

early delinquency experience is an improvement compared with the loans originated in 2005 through 2008. however, both gses 

expect to make additional draws under the sPsPa in future periods despite improving levels of net income as the required dividend 

payments required under the sPsPas exceed the net income of the gses and incremental draws under the sPsPas are needed to 

meet dividend payment requirements. the gses expect their net worth will also be impacted negatively by dividend payments on 

the sPsPas. 

under the existing sPsPas, as amended, the Department’s projections show that each gse will fully utilize the amount of funding 

available under the adjusted cap. this is in addition to any draws during calendar years 2010 through 2012, as this period is not 

subject to the cap. adverse changes in home prices would have a material and adverse impact on the sPsPas. 

note 9. investments in government sponsored enterprises (gses) 

part 3: annual financial report
performance and accountability report | fiscal year 2010 

215 

GSEs Non-Entity Revenue 

as of september 30, 2010 and september 30, 2009, gses non-entity revenue consisted of the following (in millions): 

Summary of GSEs Non-Entity Revenue 2010 2009 

General Fund Revenue from Increase in Liquidity Preference of GSEs Preferred Stock $ (52,600) $ (95,600) 

Current Valuation Loss on GSEs Warrants/Preferred Stock 8,064 37,953 

GSEs Preferred Stock Dividends (12,142) (4,336) 

Total GSEs Non-Entity Revenue $ (56,678) $ (61,983) 

Changing Regulatory Environment 

on July 9, 2010, fhfa published, in the federal register, a proposed rule to clarify certain terms of conservatorship and receivership 

operations for the gses. the key issues addressed in the proposed rule are the status and priority of claims and the relationships 

among various classes of creditors and equity-holders under conservatorships or receiverships. 

on July 21, 2010, the President signed the Dodd-frank Wall street reform and consumer Protection act, or the Dodd-frank act, 

into law. the Dodd-frank act will significantly change the regulation of the financial services industry, including the creation of new 

standards related to regulatory oversight of financial institutions deemed systemically important; an orderly liquidation mechanism 

for these institutions; and oversight of derivatives, capital requirements, asset-backed securitization, mortgage underwriting, and 

consumer financial protection. the Dodd-frank act may result in the gses being subjected to new and additional regulatory 

oversight and standards, which would lead to increased restrictions on their day-to-day business and operations. also, it contains a 

provision requiring the secretary of the treasury to conduct a study and develop recommendations regarding the options for ending 

the conservatorship. the secretary’s report and recommendations are required to be submitted to congress by January 31, 2011. 

note 9. investments in government sponsored enterprises (gses) 

part 3: annual financial report
the department of the treasury 

216 

10. investments in internatiOnal finanCial institutiOns 

the Multilateral Development banks (MDb) consist of the World bank group (International bank for reconstruction and 

Development, International finance corporation, and Multilateral Investment guarantee agency), and five regional development 

banks (the african, asian, european, Inter-american, and north american institutions), as enumerated in the table below. 

as of september 30, 2010 and september 30, 2009, investments in international financial institutions consisted of the following (in 

millions): 

2010 2009 

African Development Bank $ 175 $ 175 

Asian Development Bank 458 458 

European Bank for Reconstruction and Development 636 636 

Inter-American Development Bank 1,487 1,482 

International Bank for Reconstruction and Development 1,985 1,985 

International Finance Corporation 569 569 

Multilateral Investment Guarantee Agency 45 45 

North American Development Bank 225 225 

Total $ 5,580 $ 5,575 

refer to note 31 for a description of the additional commitments related to these institutions. 

note 10. investments in international financial institutions 

part 3: annual financial report
performance and accountability report | fiscal year 2010 

11. Other investments anD relateD interest 

Investments in u.s. government securities held by the Department’s entities have been eliminated against the federal debt liability 

for financial reporting purposes (see note 4). foreign investment holdings are normally invested in interest bearing securities issued 

or held through foreign governments or monetary authorities (see note 6). the $1,100 million of other Investments in gses 

securities held by the esf at september 30, 2009 matured in november 2009. 

as of september 30, 2010 and september 30, 2009, entity investments in foreign investment holdings and other investments 

consisted of the following (in millions): 

Unamortized 

Cost/Acquisition (Premium)/ Interest Net Investment 9/30/10 

Type of Investment value Discount Receivable at 9/30/10 Gain/(Loss) Fair value 

Foreign Investments: 

Euro Bonds & Notes $ 4,478 $ 76 $ 102 $ 4,656 $ 178 $ 4,834 

Japanese Government Bonds 7,729 10 9 7,748 35 7,783 

Other Investments 32 (2) 0 30 (8) 22 

Total Non-Federal $ 12,239 $ 84 $ 111 $ 12,434 $ 205 $ 12,639 

Unamortized 9/30/09 

Cost/Acquisition (Premium)/ Interest Investment Unrealized 9/30/09 

Type of Investment value Discount Receivable Balance Gain/ (Loss) Fair value 

Foreign Investments: 

Euro Bonds & Notes $ 4,827 $ 52 $ 116 $ 4,995 $ 184 $ 5,179 

Japanese Government Bonds 7,192 9 12 7,213 43 7,256 

Other Investments 1,137 (7) 0 1,130 0 1,130 

Total Non-Federal $ 13,156 $ 54 $ 128 $ 13,338 $ 227 $ 13,565 

note 11. other investments and related interest 217 

part 3: annual financial report
the department of the treasury 

218 

12. CreDit prOgram reCeivables anD DireCt lOans, net 

as of september 30, 2010 and september 30, 2009, credit Program receivables and Direct loans consisted of the following (in 

millions): 

2010 2009 

GSEs MBS Purchase Program Receivables $ 172,234 $ 184,419 

CDFI Direct Loans 41 41 

State and Local Housing Finance Agency Initiative Program Receivables 14,121 0 

Total $ 186,396 $ 184,460 

Government Sponsored Enterprise (GSE) Mortgage-Backed Securities (MBS) Purchase 

Program: 

the Housing and Economic Recovery Act (hera) (Public law no. 110-289), authorized the Department to enter into the gse 

Mbs Purchase Program. under this program, the Department, using private sector asset managers, purchased on the open market a 

portfolio of mortgage-backed securities issued by the gses. by purchasing these credit-guaranteed securities, the Department sought 

to broaden access to mortgage funding for current and prospective homeowners and to promote stability in the mortgage market. the 

asset managers were also authorized to enter into other trade/sell transactions such as pair offs, turns, assignments, and dollar rolls 

to further support the market under the hera provisions/mandate. the authority granted by congress to purchase Mbs expired 

on December 31, 2009 at which point the purchase of new securities ended, though the Department still retains its portfolio of 

previously purchased securities. 

the Department’s gse Mbs Purchase Program portfolio consists of mortgage pass-through securities issued by freddie Mac and 

fannie Mae. as of september 30, 2010, the Department held $164,340 million ($173,326 million as of september 30, 2009) in 

outstanding Mbs principal and estimated the net present value of future cash flows on these holdings to be $172,234 million 

($184,419 million as of september 30, 2009). the difference between the Department’s cost of purchasing the Mbs Portfolio and the 

expected value of repayments to the Department is the negative subsidy allowance. 

Community Development Financial Institution (CDFI) Direct Loans: 

the community Development financial Institutions fund (the fund) was created as a bipartisan initiative in the riegle community 

Development and regulatory Improvement act of 1994 (Public law no. 103-325). the fund was placed in the Department and 

began operations in July 1995. the fund operates various programs aimed at expanding the availability of credit, investment capital, 

and financial and other services in distressed urban, rural, and native american communities. the fund is intended to help create 

a national network of financial institutions dedicated to community development that leverages private resources (financial and 

human) to address community development needs. the cDfI Program provides financial and technical assistance awards to certified 

community development financial institutions (cDfIs) which in turn provide services to create community development impact in 

underserved markets. some of the financial assistance awards take the form of direct loans. 

note 12. credit program receivables and direct loans, net 

part 3: annual financial report
performance and accountability report | fiscal year 2010 

State and Local Housing Finance Agency (HFA) Initiative (Accounted for Under the 

FCRA): 

under hera, the Department, together with the federal housing finance agency, fannie Mae, freddie Mac, and the Department 

of housing and urban Development announced in october 2009 an initiative to provide support to state and local housing finance 

agencies (hfas). hfas have historically played a central role in providing a safe, sustainable path to homeownership for working 

families in all 50 states and many localities across the country. this initiative is designed to support low mortgage rates and expand 

resources for low and middle income borrowers to purchase or rent homes, making them more affordable over the long term. In 

December 2009, several transactions closed as part of the hfa Initiative’s two separate programs: (1) the temporary credit and 

liquidity Program (tclP) and (2) the new Issue bond Program (nIbP). as part of the tclP, the Department has entered into 

participation interests with fannie Mae and freddie Mac, supporting credit and liquidity facilities that the gses are providing to 

11 states as part of the program. as of september 30, 2010, the liquidity facilities cover $7,572 million of single-family and multifamily variable-rate demand obligations. as of september 30, 2010, none of these bonds have been tendered to the gses, and the 

Department accordingly has not disbursed any funds. as part of the nIbP, as of september 30, 2010, the Department held $15,307 

million of gross gses obligations backed by a combination of mortgage revenue bonds and escrowed funds from over 92 hfas in 49 

states plus the District of columbia. 

note 12. credit program receivables and direct loans, net 219 

part 3: annual financial report
the department of the treasury 

220 

2010 

(in millions) GSE MBS CDFI HFA TOTAL 

Net Credit Program Receivables: 

Credit Program Receivables, Gross $ 164,340 $ 56 $ 15,307 $ 179,703 

Subsidy Cost Allowance 7,894 (15) (1,186) 6,693 

Net Credit Program Receivables $ 172,234 $ 41 $ 14,121 $ 186,396 

New Credit Program and Loan Disbursed $ 29,878 $ 0 $ 15,308 $ 45,186 

Budget Subsidy Rate, excluding Modifications and Reestimates: 

Interest Differential -3.73% 0.00% -0.52% 

Defaults 0.00% 0.00% 0.00% 

Other 0.00% 0.00% 0.00% 

Total Budget Subsidy Rate -3.73% 0.00% -0.52% 

Subsidy Cost by Component: 

Interest Differential $ (1,115) $ 0 $ (79) $ (1,194) 

Total Subsidy Cost, Excluding Modifications and Reestimates $ (1,115) $ 0 $ (79) $ (1,194) 

Reconciliation of Subsidy Cost Allowance: 

Balance, 10/1/2009 $ (11,093) $ 20 $ 0 $ (11,073) 

Subsidy Cost for Disbursements (1,115) 0 (79) (1,194) 

Subsidy Cost for Modifications 0 0 (20) (20) 

Subsidy Allowance Amortized 3,831 (1) (537) 3,293 

Balance, 9/30/2010, Before Reestimates (8,377) 19 (636) (8,994) 

Subsidy Reestimates 483 (4) 1,822 2,301 

Balance, 9/30/2010 $ (7,894) $ 15 $ 1,186 $ (6,693) 

Reestimates: 

Interest Rate Reestimate $ (157) $ 0 $ 847 $ 690 

Technical/Default Reestimate 640 (4) 975 1611 

Total Reestimates – (Decrease) in Subsidy Cost $ 483 $ (4) $ 1,822 $ 2,301 

GSE MBS CDFI HFA TOTAL 

Reconciliation of Subsidy Costs: 

Subsidy Cost for Disbursements 

Subsidy Cost for Modifications 

Subsidy Reestimates 

Total Credit Program Receivables Subsidy Costs 

$

$

 (1,115) 

0 

483 

(632) 

$

$ 

0 

0 

(4) 

(4) 

$

$

 (79) 

(20) 

1,822 

1,723 

$

$

 (1,194) 

(20) 

2,301 

1,087 

Administrative Expense $ 6 $ 0 $ 0 $ 6 

note 12. credit program receivables and direct loans, net

part 3: annual financial report
performance and accountability report | fiscal year 2010 

221

2009 

(in millions) 

Credit Program Receivables, Gross 

Subsidy Cost Allowance 

Net Credit Program Receivables 

$ 

$ 

GSE MBS 

173,326 

11,093 

184,419 

$ 

$ 

CDFI 

61 

(20) 

41 

$ 

$ 

HFA 

0 

0 

0 

$ 

$ 

TOTAL 

173,387 

11,073 

184,460 

New Credit Program and Loan Disbursed $ 192,263 $ 0 $ 0 $ 192,263 

Budget Subsidy Rate, Excluding Modifications and Reestimates: 

Interest Differential -2.61% 0.00% 0.00% 

Defaults 0.25% 0.00% 0.00% 

Other 0.00% 0.00% 0.00% 

Total Budget Subsidy Rate -2.36% 0.00% 0.00% 

Subsidy Cost by Component: 

Interest Differential $ (4,977) $ 0 $ 0 $ (4,977) 

Defaults 477 0 0 477 

Other 0 0 0 0 

Total Subsidy Cost, Excluding Modifications and Reestimates $ (4,500) $ 0 $ 0 $ (4,500) 

Reconciliation of Subsidy Cost Allowance: 

Balance, 10/1/2008 $ (74) $ 20 $ 0 $ (54) 

Subsidy Cost for Disbursements (4,500) 0 0 (4,500) 

Subsidy Cost for Modifications 0 0 0 0 

Subsidy Allowance Amortization 1,873 0 0 1,873 

Balance, 9/30/2009, Before Reestimates (2,701) 20 0 (2,681) 

Subsidy Reestimates (8,392) 0 0 (8,392) 

Balance, 9/30/2009 $ (11,093) $ 20 $ 0 $ (11,073) 

GSE MBS CDFI HFA TOTAL 

Reestimates 

Interest Rate Reestimate $ 0 $ 0 $ 0 $ 0 

Technical/Default Reestimate (8,392) 0 0 (8,392) 

Total Reestimates – (Decreased) in Subsidy Cost $ (8,392) $ 0 $ 0 $ (8,392) 

Reconciliation of Subsidy Costs: 

Subsidy Cost for Disbursements $ (4,500) $ 0 $ 0 $ (4,500) 

Subsidy Cost for Modifications 0 0 0 0 

Subsidy Reestimates (8,392) 0 0 (8,392) 

Total Credit Program Receivables Subsidy Costs $ (12,892) $ 0 $ 0 $ (12,892) 

Administrative Expense $ 12 $ 0 $ 0 $ 12 

note 12. credit program receivables and direct loans, net

part 3: annual financial report
the department of the treasury 

222 

13. lOans anD interest reCeivable 

Non-Entity Non-Federal 

as of september 30, 2010 and september 30, 2009, loans and interest receivable from non-federal entities consisted of the following 

(in millions): 

2010 Total 2009 Total 

Direct Loans $ 123 $ 125 

Interest Receivable 1 2 

Total Non-Federal Loans and Related Interest Receivable $ 124 $ 127 

loans and Interest receivable amounts include certain loans and credits issued by the united states to various foreign governments 

and other entities. the agreements with each debtor government vary as to dates, interest rates, method of payment, and billing 

procedures. all such loans and credits represent legally valid and outstanding obligations of foreign governments, other entities, and 

the u.s. government has not waived or renounced its rights with respect to any of them. the loans are due and payable in u.s. 

denominations. 

note 13. loans and interest receivable 

part 3: annual financial report
performance and accountability report | fiscal year 2010 

223

14. reserve pOsitiOn in the internatiOnal mOnetary funD 

the united states participates in the IMf through a quota subscription. Quota subscriptions are paid partly through the transfer 

of reserve assets, such as foreign currencies or sDrs, which are international reserve currency assets created by the IMf, and partly 

by making domestic currency available as needed through a non-interest-bearing letter of credit. this letter of credit, issued by 

the Department and maintained by the frbny, represents the bulk of the IMf’s holdings of dollars. In keeping with IMf rules, 

approximately one quarter of 1 percent of the u.s. quota is held in cash in an IMf account at frbny. 

While resources for transactions between the IMf and the united states are appropriated, they do not result in net budgetary outlays. 

this is because u.s./IMf quota transactions constitute an exchange of monetary assets in which the united states receives an equal 

offsetting claim on the IMf in the form of an increase in the u.s. reserve position in the IMf, which is interest-bearing and can 

be drawn at any time for balance of payments needs. When the IMf draws dollars from the letter of credit to finance its operations 

and expenses, the drawing does not represent a net budget outlay on the part of the united states because there is a commensurate 

increase in the u.s. reserve position. When the IMf repays dollars to the united states, no net budget receipt results because the 

u.s. reserve position declines concurrently in an equal amount. 

as of september 30, 2010, the u.s. quota in the IMf was 37,149 million sDrs, valued at approximately $58,327 million. (the quota 

as of september 30, 2009, was 37,149 million sDrs, valued at approximately $66,569 million.) the quota consisted of the following 

(in millions): 

2010 2009 

Letter of Credit /1 $ 45,245 $ 53,056 

U.S. Dollars Held in Cash by the IMF /1 144 44 

Reserve Position /2 12,938 13,469 

U.S. Quota in the IMF $ 58,327 $ 66,569 

1/ This amount is included in entity appropriated funds under Note 2, Fund Balance with Treasury, and unexpended appropriations – Obligations/ Undelivered orders.
 

