Fiscal Year 2023 Financial Report of the United States

DEPARTMENT OF THE TREASURY

W ASH I N G T O N , D . C .

February 15, 2024

A Message from the Secretary of the Treasury

During fiscal year 2023, the American economy continued to improve and the gains have been widely

shared: consumers have more purchasing power, businesses have been investing more, and inflation has

come down significantly. The labor market is also strong, with the unemployment rate near historic lows.

This is the result of a historically fast recovery, as well as actions to navigate adverse shocks. Over the past

year, the Biden Administration acted decisively in response to stress in the banking sector to protect

depositors and mitigate systemic risks to the financial system. The Administration continues to vigilantly

monitor potential economic spillovers from global events, including Russia’s war in Ukraine and the

conflict in the Middle East.

The Biden Administration also remains focused on growing our economy for the medium to long term. This

year, Americans are starting to see the results of the historic legislation passed in 2021 and 2022:

the Bipartisan Infrastructure Law, the CHIPS and Science Act, and the Inflation Reduction Act. Public

dollars are now crowding in private investment, with companies announcing over $600 billion in clean

energy and manufacturing investments since the start of the Biden Administration and new jobs being

created in twenty-first century industries.

To further the government’s commitment to financial transparency and accountability, the annual Financial

Report of the United States Government lays out comprehensive data and analysis on our nation’s finances.

Here, you will find information on all aspects of the government’s current financial position, as well as

information on changes in the financial position during this fiscal year, and potential future changes.

It is my duty and pleasure to present the Fiscal Year 2023 Report to the American people.

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Contents

A Message from the Secretary of the Treasury

Executive Summary...........................................................................................

Management’s Discussion and Analysis ..........................................................

Statement of the Comptroller General of the United States ..........................

Financial Statements

Introduction .......................................................................................................

Statement of Net Cost ........................................................................................

Statement of Operations and Changes in Net Position ......................................

Reconciliations of Net Operating Cost and Budget Deficit ...............................

Statements of Changes in Cash Balance from Budget and Other

Activities ...........................................................................................................

Balance Sheets ...................................................................................................

Statements of Long-Term Fiscal Projections.....................................................

Statements of Social Insurance ..........................................................................

Statement of Changes in Social Insurance Amounts .........................................

Notes to the Financial Statements

Note 1. Summary of Significant Accounting Policies .......................................

Note 2. Cash and Other Monetary Assets ..........................................................

Note 3. Accounts Receivable, Net .....................................................................

Note 4. Loans Receivable, Net and Loan Guarantee Liabilities ........................

Note 5. Inventory and Related Property, Net ....................................................

Note 6. General Property, Plant, and Equipment, Net .......................................

Note 7. Investments ...........................................................................................

Note 8. Investments in Government-Sponsored Enterprises .............................

Note 9. Advances and Prepayments ..................................................................

Note 10. Other Assets ........................................................................................

100

Note 11. Accounts Payable ................................................................................

102

Note 12. Federal Debt and Interest Payable ......................................................

103

Note 13. Federal Employee and Veteran Benefits Payable ...............................

106

Note 14. Environmental and Disposal Liabilities ..............................................

116

Note 15. Benefits Due and Payable ...................................................................

118

Note 16. Insurance and Guarantee Program Liabilities .....................................

119

Note 17. Advances from Others and Deferred Revenue....................................

120

Note 18. Other Liabilities ..................................................................................

121

Note 19. Collections and Refunds of Federal Revenue .....................................

123

Note 20. Commitments ......................................................................................

126

Note 21. Contingencies .....................................................................................

129

Note 22. Funds from Dedicated Collections ......................................................

136

Note 23. Fiduciary Activities.............................................................................

142

Note 24. Long-Term Fiscal Projections.............................................................

144

Note 25. Social Insurance ..................................................................................

150

Note 26. Stewardship Property, Plant, and Equipment ......................................

159

Note 27. Disclosure Entities and Related Parties ..............................................

160

Note 28. Public-Private Partnerships .................................................................

166

Note 29. COVID-19 Activity ............................................................................

167

Note 30. Subsequent Events .............................................................................

168

Required Supplementary Information (Unaudited)

The Sustainability of Fiscal Policy ....................................................................

170

Social Insurance ................................................................................................

181

Social Security and Medicare ..........................................................................

181

Railroad Retirement, Black Lung, and Unemployment Insurance ..................

195

Deferred Maintenance and Repairs ...................................................................

197

Other Claims for Refunds ..................................................................................

197

Tax Assessments ...............................................................................................

198

Federal Oil and Gas Resources ..........................................................................

198

Federal Natural Resources Other than Oil and Gas ...........................................

200

Land and Permanent Land Rights .....................................................................

201

Other Information (Unaudited)

Tax Burden ........................................................................................................

204

Tax Gap .............................................................................................................

205

Tax Expenditures ...............................................................................................

205

Unmatched Transactions and Balances .............................................................

207

Appendices

Appendix A: Reporting Entity ...........................................................................

208

Appendix B: Glossary of Acronyms..................................................................

212

U.S. Government Accountability Office Independent Auditor’s Report......

218

For a complete listing of frequently used acronyms found

throughout the Financial Report, please refer to the Glossary

of Acronyms located in Appendix B.

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EXECUTIVE SUMMARY TO THE 2023 FINANCIAL REPORT OF THE U.S. GOVERNMENT

Executive Summary to the FY 2023

Financial Report of the United States Government

The FY 2023 Financial Report presents the U.S. government’s current financial position and condition, and

discusses key financial topics and trends. The Financial Report is produced by Treasury in coordination with

OMB, which is part of the Executive Office of the President. The table on the preceding page presents several key

indicators of the government’s financial position and condition, which are discussed in this Executive Summary

and, in greater detail, in the Financial Report. The Secretary of the Treasury, the Director of OMB, and the

Comptroller General of the U.S. at the GAO believe that the information discussed in the Financial Report is

important to all Americans.

The Financial Report addresses the government’s financial activity and results as of and for the fiscal years

ended September 30, 2023, and 2022. Note 30—Subsequent Events discusses events that occurred after the end of

the fiscal year that may affect the government’s financial position and condition.

Results in Brief

The “Nation by the Numbers” table on the preceding page and the following summarize key metrics about

the federal government’s financial position for and during FY 2023:

• The budget deficit increased by $319.7 b

illion (23.2 percent) to $1.7 trillion and net operating cost

decreased by $753.8 billion (18.1 percent) to $3.4 trillion.

• Net operating cost decreased due largely to significant decreases in non-cash costs (including decreases in

losses stemming from changes in assumptions affecting cost and liability estimates for the government’s

employee and veteran benefits programs (which do not affect the current year deficit) and reestimates of

long-term student loan costs).

•

The government’s gross costs of $7.7 trillion, less $539.5 billion in revenues earned for goods and

services provided to the public, plus $760.6 billion in net losses from changes in assumptions yields the

government’s net cost of $7.9 trillion, a decrease of $1.2 trillion (13.3 percent) from FY 2022.

• Tax and other revenues decreased by $460.3 billion to $4.5 trillion. Deducting these revenues from net

cost yields the federal government’s “bottom line” net operating cost of $3.4 trillion referenced above.

• Comparing total government assets of $5.4 trillion (including $1.7 trillion of loans receivable, net and

$1.2 trillion of PP&E) to total liabilities of $42.9 trillion (including $26.3 trillion in federal debt and

interest payable, and $14.3 trillion of federal employee and veteran benefits payable) yields a negative net

position of $37.5 trillion.

• The Statement of Long-Term Fiscal Projections (SLTFP) shows that the present value (PV) of total non-

interest spending, over the next 75 years, under current policy, is projected to exceed the PV of total

receipts by $73.2 trillion (total federal non-interest net expenditures from the table on the previous page).

• The debt-to-GDP ratio was approximately 97 percent at the end of FY 2023. Under current policy and

based on this report’s assumptions, it is projected to reach 531 percent by 2098. The projected continuous

rise of the debt-to-GDP ratio indicates that current policy is unsustainable.

• The Statement of Social Insurance (SOSI) shows that the PV of the government’s expenditures for Social

Security and Medicare Parts A, B and D, and other social insurance programs over 75 years is projected

to exceed social insurance revenues by about $78.4 tri

llion, a $2.5 trillion increase over 2022 social

insurance projections.

EXECUTIVE SUMMARY TO THE 2023 FINANCIAL REPORT OF THE U.S. GOVERNMENT

Where We Are Now

The government’s financial position and condition have traditionally been expressed through the Budget,

focusing on surpluses, deficits, and debt. However, this primarily cash-based discussion of the government’s net

outlays (deficit) or net receipts (surplus) tells only part of the story. The government’s accrual-based net position,

(the difference between its assets and liabilities, adjusted for unmatched transactions and balances), and its

“bottom line” net operating cost (the difference between its revenues and costs) are also key financial indicators.

The following includes brief discussions of some of the diminishing effects of the pandemic on the government’s

financial results for FY 2023. Please refer to Note 29—COVID-19 Activity and other disclosures in this Financial

Report, as well as in the individual entities’ financial statements for more information.

Comparing the Budget and the Financial Report

The Budget and the Financial Report present complementary perspectives on the government’s financial

position and condition.