2/ This amount is included in the Cumulative Results of Operations. 


the u.s. reserve position is denominated in sDr, as is the u.s. quota. consequently, fluctuations in the value of the dollar with 

respect to the sDr results in valuation changes in dollar terms for the u.s. reserve position in the IMf as well as the IMf letter of 

credit. the Department periodically adjusts these balances to maintain the sDr value of the u.s. quota and records the change as 

a deferred gain or loss in its cumulative results of operations. these adjustments, known as maintenance of value adjustments, are 

settled annually after the close of the IMf financial year on april 30. such adjustments do not involve a flow of funds. at april 30, 

2010, the annual settlement with the IMf resulting from the appreciation of the dollar against the sDr since april 30, 2009, called 

for an upward adjustment of the u.s. quota by $349 million and a corresponding decrease to unexpended appropriations on the 

statement of changes in net Position. at april 30, 2009, the appreciation of the dollar against the sDr since april 30, 2008, called 

for a downward adjustment of the u.s. quota by $4,308 million and a corresponding increase to unexpended appropriations. the 

dollar balances shown above for the u.s. quota includes accrued valuation adjustments. on september 30, 2010, the Department 

recorded a net deferred valuation loss in the amount of $168 million for deferred maintenance of value adjustments needed at year 

end ($498 million gain at september 30, 2009). 

note 14. reserve position in the international monetary fund 

part 3: annual financial report
224 

the department of the treasury 

the united states earns “remuneration” (interest) on its reserve position in the IMf except for the portion of the reserve position 

originally paid in gold. remuneration is paid quarterly and is calculated on the basis of the sDr interest rate. the sDr interest 

rate is a market-based interest rate determined on the basis of a weighted average of interest rates on short-term instruments in the 

markets of the currencies included in the sDr valuation basket. Payment of a portion of this remuneration is deferred as part of a 

mechanism for creditors and debtors to share the financial consequences of overdue obligations to the IMf, such as unpaid overdue 

interest, and to similarly share the burden of establishing any contingency accounts deemed necessary to reflect the possibility of 

non-repayment of relevant principal amounts. as overdue interest is paid, previously deferred remuneration corresponding to the 

creditors’ share of the burden of earlier nonpayment is included in the next payment of remuneration. the deferred remuneration 

corresponding to the creditors’ share of establishing the contingency accounts is usually paid when there are no longer any relevant 

overdue obligations or when the IMf executive board determines to pay the remuneration. there was no deduction in the 

remuneration paid by the IMf as a result of burden-sharing during fiscal years 2010 or 2009. for fiscal years 2010 and 2009, the 

Department received $23 million and $40 million as remuneration, respectively. (see note 6). 

In addition to quota subscriptions, the IMf maintains borrowing arrangements to supplement its resources in times of crisis when IMf 

liquidity is low. the united states currently participates in two such arrangements – the general arrangements to borrow (gab) 

and the new arrangements to borrow (nab). there were no u.s. loans outstanding under these arrangements in fiscal year 2010 

and fiscal year 2009. the dollar equivalent of sDr $6,712 million has been appropriated to finance u.s. participation in the gab 

and nab; as of september 30, 2010 and september 30, 2009, this amounted to $10,445 million and $10,634 million, respectively, 

in standing appropriations available for lending through the gab or nab, as needed. as is the case for the u.s. quota in the IMf, 

budgetary treatment of u.s. participation in the gab and nab does not result in net budgetary outlays, since transactions under the 

gab or nab result in concurrent adjustments to the u.s. reserve position in the IMf. 

refer to note 31 for a description of nab commitment related to IMf for a description of the new portion of quota shares and nab 

subject to fcra. 

note 14. reserve position in the international monetary fund 

part 3: annual financial report
performance and accountability report | fiscal year 2010 

225 

15. tax, Other, anD relateD interest reCeivables, net 

tax, other, and related interest receivables include receivables from tax assessments, excise taxes, fees, penalties, and interest assessed 

and accrued that were not paid or abated, reduced by an estimate for uncollectible amounts. In addition to amounts attributed to 

taxes, interest income due on monies deposited in federal reserve banks is also included in this line item. 

as of september 30, 2010 and september 30, 2009, tax, other, and related Interest receivables, and net, consisted of the following 

(in millions): 

NON-ENTITY: 

2010 2009 

IRS Federal Tax Receivable, Gross $ 138,111 $ 128,115 

Less: Allowance on Taxes Receivable (103,091) (99,027) 

Receivable, Deposit of Earnings, Federal Reserve Banks 1,910 1,254 

Other Receivables and Interest 25 33 

Less: Allowance on Other and Related Interest Receivable (24) (15) 

Total Tax, and Other Non-Entity Receivables, Net 36,931 30,360 

ENTITY: 

Miscellaneous Entity Receivables and Related Interest 45 48 

Total Tax, Other, and Related Interest Receivables, Net $ 36,976 $ 30,408 

Irs federal taxes receivable constitute the largest portion of the receivables. Irs federal taxes receivable consists of tax assessments, 

penalties, and interest which were not paid or abated, and which were agreed to by either the taxpayer and Irs, or the courts. an 

allowance for doubtful accounts is established for the difference between the gross receivables and the portion deemed collectible. 

the portion of tax receivables estimated to be collectible and the allowance for doubtful accounts are based on projections of 

collectability from a statistical sample of taxes receivable. the Department does not establish an allowance for the receivable on 

deposits of federal reserve bank earnings. 

note 15. tax, other, and related interest receivables, net 

part 3: annual financial report
the department of the treasury 

226
 

16. inventOry anD relateD prOperty, net 

the Department’s operating materials and supplies are maintained for the production of bureau products. the Department maintains 


inventory accounts or balances (e.g., paper, metals, etc.) for use in manufacturing currency and coin. the cost of these items is 


included in inventory costs, and is recorded as cost of goods sold upon delivery to customers. Inventory for check processing activities 


is also maintained. as of september 30, 2010 and september 30, 2009, inventory and related property consisted of the following (in 


millions): 


2010 2009
 

Operating materials and supplies held for use $ 17 $ 17
 

Operating materials and supplies held in reserve for future use 25 24
 

Forfeited property 69 62
 

Inventory – raw materials 299 239
 

Inventory – work in process 158 128
 

Inventory – finished goods 139 142
 

Allowance for inventories and related property (10) (14)
 

Total Inventories and Related Property, Net $ 697 $ 598
 

note 16. inventory and related property, net 

part 3: annual financial report
performance and accountability report | fiscal year 2010 

227 

17. prOperty, plant, anD equipment, net 

as of september 30, 2010 and september 30, 2009, property, plant, and equipment consisted of the following (in millions): 

Depreciation Service Accumulated 2010 

Method Life Cost Depreciation Net Book value 

Buildings, structures, and facilities S/L 3 - 50 years $ 701 $ (336) $ 365 

Furniture, fixtures, and equipment S/L 2 - 20 years 3,100 (2,295) 805 

Construction in progress N/A N/A 15 0 15 

Land and land improvements N/A N/A 13 0 13 

Internal use software S/L 2 -10 years 1,510 (1,003) 507 

Internal use software in development N/A N/A 102 0 102 

Assets under capital lease S/L 2 - 25 years 4 (2) 2 

Leasehold improvements S/L 2 - 25 years 541 (319) 222 

Total $ 5,986 $ (3,955) $ 2,031 

Depreciation 

Method 

Service 

Life Cost 

Accumulated 

Depreciation 

2009 

Net Book value 

Buildings, structures, and facilities S/L 3 - 50 years $ 676 $ (308) $ 368 

Furniture, fixtures, and equipment S/L 2 - 20 years 3,048 (2,268) 780 

Construction in progress N/A N/A 38 0 38 

Land and land improvements N/A N/A 12 0 12 

Internal use software S/L 2-10 years 1,352 (807) 545 

Internal use software in development N/A N/A 112 0 112 

Assets under capital lease S/L 2 - 25 years 25 (23) 2 

Leasehold improvements S/L 2 - 25 years 482 (303) 179 

Total $ 5,745 $ (3,709) $ 2,036 

the service life ranges vary significantly due to the diverse nature of PP&e held by the Department. 

Heritage Assets 

the treasury complex (Main treasury building and annex) was declared a national historical landmark in 1972. the treasury 

complex is treated as a multi-use heritage asset and is expected to be preserved indefinitely. the buildings housing the united states 

Mint in Denver, san francisco, and West Point are also considered multi-use heritage assets. Multi-use heritage assets are recognized 

and presented with general property, plant and, equipment in the balance sheet. 

note 17. property, plant, and equipment, net 

part 3: annual financial report
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228 

18. nOn-entity assets 

non-entity assets are those that are held by the Department but are not available for use by the Department. for example non-entity 

fund balance with treasury represents unused balances of appropriations received by various treasury’s entities to conduct custodial 

operations such as the payment of interest on the federal debt and refunds of taxes and fees. non-entity loans and interest receivable 

represents loans managed by the Department on behalf of the u.s. government. these loans are provided to federal agencies, and 

the Department is responsible for collecting these loans and transferring the proceeds to the general fund of the u.s. government. 

non-entity cash, foreign currency, and other monetary assets include the operating cash of the u.s. government, managed by the 

Department. It also includes foreign currency maintained by various u.s. and military disbursing offices, as well as seized monetary 

instruments. non-entity Investments in gses include the gses’ senior preferred stock and warrants held by the Department on 

behalf of the general fund. as the stock and warrants are liquidated all proceeds are returned to the general fund. 

as of september 30, 2010 and september 30, 2009, non-entity assets consisted of the following (in millions): 

2010 2009 

Intra-governmental Assets: 

Fund Balance (Note 2) $ 542 $ 513 

Loans and Interest Receivable (Note 3) 493,389 348,800 

Accounts Receivable and Related Interest (Note 5) 350 285 

Advances to the Unemployment Trust Fund (Note 1) 34,111 7,981 

Due from the General Fund (Note 4) 13,655,637 11,992,719 

Total Non-Entity Intra-governmental Assets 14,184,029 12,350,298 

Cash, Foreign Currency, and Other Monetary Assets (Note 6) 304,244 269,579 

Gold and Silver Reserves (Note 7) 11,062 11,062 

Loans and Interest Receivable (Note 13) 124 127 

Investments in GSEs (Note 9) 109,216 64,679 

Tax, Other, and Related Interest Receivable, Net (Note 15) 36,931 30,360 

Beneficial Interest in AIG Trust 20,805 23,472 

Miscellaneous Assets 5 3 

Total Non-Entity Assets 14,666,416 12,749,580 

Total Entity Assets 932,841 1,097,021 

Total Assets $ 15,599,257 $ 13,846,601 

note 18. non-entity assets 

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229

19. feDeral Debt anD interest payable 

the Department is responsible for administering the federal debt on behalf of the u.s. government. the federal debt includes 

borrowings from the public as well as borrowings from federal agencies. the federal debt managed by the Department does not 

include debt issued by other governmental agencies such as the tennessee Valley authority or the Department of housing and urban 

Development. 

the federal debt as of september 30, 2010 and september 30, 2009 was as follows (in millions): 

Intra-governmental 2010 2009 

Beginning Balance $ 4,319,892 $ 4,179,570 

New Borrowings/Repayments 181,136 140,322 

Subtotal at Par value 4,501,028 4,319,892 

Premium/(Discount) 38,228 33,779 

Interest Payable Covered by Budgetary Resources 48,546 49,409 

Total $ 4,587,802 $ 4,403,080 

Owed to the Public 2010 2009 

Beginning Balance $ 7,551,862 $ 5,808,691 

New Borrowings/Repayments 1,470,946 1,743,171 

Subtotal at Par value 9,022,808 7,551,862 

Premium/(Discount) (33,870) (33,906) 

Interest Payable Covered by Budgetary Resources 46,991 41,349 

Total $ 9,035,929 $ 7,559,305 

Debt held by the public approximates the u.s. government’s competition with other sectors in the credit markets. In contrast, debt 

held by federal entities, primarily trust funds, represents the cumulative annual surpluses of these funds (i.e., excess of receipts over 

disbursements plus accrued interest) that have been used to finance general government operations. 

Federal Debt held by Other Federal Agencies 

certain federal agencies are allowed to invest excess funds in debt securities issued by the Department on behalf of the u.s. 

government. the terms and the conditions of debt securities issued are designed to meet the cash needs of the u.s. government. 

the vast majority is non-marketable securities issued at par value, but some are issued at market prices and interest rates that reflect 

market terms. the average interest rate for debt held by the federal entities, excluding tIPs, for fiscal year 2010 was 4.3 percent (4.6 

percent in fiscal year 2009). the average interest rate on tIPs for fiscal year 2010 was 1.9 percent (2.0 percent in fiscal year 2009). 

the average interest rate represents the original issue weighted effective yield on securities outstanding at year end. 

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, at par value (not including interest receivable), owed to federal agencies as of september 30, 2010 and 

september 30, 2009 was as follows (in millions): 

2010 2009 

Social Security Administration 

Office of Personnel Management 

Department of Defense Agencies 

Department of Health and Human Services 

All Other Federal Agencies - Consolidated 

Total Federal Debt Held by Other Federal Agencies

 $ 

$ 

2,586,333 

866,090 

433,203 

355,554 

259,848 

4,501,028 

$ 

$ 

2,504,248 

828,952 

375,519 

376,512 

234,661 

4,319,892 

the above balances do not include premium/discount and interest payable. 

note 19. federal debt and interest payable 

part 3: annual financial report
the department of the treasury 

230 

Federal Debt Held by the Public 

as of september 30, 2010 and september 30, 2009, federal Debt held by the Public consisted of the following (in millions): 

Average 

(at par value) Term Interest Rates 2010 

Marketable: 

Treasury Bills 1 Year or Less 0.2% $ 1,783,674 

Treasury Notes Over 1 Year – 10 Years 2.6 % 5,252,585 

Treasury Bonds Over 10 Years 6.1% 846,054 

Treasury Inflation-Protected Securities (TIPS) 5 Years or More 2.2% 593,615 

Total Marketable 8,475,928 

Non-Marketable On Demand to Over 10 Years 2.8% 546,880 

Total Federal Debt Held by the Public $ 9,022,808 

(at par value) Term 

Average 

Interest Rates 2009 

Marketable: 

Treasury Bills 1 Year or Less 0.3% $ 1,986,174 

Treasury Notes 2 - 10 Years 3.0% 3,772,964 

Treasury Bonds Over 10 Years 6.5% 677,491 

Treasury Inflation-Protected Securities (TIPS) 5 Years or More 2.1% 551,308 

Total Marketable 6,987,937 

Non-Marketable On Demand to Over 10 Years 3.7% 563,925 

Total Federal Debt Held by the Public $ 7,551,862 

the above balances do not include premium/discount and interest payable. 

the Department issues marketable bills at a discount or at par and pays the par amount of the security upon maturity. the average 

interest rate on treasury bills represents the original issue effective yield on securities outstanding at year-end. treasury bills are issued 

with a term of one year or less. 

the Department issues marketable notes and bonds as long-term securities that pay semi-annual interest based on the securities’ 

stated interest rates. these securities are issued at either par value or at an amount that reflects a discount or a premium. the 

average interest rate on marketable notes and bonds represents the stated interest rate adjusted by any discount or premium on 

securities outstanding at year-end. treasury notes are issued with a term of 2 to 10 years and treasury bonds are issued with a term of 

more than 10 years. the Department also issues treasury Inflation-Protected securities (tIPs) that have interest and redemption 

payments, which are tied to the consumer Price Index for all urban consumers, a widely used measurement of inflation. tIPs are 

issued with a term of five years or more. 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 september 30, 2010 and september 30, 2009. the tIPs federal Debt held by the Public inflation-adjusted 

principal balance includes inflation of $57,481 million and $57,552 million as of september 30, 2010 and 2009, respectively. 

note 19. federal debt and interest payable 

part 3: annual financial report
performance and accountability report | fiscal year 2010 

231

Debt held by the public primarily represents the amount the federal government has borrowed to finance cumulative cash deficits. 