• The Budget is the government’s primary financial planning and control tool. It accounts for past

government receipts and spending and includes the President’s proposed receipts and spending plan.

Receipts are cash received by the U.S. government and spending is measured as outlays, or payments

made by the federal government to the public or entities outside the government. When total receipts

exceed outlays, there is a budget surplus; conversely, if total outlays exceed total receipts, there is a

budget deficit.

• The Financial Report includes the government’s costs and revenues, assets and liabilities, and other

important financial information. It compares the government’s revenues (amounts earned, but not

necessarily collected), with costs (amounts incurred, but not necessarily paid) to derive net operating cost.

Chart 1 compares the government’s budget deficit (receipts vs. outlays) and net operating cost (revenues vs.

costs) for FYs 2019 - 2023. During FY 2023:

• A $456.8 billion decrease in receipts

more than offset a $137.1 billion

decrease in outlays resulting in a

$319.7 billion (23.2 percent) increase

in the budget deficit from $1.4 trillion

to $1.7 trillion.

• Net operating cost decreased $753.8

billion or 18.1 percent from $4.2

trillion to $3.4 trillion, due mostly to a

$1.2 trillion or 13.3 percent decrease

in net cost which more than offset a

$460.3 billion or 9.3 percent decrease

in tax and other revenues.

The $1.7 trillion difference between the

budget deficit and net operating cost for FY

2023 is primarily due to accrued costs (incurred but not necessarily paid) that are included in net operating cost,

but not the budget deficit. These are primarily actuarial costs related to federal employee and veteran benefits

programs, particularly at VA, DOD, and OPM. Other sources of differences include but are not limited to

decreases in taxes receivable, increases in advances and deferred revenue received by the federal government

from others, decreases in advances and prepayments made by the federal government.

EXECUTIVE SUMMARY TO THE 2023 FINANCIAL REPORT OF THE U.S. GOVERNMENT

Costs and Revenues

The government’s “bottom line” net operating cost decreased $753.8 billion (18.1 percent) during FY 2023

to $3.4 trillion. It is calculated as follows:

• Starting with total gross costs of $7.7

trillion, the government subtracts

earned program revenues (e.g.,

Medicare premiums, national park

entry fees, and postal service fees) and

adjusts the balance for gains or losses

from changes in actuarial assumptions

used to estimate future federal

employee and veteran benefits

payments to derive its net cost before

taxes and other revenues of $7.9

trillion (see Chart 2), a decrease of

$1.2 trillion (13.3 percent) from FY

2022. This net decrease is the

combined effect of many offsetting

increases and decreases across the

government. For example:

o Entities administering federal employee and veteran benefits programs, including the VA, DOD, and

OPM employ a complex series of assumptions to make actuarial projections of their long-term

benefits liabilities. These assumptions include but are not limited to interest rates, beneficiary

eligibility, life expectancy, and medical cost levels. Changes in these assumptions can result in either

losses (net cost increases) or gains (net cost decreases). Across the government, these net losses from

changes in assumptions amounted to $760.6 billion in FY 2023, a loss decrease (and a corresponding

net cost decrease) of $1.4 trillion compared to FY 2022.

o In particular, VA net costs decreased $479.6 billion due largely to decreased losses from changes in

assumptions as referenced above, partially offset by an increase in costs as a result of legislation

expanding and extending eligibility for veteran’s benefits.

o DOD net costs decreased $455.6 billion due primarily to a $437.7 billion loss decrease from changes

in assumptions as referenced above. However, most of DOD’s net costs included those related to

military operations, readiness and support, procurement, personnel, and R&D.

o A $222.7 billion decrease in Treasury net costs was largely due to a decrease in costs associated with

Treasury’s pandemic relief programs, including: 1) the Coronavirus State and Local Fiscal Recovery

Funds; and 2) COVID-19 related refunds and other payments such as the EIP and advances for child

tax credits.

o Education net costs decreased $521.0 billion due largely to the combined effect of: 1) an FY 2022

cost increase of $330.9 billion due largely to a $337.3 billion loan modification stemming from the

announced broad-based student loan debt relief; and 2) an FY 2023 cost decrease of $319.9 billion

from a downward modification to reverse the broad-based student loan debt relief, as a result of the

Supreme Court’s ruling on Biden v. Nebraska. Education’s FY 2023 net costs were also impacted by:

1) $71.4 billion in upward cost reestimates of the Department’s existing loan portfolio; and 2) $115.7

billion of upward modifications related to COVID-19 administrative actions, changes to repayment

plans, and other programmatic changes.

o A $54.1 billion net cost increase at HHS primarily due to a $116.1 billion increase across the

Medicare and Medicaid benefits programs largely associated with increasing benefits payments. This

cost increase was offset by a $62.0 billion cost decrease across all other HHS segments primarily due

to decreases in COVID-19 costs.

EXECUTIVE SUMMARY TO THE 2023 FINANCIAL REPORT OF THE U.S. GOVERNMENT

o SSA net costs increased $138.8 billion due largely to a 2.5 percent increase in the number of OASI

beneficiaries, combined with an 8.7 percent COLA provided to beneficiaries in 2023.

o Interest costs related to federal debt securities held by the public increased by $181.5 billion due

largely to increases in outstanding debt held by the public and the average interest rates, which were

offset by a decrease in inflation adjustments.

• The government deducts tax and other revenues from net cost (with some adjustments) to derive its FY

2023 “bottom line” net operating cost

of $3.4 trillion.

o From Chart 3, total government tax

and other revenues decreased by

$460.3 billion (9.3 percent) to

about $4.5 trillion for FY 2023 due

primarily to a decline in individual

income and tax withholdings and

corporate income taxes as well as

decreased deposits of earnings

from the Federal Reserve due to

increased interest rates.

o Together, individual income tax

and tax withholdings, and

corporate income taxes accounted

for about 91.4 percent of total tax

and other revenues in FY 2023. Other revenues include Federal Reserve earnings, excise taxes, and

customs duties.

Assets and Liabilities

Chart 4 summarizes the assets and liabilities that the government reports on its Balance Sheet. As of

September 30, 2023:

• More than three-fourths of the federal

government’s total assets ($5.4

trillion) consist of: 1) $922.2 billion in

cash and monetary assets; 2) $423.0

billion in inventory and related

property; 3) $1.7 trillion in loans

receivable, net (primarily student

loans); and 4) $1.2 trillion in net

PP&E.

o Cash and monetary assets ($922.2

billion) is comprised largely of the

operating cash of the U.S.

government. Operating cash held

by Treasury increased $21.9 billion

(3.5 percent) to $638.9 billion

during FY 2023.

o Inventory and related property ($423.0 billion) includes: 1) inventory, which is tangible personal

property that is either held for sale, in the process of production for sale, or to be consumed in the

production of goods for sale or in the provision of services for a fee; 2) OM&S, or tangible personal

property to be consumed in normal operations (e.g., spare and repair parts, ammunition, and tactical

EXECUTIVE SUMMARY TO THE 2023 FINANCIAL REPORT OF THE U.S. GOVERNMENT

missiles); and 3) stockpiles, or strategic and critical materials held due to statutory requirements for

use in national defense, conservation, or local/national emergencies.

o Loans receivable, net ($1.7 trillion) is comprised of loans provided by multiple agencies, including

Education and SBA, to promote the nation’s welfare by making financing available to segments of the

population not served adequately by non-federal institutions or otherwise providing for certain

activities or investments. The government’s net loan portfolio increased by $261.0 billion (18.2

percent) during FY 2023. This net increase was largely due to a $214.3 billion increase in Education’s

Federal Direct Student Loans, net, primarily due to a reversal of the broad-based student loan debt

relief as a result of the Supreme Court’s ruling in Biden v. Nebraska. Additional Loans Receivable, net

increases included Treasury’s purchase of a $50 billion note issued by a trust created by FDIC in its

receivership capacity and backed by a guarantee from the FDIC in its corporate capacity. These and

other net increases were partially offset by a $49.6 billion decrease in SBA’s loan receivables, net, due

largely to write-offs of direct disaster loans. Other changes included fluctuations in loan programs for

HUD, DOT, and DFC.

o Federal government general PP&E includes many of the physical resources that are vital to the federal

government’s ongoing operations, including buildings, structures, facilities, equipment, internal use

software, and general-purpose land. DOD comprises approximately 67.4 percent of the government’s

reported general PP&E of $1.2 trillion as of September 30, 2023.

o Other significant government resources not reported on the Balance Sheet include the government’s

power to tax and set monetary policy, natural resources, and stewardship assets. Stewardship assets,

including heritage assets and stewardship land, benefit the nation (e.g., national monuments, national

parks) and are intended to be held indefinitely.