During fiscal year 2010, the Department implemented several important components as a debt management strategy, which affected 

the mix of outstanding treasury securities. treasury bills decreased by $202,000 million; whereas, treasury notes and bonds increased 

by $1,480,000 million and $169,000 million, respectively, in fiscal year 2010. as of september 30, 2010 and 2009, gross debt held 

by the public totaled $9,023,000 million and $7,552,000 million, respectively an increase of $1,471,000 million. this increase was 

primarily the result of borrowings needed to finance the government’s fiscal year 2010 deficit. however, as a result of most of the 

increase in outstanding gross debt held by the public being in the form of longer term securities, the total dollar amount of activity for 

both borrowings and repayments of debt held by the public decreased for fiscal year 2010. 

federal Debt held by the Public includes federal debt held outside of the u. s. government by individuals, corporations, federal 

reserve banks (frb), state and local governments, foreign governments, and central banks. as of september 30, 2010, the frb had 

total holdings of $813,550 million, including a net of $1,880 million in treasury securities held by the frb as collateral for securities 

lending activities. as of september 30, 2009, the frb had total holdings of $769,144 million, excluding a very small net amount in 

treasury securities lent by the frb to dealers. these securities are held in the frb system open Market account (soMa) for the 

purpose of conducting monetary policy. 

note 19. federal debt and interest payable 

part 3: annual financial report
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232 

20. Other Debt anD interest payable 

borrowings outstanding and related accrued interest are with the civil service retirement and Disability fund (csr&Df), which is 

administered by the office of Personnel Management (oPM). at september 30, 2010 and september 30, 2009, ffb had borrowings 

and related accrued interest of $10,358 millions and $12,060 million, respectively. these borrowings have stated interest rates 

ranging from 4.63 percent to 5.25 percent, an effective interest rate of 4.13 percent, and with maturity dates range from June 30, 

2011 to June 30, 2019. 

note 20. other debt and interest payable 

part 3: annual financial report
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233

21. D.C. pensiOns anD juDiCial retirement aCtuarial liability 

Pursuant to title XI of the balanced budget act of 1997, as amended (the act), on october 1, 1997, the Department became 

responsible for certain District of columbia retirement plans. the act was intended to relieve the District of columbia government 

of the burden of unfunded pension liabilities transferred to the District by the u.s. government in 1979. to fulfill its responsibility, 

the Department manages two funds—the D.c. teachers’, Police officers’, and firefighters’ federal Pension fund (the D.c. federal 

Pension fund) and the District of columbia Judicial retirement and survivors’ annuity fund (the Judicial retirement fund). the 

Department is required to make annual amortized payments from the general fund of the u.s. government to the D.c. federal 

Pension fund and the Judicial retirement fund. the D.c. federal Pension fund benefit payments and administrative expenses 

are related to benefits earned based upon service on or before June 30, 1997. the actuarial cost method used to determine costs for 

the retirement plans is the aggregate entry age normal actuarial cost Method. the actuarial liability is based upon long term 

assumptions selected by the Department. the Department is also responsible for other smaller pension plans administered by the 

office of thrift supervision and office of the comptroller of the currency. the pension benefit costs incurred by the plans are 

included on the consolidated statements of net cost. 

effective in fiscal year 2010 fasab issued sffas 33, Pensions, Other Retirement Benefits, and Other Postemployment Benefits: 

Reporting the Gains and Losses from Changes in Assumptions and Selecting Discount Rates and Valuation Dates, which requires disclosure 

of the components of the expense associated with federal employee pension, orb, and oPeb liabilities in the notes to the financial 

statement. sffas 33 also provides a standard for selecting the discount rate assumption for present value estimates of federal 

employee pension, orb, and oPeb liabilities. 

as of september 30, 2010, pension expense actuarial liabilities consisted of the following (in millions): 

PENSION ExPENSE ACTUARIAL LIABILITIES - BY FUND 

For the Year Ended September 30, 2010

D.C. Federal Judicial 

Pension Fund Retirement Fund 2010 Total 

Beginning Liability Balance $ 8,892 $ 157 $ 9,049 

Pension Expense: 

Normal Cost 0 4 4 

Interest on Pension Liability During the Year 391 8 399 

Actuarial (Gains) Losses During the Year: 

From Experience (60) (2) (62) 

From Discount Rate Assumption Change 1,845 34 1,879 

From Other Assumption Changes (991) (8) (999) 

Prior Service Costs 0 0 0 

Total Pension Expense 1,185 36 1,221 

Less Amounts Paid (519) (8) (527) 

Ending Liability Balance $ 9,558 $ 185 $ 9,743 

note 21. pensions and other actuarial liability 

part 3: annual financial report
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234 

ADDITIONAL INFORMATION 

DC Federal Judicial 

Pension Fund Retirement Fund 2010 Total 

Actuarial Liability $ 9,558 $ 185 $ 9,743 

Unobligated Budgetary Resources (3,600) (127) (3,727) 

Unfunded Liability $ 5,958 $ 58 $ 6,016 

Amount Received from the General Fund $ 519 $ 8 $ 527 

Annual Rate of Investment Return assumption 2.79% - 5.13% 2.79% - 5.13% 

Future Annual Rate of Inflation and Cost-of-Living Adjustment 2.56% 2.78% 

Future Annual Rate of Salary Increases: 

Police Officers & Firefighters 

Teachers 

Judicial 

4.20% 

4.20% 

N/A 

N/A 

N/A 

2.11% 

Actuarial Liability 

Unobligated Budgetary Resources 

Unfunded Liability 

DC Federal 

Pension Fund 

$ 8,893 

(3,558) 

$ 5,335 

Judicial 

Retirement Fund 

$ 156 

(122) 

$ 34 

$ 

$ 

2009 Total 

9,049 

(3,680) 

5,369 

Amount Received from the General Fund $ 400 $ 7 $ 407 

Annual Rate of Investment Return Assumption 4.5% - 6.0% 5.2% - 6.0% 

Future Annual Rate of Inflation and Cost-of-Living Adjustment 3.5% 3.5% 

Future Annual Rate of Salary Increases: 

Police Officers & Firefighters 

Teachers 

Judicial 

3.5% - 6.5% 

3.5% - 5.5% 

N/A 

N/A 

N/A 

3.5% 

note 21. pensions and other actuarial liability 

part 3: annual financial report
performance and accountability report | fiscal year 2010 

22. liabilities 

liabilities not covered by budgetary and other resources 

as of september 30, 2010 and september 30, 2009, liabilities not covered by budgetary and other resources consisted of the following 

(in millions): 

2010 2009 

Intra-governmental Liabilities Not Covered by Budgetary and Other Resources: 

Federal Debt Principal, Premium/Discount (Note 19) $ 4,539,256 $ 4,353,671 

Other Intra-governmental Liabilities 123 105 

Total Intra-governmental Liabilities Not Covered by Budgetary and Other Resources 4,539,379 4,353,776 

Federal Debt Principal, Premium/Discount (Note 19) 8,988,938 7,517,956 

Gold and Silver Reserves held by the U.S. Mint 10,494 10,494 

Pensions and Other Actuarial Liability (Note 21) 6,016 5,369 

Liabilities to GSEs (Note 9) 359,900 91,937 

Other Liabilities 1,990 1,057 

Total Liabilities Not Covered by Budgetary and Other Resources 13,906,717 11,980,589 

Total Liabilities Covered by Budgetary and Other Resources 1,591,444 1,437,956 

Total Liabilities $ 15,498,161 $ 13,418,545 

Other Liabilities 

total “other liabilities” displayed on the balance sheets consists of both liabilities that are covered and not covered by budgetary 

resources. 

other liabilities at september 30, 2010 and september 30, 2009 consisted of the following (in millions): 

2010 

Current Non-Current Total 

Intra-governmental 

Unfunded Federal Workers Compensation Program Liability (FECA) 

Accounts Payable 

Accrued Interest Payable 

Other Accrued Liabilities 

$ 46 

59 

0 

203 

$ 57 

0 

0 

1 

$ 103 

59 

0 

204 

Total Intra-governmental $ 308 $ 58 $ 366 

With the Public 

Actuarial Federal Workers Compensation Program Liability (FECA) $ 0 $ 553 $ 553 

Liability for Deposit Funds (Held by the Federal Government for Others) and Suspense Accounts 724 0 724 

Accrued Funded Payroll and Benefits 533 0 533 

Capital Lease Liabilities 0 0 0 

Accounts Payable and Other Accrued Liabilities 2,607 53 2,660 

Total with the Public $ 3,864 $ 606 $ 4,470 

note 22. liabilities 235

part 3: annual financial report
the department of the treasury 

2009 

Current Non-Current Total 

Intra-governmental 

Unfunded Federal Workers Compensation Program Liability (FECA) $ 46 $ 57 $ 103 

Accounts Payable 61 0 61 

Accrued Interest Payable (3) 0 (3) 

Other Accrued Liabilities 263 1 264 

Total Intra-governmental 367 58 425 

With the Public 

Actuarial Federal Workers Compensation Program Liability (FECA) $ 0 $ 533 $ 533 

Liability for Deposit Funds (Held by the Federal Government for Others) and Suspense Accounts 71 0 71 

Accrued Funded Payroll and Benefits 488 0 488 

Capital Lease Liabilities 1 0 1 

Accounts Payable and Other Accrued Liabilities 2,194 44 2,238 

Total with the Public $ 2,754 $ 577 $ 3,331 

236 note 22. liabilities 

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237

23. 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 expired. 

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 workers compensation, (c) credit reform cost reestimates, and (d) expenses for contingent liabilities. 

the amount reported as “appropriations received” are appropriated from the treasury general fund of the u.s. government 

receipts, such as income taxes, that are not earmarked by law for a specific purpose. this amount will not necessarily agree with the 

“appropriation received” amount reported on the statement of budgetary resources (sbr) because of differences between proprietary 

and budgetary accounting concepts and reporting requirements. for example, certain dedicated and earmarked receipts are recorded 

as “appropriations received” on the sbr, but are recognized as exchange or non-exchange revenue (i.e., typically in special and nonrevolving trust funds) and reported on the statement of changes in net Position in accordance with statement of federal financial 

accounting standards (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 as of september 30, 2010 and september 30, 2009 (in millions): 

Categories of Transfers to the General Fund and Other: 2010 2009 

Downward Reestimates of Credit Reform Subsidies $ 35,906 $ 125,359 

Increase in Liquidity Preference of GSEs Preferred Stock, GSEs PS Dividends and Valuation Changes (Note 9) 56,678 61,983 

Interest Revenue/Distribution of Income 35,993 30,124 

Other 368 238 

TOTAL $ 128,945 $ 217,704 

the credit reform downward reestimate subsidies are transferred to the general fund due to a change in forecasts of future cash flows 

(see notes 8 and 12). also included in “transfers to the general fund and other” are the gses senior Preferred stock investments 

and related dividends as well as the annual valuation adjustment to those investments (see note 9). In addition, these transfers also 

include distribution of interest revenue to the general fund of the u.s. government the interest revenue is accrued on interagency loans held by the Department on behalf of the u.s. government. a corresponding balance is reported on the consolidated 

statement of net cost under “federal costs: less Interest revenue from loans.” the amount reported on the consolidated 

statement of net cost is reduced by eliminations with treasury bureaus. 

the Department also includes seigniorage in “transfers to the general fund and other.” seigniorage is the face value of newly 

minted circulating coins less the cost of production. the united states Mint is required to distribute the seigniorage that it recognizes 

to the general fund of the u.s. government. the distribution is also included in “transfers to the general fund and other.” In 

any given year, the amount recognized as seigniorage may differ for the amount distributed to the general fund by an insignificant 

amount due to timing differences. 

note 23. net position 

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238 

24. COnsOliDateD statement Of net COst anD net COsts Of treasury 

sub-OrganizatiOns 

the Department’s consolidated statement of net cost displays information on a consolidated basis. the complexity of the 

Department’s organizational structure and operations requires that supporting schedules for net cost be included in the notes to 

the financial statements. these supporting schedules provide consolidating information, which fully displays the costs of each 

sub-organization (Departmental offices and each operating bureau). In addition, a separate supporting schedule for fiscal year 2010 

provides net cost information for the significant programs within the Departmental offices. 

Reporting Entity 

the classification of sub-organizations has been determined in accordance with sffas no. 4, “Managerial Cost Accounting Concepts 

and Standards for the Federal Government” which states that the predominant factor is the reporting entity’s organization structure and 

existing responsibility components, such as bureaus, administrations, offices, and divisions within a department. 

each sub-organization is responsible for accumulating costs. the assignment of the costs to treasury-wide programs is the result of 

using the following cost assignment methods: (1) direct costs, (2) cause and effect, and (3) cost allocation. 

Intra-departmental costs/revenues 

Intra-Departmental costs/revenues resulting from the provision of goods and/or services on a reimbursable basis among Departmental 

sub-organizations are reported as costs by providing sub-organizations, and as revenues by receiving sub-organizations. accordingly, 

such costs/revenues are eliminated in the consolidation process. 

Intra-governmental cost 

Intra-governmental cost relates to the source of goods and services purchased by the Department and not to the classification of the 

related intra-governmental revenue. 

In certain cases, other federal agencies incur costs that are directly identifiable to the Department’s operations. In accordance 

with sffas no. 30, Inter-Entity Cost Implementation Amending SFFAS 4, Managerial Cost Accounting Standards and Concepts, 

the Department recognizes identified cost paid for the Department by other agencies as expense of the Department. the material 

Imputed Inter-departmental financing sources currently recognized by the Department include the actual cost of future benefits for 

the federal pension plans that are paid by other federal entities, the federal employees health benefits Program (fehb), and any 

un-reimbursed payments made from the treasury Judgment fund on behalf of the Department. the funding for these costs is reflected 

as imputed financing sources on the statement of changes in net Position. cost paid by other agencies on behalf of the Department 

were $1,008 million and $793 million for the years ended september 30, 2010 and september 30, 2009, respectively. 

note 24. consolidated statement of net cost and net costs of treasury sub-organizations 

part 3: annual financial report
performance and accountability report | fiscal year 2010 

Statement of Net Cost 

oMb circular no. a-136, Financial Reporting Requirements, as amended, requires that the presentation of the statements of net cost 

align directly with the goals and outcomes identified in the strategic Plan. accordingly, the Department has presented the gross costs 

and earned revenues by the applicable strategic goals in its fiscal years 2008 - 2013 strategic Plan. the majority of treasury bureaus’ 

and reporting entities’ net cost information falls within one strategic goal in the statement of net cost. ttb and Do allocate costs 

to multiple programs using a net cost percentage calculation. 

to the extent practical or reasonable to do so, earned revenue is deducted from the gross costs of the programs to determine their net 

cost. there are no precise guidelines to determine the degree to which earned revenue can reasonably be attributed to programs. the 

attribution of earned revenues requires the exercise of managerial judgment. 

fasab issued sffas 33, Pensions, Other Retirement Benefits, and Other Postemployment Benefits: Reporting the Gains and Losses from 

Changes in Assumptions and Selecting Discount Rates and Valuation Dates, which requires gains and losses from changes in long-term 

assumptions used to estimate federal employee pensions, orb and oPeb liabilities to be displayed on the statement of net cost 

separately from other costs. 

the Department’s snc also presents interest expense on the federal Debt and other federal costs incurred as a result of assets and 

liabilities managed on behalf of the u.s. government. these costs are not reflected as program costs related to the Department’s 

strategic plan missions. such costs are eliminated in the consolidation process to the extent that they involve transactions with 

treasury sub-organizations. 

other federal costs for the years ended september 30, 2010 and september 30, 2009 consisted of the following (in millions): 

2010 2009 

Credit Reform Interest on Uninvested Funds (Intra-governmental) $ 8,192 $ 6,534 

Resolution Funding Corporation 2,276 2,120 

Judgment Claims and Contract Disputes 1,119 2,305 

Corporation for Public Broadcasting 506 461 

Legal Services Corporation 418 388 

All Other Payments 242 323 

Total $ 12,753 $ 12,131 

note 24. consolidated statement of net cost and net costs of treasury sub-organizations 239

part 3: annual financial report
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240 

24. Consolidated Statement of Net Cost and Net Costs of Treasury Sub-organizations (in millions): 

FOR YEAR ENDED SEPTEMBER 30, 2010 Fin. 

Bureau of Bureau of Crimes Financial Internal 

Engraving the Public Departmental Enforcement Management Revenue 

Program Costs: & Printing Debt Offices* Network Service Service U.S. Mint 

FINANCIAL PROGRAM: 

Intra-governmental Gross Costs $ 0 $ 120 $ 1,712 $ 0 $ 189 $ 4,577 $ 0 

Less: Earned Revenue 0 (21) (2,234) 0 (168) (68) 0 

Intra-governmental Net Costs 0 99 (522) 0 21 4,509 0 

Gross Costs with the public 0 221 459 0 1,185 9,323 0 

Less: Earned Revenue 0 (6) (1) 0 0 (386) 0 

Net Costs with the public 0 215 458 0 1,185 8,937 0 

Net Cost: Financial Program 0 314 (64) 0 1,206 13,446 0 

ECONOMIC PROGRAM: 

Intra-governmental Gross Costs 90 0 12,727 0 0 0 75 

Less: Earned Revenue (4) 0 (2,260) 0 0 0 (11) 

Intra-governmental Net Costs 86 0 10,467 0 0 0 64 

Gross Costs with the public 515 0 308,859 0 0 0 3,451 

Less: Earned Revenue (627) 0 (11,698) 0 0 0 (3,566) 

Net Costs with the public (112) 0 297,161 0 0 0 (115) 

Net Cost: Economic Program (26) 0 307,628 0 0 0 (51) 

SECURITY PROGRAM: 

Intra-governmental Gross Costs 0 0 141 71 0 0 0 

Less: Earned Revenue 0 0 (19) (3) 0 0 0 

Intra-governmental Net Costs 0 0 122 68 0 0 0 

Gross Costs with the public 0 0 156 57 0 0 0 

Less: Earned Revenue 0 0 0 0 0 0 0 

Net Costs with the public 0 0 156 57 0 0 0 

Net Cost: Security Program 0 0 278 125 0 0 0 

MANAGEMENT PROGRAM: 

Intra-governmental Gross Costs 0 65 160 0 0 0 0 

Less: Earned Revenue 0 (180) (206) 0 0 0 0 

Intra-governmental Net Costs 0 (115) (46) 0 0 0 0 

Gross Costs with the public 0 102 337 0 0 0 0 

Less: Earned Revenue 0 0 0 0 0 0 0 

Net Costs with the public 0 102 337 0 0 0 0 

Net Cost: Management Program 0 (13) 291 0 0 0 0 

Total Program Cost Before Assumption Changes (26) 301 308,133 125 1,206 13,446 (51) 

(Gains)/Losses on Pension, ORB, or OPEB 

Assumption Changes 0 0 818 0 0 0 0 

Net Cost of Operations $ (26) $ 301 $ 308,951 $ 125 $ 1,206 $ 13,446 $ (51) 

* Additional information by DO components are provided on subsequent page 

note 24. consolidated statement of net cost and net costs of treasury sub-organizations 

part 3: annual financial report
performance and accountability report | fiscal year 2010 

241 

24. Consolidated Statement of Net Cost and Net Costs of Treasury Sub-organizations (in millions): 

FOR YEAR ENDED SEPTEMBER 30, 2010 Alcohol, 

Office of the Office of Tobacco Eliminations 

Comptroller of the Thrift Tax and Combined & 9/30/2010 

Program Costs: the Currency Supervision Trade Bureau Total Adjustments Consolidated 

FINANCIAL PROGRAM: 

Intra-governmental Gross Costs $ 0 $ 0 $ 15 $ 6,613 $ (1,985) $ 4,628 

Less: Earned Revenue 0 0 0 (2,491) 276 

Intra-governmental Net Costs 0 0 15 4,122 (1,709) 2,413 

Gross Costs with the public 0 0 38 11,226 0 

Less: Earned Revenue 0 0 (3) (396) 0 (396) 

Net Costs with the public 0 0 35 10,830 0 

Net Cost: Financial Program 0 0 50 14,952 (1,709) 13,243 

ECONOMIC PROGRAM: 

Intra-governmental Gross Costs 111 39 15 13,057 (12,661) 396 

Less: Earned Revenue (21) (10) 0 (2,306) 2,279 

Intra-governmental Net Costs 90 29 15 10,751 (10,382) 369 

Gross Costs with the public 676 202 39 313,742 0 

Less: Earned Revenue (766) (220) 0 (16,877) 0 (16,877) 

Net Costs with the public (90) (18) 39 296,865 0 

Net Cost: Economic Program 0 11 54 307,616 (10,382) 297,234 

SECURITY PROGRAM: 

Intra-governmental Gross Costs 0 0 0 212 (81) 131 

Less: Earned Revenue 0 0 0 (22) 18 

Intra-governmental Net Costs 0 0 0 190 (63) 127 

Gross Costs with the public 0 0 0 213 0 

Less: Earned Revenue 0 0 0 0 0 0 

Net Costs with the public 0 0 0 213 0 

Net Cost: Security Program 0 0 0 403 (63) 340 

MANAGEMENT PROGRAM: 

Intra-governmental Gross Costs 0 0 0 225 (82) 143 

Less: Earned Revenue 0 0 0 (386) 330 

Intra-governmental Net Costs 0 0 0 (161) 248 87 

Gross Costs with the public 0 0 0 439 0 

Less: Earned Revenue 0 0 0 0 0 0 

Net Costs with the public 0 0 0 439 0 

Net Cost: Management Program 0 0 0 278 248 526 

Total Program Cost Before Assumption Changes 0 11 104 323,249 (11,906) 

(2,215) 

11,226 

10,830 

(27) 

313,742 

296,865 

(4) 

213 

213 

(56) 

439 

439 

311,343 

(Gains)/Losses on Pension, ORB, or OPEB 

Assumption Changes 2 0 0 820 0 820 

Net Cost of Operations $ 2 $ 11 $ 104 $ 324,069 $ (11,906) $ 312,163 

note 24. consolidated statement of net cost and net costs of treasury sub-organizations 

part 3: annual financial report
the department of the treasury 

242 

24. Consolidated Statement of Net Cost and Net Costs of Treasury Sub-organizations (in millions): 

FOR YEAR ENDED SEPTEMBER 30, 2009 Fin. 

Bureau of Bureau of Crimes Financial Internal 

Engraving the Public Departmental Enforcement Management Revenue 

Program Costs: & Printing Debt Offices Network Service Service U.S. Mint 

FINANCIAL PROGRAM: 

Intra-governmental Gross Costs $ 0 $ 111 $ 1,440 $ 0 $ 184 $ 4,145 $ 0 

Less: Earned Revenue 0 (22) (1,948) 0 (167) (55) 0 

Intra-governmental Net Costs 0 89 (508) 0 17 4,090 0 

Gross Costs with the public 0 221 829 0 1,153 8,725 0 

Less: Earned Revenue 0 (8) (1) 0 0 (313) 0 

Net Costs with the public 0 213 828 0 1,153 8,412 0 

Net Cost: Financial Program 0 302 320 0 1,170 12,502 0 

ECONOMIC PROGRAM: 

Intra-governmental Gross Costs 83 0 12,151 0 0 0 73 

Less: Earned Revenue (3) 0 (6,146) 0 0 0 (10) 

Intra-governmental Net Costs 80 0 6,005 0 0 0 63 

Gross Costs with the public 392 0 206,456 0 0 0 2,380 

Less: Earned Revenue (481) 0 (10,824) 0 0 0 (2,456) 

Net Costs with the public (89) 0 195,632 0 0 0 (76) 

Net Cost: Economic Program (9) 0 201,637 0 0 0 (13) 

SECURITY PROGRAM: 

Intra-governmental Gross Costs 0 0 121 68 0 0 0 

Less: Earned Revenue 0 0 (16) (1) 0 0 0 

Intra-governmental Net Costs 0 0 105 67 0 0 0 

Gross Costs with the public 0 0 147 55 0 0 0 

Less: Earned Revenue 0 0 0 0 0 0 0 

Net Costs with the public 0 0 147 55 0 0 0 

Net Cost: Security Program 0 0 252 122 0 0 0 

MANAGEMENT PROGRAM: 

Intra-governmental Gross Costs 0 56 145 0 0 0 0 

Less: Earned Revenue 0 (159) (222) 0 0 0 0 

Intra-governmental Net Costs 0 (103) (77) 0 0 0 0 

Gross Costs with the public 0 104 329 0 0 0 0 

Less: Earned Revenue 0 0 0 0 0 0 0 

Net Costs with the public 0 104 329 0 0 0 0 

Net Cost: Management Program 0 1 252 0 0 0 0 

Total Program Cost Before Assumption Changes (9) 303 202,461 122 1,170 12,502 (13) 

(Gains)/Losses on Pension, ORB, or OPEB 

Assumption Changes 0 0 0 0 0 0 0 

Net Cost of Operations $ (9) $ 303 $ 202,461 $ 122 $ 1,170 $ 12,502 $ (13) 

note 24. consolidated statement of net cost and net costs of treasury sub-organizations 

part 3: annual financial report
performance and accountability report | fiscal year 2010 

243 

24. Consolidated Statement of Net Cost and Net Costs of Treasury Sub-organizations (in millions): 

FOR YEAR ENDED SEPTEMBER 30, 2009 Alcohol, 

Office of the Office of Tobacco Eliminations 

Comptroller of the Thrift Tax and Combined & 9/30/2009 

Program Costs: the Currency Supervision Trade Bureau Total Adjustments Consolidated 

FINANCIAL PROGRAM: 

Intra-governmental Gross Costs $ 0 $ 0 $ 14 $ 5,894 $ (1,548) $ 4,346 

Less: Earned Revenue 0 0 0 (2,192) 258 

Intra-governmental Net Costs 0 0 14 3,702 (1,290) 2,412 

Gross Costs with the public 0 0 39 10,967 0 

Less: Earned Revenue 0 0 (2) (324) 0 (324) 

Net Costs with the public 0 0 37 10,643 0 

Net Cost: Financial Program 0 0 51 14,345 (1,290) 13,055 

ECONOMIC PROGRAM: 

Intra-governmental Gross Costs 100 37 13 12,457 (12,066) 391 

Less: Earned Revenue (22) (11) 0 (6,192) 6,166 

Intra-governmental Net Costs 78 26 13 6,265 (5,900) 365 

Gross Costs with the public 632 202 37 210,099 0 

Less: Earned Revenue (752) (245) (0) (14,758) (1) (14,759) 

Net Costs with the public (120) (43) 37 195,341 (1) 

Net Cost: Economic Program (42) (17) 50 201,606 (5,901) 195,705 

SECURITY PROGRAM: 

Intra-governmental Gross Costs 0 0 0 189 (66) 123 

Less: Earned Revenue 0 0 0 (17) 14 

Intra-governmental Net Costs 0 0 0 172 (52) 120 

Gross Costs with the public 0 0 0 202 0 

Less: Earned Revenue 0 0 0 0 0 0 

Net Costs with the public 0 0 0 202 0 

Net Cost: Security Program 0 0 0 374 (52) 322 

MANAGEMENT PROGRAM: 

Intra-governmental Gross Costs 0 0 0 201 (65) 136 

Less: Earned Revenue 0 0 0 (381) 321 

Intra-governmental Net Costs 0 0 0 (180) 256 76 

Gross Costs with the public 0 0 0 433 0 

Less: Earned Revenue 0 0 0 0 0 0 

Net Costs with the public 0 0 0 433 0 433 

Total Program Cost Before Assumption Changes (42) (17) 101 216,578 (6,987) 209,591 

(1,934) 

10,967 

10,643 

(26) 

210,099 

195,340 

(3) 

202 

202 

(60) 

433 

Net Cost: Management Program 0 0 0 253 256 509 

(Gains)/Losses on Pension, ORB, or OPEB 

Assumption Changes 0 0 0 0 0 0 

Net Cost of Operations $ (42) $ (17) $ 101 $ 216,578 $ (6,987) $ 209,591 

note 24. consolidated statement of net cost and net costs of treasury sub-organizations 

part 3: annual financial report
the department of the treasury 

244 

24. Consolidated Statement of Net Cost and Net Costs of Departmental Offices Accounts (in millions): 

FOR YEAR ENDED SEPTEMBER 30, 2010 Exchange Government Office of Office of DO 

Stabilization Sponsored International Financial Combined 

Program Costs: Fund Enterprises Affairs Stability All Others Total 

FINANCIAL PROGRAM: 

Intra-governmental Gross Costs $ - $ - $ - $ - $ 1,712 $ 1,712 

Less: Earned Revenue 0 0 (2,234) (2,234) 

Gross Costs with the public 0 0 459 459 

Net Costs with the public 0 0 0 0 458 458 

Less: Earned Revenue (19) (1,035) (1,173) (33) (2,260) 

Gross Costs with the public 1,476 321,679 2,348 (23,176) 6,532 308,859 

Net Costs with the public 103 316,048 2,348 (27,867) 6,529 297,161 

Less: Earned Revenue 0 0 0 0 (19) (19) 

Gross Costs with the public 0 0 0 0 156 156 

Net Costs with the public 0 0 0 0 156 156 

Less: Earned Revenue 0 0 0 0 (206) (206) 

Gross Costs with the public 0 0 0 0 337 337 

Net Costs with the public 0 0 0 0 337 337 

Total Program Cost Before Assumption Changes 84 321,679 2,395 (23,083) 7,058 308,133 

Net Cost of Operations $ 84 $ 321,679 $ 2,395 $ (23,083) $ 7,876 $ 308,951 

Intra-governmental Net Costs 0 0 0 0 (522) (522) 

Less: Earned Revenue 0 0 (1) (1) 

Net Cost: Financial Program 0 0 0 0 (64) (64) 

ECONOMIC PROGRAM: 0 

Intra-governmental Gross Costs 0 6,666 47 5,957 57 12,727 

Intra-governmental Net Costs (19) 5,631 47 4,784 24 10,467 

Less: Earned Revenue (1,373) (5,631) (4,691) (3) (11,698) 

Net Cost: Economic Program 84 321,679 2,395 (23,083) 6,553 307,628 

SECURITY PROGRAM: 

Intra-governmental Gross Costs 0 0 0 0 141 141 

Intra-governmental Net Costs 0 0 0 0 122 122 

Less: Earned Revenue 0 0 0 0 0 0 

Net Cost: Security Program 0 0 0 0 278 278 

MANAGEMENT PROGRAM: 

Intra-governmental Gross Costs 0 0 0 0 160 160 

Intra-governmental Net Costs 0 0 0 0 (46) (46) 

Less: Earned Revenue 0 0 0 0 0 0 

Net Cost: Management Program 0 0 0 0 291 291 

(Gains)/Losses on Pension, ORB, or OPEB 

Assumption 0 0 0 0 818 818 

note 24. consolidated statement of net cost and net costs of treasury sub-organizations 

part 3: annual financial report
performance and accountability report | fiscal year 2010 

25.	 aDDitiOnal infOrmatiOn relateD tO the COmbineD statements 

Of buDgetary resOurCes 

federal agencies are required to disclose additional information related to the combined statements of budgetary resources (per 

oMb circular no. a-136). In accordance with sffas no. 7, the Department must report the value of goods and services ordered 

and obligated which have not been received. this amount includes any orders for which advance payment has been made but for 

which delivery or performance has not yet occurred. the information for the fiscal years ended september 30, 2010 and september 

30, 2009 is as follows (in millions): 

Undelivered Orders 

2010	 2009 

Undelivered orders: 

Paid $ 126 $ 171 

Unpaid 169,305 185,641 

Undelivered orders at the end of the year $ 169,431 $ 185,812 

Contributed Capital	 $ 20 $ 40 

Apportionment Categories of Obligations Incurred 

apportionment categories are determined in accordance with the guidance provided in oMb circular no. a-11, Preparation, 

submission and execution of the budget. category a represents resources apportioned for calendar quarters. category b represents 

resources apportioned for other time periods; for activities, projects, or objectives; or for any combination thereof (in millions). 

Direct vs. Reimbursable Obligations Incurred:	 2010 2009 

Direct - Category A $ 2,849 $ 14,715 

Direct - Category B 330,068 977,506 

Direct - Exempt from Apportionment 481,785 390,305 

Total Direct 814,702 1,382,526 

Reimbursable - Category A 11 1 

Reimbursable - Category B 4,883 3,386 

Reimbursable - Exempt from Apportionment 1,242 1,282 

Total Reimbursable 6,136 4,669 

Total Direct and Reimbursable Obligations Incurred $ 820,838 $ 1,387,195 

note 25. additional information related to the combined statements of budgetary resources 245

part 3: annual financial report
the department of the treasury 

246 

Terms of Borrowing Authority Used 

several Department’s programs have authority to borrow under the Federal Credit Reform Act of 1990 (fcra), as amended. the 

ffb and IaP also have borrowing authority. the fcra provides indefinite borrowing authority to financing accounts to fund 

the unsubsidized portion of direct loans and to satisfy obligations in the event the financing account’s resources are insufficient. 

repayment requirements are defined by oMb circular a-11. Interest expense due is calculated based on the beginning balance of 

borrowings outstanding and the borrowings/repayments activity that occurred during the fiscal year. undisbursed treasury borrowings 

earn interest at the same rate as the financing account pays on its debt owed to bPD. In the event that principal and interest 

collections exceed the interest expense due, the excess will be repaid to the Department. If principal and interest do not exceed 

interest expense due, the Department will borrow the difference. the Department makes periodic principal repayments based on 

the analysis of cash balances and future disbursement needs. all interest on borrowings were due the last day of the fiscal year, on 

september 30, 2010. Interest rates on fcra borrowings range from 0.08 percent to 9.38 percent. 

Available Borrowing, End of Year: 

2010 2009 

Beginning Balance $ 51,510 $ 29,810 

Current Authority 151,473 548,734 

Decreases (19,274) (107,475) 

Borrowing Authority Withdrawn (37,982) 0 

Borrowing Authority Converted to Cash (122,250) (419,559) 

Ending Balance $ 23,477 $ 51,510 

Reconciliation of the President’s Budget 

the Budget of the United States (also known as the President’s budget), with actual numbers for fiscal year 2010, was not published 

at the time that these financial statements were issued. the President’s budget is expected to be published in february 2011, and 

can be located at the oMb website http://www.whitehouse.gov/omb. It will be available from the u.s. government Printing office. 

the following chart displays the differences between the combined statement of budgetary resources (sbr) in the fiscal year 2009 

Agency Financial Report and the actual fiscal year 2009 balances included in the fiscal year 2011 President’s budget (Pb). 

note 25. additional information related to the combined statements of budgetary resources 

part 3: annual financial report
performance and accountability report | fiscal year 2010 

247

RECONCILIATION OF FISCAL YEAR 2009 COMBINED STATEMENT OF BUDGETARY RESOURCES 

TO ThE FISCAL YEAR 2011 PRESIDENT’S BUDGET (IN MILLIONS) 

Outlays (net 

Budgetary of offsetting Offsetting Obligations 

Resources collections) Receipts Net Outlays Incurred 

Statement of Budgetary Resources Amounts $ 1,835,034 $ 966,779 $ (44,614) $ 922,165 $ 1,387,195 

Included in the Treasury Department Chapter of the President’s Budget 

(PB) but not in the Statement of Budgetary Resources (SBR): 

IRS non-entity tax credit payments (1) 82,378 82,378 (5) 82,373 82,378 

Tax and Trade Bureau (TTB) non-entity collections for Puerto Rico 473 473 0 473 473 

Non-Treasury offsetting receipts included in Treasury chapter of PB 0 0 (40) (40) 0 

Treasury offsetting receipts considered to be “General Fund” transactions 

for reporting purposes (2) 0 0 128 128 0 

Continued dumping subsidy – CBP 217 226 0 226 226 

SIG for TARP Appropriations not recorded 35 0 0 0 0 

Other 21 0 3 3 1 

Subtotal 83,124 83,077 86 83,163 83,078 

Included in the SBR but not in the Treasury Department chapter of the PB: 

Treasury resources shown in non-Treasury chapters of the PB, included in 

SBR (3) (38,760) (3,281) 0 (3,281) (4,423) 

Offsetting collections net of collections shown in PB (8,013) 0 59 59 (1) 

Treasury offsetting receipts shown in other chapters of PB, part of which is 

in SBR 0 0 531 531 0 

Unobligated balance carried forward, recoveries of prior year funds and 

expired accounts (201,406) 0 0 0 (73) 

Exchange Stabilization Fund resources not shown in PB (4) (34,317) 0 0 0 (64) 

Treasury Financing Accounts (CDFI, OFS and GSEs) (694,656) (300,862) 0 (300,862) (652,828) 

Enacted reduction, 50% Transfer Accounts, and Capital Transfers to 

General Fund not included in PB (17) 0 0 0 0 

Other (5) 0 0 0 0 

Subtotal (977,174) (304,143) 590 (303,553) (657,389) 

Trust Fund – Comptroller of the Currency (OCC) (5) (71) 71 0 71 0 

President’s Budget Amounts* $ 940,913 $ 745,784 $ (43,938) $ 701,846 $ 812,884 

1. 	These are primarily Earned Income Tax Credit and Child Tax Credit payments that are reported with refunds as custodial activities in the Department’s financial statements 

and thus are not reported as budgetary resources. 