• Total liabilities ($42.9 trillion) consist mostly of: 1) $26.3 trillion in federal debt and interest payable; and

2) $14.3 trillion in federal employee and veteran benefits payable.

o Federal debt held by the public is debt held outside of the government by individuals, corporations,

state and local governments, the FR System, foreign governments, and other non-federal entities.

o The government borrows from the public (increases federal debt levels) to finance deficits. During FY

2023, federal debt held by the public increased $2.0 trillion (8.3 percent) to $26.3 trillion.

o The government also reports about $6.9 trillion of intra-governmental debt outstanding, which arises

when one part of the government borrows from another. For example, government funds (e.g., Social

Security and Medicare Trust Funds) typically must invest excess receipts, including interest earnings,

in Treasury-issued federal debt securities. Although not reflected in Chart 4, these securities are

included in the calculation of federal debt subject to the debt limit.

o Federal debt held by the public plus intra-governmental debt equals gross federal debt, which, with

some adjustments, is subject to a statutory debt ceiling (“debt limit”). Congress and the President

increased the debt limit by $2.5 trillion in December 2021 with the enactment of P.L. 117-73. In

response to delays in raising the statutory debt limit, Treasury took extraordinary measures to meet the

government’s obligations as they came due without exceeding the debt limit from January 19 through

June 2, 2023. On June 3, 2023, P.L. 118-5 was enacted, suspending the debt limit through January 1,

2025. On Monday, June 5, 2023, Treasury discontinued its use of extraordinary measures and resumed

normal debt management operations. At the end of FY 2023, debt subject to the statutory limit was

$33.1 trillion. Increasing or suspending the debt limit does not increase spending or authorize new

spending; rather, it permits the government to continue to honor pre-existing commitments (see Note

12—Federal Debt and Interest Payable).

o Federal employee and veteran benefits payable ($14.3 trillion) represents the amounts of benefits

payable by agencies that administer the government’s pension and other benefit plans for its military

and civilian employees.

See Note 29—COVID-19 Activity, as well as the referenced agencies’ FY 2023 financial statements for

additional information about the financial effects of the federal government’s response to the pandemic. See Note

EXECUTIVE SUMMARY TO THE 2023 FINANCIAL REPORT OF THE U.S. GOVERNMENT

30—Subsequent Events for information about events that occurred after the end of the fiscal year that may affect

the government’s financial results.

Key Economic Trends

An analysis of U.S. economic performance provides useful background when evaluating the government’s

financial statements. Over the course of FY 2023, the economy’s growth accelerated even as inflation continued

to slow. In addition, labor markets remained tight and continued to generate a substantial number of jobs but also

showed signs of very gradual easing over the course of FY 2023. These and other economic and financial

developments are discussed in greater detail in the Financial Report.

An Unsustainable Fiscal Path

An important purpose of this Financial Report is to help citizens understand current fiscal policy and the

importance and magnitude of policy reforms necessary to make it sustainable. A sustainable fiscal policy is

defined as one where the ratio of debt held by the public to GDP (the debt-to-GDP ratio) is stable or declining

over the long term. GDP measures the size of the nation’s economy in terms of the total value of all final goods

and services that are produced in a year. Considering financial results relative to GDP is a useful indicator of the

economy’s capacity to sustain the government’s many programs. This Financial Report presents data, including

debt, as a percent of GDP to help readers assess whether current fiscal policy is sustainable. The debt-to-GDP

ratio was approximately 97 percent at the end of FY 2023, which is similar to (but slightly above) the debt-to-

GDP ratio at the end of FY 2022. The long-term fiscal projections in this Financial Report are based on the same

economic and demographic assumptions that underlie the SOSI.

The current fiscal path is unsustainable. To determine if current fiscal policy is sustainable, the projections

based on the assumptions discussed in the Financial Report assume current policy will continue indefinitely.

The

projections are therefore neither forecasts nor predictions. Nevertheless, the projections demonstrate that policy

changes need to be enacted for the actual financial outcomes to differ from those projected.

Receipts, Spending, and the Debt

Chart 5 shows historical and current policy projections for receipts, non-interest spending by major category,

net interest, and total spending expressed

as a percent of GDP.

• The primary deficit is the

difference between non-interest

spending and receipts. The ratio

of the primary deficit to GDP is

useful for gauging long-term

fiscal sustainability.

• The primary deficit-to-GDP ratio

increased during the financial

crisis of 2008 and the COVID-19

pandemic. Spending was

elevated in 2020 and 2021 due to

funding to support economic

recovery, but increased receipts

reduced the primary deficit-to-

GDP ratio to 10.8 percent in

2021 from 13.3 percent in 2020. The primary deficit-to-GDP ratio in 2023 was 3.8 percent, increasing by

0.2 percentage points from 3.6 percent in 2022 partially due to lower receipts.

Current policy in the projections is based on current law, but includes extension of certain policies that expire under current law but are routinely extended

or otherwise expected to continue.

EXECUTIVE SUMMARY TO THE 2023 FINANCIAL REPORT OF THE U.S. GOVERNMENT

• The persistent long-term gap between projected receipts and total spending shown in Chart 5 occurs

despite the projected effects of the PPACA

on long-term deficits.

o Enactment of the PPACA in 2010 and the MACRA (P.L. 114-10) in 2015 established cost controls for

Medicare hospital and physician payments whose long-term effectiveness is still to be demonstrated

fully.

o There is uncertainty about the extent to which these projections can be achieved and whether the

PPACA’s provisions intended to reduce Medicare cost growth will be overridden by new legislation.

Table 1 summarizes the status and projected trends of the government’s Social Security and Medicare Trust

Funds.

The primary deficit projections in Chart 5, along with those for interest rates and GDP, determine the debt-

to-GDP ratio projections in Chart 6.

• The debt-to-GDP ratio was

approximately 97 percent at the

end of FY 2023, and under

current policy and based on this

report’s assumptions is projected

to reach 531 percent in 2098.

• The debt-to-GDP ratio rises

continuously in great part because

primary deficits lead to higher

levels of debt. The continuous

rise of the debt-to-GDP ratio

indicates that current fiscal policy

is unsustainable.

• These debt-to-GDP projections

are lower than both the 2022 and

2021 Financial Report

projections.

The PPACA refers to P.L. 111-148, as amended by P.L. 111-152. The PPACA expands health insurance coverage, provides health insurance subsidies for

low-income individuals and families, includes many measures designed to reduce health care cost growth, and significantly reduces Medicare payment rate

updates relative to the rates that would have occurred in the absence of the PPACA. (See Note 25 and the RSI section of the Financial Report, and the 2023

Medicare Trustees Report for additional information).

EXECUTIVE SUMMARY TO THE 2023 FINANCIAL REPORT OF THE U.S. GOVERNMENT

The Fiscal Gap and the Cost of Delaying Fiscal Policy Reform

• The 75-year fiscal gap is a measure of how much primary deficits must be reduced over the next 75 years

in order to make fiscal policy sustainable. That estimated fiscal gap for 2023 is 4.5 percent of GDP

(compared to 4.9 percent for 2022).

• This estimate implies that making fiscal policy sustainable over the next 75 years would require some

combination of spending reductions and receipt increases that equals 4.5 percent of GDP on average over

the next 75 years. The fiscal gap represents 23.8 percent of 75-year PV receipts and 19.8 percent of 75-

year PV non-interest spending.

• The timing of policy changes to make fiscal policy sustainable has important implications for the well-

being of future generations as is shown in Table 2.

o Table 2 shows that, if reform begins in 2034 or 2044, the estimated magnitude of primary surplus

increases necessary to close the 75-year fiscal gap is 5.3 percent and 6.5 percent of GDP, respectively.

The difference between the primary surplus increase necessary if reform begins in 2034 or 2044 and

the increase necessary if reform begins in 2024, an additional 0.8 and 2.0 percentage points,

respectively, is a measure of the additional burden policy delay would impose on future generations.

o The longer policy action to close the fiscal gap is delayed, the larger the post-reform primary surpluses

must be to achieve the target debt-to-GDP ratio at the end of the 75-year period. Future generations are

harmed by a policy delay because the higher the primary surpluses are during their lifetimes, the

greater is the difference between the taxes they pay and the programmatic spending from which they

benefit.

Conclusion

• Projections in the Financial Report indicate that the government’s debt-to-GDP ratio is projected to rise

over the 75-year projection period and beyond if current policy is kept in place. The projections in this

Financial Report show that current policy is not sustainable.

• If changes in fiscal policy are not so abrupt as to slow economic growth and those policy changes are

adopted earlier, then the required changes to revenue and/or spending will be smaller to return the

government to a sustainable fiscal path.

Reporting on Climate Change

As stated in Executive Order 14008, Tackling the Climate Crisis at Home and Abroad “the United States and

the world face a profound climate crisis…Domestic action must go hand in hand with United States international

leadership, aimed at significantly enhancing global action.” In response, the administration has enacted key

legislation and issued important policy actions. As summarized in the MD&A section of the Financial Report,

many of the 24 CFO Act agencies have leveraged their FY 2023 financial statements to discuss a wide range of

topics concerning how their agencies are responding to the climate crisis, including providing links to agency

Climate Adaptation and Resilience Plans.

EXECUTIVE SUMMARY TO THE 2023 FINANCIAL REPORT OF THE U.S. GOVERNMENT

Find Out More

The FY 2023 Financial Report and other information about the nation’s finances are available at:

• Treasury, https://www.fiscal.treasury.gov/fsreports/rpt/finrep/fr/fr_index.htm and

https://fiscaldata.treasury.gov/americas-finance-guide/;

• OMB’s Office of Federal Financial Management, https://www.whitehouse.gov/omb/management/office-

federal-financial-management/; and

• GAO, https://www.gao.gov/federal-financial-accountability.