2. 	These are receipt accounts that the Department manages on behalf of other agencies and considers to be “General Fund” receipts rather than receipts of the Department 

reporting entity. 

3. The largest of these resources relate to the Department’s International Assistance Programs. 

4. 	Exchange Stabilization Fund (ESF) is a self-sustaining component that finances its operations with the buying and selling of foreign currencies to regulate the fluctuations of 

the dollar. Because of the nature of the activities of the component, it does not receive appropriations, and therefore is excluded from the PB. 

5. The OCC negative outlay also appears in the offsetting receipts section of the Analytical Perspectives, and hence shown as a reconciling item.

 * 	Per the President’s Budget for fiscal year 2011 – Budgetary Resources and Outlays are from the Analytical Perspective. 

Offsetting Receipts and Obligations Incurred are from the Appendix. 

note 25. additional information related to the combined statements of budgetary resources 

part 3: annual financial report
the department of the treasury 

248 

Legal Arrangements Affecting Use of Unobligated Balances 

the use of unobligated balances is restricted based on annual legislation requirements or enabling authorities. funds are presumed to 

be available for only one fiscal year unless otherwise noted in the annual appropriation language. unobligated balances in unexpired 

fund symbols are available in the next fiscal year for new obligations unless some restrictions had been placed on those funds by law. 

In those situations, the restricted funding will be temporarily unavailable until such time as the reasons for the restriction have been 

satisfied or legislation has been enacted to remove the restriction. 

amounts in expired fund symbols are not available for new obligations, but may be used to adjust obligations and make disbursements 

that were recorded before the budgetary authority expired or to meet a bona fide need that arose in the fiscal year for which the 

appropriation was made. 

Change in Accounting Policy Effect on Unobligated and Unpaid Obligations 

beginning in fiscal year 2010, the Department changed its budgetary accounting policy for the accounting and reporting of esf 

investment balance changes. the change in accounting policy allows the Department to present the revaluations of esf investments 

as well as other esf assets not readily convertible to cash as a budgetary resource that is permanently not available without affecting 

outlays (see note1 aD for change in accounting Policy). 

In order to facilitate this change in accounting, an adjustment for $14,135 million to the sbr line, Unobligated balances, brought 

forward, October 1, 2009 was required. this adjustment primarily included additions of prior year accumulated fcDa investment 

balances now permitted by office of Management and budget to be reported on the sbr through the use of the new ussgl. these 

budgetary adjustments have no impact on esf proprietary account balances in fiscal year 2010 or previous years. 

In order to maintain appropriate budgetary relationships on the sbr between budgetary resources, status of budgetary resources, 

and relationship of obligations to outlays, an adjustment corresponding to the fcDa investment balance of net $14,135 million 

was made to Obligations Incurred, Unpaid Obligations Brought Forward, and Obligations Incurred, net. 

note 25. additional information related to the combined statements of budgetary resources 

part 3: annual financial report
performance and accountability report | fiscal year 2010 

249 

26. COlleCtiOn anD DispOsitiOn Of CustODial revenue 

the Department collects the majority of federal revenue from income and excise taxes. collection activity, by revenue type and tax 

year, was as follows for the years ended september 30, 2010 and september 30, 2009 (in millions): 

Tax Year 2010

2010 2009 2008 Pre-2008 Collections 

Individual Income and FICA Taxes $ 1,315,876 $ 635,920 $ 20,182 $ 16,782 $ 1,988,760 

Corporate Income Taxes 55,035 221,235 716 951 277,937 

Estate and Gift Taxes 4 7,841 881 11,025 19,751 

Excise Taxes 52,112 18,583 98 153 70,946 

Railroad Retirement Taxes 3,547 1,099 1 1 4,648 

Unemployment Taxes 4,697 1,726 37 83 6,543 

Fines, Penalties, Interest & Other Revenue - Tax Related 244 1 0 0 245 

Tax Related Cash Revenue Received 1,431,515 886,405 21,915 28,995 2,368,830 

Federal Reserve Earnings 56,582 19,263 0 0 75,845 

Fines, Penalties, Interest & Other Revenue - Non-Tax Related 1,613 22 0 0 1,635 

Non-Tax Related Cash Revenue Received 58,195 19,285 0 0 77,480 

Total Cash Revenue Received 1,489,710 905,690 21,915 28,995 2,446,310 

Less Amounts Collected for Non-Federal Entities (387) 

Total $ 2,445,923 

Tax Year 2009 

2009 2008 2007 Pre-2007 Collections 

Individual Income and FICA Taxes $ 1,296,427 $ 702,557 $22,250 $15,323 $ 2,036,557 

Corporate Income Taxes 138,144 69,016 1,692 16,630 225,482 

Estate and Gift Taxes 92 3,979 796 19,810 24,677 

Excise Taxes 54,502 12,512 102 132 67,248 

Railroad Retirement Taxes 3,559 1,148 3 1 4,711 

Unemployment Taxes 4,772 1,859 36 98 6,765 

Fines, Penalties, Interest & Other Revenue - Tax Related 516 0 0 0 516 

Tax Related Cash Revenue Received 1,498,012 791,071 24,879 51,994 2,365,956 

Federal Reserve Earnings 24,552 9,766 0 34,318 

Fines, Penalties, Interest & Other Revenue - Non-Tax Related 1,376 37 0 0 1,413 

Non-Tax Related Cash Revenue Received 25,928 9,803 0 0 35,731 

Total Cash Revenue Received 1,523,940 800,874 24,879 51,994 2,401,687 

Less Amounts Collected for Non-Federal Entities (487) 

Total $ 2,401,200 

amounts reported for corporate Income taxes collected in fiscal year 2010 include corporate taxes of $13,179 million for tax year 

2011 (similarly, amounts reported for corporate Income taxes collected in fiscal year 2009 include corporate taxes of $9,000 million 

for tax year 2010). 

note 26. collection and disposition of custodial revenue 

part 3: annual financial report
the department of the treasury 

Amounts Provided to Fund the Federal Government 

for the years ended september 30, 2010 and september 30, 2009, collections of custodial revenue transferred to other entities were 

as follows (in millions): 

2010 2009 

Department of the Interior $ 361 $ 453 

General Fund 1,975,625 1,962,775 

Total $ 1,975,986 $ 1,963,228 

Federal Tax Refunds Paid 

refund activity, broken out by revenue type and by tax year, was as follows for the years ended september 30, 2010 and september 

30, 2009 (in millions): 

Tax Year 

2010 2009 2008 Pre-2008 2010 Refunds 

Individual Income and FICA Taxes 

Corporate Income Taxes 

Estate and Gift Taxes 

Excise Taxes 

Railroad Retirement Taxes 

Unemployment Taxes 

Total 

$ 

$

113,577 

2,630 

0 

429 

0 

1 

116,637 

$

$

 179,159 

15,913 

209 

611 

1 

56 

195,949 

$

$

 48,846 

16,414 

439 

171 

0 

13 

65,883 

$ 29,724 

61,229 

277 

215 

0 

23 

$ 91,468 

$ 371,306 

96,186 

925 

1,426 

1 

93 

$ 469,937 

Tax Year 

2009 2008 2007 Pre-2007 2009 Refunds 

Individual Income and FICA Taxes $ 1,075 $ 293,971 $ 30,361 $ 14,222 $ 339,629 

Corporate Income Taxes 6,626 32,646 17,370 38,558 95,200 

Estate and Gift Taxes 0 324 566 358 1,248 

Excise Taxes 535 541 81 626 1,783 

Railroad Retirement Taxes 0 2 0 1 3 

Unemployment Taxes 1 66 13 29 109 

Total $ 8,237 $ 327,550 $ 48,391 $ 53,794 $ 437,972 

Federal Tax Refunds Payable 

as of september 30, 2010 and september 30, 2009, refunds payable to taxpayers consisted of the following (in millions): 

2010 2009 

Alcohol, Tobacco Tax and Trade Bureau $ 13 $ 9
 

Internal Revenue Service 4,133 4,031
 

Total $ 4,146 $ 4,040 

250 note 26. collection and disposition of custodial revenue 

part 3: annual financial report
performance and accountability report | fiscal year 2010 

251

27. earmarkeD funDs 

the majority of the Department’s earmarked fund activities are attributed to the esf and the pension and retirement funds managed 

by the office of DcP. In addition, several Department bureaus operate with “public enterprise revolving funds” and receive no 

appropriations from the congress. these bureaus are beP, u.s. Mint, occ, and ots. other miscellaneous earmarked funds are 

managed by bPD, Do, fMs, Irs, and tff. 

the following is a list of earmarked funds and a brief description of the purpose, accounting, and uses of these funds. 

Exchange Stabilization Fund (ESF) 

ESF 20X4274 ESF Money Market Guaranty Facility 

ESF 20X4444 Exchange Stabilization Fund 

D.C. Pensions 

DCP 20X1713 Federal payment – D.C. Judicial Retirement 

DCP 20X1714 Federal payment – D.C. Federal Pension Fund 

DCP 20X5511 D.C. Federal Pension Fund 

DCP 20X8212 D.C. Judicial Retirement and Survivor’s Annuity Fund 

Public Enterprise Revolving Funds 

BEP 20X4502 Bureau of Engraving and Printing Fund 

MNT 20X4159 Public Enterprise Revolving Fund 

OCC 20X8413 Assessment Funds 

OTS 20X4108 Public Enterprise Revolving Fund 

IRS 20X4413 Federal Tax Lien Revolving Fund 

Other Earmarked Funds 

BPD 20X5080 Gifts to Reduce Public Debt 

DO 20X5407 Sallie Mae Assessments 

DO 20X5590 Financial Research Fund 

DO 20X5816 Confiscated and Vested Iraqi Property and Assets 

DO 20X8790 Gifts and Bequests Trust Fund 

FMD 205445 Debt Collection 

FMD 20X5081 Presidential Election Campaign 

FMD 20X8902 Esther Cattell Schmitt Gift Fund 

FMS 204/55445 Debt Collection Special Fund 

FMS 205/65445 Debt Collection Special Fund 

FMS 206/75445 Debt Collection Special Fund 

FMS 207/85445 Debt Collection Special Fund 

FMS 208/95445 Debt Collection Special Fund 

FMS 209/05445 Debt Collection Special Fund 

FMS 200/15445 Debt Collection Special Fund 

IRS 20X5510 Private Collection Agency Program 

IRR 20X5433 Informant Reimbursement 

TFF 20X5697 Treasury Forfeiture Fund 

the esf uses funds to purchase or sell foreign currencies, to hold u.s. foreign exchange and sDr assets, and to provide financing 

to foreign governments. esf accounts and reports its holdings to fMs on the sf224, “statement of transactions,” as well as to the 

congress and the Department’s policy office. the gold reserve act of 1934, bretton Woods agreement act of 1945, P.l. 95-147 

and P.l. 94-564 established and authorized the use of the fund. sDrs in the IMf, Investments in u.s. securities (bPD), and 

note 27. earmarked funds 

part 3: annual financial report
the department of the treasury 

Investments in foreign currency assets are the sources of revenues or other financing sources. esf’s earnings and realized gains on 

foreign currency assets represent inflows of resources to the government, and the revenues earned are the result of intra-governmental 

inflows. 

D.c. Pension funds provide annuity payments for retired D.c. teachers, police officers, judges, and firefighters. the sources of 

revenues are through annual appropriations, employees’ contributions, and interest earnings from investments. all proceeds are 

earmarked. note 21 provides detailed information on various funds managed by the office of DcP. 

the Department’s four non-appropriated bureaus, Mint, beP, occ, and ots, operate “public enterprise funds” that account for 

the revenue and expenses related to the production and sale of numismatic products and circulating coinage (Mint), the currency 

printing activities (beP), and support of oversight functions of banking (occ) and thrift operations (ots). 31 usc § 5142 

established the revolving fund for beP to account for revenue and expenses related to the currency printing activities. Public law 

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 coins, and the sale of circulating coins to the federal reserve bank system. 12 usc § 481 

established the assessment funds for occ, and 12 u.s.c. § 1467 governs the collection and use of assessments and other funds by 

ots. revenue and financing sources are from the bank examination and assessments for the oversight of the national banks, savings 

associations, and savings and loan holding companies. these non-appropriated funds do not directly contribute to the inflows of 

resources to the government. there are minimal transactions with other government agencies. 

there are other earmarked funds at several treasury bureaus, such as donations to the Presidential election campaign fund, funds 

related to the debt collection program, gifts to reduce the public debt, and other enforcement related activities. Public laws, statutory 

laws, u.s. code, and the Debt collection Improvement act 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 debt 

collection. 

Intra-governmental Investments in Treasury Securities 

the federal government does not set aside assets to pay future benefits or other expenditures associated with earmarked funds. the 

Department’s bureaus and other federal agencies invest some of the earmarked funds that they collect from the public. the funds are 

invested in securities issued by the Department’s bureau of the Public Debt (bPD). the cash collected by bPD is deposited in the 

general fund of the u.s. government, which uses the cash for general government purposes. 

the investments provide Department bureaus and other federal agencies with authority to draw upon the general fund of the u.s. 

government to make future benefit payments or other expenditures. When the Department bureaus or other federal agencies require 

redemption of these securities to make expenditures, the government finances those expenditures out of accumulated cash balances, 

by raising taxes or other receipts, by borrowing from the public or repaying less debt, or by curtailing other expenditures. this is the 

same way that the government finances all other expenditures. 

the securities are an asset to the Department bureaus and other federal agencies and a liability of the bPD. the general fund of the 

u.s. government is liable to bPD. because the Department bureaus and other federal agencies are parts of the u.s. government, 

these assets and liabilities offset each other from the standpoint of the government as a whole. for this reason, they do not represent 

an asset or a liability in the u.s. government-wide financial statements. 

the balances related to the investments made by the Department bureaus are not displayed on the Department’s financial statements 

because the bureaus are subcomponents of the Department. however, the general fund of the u.s. government remains liable to 

bPD for the invested balances and bPD remains liable to the investing Department bureaus (see note 4). 

252 note 27. earmarked funds 

part 3: annual financial report
performance and accountability report | fiscal year 2010 

253 

Summary Information for Earmarked Funds as of and for the Year ended September 30, 2010 

(in millions): 

Public 

Exchange Enterprise Other Combined 

Stabilization D.C. Revolving Earmarked Earmarked 9/30/2010 

Fund Pensions Funds Funds Funds Eliminations Total 

ASSETS 

Fund Balance $ 0 $ 7 $ 490 $ 362 $ 859 $ 0 $ 859 

Investments and Related Interest - Intragovernmental 20,436 3,980 1,398 1,385 27,199 27,199 0 

Cash, Foreign Currency and Other 

Monetary Assets 70,878 0 0 12 70,890 0 70,890 

Investments and Related Interest 12,616 0 0 0 12,616 0 12,616 

Other Assets 0 5 1,306 114 1,425 7 1,418 

Total Assets $ 103,930 $ 3,992 $ 3,194 $ 1,873 $ 112,989 $ 27,206 $ 85,783 

LIABILITIES 

Intra-governmental Liabilities 

Certificates Issued to Federal Reserve 

Banks 

Allocation of Special Drawing Rights 

0 

5,200 

54,958 

0 

0 

0 

38 

0 

0 

260 

0 

0 

298 

5,200 

54,958 

55 

0 

0 

243 

5,200 

54,958 

Total Liabilities 60,185 9,797 666 715 71,363 55 71,308 

Net Position 

Unexpended Appropriations-Earmarked 

Funds 

Cumulative Results of OperationsEarmarked Funds 

200 

43,545 

0 

(5,805) 

0 

2,528 

0 

1,158 

200 

41,426 

0 

0 

200 

41,426 

Other Liabilities 27 9,797 628 455 10,907 0 10,907 

Total Liabilities and Net Position $ 103,930 $ 3,992 $ 3,194 $ 1,873 $ 112,989 $ 55 $ 112,934 

Statement of Net Cost 

Gross Cost $ 1,476 $ 417 $ 5,159 $ 229 $ 7,281 $ 80 $ 7,201 

Less: Earned Revenue $ (1,392) $ (128) $ (5,225) $ 0 $ (6,745) $ (177) $ (6,568) 

Gains/Losses on Pension, ORB, or OPEB 

Assumption Changes $ 0 $ 818 $ 2 $ 0 $ 820 $ 0 $ 820 

Total Net Cost of Operations $ 84 $ 1,107 $ (64) $ 229 $ 1,356 $ (97) $ 1,453 

Statement of Changes in Net Position 

Cumulative Results of Operations: 

Beginning Balance, as Adjusted $ 43,647 $ (5,225) $ 2,465 $ 766 $ 41,653 $ 0 $ 41,653 