The GAO audit report on the U.S. government’s consolidated financial statements can be found beginning on page 218

of the full Financial Report

. GAO was unable to express an opinion (disclaimed) on these consolidated financial

statements for the reasons discussed in the audit report.

EXECUTIVE SUMMARY TO THE 2023 FINANCIAL REPORT OF THE U.S. GOVERNMENT

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MANAGEMENT’S DISCUSSION AND ANALYSIS

MANAGEMENT’S DISCUSSION AND

ANALYSIS

Introduction

The FY 2023 Financial Report provides the President, Congress, and the American people with a comprehensive view

of the federal government’s financial position and condition; and discusses important financial issues and significant

conditions that may affect future operations, including the need to achieve fiscal sustainability over the long-term.

Pursuant to 31 U.S.C. § 331(e)(1), Treasury, in cooperation with OMB, must submit an audited (by GAO) financial

statement for the preceding fiscal year, covering all accounts and associated activities of the executive branch of the U.S.

government

to the President and Congress no later than six months after the September 30 fiscal year-end.

The Financial Report is prepared from the financial information provided by 166 federal consolidation entities (see

organizational chart on the next page and Appendix A). As it has for the past 25 years, GAO issued a disclaimer of opinion

on the accrual-based, consolidated financial statements for the fiscal years ended September 30, 2023, and 2022. GAO also

issued a disclaimer of opinion on the sustainability financial statements, which consist of the 2023 and 2022 SLTFP; the

2023, 2022, 2021, 2020, and 2019 SOSI; and the 2023 and 2022 SCSIA. A disclaimer of opinion indicates that sufficient

information was not available for the auditors to determine whether the reported financial statements were fairly presented in

accordance with GAAP. In FY 2023, 32

of the 40 most significant entities earned unmodified (“clean”) opinions on their

financial statements.

The FY 2023 Financial Report consists of:

• MD&A, which provides management’s perspectives on and analysis of information presented in the Financial

Report, such as financial and performance trends;

• Financial statements and the related notes to the financial statements;

• RSI and Other Information; and

• GAO’s audit report.

This Financial Report addresses the government’s financial activity and results as of and for the fiscal years ended

September 30, 2023, and 2022. Note 30—Subsequent Events discusses events that occurred after the end of the fiscal year

that may affect the government’s financial position and condition.

In addition, the Executive Summary to this Financial Report provides a quick reference to the key issues in the

Financial Report and an overview of the government's financial position and condition.

Mission & Organization

The government’s fundamental mission is derived from the Constitution: “…to form a more perfect union, establish

justice, insure domestic tranquility, provide for the common defense, promote the general welfare and secure the blessings of

liberty to ourselves and our posterity.” The government’s functions have evolved over time to include health care, income

security, veterans benefits and services, housing and transportation, security, and education. Exhibit 1 provides an overview

of how the U.S. government is organized.

The Government Management Reform Act of 1994 has required such reporting, covering the executive branch of the government, beginning with financial

statements prepared for FY 1997. The consolidated financial statements include the legislative and judicial branches.

The 32 entities include the HHS, which received disclaimers of opinion on its 2023, 2022, 2021, 2020, and 2019 SOSI and on its 2023 and 2022 SCSIA.

MANAGEMENT’S DISCUSSION AND ANALYSIS

Exhibit 1

EXECUTIVE BRANCH

THE PRESIDENT

THE VICE PRESIDENT

EXECUTIVE OFFICE OF THE PRESIDENT

White House Office

Office of the Vice President

Council of Economic Advisers

Council on Environmental Quality

National Security Council

Office of Administration

Office of Management and Budget

Office of National Drug Control Policy

Office of Policy Development

Office of Science and Technology Policy

Office of the U.S. Trade Representative

LEGISLATIVE BRANCH

THE CONGRESS

SENATE HOUSE

Architect of the Capitol

U.S. Botanic Garden

Government Accountability Office

Government Publishing Office

Library of Congress

Congressional Budget Office

U.S. Capitol Police

JUDICIAL BRANCH

THE SUPREME COURT

OF THE U.S.

U.S. Courts of Appeals

U.S. District Courts

Territorial Courts

U.S. Court of International Trade

U.S. Court of Federal Claims

Administrative Office of the U.S. Courts

Federal Judicial Center

U.S. Sentencing Commission

CHIEF FINANCIAL OFFICERS ACT AGENCIES (24)

DEPARTMENT OF AGRICULTURE

DEPARTMENT OF TRANSPORTATION

DEPARTMENT OF COMMERCE

DEPARTMENT OF THE TREASURY

DEPARTMENT OF DEFENSE

DEPARTMENT OF VETERANS AFFAIRS

DEPARTMENT OF EDUCATION

ENVIRONMENTAL PROTECTION AGENCY

DEPARTMENT OF ENERGY

GENERAL SERVICES ADMINISTRATION

DEPARTMENT OF HEALTH AND HUMAN SERVICES

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

DEPARTMENT OF HOMELAND SECURITY

NATIONAL SCIENCE FOUNDATION

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

OFFICE OF PERSONNEL MANAGEMENT

DEPARTMENT OF THE INTERIOR

SMALL BUSINESS ADMINISTRATION

DEPARTMENT OF JUSTICE

SOCIAL SECURITY ADMINISTRATION

DEPARTMENT OF LABOR

U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT

DEPARTMENT OF STATE

U.S. NUCLEAR REGULATORY COMMISSION

SIGNIFICANT CONSOLIDATION ENTITIES (16)

EXPORT-IMPORT BANK OF THE U.S.

PENSION BENEFIT GUARANTY CORPORATION

FARM CREDIT SYSTEM INSURANCE CORPORATION

RAILROAD RETIREMENT BOARD

FEDERAL COMMUNICATIONS COMMISSION

SECURITIES AND EXCHANGE COMMISSION

FEDERAL DEPOSIT INSURANCE CORPORATION

SECURITY ASSISTANCE ACCOUNTS

GENERAL FUND OF THE U.S. GOVERNMENT

SMITHSONIAN INSTITUTION

MILLENNIUM CHALLENGE CORPORATION

TENNESSEE VALLEY AUTHORITY

NATIONAL CREDIT UNION ADMINISTRATION

U.S. INTERNATIONAL DEVELOPMENT FINANCE CORP

NATIONAL RAILROAD RETIREMENT INVESTMENT TRUST

U.S. POSTAL SERVICE

OTHER CONSOLIDATION ENTITIES LISTED IN APPENDIX A OF THIS FINANCIAL REPORT (126)

THE UNITED STATES GOVERNMENT

THE CONSTITUTION

MANAGEMENT’S DISCUSSION AND ANALYSIS

The Government’s Financial Position and Condition

This Financial Report presents the government’s financial position at the end of the fiscal year, explains how and why

the financial position changed during the year, and discusses the government’s financial condition and how it may change in

the future.

MANAGEMENT’S DISCUSSION AND ANALYSIS

Table 1 on the previous page and the following summarize the federal government’s financial position:

• This Financial Report includes discussion and analysis of the effects that the federal government’s response to the

COVID-19 pandemic continued to have on the government’s financial position during FY 2023.

• During FY 2023, the budget deficit increased by $319.7 billion (23.2 percent) to $1.7 trillion. However, net

operating cost decreased by $753.8 billion (18.1 percent) to $3.4 trillion.

• Net operating cost decreased due largely to significant decreases in non-cash costs (including decreases in losses

stemming from changes in assumptions affecting cost and liability estimates for the government’s employee and

veteran benefits programs (which do not affect the current year deficit), and reestimates of long-term student loan

costs).

• The government’s gross costs of $7.7 trillion, less $539.5 billion in revenues earned for goods and services provided

to the public (e.g., Medicare premiums, national park entry fees, and postal service fees), plus $760.6 billion in net

losses from changes in assumptions (e.g., interest rates, inflation, disability claims rates) yields the government’s net

cost of $7.9 trillion, a decrease of $1.2 trillion or 13.3 percent compared to FY 2022.

• Total tax and other revenues decreased $460.3 billion to $4.5 trillion. Deducting these revenues from net cost results

in a “bottom line” net operating cost of $3.4 trillion for FY 2023, a decrease of $753.8 billion or 18.1 percent

compared to FY 2022.

• Comparing total FY 2023 government assets of $5.4 trillion (including $1.7 trillion of loans receivable, net and $1.2

trillion of PP&E) to total liabilities of $42.9 trillion (including $26.3 trillion in federal debt and interest payable

and $14.3 trillion of federal employee and veteran benefits payable) yields a negative net position of $37.5 trillion.

• The budget deficit is primarily financed through borrowing from the public. As of September 30, 2023, debt held by

the public, excluding accrued interest, was $26.3 trillion. This amount, plus intra-governmental debt ($6.9 trillion)

equals gross federal debt, which, with some adjustments, is subject to the statutory debt limit. As of September 30,

2023, the government’s total debt subject to the debt limit was $33.1 trillion. Congress and the President increased

the debt limit by $480.0 billion in October 2021 and by $2.5 trillion in December 2021. On June 3, 2023, P.L. 118-5

was enacted, suspending the debt limit through January 1, 2025.