Budgetary Financing Sources (18) 527 (13) 384 880 (12) 892 

Other Financing Sources 0 0 12 237 249 (38) 287 

Total Financing Sources (18) 527 (1) 621 1,129 (50) 1,179 

Net Cost of Operations (84) (1,107) 64 (229) (1,356) 97 (1,453) 

Change in Net Position (102) (580) 63 392 (227) 47 (274) 

Ending Balance $ 43,545 $ (5,805) $ 2,528 $ 1,158 $ 41,426 $ 47 $ 41,379 

* The eliminations reported above include both inter and intra eliminations for the Earmarked Funds. The total eliminations amount will not agree with the eliminations 


reported in the Statement of Changes in Net Position, which include eliminations for Other Funds.
 

note 27. earmarked funds 

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254 

Summary Information for Earmarked Funds as of and for the Year ended September 30, 2009 

(in millions): 

Public 

Exchange Enterprise Other Combined 

Stabilization D.C. Revolving Earmarked Earmarked 9/30/2009 

Fund Pensions Funds Funds Funds Eliminations* Total 

ASSETS 

Fund Balance $ 0 $ 0 $ 573 $ 312 $ 885 $ 0 $ 885 

Investments and Related Interest - Intragovernmental 19,816 3,866 1,346 707 25,735 25,735 0 

Cash, Foreign Currency and Other 

Monetary Assets 71,662 0 0 18 71,680 0 71,680 

Investments and Related Interest 13,537 0 0 0 13,537 0 13,537 

Other Assets 0 13 1,207 104 1,324 10 1,314 

Total Assets $ 105,015 $ 3,879 $ 3,126 $ 1,141 $ 113,161 $ 25,745 $ 87,416 

LIABILITIES 

Intra-governmental Liabilities 

Certificates Issued to Federal Reserve 

Banks 

Allocation of Special Drawing Rights 

$ 0 

5,200 

55,953 

$ 0 

0 

0 

$ 37 

0 

0 

$ 194 

0 

0 

$ 231 

5,200 

55,953 

$ 28 

0 

0 

$ 203 

5,200 

55,953 

Total Liabilities 61,169 9,104 660 375 71,308 28 71,280 

Net Position 

Unexpended Appropriations-Earmarked 

Funds 

Cumulative Results of OperationsEarmarked Funds 

200 

43,646 

0 

(5,225) 

0 

2,466 

0 

766 

200 

41,653 

0 

0 

200 

41,653 

Other Liabilities 16 9,104 623 181 9,924 0 9,924 

Total Liabilities and Net Position $ 105,015 $ 3,879 $ 3,126 $ 1,141 $ 113,161 $ 28 $ 113,133 

Statement of Net Cost 

Gross Cost $ 1,117 $ 785 $ 3,899 $ 214 $ 6,015 $ 60 $ 5,955 

Less: Earned Revenue (4,951) (134) (3,981) 0 (9,066) (187) (8,879) 

Gains/Losses on Pension, ORB, or OPEB 

Assumption Changes $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 

Total Net Cost of Operations $ (3,834) $ 651 $ (82) $ 214 $ (3,051) $ (127) $ (2,924) 

Cumulative Results of Operations: 

Beginning Balance, as Adjusted 

Budgetary Financing Sources 

Other Financing Sources 

$ 39,618 

194 

0 

$ (4,982) 

408 

0 

$ 2,350 

0 

34 

$ 575 

345 

60 

$ 37,561 

947 

94 

$ 0 

1 

(27) 

$ 37,561 

946 

121 

Net Cost of Operations 3,834 (651) 82 (214) 3,051 127 2,924 

Total Cumulative Results of 

Operations $ 43,646 $ (5,225) $ 2,466 $ 766 $ 41,653 $ 101 $ 41,552 

Total Financing Sources 194 408 34 405 1,041 (26) 1,067 

Net Changes 4,028 (243) 116 191 4,092 101 3,991 

* The eliminations reported above include both inter and intra eliminations for the Earmarked Funds. The total eliminations amount will not agree with the eliminations 

reported in the Statement of Changes in Net Position, which include eliminations for Other Funds. 

note 27. earmarked funds 

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255 

28. reCOnCiliatiOn Of net COst Of OperatiOns tO buDget 

the reconciliation of net cost of operations to budget explains the difference between the budgetary net obligations and the 

proprietary net cost of operations. for fiscal years 2010 and 2009, oMb did not prescribe a format for this reconciliation in oMb 

circular no. a-136, Financial Reporting Requirements, as amended, so that preparers might develop a more robust presentation 

tailored to their agency. as of september 30, 2010 and september 30, 2009, the reconciliation of net cost of operations to budget 

consisted of the following (in millions): 

2010 2009 

RESOURCES USED TO FINANCE ACTIvITIES: 

Budgetary Resources Obligated: 

Obligations Incurred $ 820,838 $ 1,387,195 

Less: Spending Authority from Offsetting Collections and Recoveries (251,553) (321,262) 

Obligations Net of Offsetting Collections and Recoveries 569,285 1,065,933 

Less: Offsetting Receipts (178,909) (44,614) 

Net Obligations 390,376 1,021,319 

Other Resources: 

Donations and Forfeiture of Property 319 127 

Financing Sources for Accrued Interest and Discount on the Debt 11,086 6,027 

Transfers In/Out Without Reimbursement (42) (36) 

Imputed Financing from Cost Absorbed by Others 1,008 793 

Transfers to the General Fund and Other (Note 23) (128,945) (217,704) 

Net Other Resources Used to Finance Activities (116,574) (210,793) 

Total Resources Used to Finance Activities 273,802 810,526 

RESOURCES USED TO FINANCE ITEMS NOT PART OF THE NET COST OF OPERATIONS: 

Change in Budgetary Resources Obligated for Goods, Services, and Benefits Ordered but not yet Provided 20,955 49,063 

Credit Program Collections that Increase Liabilities for Loans Guarantees or Allowances for Subsidy (40,146) (6) 

Adjustment to Accrued Interest and Discount on the Debt 12,011 8,687 

Other (Primarily offset to offsetting receipts) (98,559) 320,755 

Total Resources Used to Finance Items Not Part of the Net Cost of Operations (105,739) 378,499 

Total Resources Used to Finance the Net Cost of Operations 379,541 432,027 

Total Components of Net Cost of Operations that will Require or Generate Resources in Future Periods 307,422 87,673 

Total Components of Net Cost of Operations that will not Require or Generate Resources (28,122) 3,232 

Total Components of Net Cost of Operations that will not Require or 

Generate Resources in the Current Period 279,300 90,905 

Net Cost of Operations $ 658,841 $ 522,932 

note 28. reconciliation of net cost of operations to budget 

part 3: annual financial report
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256 

29. finanCial stability anD stimulus aCtivities 

Government Sponsored Enterprises (GSEs) 

the federal national Mortgage association (fannie Mae) and the federal home loan Mortgage corporation (freddie Mac) are 

stockholder-owned gses. congress established these gses to increase the supply of mortgage loans and to reduce the accompanying 

costs. starting in early fiscal year 2008, increasingly difficult conditions in the housing market challenged the soundness and 

profitability of gses, thereby undermining the entire housing market. several actions have been taken by the Department that are 

intended to provide financial stability to the gses (note 9 and 12 disclosures further describes these actions). 

Temporary Guarantee Program Money Market Funds 

In september 2008, the Department established a temporary guarantee Program for Money Market funds. under this Program, 

the Department guaranteed to investors that they would receive the stable share price (ssP) for shares held in participating money 

market funds up to the number of shares held as of the close of business on september 19, 2008. to participate in the Program, 

eligible money market funds had to submit an application and pay a premium of 1 basis point if the fund’s net asset value (naV) is 

greater than or equal to 99.75 percent of the ssP, or 1.5 basis points of the ssP if the fund’s naV is less than 99.75 percent of the 

ssP but greater than or equal to 99.50 percent of the ssP. 

under this program, any outlays would have been paid out initially from the esf, and then under the provisions of section 131 of 

the emergency economic stabilization act of 2008. such outlays would then be reimbursed from funds available under the troubled 

asset relief Program. the temporary guarantee program was extended and continued to provide coverage through september 19, 

2009 to shareholders up to amounts that they held in participating money market funds as of the close of business on september 19, 

2008. as of september 30, 2009, the program had expired. the Department did not receive any claims for payment. as of september 

30, 2009, the Department had collected a total of approximately $1,200 million in program participation payments. all participant 

payments are invested into u.s. government securities. 

Home Ownership Preservation Entity (HOPE Bond) 

the home ownership Preservation entity (hoPe) fund for homeowners act of 2008, of the housing and recovery act of 2008, 

authorizes the secretary of the treasury to issue hoPe bonds without any limitations as to the purchaser of the issuance. Due to the 

cost of issuing special purpose bonds to the public, the secretary of the treasury has decided to issue the hoPe bonds to the federal 

financing bank (ffb). the total outstanding hoPe bonds may not exceed $300,000 million. the ffb’s purchase of hoPe bonds 

issued by the secretary is consistent with the core mission of the ffb. ffb purchased $0.577 million and $462.5 million in bonds at 

par value in fiscal year 2010 and 2009, respectively, with a floating interest rate to be reset quarterly. the interest rate is 0.153 percent 

and 0.183 percent as of september 30, 2010 and september 30, 2009, respectively. the bonds have 30 year maturity dates starting on 

august 27, 2038 and ending on July 16, 2040. the hoPe bonds are reported as investments held-to-maturity and the related interest 

receivable is reported as accrued interest receivable in ffb’s stand-alone financial statements. the hoPe bond transactions are 

subsequently eliminated at the Departmental level. 

Troubled Asset Relief Program (TARP) 

the emergency economic stabilization act of 2008 (eesa) established the troubled asset relief Program (tarP) on october 

3, 2008 to be administered by the Department and established the office of financial stability within the Department’s office of 

Domestic finance. the act gave the treasury secretary broad and flexible authority to purchase and insure mortgages and other 

troubled assets, as well as to inject capital into banks and other commercial companies by taking equity positions in those entities, if 

needed, to stabilize the financial markets. the actions taken by tarP are intended to promote market stability and protect the u.s. 

economy and are disclosed further in note 8. 

note 29. financial stability and stimulus activities 

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257 

Small Business Lending Initiatives 

on september 27, 2010, the small business Jobs and credit act of 2010 (Public law 111-240) was enacted to create the small 

business lending fund Program to direct the secretary of the treasury to make capital investments in eligible institutions in order 

to increase the availability of credit for small businesses, to amend the Internal revenue code of 1986 to provide tax incentives for 

small business job creation, and for other purposes. 

two small business lending initiatives were created: 

Small Business Lending Fund (SBLF) 

the primary purposes of the $30,000 million sblf is to support lending among small and medium sized banks (with assets under 

$10,000 million). the new lending fund is an initiative to invest in smaller banks under terms that provide strong incentives to 

increase lending to small businesses. as participating banks increase lending to small firms compared to 2009 levels, the dividend 

paid to treasury on that capital investment would be reduced. 

as of september 30, 2010, no disbursements were made under the sblf program. 

State Small Business Credit Initiative (SSBCI) 

a $1,500 million initiative that allocates funds to participating states to establish or maintain approved state small business programs 

that include capital access programs. the initiative provides portfolio insurance for business loans and provides for contributions to 

be made by the state to the reserve fund in amounts at least equal to the sum of the amount of the insurance premium charges paid by 

the borrower and the financial institution to the reserve fund for any newly enrolled loan. 

as of september 30, 2010 no disbursements were made under the ssbcI program. 

Establishment of the Consumer Financial Protection Bureau 

the Dodd-frank Wall street reform and consumer Protection act of 2010, which was signed into law on July 21, 2010, established 

the consumer financial Protection bureau (cfPb) within the federal reserve system. the cfPb is charged with protecting 

consumers against deceptive and unscrupulous practices and ensuring that consumers have the information they need to choose 

consumer financial products and services that best meet their needs. the cfPb will implement rules for consumer financial products 

and services, develop supervision programs to regularly examine the most critical bank and nonbank financial services providers, 

and develop programs to promote greater financial literacy of consumers. funding for the cfPb is to be provided by the board of 

governors of the federal reserve system. 

the Department is working to start up the cfPb by defining the organizational structure, establishing program and administrative 

support offices, and recruiting staff. In 2010, cfPb entered into a reimbursable agreement with the Department to provide services 

before the designated transfer date of July 21, 2011. 

American International Group (AIG) 

as described in note 8, in fiscal year 2009 the Department ultimately invested $41,600 million in series e perpetual, non-cumulative 

10 percent preferred shares of aIg through the aIg Investment Program. the Department also received warrants for the purchase of 

approximately 2.7 million shares of aIg common stock. and, to further assist the stability and restructuring of aIg, the Department 

agreed to make an additional $29,800 million available to aIg under the Department’s credit facility. In return, the Department 

received $29,800 million of aIg series f perpetual, non-cumulative 10 percent preferred stock (300,000 shares). the initial 

liquidation preference of the series f preferred shares was zero and increases pro rata by the amount of each drawdown by aIg. as 

of september 30, 2010 and september 30, 2009, aIg had drawn a cumulative $7,544 million and $3,206 million through the credit 

facility, leaving an outstanding commitment to aIg of $22,256 million and $26,594 million, respectively. 

note 29. financial stability and stimulus activities 

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258 

under the initial terms of the credit facility agreement with aIg and the federal reserve bank of new york (frbny), a 

77.9 percent equity interest in aIg (in the form of series c convertible Participating serial Preferred stock convertible into 

approximately 77.9 percent of the issued and outstanding shares of common stock) was issued to a trust established by the frbny. 

subsequent to the initial agreement, a reverse stock split of aIg’s common stock increased this to 79.8 percent. the u.s. 

government is the sole beneficiary of that trust, so that when the stock is ultimately liquidated the proceeds will be deposited into 

the general fund of the u.s. government. the u.s. government will be the ultimate recipient of any dividends on the stock and 

any proceeds from the liquidation of the stock. the accounting and reporting for any activities related to the government’s beneficial 

interest in the stock held by the trust is done by the Department. the trustees of the trust are independent of both the Department 

and the frbny, and are not involved in day-to-day management of aIg. 

as the u.s. government is the sole beneficiary of the trust, and as it is anticipated that the u.s. government will ultimately realize 

an economic benefit from its beneficial interest in the trust, the Department recorded a non-entity asset of $23,472 million as of 

september 30, 2009, and corresponding custodial revenue for the same amount. the value recorded was based on the market value 

of the trust’s aIg holdings at september 30, 2009; as the underlying aIg common stock is actively traded on the new york stock 

exchange, this represents the best independent valuation available for the government’s beneficial interest. as of september 30, 

2010, the underlying market value of the trust’s aIg holdings had declined by approximately $2,666 million. the carrying value of 

the beneficial interest in the trust was reduced by this amount, and a corresponding expense recorded on the statement of custodial 

activity. 

under the terms of the existing trust agreement, the u.s. government’s proceeds will be received when aIg’s credit line with the 

frbny is terminated, aIg has redeemed the preferred stock owned by the Department through tarP, and the trustees sell the 

stock held by the trust. the Department will re-value its beneficial interest in the trust each year until the trust is liquidated. like any 

asset, future events may increase or decrease the value of the u.s. government’s interest in the trust. 

the Department’s participation in enhancing aIg’s capital and liquidity in order to facilitate an orderly restructuring of the company 

are in addition to the frbny activities in this regard. 

as noted in note 8, on september 30, 2010, the Department, the frbny, and aIg announced plans for a restructuring of the 

federal government’s investments in aIg. the aIg recapitalization agreement is intended to convert the trust’s preferred stock 

into common stock that will be transferred to the Department, as custodian for the u.s. government, in the second quarter of fiscal 

year 2011. under this agreement, it is anticipated that the Department would sell its shares in the open market over time. this 

planned conversion of the trust’s preferred stock into common stock, in conjunction with the conversion of tarP’s aIg preferred 

stock into aIg common stock, would reduce the trust’s common stock ownership percentage from 79.8 percent to approximately 

31 percent, with the tarP holding approximately 61 percent of aIg’s common stock. actual execution of the recapitalization 

agreement is contingent on numerous material conditions being satisfied prior to the closing of the agreement. If the closing does not 

occur on or prior to March 15, 2011, any of aIg, the frbny, or the Department may terminate the agreement. 