This Financial Report also contains information about projected impacts on the government’s future financial condition.

Under federal accounting rules, social insurance amounts as reported in both the SLTFP and in the SOSI are not considered

liabilities of the government. From Table 1:

• The SLTFP shows that the PV

of total non-interest spending, including Social Security, Medicare, Medicaid,

defense, and education, etc., over the next 75 years, under current policy, is projected to exceed the PV of total

receipts by $73.2 trillion (total federal non-interest net expenditures from Table 1).

• The SOSI shows that the PV of the government’s expenditures for Social Security and Medicare Parts A, B and D,

and other social insurance programs over 75 years is projected to exceed social insurance revenues

by about $78.4

trillion, a $2.5 trillion increase over 2022 social insurance projections.

• The Social Insurance and Total Federal Non-Interest Net Expenditures measures in Table 1 differ primarily because

total non-interest net expenditures from the SLTFP include the effects of general revenues and non-social insurance

spending, neither of which is included in the SOSI.

The government’s current financial position and long-term financial condition can be evaluated both in dollar terms and

in relation to the economy. GDP is a measure of the size of the nation’s economy in terms of the total value of all final goods

and services that are produced in a year. Considering financial results relative to GDP is a useful indicator of the economy’s

capacity to sustain the government’s many programs. For example:

• The budget deficit increased from $1.4 trillion in FY 2022 to $1.7 trillion in FY 2023. The deficit-to-GDP ratio also

increased from 5.4 percent in FY 2022 to 6.3 percent in 2023.

• The budget deficit is primarily financed through borrowing from the public. As of September 30, 2023, the $26.3

trillion in debt held by the public, excluding accrued interest, equates to 97 percent of GDP.

• The 2023 SOSI projection of $78.4 trillion net PV excess of expenditures over receipts over 75 years represents

about 4.4 percent of the PV of GDP over 75 years. The excess of total projected non-interest spending over receipts

of $73.2 trillion from the SLTFP represents 3.8 percent of GDP over 75 years. As discussed in this Financial

Report, changes in these projections can, in turn, have a significant impact on projected debt as a percent of GDP.

• To prevent the debt-to-GDP ratio from rising over the next 75 years, a combination of non-interest spending

reductions and receipts increases that amounts to 4.5 percent of GDP on average is needed (4.9 percent of GDP on

On the government’s Balance Sheet, federal debt and interest payable consists of Treasury securities, net of unamortized discounts and premiums, and

accrued interest payable. The “public” consists of individuals, corporations, state and local governments, FRB, foreign governments, and other entities

outside the federal government.

PVs recognize that a dollar paid or collected in the future is worth less than a dollar today because a dollar today could be invested and earn interest. To

calculate a PV, future amounts are thus reduced using an assumed interest rate, and those reduced amounts are summed.

Social Security is funded by the payroll taxes and revenue from taxation of benefits. Medicare Part A is funded by the payroll taxes, revenue from taxation

of benefits, and premiums that support those programs. Medicare Parts B and D are primarily financed by transfers from the General Fund, which are

presented, and by accounting convention, eliminated in the SOSI. For the FYs 2023 and 2022 SOSI, the amounts eliminated totaled $48.5 trillion and $47.5

trillion, respectively. In addition, the SOSI programs include DOL’s Black Lung Program, the projection period for which is 40 years.

MANAGEMENT’S DISCUSSION AND ANALYSIS

average in the 2022 projections). The fiscal gap in the 2023 projections represents 23.8 percent of 75-year PV

receipts and 19.8 percent of 75-year PV non-interest spending.

FY 2023 Financial Statement Audit Results

For FY 2023, GAO issued a disclaimer of audit opinion on the accrual-based, government-wide financial statements, as

it has for the past 26 years, due to certain material weaknesses in internal control over financial reporting and other

limitations on the scope of its work. In addition, GAO issued a disclaimer of opinion on the sustainability financial

statements due to significant uncertainties primarily related to the achievement of projected reductions in Medicare cost

growth and certain other limitations. GAO’s audit report on page 218 of this Financial Report, discusses GAO’s findings.

In FY 2023, 19 of the 24 entities required to issue audited financial statements under the CFO Act received unmodified

audit opinions, as did 13 of 16 additional significant consolidation entities (see Table 10 and Appendix A).

The Government-wide Reporting Entity

This Financial Report includes the financial status and activities of the executive, legislative, and judicial branches of

the federal government. SFFAS No. 47, Reporting Entity, provides criteria for identifying organizations that are

consolidation entities, disclosure entities, and related parties. Such criteria are summarized in Note 1.A, Significant

Accounting Policies, Reporting Entity, and in Appendix A, which lists the entities included in this Financial Report by these

categories. The assets, liabilities, results of operations, and related activity for consolidation entities are consolidated in the

financial statements.

Fannie Mae and Freddie Mac meet the criteria for disclosure entities and, consequently, are not consolidated into the

government’s financial statements. However, the values of the investments in such entities, changes in value, and related

activity with these entities are included in the consolidated financial statements. The FR System and the SPVs are disclosure

entities and are not consolidated into the government’s financial statements. See Note 1.A and Note 27—Disclosure Entities

and Related Parties for additional information. In addition, per SFFAS No. 31, Accounting for Fiduciary Activities, fiduciary

funds are not consolidated in the government financial statements.

Most significant consolidation entities prepare financial statements that include financial and performance related

information, as well as Annual Performance Reports. More information may be obtained from entities’ websites indicated in

Appendix A and at https://www.performance.gov/.

The following pages contain a more detailed discussion of the government’s financial results for FY 2023, the Budget,

the economy, the debt, and a long-term perspective about fiscal sustainability, including the government’s ability to meet its

social insurance benefits obligations. The information in this Financial Report, when combined with the Budget, collectively

presents information on the government’s financial position and condition.

Accounting Differences Between the Budget and the Financial

Report

Each year, the administration issues two reports that detail the government’s financial results: the Budget and this

Financial Report. The exhibit on the following page provides the key characteristics and differences between the two

documents.

Treasury generally prepares the financial statements in this Financial Report on an accrual basis of accounting as

prescribed by GAAP for federal entities.

These principles are tailored to the government’s unique characteristics and

circumstances. For example, entities prepare a uniquely structured “Statement of Net Cost,” which is intended to present net

government resources used in its operations. Also, unique to government is the preparation of separate statements to

reconcile differences and articulate the relationship between the Budget and financial accounting results.

The 19 entities include the HHS, which received disclaimers of opinions on its 2023, 2022, 2021, 2020, and 2019 SOSI and its 2023 and 2022 SCSIA. The

13 entities include the FDIC, the NCUA, and the FCSIC, which operate on a calendar year basis (December 31 year-end). Statistic reflects 2022 audit results

for these organizations if 2023 results are not available.

See Note 23—Fiduciary Activities.

Under GAAP, most U.S. government revenues are recognized on a ‘modified cash’ basis, (see Financial Statement Note 1.B). The SOSI presents the PV of

the estimated future revenues and expenditures for scheduled benefits over the next 75 years for the Social Security, Medicare, RRP; and 25 years for the

Black Lung program. The SLTFP presents the 75-year PV of the projected future receipts and non-interest spending for the federal government.

MANAGEMENT’S DISCUSSION AND ANALYSIS

Budget of the U.S. Government

Financial Report of the U.S. Government

Prepared primarily on a “cash basis”

• Initiative-

based and prospective: focus on

current and future initiatives planned and

how resources will be used to fund them.

•

Receipts (“cash in”), taxes and other

collections recorded when received.

• Outlays (“cash out”), largely recorded when

payment is made.

Prepared on an “accrual basis” and “modified cash basis”

• Entity-based and retrospective –

prior and present

resources used to implement initiatives.

• Revenue: Tax revenue (more than 90.0 percent of total

revenue) recognized on modified cash basis (see Financial

Statement Note 1.B). Remainder recognized when earned,

but not necessarily received.

• Costs: recognized when incurred, but not necessarily paid.

Budget Deficit vs. Net Operating Cost

Three key components of the Budget process are: 1) appropriations; 2) obligations; and 3) outlays. An appropriation is a

provision of law authorizing the expenditure of funds for a given purpose. Rescissions and cancellations are reductions in law

of budgetary resources. They are considered permanent reductions unless legislation clearly indicates that the reduction is

temporary. Once funds are appropriated by Congress, Treasury issues warrants that officially establish the amounts available

to be obligated and spent (i.e., expended or outlayed) by each agency. An agency’s obligation of funds is a binding agreement

to outlay funds for a particular purpose immediately or in the future. The budget deficit is measured as the excess of outlays,

or payments made by the government, over receipts, or cash received by the government.

Net operating cost, calculated on an accrual basis, is the excess of costs (what the government has incurred but has not

necessarily paid) over revenues (what the government has collected and expects to collect but has not necessarily received).

As shown in Chart 1, net operating cost typically exceeds the budget deficit due largely to the inclusion of cost accruals

associated with increases in estimated liabilities for the government’s postemployment benefit programs for its military and

civilian employees and veterans as well as environmental liabilities.

The government’s

primarily cash-based

budget

deficit increased by $319.7

billion (23.2 percent) from

approximately $1.4 trillion in

FY 2022 to about $1.7 trillion

in FY 2023 due to a $456.8

billion decrease in receipts

which more than offset a

$137.1 billion decrease in

outlays in FY 2023. The

decrease in receipts can be

attributed to lower individual

income tax receipts as capital

gains realizations fell and lower

deposits of earnings by the

Federal Reserve due to higher

interest rates. These decreases

were partially offset by higher

social insurance and retirement

receipts due to a strong labor

market boosting wages and

salaries. The decrease in outlays in part reflects the broad-based student loan debt relief, which increased outlays in FY 2022,

and the effect of the reversal of broad-based debt relief in FY 2023 as a result of the Supreme Court’s decision in Biden v.

Nebraska. It also reflects decreases due to the expiration of the expanded child tax credit as well as reductions in COVID-19

related spending, including spending by Treasury from the Coronavirus Relief Fund and by the Food and Nutrition Service

for SNAP and child nutrition programs. Outlays for some other categories of spending increased, including Social Security,

Medicare, Medicaid, and net interest.

Interest outlays on Treasury debt held by the public are recorded in the Budget when interest accrues, not when the interest payment is made. For federal

credit programs, outlays are recorded when loans are disbursed, in an amount representing the PV cost to the government, commonly referred to as credit

subsidy cost. Credit subsidy cost excludes administrative costs.

10/20/23 press release – Joint Statement of Janet L. Yellen, Secretary of the Treasury, and Shalanda D. Young, Director of the Office of Management and

Budget, on Budget Results for Fiscal Year 2023. Note that some amounts in this Financial Report reflect updates subsequent to publication of the press

release.

MANAGEMENT’S DISCUSSION AND ANALYSIS

Treasury’s September 2023 MTS provides fiscal year-end receipts, spending, and deficit information for this Financial

Report. The MTS presents primarily cash-based spending, or outlays, for the fiscal year in a number of ways, including by

month, by entity, and by budget function classification. The Budget is divided into approximately 20 categories, or budget

functions, as a means of organizing federal spending by primary purpose (e.g., National Defense, Transportation, and

Health). Multiple entities may contribute to one or more budget functions, and a single budget function may be associated

with only one entity. For example, DOD, DHS, DOE, and multiple other entities administer programs that are critical to the

broader functional classification of National Defense. DOD, OPM, and many other entities also administer Income Security

programs (e.g., retirement benefits, housing, financial assistance). By comparison, the Medicare program is a budget function

category unto itself and is administered exclusively at the federal level by HHS. Federal spending information by budget

function and other categorizations may be found in the September 2023 MTS.

The government’s largely accrual-based net operating cost decreased by $753.8 billion (18.1 percent) to $3.4 trillion

during FY 2023. As discussed in this Financial Report, as the deficit is affected by changes in both receipts and outlays, so

too are the government’s net operating costs affected by changes in both revenues and costs.

The Reconciliation of Net Operating Cost and Budget Deficit statement articulates the relationship between the

government’s accrual-based net operating cost and the primarily cash-based budget deficit. The difference between the

government’s budget deficit and net operating cost is typically impacted by many variables. For example, from Table 2, 88

percent of the $1.7 trillion net difference for FY 2023 is attributable to a $1.5 trillion net increase in liabilities for federal

employee and veteran benefits payable (see Note 13—Federal Employee and Veteran Benefits Payable). Other differences

include: 1) a $108.1 billion increase in advances from others and deferred revenue (see Note 17—Advances from Others and

Deferred Revenue); 2) a $55.0 billion decrease in net taxes receivable (see Note 3—Accounts Receivable, Net); and 3) a

$45.4 billion decrease in advances and prepayments made by the federal government (see Note 9—Advances and

Prepayments).

The Government’s Net Position: “Where We Are”

The government’s financial position and condition have traditionally been expressed through the Budget, focusing on

surpluses, deficits, and debt. However, this primarily cash-based discussion of the government’s net outlays (deficit) or net

receipts (surplus) tells only part of the story. The government’s accrual-based net position, (the difference between its assets

and liabilities, adjusted for unmatched transactions and balances), and its “bottom line” net operating cost (the difference

between its revenues and costs) are also key financial indicators. The following includes brief discussions of some of the

diminishing effects of the pandemic on the government’s financial results for FY 2023. Please refer to Note 29—COVID-19

Activity and other disclosures in this Financial Report, as well as in the individual entities’ financial statements for more

information.

Costs and Revenues

The government’s Statement of Operations and Changes in Net Position, much like a corporation’s income statement,

shows the government’s “bottom line” and its impact on net position (i.e., assets net of liabilities, adjusted for unmatched

transactions and balances). To derive the government’s “bottom line” net operating cost, the Statement of Net Cost first

shows how much it costs to operate the federal government, recognizing expenses when incurred, regardless of when

payment is made (accrual basis). It shows the derivation of the government’s net cost or the net of: 1) gross costs, or the costs

Final MTS for FY 2023 through September 30, 2023 and Other Periods.

MANAGEMENT’S DISCUSSION AND ANALYSIS

of goods produced and services rendered by the government; 2) the earned revenues generated by those goods and services

during the fiscal year; and 3) gains or losses from changes in actuarial assumptions used to estimate certain liabilities. This

amount, in turn, is offset against the government’s taxes and other revenue reported in the Statement of Operations and

Changes in Net Position to calculate the “bottom line” or net operating cost.

Table 3 shows that the government’s “bottom line” net operating cost decreased $753.8 billion (18.1 percent) during

2023 from $4.2 trillion to $3.4 trillion. This decrease is due mostly to a $1.2 trillion (13.3 percent) decrease in net costs,

which more than offset a $460.3 billion (9.3 percent) decrease in tax and other revenues over the past fiscal year as discussed

in the following.

Gross Cost and Net Cost

The FY 2023 Statement of Net Cost starts with the government’s total gross costs of $7.7 trillion, subtracts $539.5

billion in revenues earned for goods and services provided (e.g., Medicare premiums, national park entry fees, and postal

service fees), and adjusts the balance for gains or losses from changes in actuarial assumptions used to estimate certain

liabilities ($760.6 billion loss), including federal employee and veteran benefits to derive its net cost of $7.9 trillion, a $1.2

trillion (13.3 percent) decrease compared to FY 2022.

Typically, the annual change in the government’s net cost is the result of a variety of offsetting increases and decreases

across entities. Offsetting changes in federal entity net cost during FY 2023 included:

• Entities administering federal employee and veteran benefits programs employ a complex series of assumptions,

including but not limited to interest rates,

beneficiary eligibility, life expectancy, and

medical cost levels, to make actuarial

projections of their long-term benefits

liabilities. Changes in these assumptions

can result in either losses (net cost

increases) or gains (net cost decreases).

Across the government, these net losses

from changes in assumptions amounted to

$760.6 billion in FY 2023, a net loss (and

a corresponding net cost) decrease of $1.4

trillion compared to FY 2022. The primary

entities that administer programs impacted

by these assumptions – typically federal

employee pension and benefit programs –

are the VA, DOD, and OPM. All three of

these entities recorded losses from

changes in assumptions in the amounts of

$111.9 billion, $89.3 billion, and $558.8 billion, respectively. These actuarial estimates and the resulting gains or

losses from changes in assumptions can sometimes cause significant swings in total entity costs from year to year.

For example, for FY 2023, net cost decreases at OPM ($88.5 billion), DOD ($455.6 billion), and VA ($479.6

billion) were significantly impacted by the decreases in losses from assumption changes at these entities.

• A $479.6 billion decrease in VA net cost was impacted largely by a $967.7 billion decrease in losses from changes

in assumptions as referenced above, partially offset by an increase in costs as a result of legislation expanding and

extending the eligibility for veteran's benefits.

• The $455.6 billion decrease in DOD net cost is primarily due to a $437.7 billion decrease in losses from changes in

assumptions referenced above. While losses from changes in assumptions represented the largest decrease, the

majority (more than 80 percent) of DOD costs are attributable to a wide range of functions, including military

operations, readiness, and support; procurement; military personnel; and R&D.

MANAGEMENT’S DISCUSSION AND ANALYSIS

• The $222.7 billion decrease in Treasury net costs is largely due to a decrease in costs associated with Treasury’s

pandemic relief programs. As discussed in Note 29—COVID-19 Activity, Treasury’s net costs related to COVID-19

relief efforts decreased $105.5 billion, from $164.4 billion to $58.9 billion, during FY 2023, mainly attributed to a

reduction in the estimated amount of eligible costs incurred by state and local, territorial, and tribal program

recipients of Coronavirus State and Local Fiscal Recovery Funds. In addition, Treasury gross costs reported in this

Financial Report reflect a decrease in COVID-19 related refunds and other payments, such as EIP and advances for

child tax credits, from $89.2 billion to $53.4 billion.

• A $521.0 billion decrease at

Education, due largely to the combined

effect of: 1) the announced broad-

based student loan debt relief in

continued response to the pandemic to

help borrowers at highest risk of

delinquencies or default once

payments resumed; and 2) the reversal

of the announced broad-based student

loan debt relief as a result of the

Supreme Court’s ruling in Biden v.