The American Recovery and Reinvestment Act of 2009 (Recovery Act) 

the President of the united states signed the recovery act into law on february 17, 2009. the recovery act is an extraordinary 

response to a crisis unlike any since the great Depression, and includes measures to modernize the nation’s infrastructure, enhance 

energy independence, expand educational opportunities, preserve and improve affordable health care, provide tax relief, and protect 

those in greatest need. by providing targeted investments and implementing tax provisions to benefit both businesses and individuals, 

the Department of the treasury continued to stimulate the u.s. economy, create and sustain jobs, and build the foundation for longterm economic growth. 

note 29. financial stability and stimulus activities 

part 3: annual financial report
performance and accountability report | fiscal year 2010 

the Department has various responsibilities related to recovery act programs, including the implementation of some 60 tax 

incentives for households and businesses; local and state government support; and investments in renewable energy, low-income 

housing, and health care. the Department’s work on these programs continued in fiscal year 2010. from the beginning, the 

Department has taken a risk-based approach and focused on balancing the requirements of speed, quality, and accountability to 

ensure the timely, accurate, and transparent distribution of recovery act funds. to achieve these objectives, treasury established 

a recovery act implementation team housed within the purview of the assistance secretary for Management and chief financial 

officer responsible for working with the program offices across the Department. the recovery act team facilitates all recovery act 

implementation department-wide and interfaces with the broader recovery act community. as part of this broad responsibility, the 

team establishes internal processes; addresses external data requirements; manages risk inherent in recovery act implementation, in 

conjunction with the Dcfo’s treasury recovery act risk Management council; and coordinates the Department’s recovery act 

audits. 

the Department administers nine recovery act programs: 

•	 community Development financial Institutions (cDfI) Program 

•	 native american cDfI assistance Program 

•	 new Markets tax credit Program 

•	 economic recovery act Payments 

•	 tax Provision Implementation Program 

•	 cash assistance in lieu of tax credits to states for low-Income housing Projects 

•	 cash assistance in lieu of tax credits for specified energy Property 

•	 health Insurance tax credit administration Program 

•	 tax Provision oversight Program 

The Qualified Therapeutic Discovery Project (QTDP) Program 

the Qualified therapeutic Discovery Project (QtDP) program, created in section 9023 of the Affordable Care Act (aca), provides 

tax credits, or grants in lieu of credits, to small firms that demonstrate potential to produce new and cost-saving therapies, support 

job creation, and increase u.s. competitiveness in the healthcare field. the credit covers up to 50 percent of the cost of qualifying 

biomedical research, with a maximum of $5 million per firm and $1 billion overall. It is available only to firms with no more than 250 

employees and only for investments made in 2009 and 2010. Qualifying firms must have current taxable income. additionally, firms 

may opt to receive a grant in lieu of the tax credit. 

note 29. financial stability and stimulus activities 259 

part 3: annual financial report
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260 

30. sCheDule Of fiDuCiary aCtivity 

the following funds have been identified by the Department as meeting the criteria for fiduciary activity. Details of the funds, as well 

as fiduciary relationships, is provided below. 

Bureau Fund Code Authority Fund Title 

BEP 20X6513.013 31 USC 5119 Mutilated Currency Claims Funds 

BPD 20X6008 31 USC 3513 Payment Prin. & Interest Govt. Agencies 

FMD 20X6045 31 USC 3328 Proceeds, Payments of Unpaid Checks 

FMD 20X6048 31 USC 3329, 3330 Proceeds of Withheld Foreign Check 

FMD 2015X6078 50 APP. USC 2012 War Claims FD, FCSC 

FMD 20X6092 31 USC 1321 Debt Management Operations 

FMD 20X6104 22 USC 1627 Albanian Claims Fund, Treasury 

FMD 20X6133 31 USC 1322 Payment of Unclaimed Moneys 

FMD 20X6309 22 USC 1627(a) Libyan Claims Settlement Fund 

FMD 20X6310 22 USC 1627(a) Libyan Claims Settlement Fund 

FMD 20X6311 98 Stat. 1876 Kennedy Center Revenue Bond 

FMD 20X6312 22 USC 1627 Iranian Claims Settlement Fund 

FMD 20X6314 22 USC 1644g German Democrat Settlement Fund 

FMD 20X6315 22 USC 1645h Vietnam Claims Settlement Fund 

FMD 20X6501.018 31 USC 3513 Small Escrow Amounts 

FMD 20X6720 31 USC 3513 SM DIF Account for Dep. & Check Adj. 

FMD 20X6830 104 Stat. 1061 Net Interest Payments to/from State 

FMD 20X6999 31 USC 3513 Accounts Payable, Check Issue UNDDR 

IRR 20X6737 90 Stat. 269-270 Internal Revenue Collections for Northern Mariana Island 

IRR 20X6738 31 USC 3513 Coverover Withholdings-U.S. Virgin Islands 

IRR 20X6740 31 USC 3515 Coverover Withholdings-Guam 

IRR 20X6741 31 USC 3513 Coverover Withholdings-American Samoa 

OAS 20X6317.001 22 USC 2431 Belize Escrow, Debt Reduction 

OAS 20X6501.018 31 USC 3513 Small Escrow Amounts 

OTS 20X6501.76 31 USC 3513 Small Escrow Amounts 

unclaimed monies were authorized by 31 u.s.c. 5119, which authorized financial Management service, Department of the 

treasury, to collect unclaimed monies on behalf of the public. other fiduciary activities by the Department as listed above are 

included in all other fiduciary funds. 

note 30. schedule of fiduciary activity 

part 3: annual financial report
performance and accountability report | fiscal year 2010 

261

SCHEDULE OF FIDUCIARY ACTIvITY (in millions) 

2010 2009 

Unclaimed All Other Total Unclaimed All Other Total 

Monies- Fiduciary Fiduciary Monies- Fiduciary Fiduciary 

FMD Funds Funds FMD Funds Funds 

Fiduciary Net Assets, 

Beginning of the Year $ 390 $ 208 $ 598 $ 366 $ 43 $ 409 

Increases 

Contributions to Fiduciary Net Assets 103 1,004 1,107 28 1,063 1,091 

Investment earnings 0 1 1 0 1 1 

Total Increases 103 1,005 1,108 28 1,064 1,092 

Decreases 

Disbursements to and on behalf of beneficiaries (73) (1,057) (1,130) (4) (899) (903) 

Total Decreases (73) (1,057) (1,130) (4) (899) (903) 

Net Increase (Decrease) in fiduciary assets 30 (52) (22) 24 165 189 

Fiduciary Net Assets, End of Year $ 420 $ 156 $ 576 $ 390 $ 208 $ 598 

SCHEDULE OF FIDUCIARY NET ASSETS (in millions) 

Unclaimed All Other 2010 Total Unclaimed All Other 2009 Total 

Monies- Fiduciary Fiduciary Monies- Fiduciary Fiduciary 

FMD Funds Funds FMD Funds Funds 

Fiduciary Assets 

Cash and cash equivalents $ 420 $ 57 $ 477 $ 390 $ 193 $ 583 

Investments 0 99 99 0 15 15 

Total Fiduciary Assets $ 420 $ 156 $ 576 $ 390 $ 208 $ 598 

note 30. schedule of fiduciary activity 

part 3: annual financial report
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262 

31. COmmitments anD COntingenCies 

Legal Contingencies 

the Department is a party in various administrative proceedings, legal actions, and claims, including equal opportunity matters 

which may ultimately result in settlements or decisions adverse to the u.s. government. these contingent liabilities arise in the 

normal course of operations and their ultimate disposition is unknown. the Department has disclosed contingent liabilities where 

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

Department does not accrue for possible losses related to cases where the potential loss cannot be estimated or the likelihood of an 

unfavorable outcome is less than probable. 

In some cases, a portion of any loss that may occur may be paid by the Department’s Judgment fund, which is separate from the 

operating resources of the Department. for cases related to the contract Disputes act of 1978 and awards under federal antidiscrimination and whistle-blower protection acts, the Department must reimburse the Judgment fund from future appropriations. 

the Department has one contingent liability in fiscal year 2010 related to legal action taken in the case American Council of the Blind 

and Others where losses are determined to be probable and amount of loss cannot be estimated. In the opinion of the Department’s 

management and legal counsel, based on information currently available, the expected outcome of other legal actions, individually 

or in the aggregate, will not have a materially adverse effect on the Department’s financial statements, except for the pending legal 

actions described below which may have a materially adverse impact on the financial statements depending on the outcomes of the 

cases. 

Pending Legal Actions 

• American Council of the Blind and Others, et. al. v. Paulson: Plaintiffs have filed suit against the Department under section 504 

of the rehabilitation act seeking the redesign of u.s. currency. In 2007, a u.s. District court judge ruled that the current 

u.s. currency design violates this act; this ruling was subsequently appealed. In 2008, the united states court of appeals for 

the District of columbia circuit affirmed the District court’s ruling. no monetary damages were awarded by the court but the 

Department was ordered to provide meaningful access to united states currency for blind and other visually impaired persons. 

this may require changes to u.s. currency (excluding the one-dollar note.) the court ordered such changes to be completed 

in connection with each denomination of currency, not later than the date when a redesign is next approved by the secretary 

of the treasury. because the cost of implementing these changes will be incorporated into future currency redesign costs, and 

cannot be estimated at this time, no redesign costs have been accrued in the accompanying financial statements as of september 

30, 2010 and september 30, 2009. 

the court of appeals in the above mentioned case ordered the parties to confer and attempt to negotiate attorney fees and 

costs to be awarded the plaintiffs. In December 2008, the parties filed a joint stipulation agreeing to the payment of $672,675 in 

attorney fees and costs that was paid from the Judgment fund in february 2009. 

on May 20, 2010, the bureau of engraving and Printing published in the federal register its proposed recommendations on 

the appropriate method(s) to comply with the court’s order to make currency accessible to the blind to be implemented with 

the next currency design. the comment period for the federal register notice closed on august 18, 2010. the beP is currently 

evaluating the comments received and is considering various options to comply with the court’s order. 

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• Amidax Trading Group v. S.W.I.F.T.: Plaintiffs allege that the Department’s terrorist finance tracking Program has involved unlawful disclosure of information by the society for Worldwide Interbank financial telecommunications (s.W.I.f.t.). Defendants 

include the Department of the treasury as well as several treasury officials. the case was dismissed by the District court on 

february 13, 2009, and the plaintiff has subsequently appealed that ruling to the court of appeals for the second circuit. the 

parties have completed the appellate briefing, and the oral argument occurred on July 14, 2010. the Department is unable to 

determine the likelihood of an unfavorable outcome or an estimate of potential loss at this time. 

•	 James X. Bormes v. United States of America: the complaint alleges that the government willfully violated certain provisions of 

the fair and accurate credit transaction act (facta) P.l. 108-159. the transaction confirmation received by the complainant from Pay.gov included the expiration date of the credit card used for that transaction. the complaint does not state the 

amount of damages sought on behalf of the class beyond asserting that each class member would be entitled to $100 to $1,000 in 

statutory damages. In a letter sent to the Department of Justice, the plaintiff proposed a fund of $30 million for just the Illinois 

class members. 

•	 Cobell et al. v. Salazar et al. (formerly Cobell v. Kempthorne): native americans allege that the Department of Interior and the 

Department of the treasury have breached trust obligations with respect to the management of the plaintiffs’ individual Indian 

monies. on august 7, 2008, the federal District court issued an opinion awarding $455 million to the plaintiffs. this decision 

was overturned on appeal in July 2009. the appellate court found that the government owes a cost-effective accounting, in 

scale with available funds. 

on December 8, 2009, a settlement was announced between the parties related to the claims raised in this lawsuit, as well 

as other claims for the mismanagement of assets and land. the settlement is contingent on the passage of new legislation to 

authorize the settlement terms and court approval. If the court approves the settlement after notice to the class, the government 

will pay $1.4 billion from the Judgment fund to settle the claims for an historical accounting and for mismanagement of assets 

and land. the government will also make available an additional sum of $2.0 billion from the Judgment fund to purchase 

numerous small interests in land from native americans, as well as for other purposes. It has not been determined which federal 

agency will be assigned responsibility for the payment through the Judgment fund. the Department is unable to determine the 

likelihood of an unfavorable outcome or an estimate of potential loss at this time. the case was appealed to the u.s. supreme 

court however, the appeal was denied in June 2010. legislation authorizing settlement is pending in congress. 

tribal trust fund cases: numerous cases have been filed in u.s. District courts in which native american tribes seek a 

declaration that the u.s. has not provided the tribes with a full and complete accounting of their trust funds, and seek an order 

requiring the government to provide such an accounting. In addition, there are a number of other related cases seeking damages 

in the united states court of federal claims which do not name the Department as a defendant. the government is currently 

in the early stages of a discussion with counsel representing approximately 80 tribes with tribal trust cases pending against the 

united states (the settlement Proposal to the obama administration or “sPoa” group) about the feasibility of an omnibus 

settlement of the tribal trust cases. the Department is unable to determine the likelihood of an unfavorable outcome or an 

estimate of potential loss at this time. 

other legal actions: the Department is also involved in employment related legal actions (e.g., matters alleging discrimination 

and other claims before the equal employment opportunity commission, Merit system Protection board, etc.) for which an 

unfavorable outcome is reasonably possible, but for which an estimate of potential loss cannot be determined at this time. It is 

not expected that these cases will have a material effect on the Department’s financial position or results. 

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264 

there are other legal actions pending for which the possibility of loss could not be determined, and where the ultimate 

resolution of the legal action may materially affect the Department’s financial position or results. as of september 30, 2010, one 

legal claim existed for which the possibility of loss could not be determined. 

Other Commitments and Contingencies 

Treaties and International Agreements 

the Department does not have any treaties or international agreements to report for fiscal year 2010. 

Multilateral Development Banks (MDB) 

the Department has subscribed to capital for certain MDb, portions of which are callable under certain limited circumstances to 

meet the obligations of the respective MDb. there has never been, nor is there anticipated, a call on the Department’s commitment 

for these subscriptions. as of september 30, 2010 and september 30, 2009, u.s. callable capital in MDb was as follows (in millions): 

2010 2009 

African Development Bank $ 1,634 $ 1,634 

Asian Development Bank 5,911 5,911 

European Bank for Reconstruction and Development 1,805 1,805 

Inter-American Development Bank 28,687 28,687 

International Bank for Reconstruction and Development 24,251 22,641 

Multilateral Investment Guarantee Agency 301 301 

North American Development Bank 1,275 1,275 

Total $ 63,864 $ 62,254 

Terrorism Risk Insurance Program 

the Terrorism Risk Insurance Act (trIa or the act) was signed into law on november 26, 2002. this law was enacted to address 

market disruptions resulting from terrorist attacks on september 11, 2001. the act helps to ensure available and affordable 

commercial property and casualty insurance for terrorism risk, and simultaneously allows private markets to stabilize. the terrorism 

risk Insurance Program is activated upon the certification of an “act of terrorism” by the secretary of the Department in concurrence 

with the secretary of state and the attorney general. If a certified act of terrorism occurs, insurers may be eligible to receive 

reimbursement from the u.s. government for insured losses above a designated deductible amount. Insured losses above this amount 

will be shared between insurance companies and the u.s. government. the act also gives the treasury Department authority 

to recoup federal payments made under the Program through policyholder surcharges under certain circumstances and contains 

provisions designed to manage litigation arising from or relating to a certified act of terrorism. 

the original trIa program was to expire on December 31, 2005, but the Program was extended through December 31, 2007 by the 

Terrorism Risk Insurance Extension Act of 2005 (extension act). this law included the following significant changes: it reduced the 

federal role in terrorism risk insurance markets by increasing insurer deductibles and excluding certain types of previously covered 

insurance. the extension act also reduced the u.s. government’s share of insured losses and added a “Program trigger” provision 

which precludes federal payments unless insured losses from a certified act of terrorism exceed $ 100 million. 

on December 26, 2007, the Terrorism Risk Insurance Program Reauthorization Act of 2007 (reauthorization act) was enacted 

extending the Program through December 31, 2014. the reauthorization act, among other Program changes, revised the definition 

of “act of terrorism” to remove the certification requirement that the act be committed by an individual acting on behalf of a foreign 

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265

person or foreign interest; revised the provisions of the act with regard to the cap on annual liability for insured losses of $100 

billion; and established deadlines by which recoupment of federal payments made under the Program would have to be accomplished. 

In september 2008, the Department issued two notices of proposed rulemaking with requests for comment. one proposed rule 

incorporated and clarified statutory requirements of the reauthorization act for capping the annual liability for insured losses at $100 

billion. the proposed rule described how the Department will determine the pro rata share of insured losses to be paid by each insurer 

that incurs losses under the Program when insured losses would otherwise exceed the cap and how the federal share of compensation 

will be calculated. the Department issued a final rule on December 14, 2009. 

the other proposed rule set forth the requirements for recoupment of the federal share of compensation for insured losses. the rule 

described how the Department will determine the amounts to be recouped and the requirements for insurers to collect, report, and 

remit surcharges to the Department. the Department issued a final rule on December 14, 2009. there were no claims under trIa as 

of september 30, 2010, or september 30, 2009. 

on august 3, 2010, the Department issued a notice of proposed rulemaking with requests for comment. the intent of this rule 

is to provide a process by which the Department would close out its claims operation for insured losses from a Program year. the 

Department expects to issue a final rule incorporating public comments early in fiscal year 2011. 

Exchange Stabilization Agreement (ESA) 

In april 1994, treasury signed the north american framework agreement (nafa), which includes the esa with Mexico. the 

Department has a standing swap line for $3 billion with Mexico under the nafa and its implementing esa. the amounts and 

terms (including the assured source of repayment) of any borrowing under nafa and esa will have to be negotiated and agreed to 

before any actual drawing can occur. the esa does provide sample clauses that state that transactions shall be exchange rate neutral 

for the esf and shall bear interest based on a then current rate tied to u.s. treasury bills. there were no drawings outstanding on the 

esf swap line as of september 30, 2010 and september 30, 2009. on December 10, 2008, the Department renewed its participation 

in the agreement until December 2010. 

New Arrangements to Borrow (NAB) 

Public law 111-32 also provided the authorization and appropriations for an increase in the united states participation in the 

nab by the dollar equivalent of sDr 75,000 million which at the sDr/dollar exchange rate applicable on september 30, 2010 

is equivalent to $116,714 million. however, this increase in the united states participation in the nab is not effective as of 

september 30, 2010 and will not come into effect until all IMf member countries participating in the nab submit notification 

of their consent to modifications to the decision governing the nab and to their new sDr commitments to the nab. although 

$119,000 million was appropriated under Public law 111-32, the united states publicly stated that it would limit its commitment 

to $100,000 million and agreed to a final commitment – which has not yet come into effect - of sDr 69,074.27 million (from sDr 

6,639.83 million) on May 10, 2010 pursuant to IMf executive board Decision no. 14577-(10/35) adopted april 12, 2010. as with 

the quota increase, the new portion of the nab will be subject to the fcra and treated as a direct loan. similarly, this will not 

affect the treatment of the reserve position in the IMf, only the budget presentation. 