Nebraska. The combined effect on

Education’s net cost was: 1) an FY

2022 cost increase of $330.9 billion,

due largely to a $337.3 billon upward

cost modification to its direct loan

program stemming from the

announced broad-based relief; and 2) a

$319.9 billion downward cost

modification in FY 2023 related to the

student loan debt relief. Education’s FY 2023 costs were also impacted by: 1) a $71.4 billion upward loan reestimate

of the costs of its existing loan portfolio; and 2) $115.7 billion in upward modifications related to COVID-19

administrative actions, changes to repayment plans, and other programmatic changes.

• A $54.1 billion net cost increase at HHS was primarily due to $116.1 billion across the Medicare and Medicaid

benefit programs largely associated with increasing benefits. Notably, Medicare HI costs increased due to increases

in HI benefit expenses of $26.6 billion and contingent liability of $10.4 billion. Medicaid benefit expense increased

$19.1 billion from higher grant awards to the states due to the continuation of the COVID-19 relief, offset by $1.1

billion decrease in contingent liability expenses for the state plan amendments. HHS also experienced a $62.0 billion

decrease across all other HHS segments primarily due to decreased COVID-19 costs.

• A $138.8 billion increase at SSA, due to a 2.5 percent increase in the number of OASI beneficiaries, and the 8.7

percent COLA provided to beneficiaries in 2023. The OASI, DI, and SSI net cost increased by 12.0 percent, 6.0

percent, and 0.1 percent respectively. Total benefit expenses increased by $137.8 billion or 10.8 percent.

• A $181.5 billion increase in interest on debt held by the public primarily attributable to an increase in the

outstanding debt held by the public and an increase in the average interest rates, which were partially offset by a

decrease in inflation adjustments.

Chart 2 shows the composition of the government’s net cost for FY 2023, and Chart 3 shows the five-year trend in the

largest agency cost components. In FY 2023, approximately 87 percent of the federal government’s total net cost came from

only six agencies (HHS, VA, SSA, DOD, Treasury, USDA), and interest on the debt. The other 150-plus entities included in

the government’s FY 2023 Statement of Net Cost accounted for a combined 13 percent of the government’s total net cost for

FY 2023. HHS and SSA net costs for FY 2023 ($1.7 trillion and $1.4 trillion, respectively) are largely attributable to major

social insurance programs administered by these entities. VA net costs of $1.5 trillion support health, education and other

benefits programs for our nation’s veterans. DOD net costs of $1.0 trillion relate primarily to operations, readiness, and

support; personnel; research; procurement; and retirement and health benefits. Treasury net costs of $303.7 billion support a

broad array of programs that promote conditions for sustaining economic growth and stability, protecting the integrity of our

nation’s financial system, and effectively managing the U.S. government’s finances and resources. USDA net costs of $226.3

billion support a wide range of programs that provide effective, innovative, science-based public policy leadership in

agriculture, food and nutrition, natural resource protection and management, rural development, and related issues with a

commitment to deliver equitable and climate-smart opportunities that inspire and help America thrive.

MANAGEMENT’S DISCUSSION AND ANALYSIS

Tax and Other Revenues

As noted earlier, tax and other revenues from the Statement of Operations and Changes in Net Position are deducted

from total net cost to derive the government’s

“bottom line” net operating cost. Chart 4 shows that

total tax and other revenue decreased by $460.3

billion or 9.3 percent to $4.5 trillion for FY 2023.

This decrease is attributable mainly to an overall

decline in income tax collections, primarily from

individuals and corporations, coupled with

decreased deposits of earnings from the Federal

Reserve due to increased interest rates. Earned

revenues from Table 3 are not considered “taxes

and other revenue” and, thus, are not shown in

Chart 4. Individual income tax and tax

withholdings and corporate income taxes accounted

for about 83.1 percent and 8.2 percent of total

revenue, respectively in FY 2023; other revenues

from Chart 4 include Federal Reserve earnings,

excise taxes, unemployment taxes, and customs

duties.

As previously shown in Table 3, the decrease in tax and other revenue was more than offset by the decrease in net cost,

yielding a $753.8 billion decrease to the government’s bottom line net operating cost to $3.4 trillion for FY 2023.

Tax Expenditures

Tax and other revenues reported reflect the effects of tax expenditures, which are special exclusions, exemptions,

deductions, tax credits, preferential tax rates, and tax deferrals that allow individuals and businesses to reduce taxes they may

otherwise owe. Tax expenditures may be viewed as alternatives to other policy instruments, such as spending or regulatory

programs. For example, the government supports college attendance through both spending programs and tax expenditures.

The government uses Pell Grants to help low- and moderate-income students afford college and allows certain funds used to

meet college expenses to grow tax free in special college savings accounts. Tax expenditures may include deductions and

exclusions which reduce the amount of income subject to tax (e.g., deductions for personal residence mortgage interest). Tax

credits, which reduce tax liability dollar for dollar for the amount of credit (e.g., child tax credit), are also considered tax

expenditures. Tax expenditures may also allow taxpayers to defer tax liability.

Receipts in the calculation of surplus or deficit, and tax revenues in the calculation of net position, reflect the effect of

tax expenditures. As discussed in more detail in the Other Information section of this Financial Report, tax expenditures will

generally lower federal government receipts although tax expenditure estimates do not necessarily equal the increase in

federal revenues (or the change in the Budget balance) that would result from repealing these special provisions.

Tax expenditures are reported annually in the Analytical Perspectives of the Budget. In addition, current and past tax

expenditure estimates and descriptions can be found at the following location from Treasury’s Office of Tax Policy:

https://home.treasury.gov/policy-issues/tax-policy/tax-expenditures.

Assets and Liabilities

The government’s net position at the end of the fiscal year is derived by netting the government’s assets against its

liabilities, as presented in the Balance Sheet (summarized in Table 4).

The Balance Sheet does not include the financial

value of the government’s sovereign powers to tax, regulate commerce, or set monetary policy or value of nonoperational

resources of the government, such as national and natural resources, for which the government is a steward. In addition, as is

the case with the Statement of Operations and Changes in Net Position, the Balance Sheet includes a separate presentation of

the portion of net position related to funds from dedicated collections. Moreover, the government’s exposures are broader

than the liabilities presented on the Balance Sheet. The government’s future social insurance exposures (e.g., Medicare and

Social Security) as well as other fiscal projections, commitments and contingencies, are reported in separate statements and

disclosures. This information is discussed later in this MD&A section, the financial statements, and RSI sections of this

Financial Report.

As shown in Table 4, the government’s Balance Sheet includes an adjustment for unmatched transactions and balances, which represent unresolved

differences in intra-governmental activity and balances between federal entities. These amounts are described in greater detail in the Other Information

section of this Financial Report.

MANAGEMENT’S DISCUSSION AND ANALYSIS

Assets

From Table 4, as of September 30, 2023, more than three-fourths of the government’s $5.4 trillion in reported assets is

comprised of: 1) cash and other monetary assets ($922.2 billion); 2) inventory and related property, net ($423.0 billion); 3)

loans receivable, net ($1.7 trillion); and 4) net PP&E ($1.2 trillion).

Chart 5 compares the balances of these and other

Balance Sheet amounts as of September 30, 2023, and 2022.

Cash and other monetary assets ($922.2 billion) is comprised largely of the operating cash of the U.S. government.

Operating cash held by Treasury, which represents balances from tax collections, federal debt receipts, and other various

receipts net of cash outflows for federal debt repayments and other payments, increased $21.9 billion (3.5 percent) to $638.9

billion (see Note 2—Cash and Other Monetary Assets).

Inventory and related property is comprised of inventory; OM&S; stockpile materials; commodities; and seized,

forfeited, and foreclosed property. Inventory is tangible personal property that is either held for sale, in the process of

production for sale, or to be consumed in the production of goods for sale or in the provision of services for a fee (e.g., raw

materials, finished goods, spare and repair parts, clothing and textiles, and fuels). OM&S consists of tangible personal

property to be consumed in normal operations (e.g., spare and repair parts, ammunition, and tactical missiles). Stockpile

materials are strategic and critical materials held due to statutory requirements for use in national defense, conservation, or

local/national emergencies. Contributing agencies include DOD, DOE, Treasury, DHS, and HHS (see Note 5—Inventory and

Related Property, Net).

For financial reporting purposes, other than multi-use heritage assets, stewardship assets of the government are not recorded as part of PP&E. Stewardship

assets are comprised of stewardship land and heritage assets. Stewardship land primarily consists of public domain land (e.g., national parks, wildlife

refuges). Heritage assets include national monuments and historical sites that among other characteristics are of historical, natural, cultural, educational, or

artistic significance. See Note 26—Stewardship Property, Plant, and Equipment.