Contingent Liability to Government Sponsored Enterprises 

the Department has recorded a contingent liability at september 30, 2010 of $359,900 million ($76,937 million at september 30, 

2009) to the government sponsored enterprises, fannie Mae and freddie Mac, based on probable future liability under the senior 

Preferred stock Purchase agreement between the Department and the gses. refer to note 9 for a full description of the agreements 

and related contingent liability. 

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266 

requireD supplemental infOrmatiOn (unauDiteD) 

Introduction 

this section provides the required supplemental Information as prescribed by office of Management and budget (oMb) circular 

a-136, financial reporting requirements, as amended. 

Other Claims For Refunds 

the Department has estimated that $27,587 million may be payable as other claims for tax refunds. this estimate represents amounts 

(principal and interest) that may be paid for claims pending judicial review by the federal courts or internally. the total estimated 

payout (including principal and interest) for claims pending judicial review by the federal courts is $19,603 million and by appeals is 

$7,984 million. 

Federal Taxes Receivable, Net 

In accordance with sffas no. 7, Accounting for Revenue and Other Financing Sources and Concepts for Reconciling Budgetary and 

Financial Accounting, some unpaid tax assessments do not meet the criteria for financial statement recognition as discussed in note 1 

to the financial statements. although compliance assessments and write-offs are not considered receivables under federal accounting 

standards, they represent legally enforceable claims of the u.s. government. there is, however, a significant difference in the 

collection potential between compliance assessments and receivables. 

the components of the total unpaid assessments at september 30, 2010 and september 30, 2009, were as follows (in millions): 

2010 2009 

Total Unpaid Assessments $ 330,000 $ 308,000 

Less: Compliance Assessments (93,000) (75,000)

 Write Offs (99,000) (105,000) 

Gross Federal Taxes Receivable 138,000 128,000 

Less: Allowance for Doubtful Accounts (103,091) (99,000) 

Federal Taxes Receivables, Net $ 34,909 $ 29,000 

to eliminate double counting, the compliance assessments reported above exclude trust fund recovery penalties, totaling $2,850 

million, assessed against officers and directors of businesses who were involved in the non-remittance of federal taxes withheld from 

their employees. the related unpaid assessments of those businesses are reported as taxes receivable or write-offs, but the Department 

may also recover portions of those businesses’ unpaid assessments from any and all individual officers and directors against whom a 

trust fund recovery penalty is assessed. 

Internal Revenue Service (IRS) 

the unpaid assessments balance represents assessments resulting from taxpayers filing returns without sufficient payment, as well 

as from the Irs’s enforcement programs such as examination, under-reporter, substitute for return, and combined annual wage 

reporting. a significant portion of this balance is not considered a receivable. also, a substantial portion of the amounts considered 

receivables is largely uncollectible. 

under federal accounting standards, unpaid assessments require taxpayer or court agreement to be considered federal taxes receivable. 

assessments not agreed to by taxpayers or the courts are considered compliance assessments and are not considered federal taxes 

receivable. Due to the lack of agreement, these compliance assessments are less likely to have future collection potential than those 

unpaid assessments that are considered federal taxes receivable. 

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assessments with little or no future collection potential are called write-offs. Write-offs principally consist of amounts owed by 

deceased, bankrupt, or defunct taxpayers, including many failed financial institutions liquidated by the federal Deposit Insurance 

corporation (fDIc) and the former resolution trust corporation (rtc). as noted above, write-offs have little or no future 

collection potential, but statutory provisions require that these assessments be maintained until the statute for collection expires. 

Alcohol and Tobacco Tax and Trade Bureau (TTB) 

as an agent of the federal government and as authorized by 26 u.s.c., the alcohol and tobacco tax and trade bureau (ttb) 

collects excise taxes from alcohol, tobacco, firearms, and ammunition industries. In addition, special occupational taxes are collected 

from certain tobacco businesses. During fiscal year 2010, ttb collected nearly $23,800 million in taxes, interest, and other revenues. 

federal excise taxes are also collected on certain articles produced in Puerto rico and the Virgin Islands, and imported into the 

united states. In accordance with 26 u.s.c. 7652, such taxes collected on rum imported into the united states are “covered over” 

or paid into the treasuries of Puerto rico and the Virgin Islands. 

substantially all of the taxes collected by ttb net of related refund disbursements are remitted to the general fund of the u.s. 

government. the Department further distributes this revenue to federal agencies in accordance with various laws and regulations. 

the firearms and ammunition excise taxes are an exception. those revenues are remitted to the fish and Wildlife restoration fund 

under provisions of the Pittman-Robertson Act of 1937. 

Deferred Maintenance 

In fiscal year 2010 and 2009, the Department had no material amounts of deferred maintenance costs to report on vehicles, buildings, 

and structures owned by the Department. 

Deferred maintenance applies to owned PP&e. Deferred maintenance is maintenance that was not performed when it should have 

been, or was scheduled to be, and is put off or delayed for a future period. Maintenance is defined as the act of keeping capitalized 

assets in an “acceptable condition” to serve their required mission. It includes preventive maintenance, normal repairs, replacement 

of parts and structural components, and other activities needed to preserve the asset so that it continues to provide acceptable 

services and achieves its expected useful life. Maintenance excludes activities aimed at expanding the capacity or significantly 

upgrading the assets to a different form than it was originally intended (i.e., activities related to capitalized improvements, 

modernization, and/or restoration). 

logistic personnel use condition assessment surveys and/or the total life-cycle cost methods to determine deferred maintenance and 

acceptable operating condition of an asset. Periodic condition assessments, physical inspections, and review of manufacturing and 

engineering specifications, work orders, and building and other structure logistics reports can be used under these methodologies. 

Statement of Budgetary Resources Disaggregated by Treasury Reporting Entity 

the following table provides the statement of budgetary resources disaggregated by treasury reporting entity for fiscal year 2010. In 

addition, a new table provides the fiscal year 2010 sbr by significant programs within the Departmental offices. 

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Fiscal Year 2010 Statement of Budgetary Resources Disaggregated by Sub-organization Accounts 

(in millions) 

Bureau of Bureau Fin. Crimes Financial Internal 

Engraving of the Departmental Enforcement Management Revenue 

& Printing Public Debt Offices Network Service Service 

BUDGETARY RESOURCES 

Unobligated balance, brought forward, Oct. 1 $ 46 $ 91 $ 454,924 $ 25 $ 274 $ 876 

Recoveries of prior year unpaid obligations 0 9 42,191 1 24 90 

Budget authority: 

Appropriations (Note 23) 0 512,067 19,468 111 24,818 12,443 

Borrowing authority: 0 0 151,473 0 0 0 

Spending Authority from Offsetting Collections: 

Earned: 

Collected 632 213 208,575 4 236 136 

Change in receivables from Federal sources 0 (5) 4 3 (3) 23 

Change in unfilled customer orders: 

Advance received (3) 0 (45) 0 0 0 

Without advance from Federal sources 0 (4) (5,105) 3 (5) 1 

Anticipated for rest of year, w/o advances 0 0 0 0 0 0 

Subtotal 629 512,271 374,370 121 25,046 12,603 

Non-expenditure transfers, net 0 (4) 394 0 (29) 0 

Temporarily not available pursuant to Public Law 0 (5) (137) 0 0 0 

Permanently not available 0 (97,800) (130,177) 0 (8,620) (152) 

Total Budgetary Resources $ 675 $ 414,562 $ 741,565 $ 147 $ 16,695 $ 13,417 

STATUS OF BUDGETARY RESOURCES 

Obligations incurred (Note 25): 

Direct 0 414,266 371,565 109 16,185 12,475 

Reimbursable 616 201 299 10 223 136 

Subtotal 616 414,467 371,864 119 16,408 12,611 

Unobligated Balance: 

Apportionment 59 80 287,754 26 273 236 

Exempt from apportionment 0 0 12,116 0 2 0 

Subtotal 59 80 299,870 26 275 236 

Unobligated balance not available 0 15 69,831 2 12 570 

Total Status of Budgetary Resources $ 675 $ 414,562 $ 741,565 $ 147 $ 16,695 $ 13,417 

CHANGE IN OBLIGATED BALANCE 

Obligated balance, net: 

Unpaid obligations brought forward, Oct. 1 115 75 184,825 15 339 1,620 

Uncollected customer payments from Federal sources brought 

forward (29) (23) (28,958) (5) (37) (32) 

Total unpaid obligated balance, net 86 52 155,867 10 302 1,588 

Obligations incurred, net 616 414,467 371,864 119 16,408 12,611 

Gross outlays (614) (414,457) (285,223) (102) (16,310) (12,335) 

Recoveries of prior year unpaid obligations, actual 0 (9) (42,191) (1) (24) (90) 

Change In uncollected customer payments from Federal source 0 9 5,101 (6) 8 (24) 

Obligated balance, net, end of period: 

Unpaid obligations 117 76 229,275 30 413 1,807 

Uncollected customer payments Federal sources (29) (14) (23,857) (10) (29) (57) 

Total unpaid obligated balance, net, end of period $ 88 $ 62 $ 205,418 $ 20 $ 384 $ 1,750 

NET OUTLAYS 

Net Outlays: 

Gross outlays 614 414,457 285,223 102 16,310 12,335 

Offsetting collections (629) (213) (208,530) (4) (236) (136) 

Distributed offsetting receipts 0 (36,615) (141,300) 0 (279) (715) 

Net Outlays $ (15) $ 377,629 $ (64,607) $ 98 $ 15,795 $ 11,484 

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Office of the Office Alcohol and 

Comptroller of of Thrift Tobacco Tax and NonU. S. Mint the Currency Supervision Trade Bureau Budgetary Budgetary 

BUDGETARY RESOURCES 

Unobligated balance, brought forward, Oct. 1 $ 246 $ 793 $ 310 $ 3 $ 415,761 $ 41,827 

Recoveries of prior year unpaid obligations 29 0 4 1 2,979 39,370 

Budget authority: 

Appropriations (Note 23) 0 0 0 103 569,010 0 

Borrowing authority: 0 0 0 0 1 151,472 

Spending Authority from Offsetting Collections: 

Earned: 

Collected 3,519 794 234 4 9,401 204,946 

Change in receivables from Federal sources 0 0 0 0 22 0 

Change in unfilled customer orders: 

Advance received 0 0 (8) 0 (56) 0 

Without advance from Federal sources 1 0 0 0 2 (5,111) 

Anticipated for rest of year, w/o advances 0 0 0 0 0 0 

Subtotal 3,520 794 226 107 578,380 351,307 

Non-expenditure transfers, net 0 0 0 0 361 0 

Temporarily not available pursuant to Public Law 0 0 0 0 (142) 0 

Permanently not available (13) 0 0 0 (47,341) (189,421) 

Total Budgetary Resources $ 3,782 $ 1,587 $ 540 $ 111 $ 949,998 $ 243,083 

STATUS OF BUDGETARY RESOURCES 

Obligations incurred (Note 25): 

Direct 0 0 0 102 595,438 219,264 

Reimbursable 3,671 740 236 4 6,136 0 

Subtotal 3,671 740 236 106 601,574 219,264 

Unobligated Balance: 

Apportionment 111 0 0 3 267,581 20,961 

Exempt from apportionment 0 847 304 0 13,269 0 

Subtotal 111 847 304 3 280,850 20,961 

Unobligated balance not available 0 0 0 2 67,574 2,858 

Total Status of Budgetary Resources 

CHANGE IN OBLIGATED BALANCE 

Obligated balance, net: 

$ 3,782 $ 1,587 $ 540 $ 111 $ 949,998 $ 243,083 

Unpaid obligations brought forward, Oct. 1 191 177 41 21 108,210 79,209 

Uncollected customer payments from Federal sources brought 

forward (7) (3) 0 (2) (168) (28,928) 

Total unpaid obligated balance, net 184 174 41 19 108,042 50,281 

Obligations incurred, net 3,671 740 236 106 601,574 219,264 

Gross outlays (3,604) (733) (229) (103) (524,098) (209,612) 

Recoveries of prior year unpaid obligations, actual (29) 0 (4) (1) (2,979) (39,370) 

Change In uncollected customer payments from Federal source (1) 0 0 0 (24) 5,111 

Obligated balance, net, end of period: 

Unpaid obligations 229 185 44 22 182,707 49,491 

Uncollected customer payments Federal sources (8) (4) 0 (1) (192) (23,817) 

Total unpaid obligated balance, net, end of period $ 221 $ 181 $ 44 $ 21 $ 182,515 $ 25,674 

NET OUTLAYS 

Net Outlays: 

Gross outlays 3,604 733 229 103 524,098 209,612 

Offsetting collections (3,519) (794) (226) (4) (9,345) (204,946) 

Distributed offsetting receipts 0 0 0 0 (169,303) (9,606) 

Net Outlays $ 85 $ (61) $ 3 $ 99 $ 345,450 $ (4,940) 

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Fiscal Year 2010 Statement of Budgetary Resources Disaggregated by Departmental Offices Accounts 

(in millions) 

Exchange Government Internal Office of 

Stabilization Sponsored Assistance Financial All Combined 

Fund Enterprises Programs Stability Others Total 

BUDGETARY RESOURCES 

Unobligated balance, brought forward 

Recoveries of prior year unpaid obligations 

Budget authority: 

Appropriations (Note 23) 

Borrowing authority: 

Spending Authority from Offsetting Collections: 

Earned: 

Collected 

Change in receivables from Federal sources 

Change in unfilled customer orders: 

Advance received 

Without advance from Federal sources 

Anticipated for rest of year, w/o advances 

$ 44,001 

983 

0 

0 

276 

0 

0 

0 

$ 337,290 

6 

0 

82,026 

48,826 

0 

0 

0 

0 

$ 34,303 

516 

2,475 

0 

911 

0 

0 

0 

$ 37,101 

40,537 

5,151 

69,440 

156,112 

0 

0 

(5,111) 

0 

$ 2,229 

149 

11,842 

7 

2,450 

4 

(45) 

6 

0 

$ 454,924 

42,191 

19,468 

151,473 

208,575 

4 

(45) 

(5,105) 

0 

Non-expenditure transfers, net 

Temporarily not available pursuant to Public Law 

Permanently not available 

0 

0 

59,510 

29 

0 

(81,440) 

67 

0 

0 

0 

0 

(107,976) 

298 

(137) 

(271) 

394 

(137) 

(130,177) 

Direct $ 61,169 $ 121,658 $ 3,414 $ 173,631 $ 11,693 $ 371,565 

Subtotal 

Unobligated Balance: 

Apportionment 

61,169 

0 

121,658 

265,077 

3,414 

12,343 

173,631 

7,834 

11,992 

2,500 

371,864 

287,754 

Subtotal 0 265,077 23,967 7,834 2,992 299,870 

Total Status of Budgetary Resources $ 104,770 $ 386,737 $ 38,272 $ 195,254 $ 16,532 $ 741,565 

Subtotal 276 130,852 3,386 225,592 14,264 374,370 

Total Budgetary Resources $ 104,770 $ 386,737 $ 38,272 $ 195,254 $ 16,532 $ 741,565 

STATUS OF BUDGETARY RESOURCES 

Obligations incurred (Note 25): 

Reimbursable 0 0 0 0 299 299 

Exempt from apportionment 0 0 11,624 0 492 12,116 

Unobligated balance not available 43,601 2 10,891 13,789 1,548 69,831 

RELATIONSHIP OF OBLIGATIONS TO OUTLAYS 

Obligated balance, net: 

Unpaid obligations brought forward, Oct. 1 

Uncollected customer payments from Federal sources 

brought forward 

$ 0 

0 

$ 6 

0 

$ 46,206 

0 

$ 135,353 

(28,927) 

$ 3,260 

(31) 

$ 184,825 

(28,958) 

Obligations incurred, net 

Gross outlays 

Recoveries of prior year unpaid obligations, actual 

Change In uncollected customer payments from Federal 

source 

Obligated balance, net, end of period: 

Unpaid obligations 

Uncollected customer payments Federal sources 

61,169 

0 

(983) 

0 

60,186 

0 

121,658 

(114,083) 

(6) 

0 

7,575 

0 

3,414 

(3,478) 

(516) 

0 

45,626 

0 

173,631 

(157,401) 

(40,537) 

5,111 

111,046 

(23,816) 

11,992 

(10,261) 

(149) 

(10) 

4,842 

(41) 

371,864 

(285,223) 

(42,191) 

5,101 

229,275 

(23,857) 

Net Outlays: 

Gross outlays 

Offsetting collections 

$ 0 

(276) 

$ 114,083 

(48,826) 

$ 3,478 

(911) 

$ 157,401 

(156,112) 

$ 10,261 

(2,405) 

$ 285,223 

(208,530) 

Net Outlays $ (276) $ 43,509 $ 2,543 $ (117,571) $ 7,188 $ (64,607) 

required supplemental information (unaudited) 

Total unpaid obligated balance, net 0 6 46,206 106,426 3,229 155,867 

Total unpaid obligated balance, net, end of period 60,186 7,575 45,626 87,230 4,801 205,418 

Distributed offsetting receipts 0 (21,748) (24) (118,860) (668) (141,300) 

part 3: annual financial report