MANAGEMENT’S DISCUSSION AND ANALYSIS

The federal government’s direct loans and loan guarantee programs are used to promote the nation’s welfare by making

financing available to segments of the

population not served adequately by

non-federal institutions, or otherwise

providing for certain activities or

investments. For those unable to afford

credit at the market rate, federal credit

programs provide subsidies in the form

of direct loans offered at an interest

rate lower than the market rate. For

those to whom non-federal financial

institutions are reluctant to grant credit

because of the high risk involved,

federal credit programs guarantee the

payment of these non-federal loans and

absorb the cost of defaults. For

example, Education supports

individuals engaged in education

programs through a variety of student

loan, grant and other assistance programs. USDA administers loan programs to support the nation’s farming and agriculture

community. HUD loan programs support affordable homeownership, as well as the construction and rehabilitation of housing

projects for the elderly and persons with disabilities. SBA loan programs enable the establishment and vitality of small

businesses and assist in the economic recovery of communities after disasters. Loans receivable consists primarily of direct

loans disbursed by the government, receivables related to guaranteed loans that have defaulted, and certain receivables for

guaranteed loans that the government has purchased from lenders. The federal government’s direct loan portfolio increased

by $261.0 billion (18.2 percent) to $1.7 trillion during FY 2023, with Education and SBA together accounting for more than

three-fourths of the total.

Loan guarantee programs are another form of federal lending. For those to whom non-federal financial institutions are

reluctant to grant credit because of the high risk involved, federal credit programs guarantee the payment of these non-federal

loans and absorb the cost of defaults. Significant changes to the federal government’s loans receivable, net, and loan

guarantee liabilities, as discussed in Note 4, include:

• Education has loan programs that are authorized by Title IV of the Higher Education Act of 1965. The William D.

Ford Federal Direct Loan Program (referred to as the Direct Loan Program), was established in FY 1994 and offers

four types of educational loans: Stafford, Unsubsidized Stafford, Parent Loan for Undergraduate Students, and

consolidation loans. Education’s net loans receivable for its Direct Loan Program increased from $816.6 billion to

$1.0 trillion (60.8 percent of total loans receivable, net). This increase was largely due to the reversal of the broad-

based student loan debt relief as a result of the Supreme Court’s ruling in Biden v. Nebraska. Education had

announced the broad-based relief during FY 2022 to address the financial harms of the pandemic by smoothing the

transition back to repayment and helping borrowers at highest risk of delinquencies or default once payments

resumed. In addition, all federal wage garnishments and collections actions for borrowers with federally held loans

in default were halted.

• Treasury purchased a $50 billion note issued by a trust created by FDIC in its receivership capacity and backed by a

guarantee from the FDIC in its corporate capacity.

• SBA makes loans to microloan intermediaries and provides a direct loan program that assists homeowners, renters

and businesses recover from disasters. SBA’s Disaster Assistance Loan Program makes direct loans to disaster

survivors under four categories: 1) physical disaster loans to repair or replace damaged homes and personal

property; 2) physical disaster loans to businesses of any size; 3) EIDLs to eligible small business and nonprofit

organizations without credit available elsewhere; and 4) economic injury loans to eligible small businesses affected

by essential employees called up to active duty in the military reserves. In FY 2023 SBA’s credit program

receivables decreased by $49.6 billion from FY 2022 due largely to write-offs of direct disaster loans.

• Fluctuations in loan programs for HUD, DOT, and DFC.

Federal government general PP&E includes many of the physical resources that are vital to the federal government’s

ongoing operations, including buildings, structures, facilities, equipment, internal use software, and general-purpose land.

DOD comprises approximately 67.4 percent of the government’s reported general PP&E of $1.2 trillion as of September 30,

2023. See Note 6—General Property, Plant, and Equipment, Net.

“Other” assets of $1.1 trillion in Table 4 and Chart 5 includes: 1) $319.9 billion in accounts receivable, net; 2) $252.7

billion in “Advances and Prepayments”; and 3) $240.4 billion in investments in GSEs. Treasury comprises approximately

57.7 percent of the government’s reported accounts receivable, net, mostly in the form of reported taxes receivable, which

consist of unpaid assessments due from taxpayers, unpaid taxes related to IRC section 965, and deferred payments for

employer’s share of FICA taxes pursuant to the CARES Act. Taxes receivable, net, decreased by $55.0 billion during FY

MANAGEMENT’S DISCUSSION AND ANALYSIS

Prior to 1917, Congress approved each debt issuance. In 1917, to facilitate planning

in World War I, Congress and the President established a dollar ceiling for federal

borrowing. With the Public Debt Act of 1941 (P.L. 77-7), Congress and the

President set an overall limit of $65 billion on Treasury debt obligations that could

be outstanding at any one time. Since then, Congress and the President have enacted

a number of measures affecting the debt limit, including several in recent years.

Congress and the President most recently suspended the debt limit from June 3,

2023 through January 1, 2025. It is important to note that increasing or suspending

the debt limit does not increase spending or authorize new spending; rather, it

permits the U.S. to continue to honor pre-existing commitments to its citizens,

businesses, and investors domestically and around the world.

2023, primarily due to the reduction in IRC 965(h) and to payments to Treasury of the deferred employer portion of FICA

Social Security taxes. (See Note 3—Accounts Receivable, Net). Advances and Prepayments represent funds disbursed in

contemplation of the future performance of services, receipt of goods, the incurrence of expenditures, or the receipt of other

assets. The $45.4 billion decrease in this amount was largely attributable to a reduction in the estimated amount of eligible

costs incurred by state, local, territorial, and tribal governments pursuant COVID-19 legislation (See Note 9—Advances and

Prepayments). Investments in GSEs refers to actions taken by Treasury in the wake of the 2008 financial crisis to maintain

the solvency of the GSEs (Fannie Mae and Freddie Mac) so they can continue to fulfill their vital roles in the mortgage

market while the administration and Congress determine what structural changes should be made to the housing finance

system. (See Note 8—Investment in Government-Sponsored Enterprises).

Liabilities

As indicated in Table 4 and Chart 6, of the

government’s $42.9 trillion in total liabilities, the

largest liability is federal debt and interest payable,

the balance of which increased by $2.0 trillion (8.3

percent) to $26.3 trillion as of September 30, 2023.

The other major component of the

government’s liabilities is federal employee and

veteran benefits payable (i.e., the government’s

pension and other benefit plans for its military and

civilian employees), which increased $1.5 trillion

(11.8 percent) during FY 2023, to about $14.3

trillion. This total amount is comprised of $3.3

trillion in benefits payable for the current and

retired civilian workforce, and $11.1 trillion for the

military and veterans. OPM administers the largest

civilian pension plan, covering nearly 2.8 million

active employees, including the Postal Service, and

more than 2.7 million annuitants, including

survivors. The DOD military pension plan covers

about 2.1 million current military personnel (including active service, reserve, and National Guard) and approximately 2.4

million retirees and survivors.

Federal Debt

The budget surplus or deficit is the difference between total federal spending and receipts (e.g., taxes) in a given year.

The government borrows from the public (increases federal debt levels) to finance deficits. During a budget surplus (i.e.,

when receipts exceed spending), the government typically uses those excess funds to reduce the debt held by the public. The

Statement of Changes in Cash Balance from Budget and Other Activities reports how the annual budget surplus or deficit

relates to the federal

government’s borrowing and

changes in cash and other

monetary assets. It also explains

how a budget surplus or deficit

normally affects changes in debt

balances.

The government’s federal

debt and interest payable

(Balance Sheet liability), which

is comprised of publicly-held

debt and accrued interest

payable, increased $2.0 trillion

(8.3 percent) to $26.3 trillion as of September 30, 2023. It is comprised of Treasury securities, such as bills, notes, and bonds,

net of unamortized discounts and premiums issued or sold to the public; and accrued interest payable. The “public” consists

of individuals, corporations, state and local governments, FRB, foreign governments, and other entities outside the federal

government. As indicated above, budget surpluses have typically resulted in borrowing reductions, and budget deficits have

conversely yielded borrowing increases. However, the government’s debt operations are generally much more complex. Each

year, trillions of dollars of debt matures and new debt is issued to take its place. In FY 2023, new borrowings were $20.2

trillion, and repayments of maturing debt held by the public were $18.2 trillion, both increases over FY 2022. The $2.0

trillion increase in publicly held debt and accrued interest payable is largely attributable to the need to finance the

government’s operations.

MANAGEMENT’S DISCUSSION AND ANALYSIS

In addition to debt held by the public, the government has about $6.9 trillion in intra-governmental debt outstanding,

which arises when one part of the government borrows from another. It represents debt issued by Treasury and held by

government accounts, including the Social Security ($2.8 trillion) and Medicare ($353.9 billion) Trust Funds. Intra-

governmental debt is primarily held in government trust funds in the form of special nonmarketable securities by various

parts of the government. Laws establishing government trust funds generally require excess trust fund receipts (including

interest earnings) over disbursements to be invested in these special securities. Because these amounts are both liabilities of

Treasury and assets of the government trust funds, they are eliminated as part of the consolidation process for the

government-wide financial statements (see Financial Statement Note 12). When those securities are redeemed, e.g., to pay

Social Security benefits, the government must obtain the resources necessary to reimburse the trust funds. The sum of debt

held by the public and intra-governmental debt equals gross federal debt, which (with some adjustments), is subject to a

statutory ceiling (i.e., the debt limit). Note that when intra-governmental debt decreases, debt held by the public will increase

by an equal amount (if the general account of the U.S. government is in deficit), so that there is no net effect on gross federal

debt. At the end of FY 2023, debt subject to the statutory limit was $33.1 trillion.

The federal debt held by the public measured as a percent of GDP (debt-to-GDP ratio) (Chart 7) compares the country’s

debt to the size of its economy, making this

measure sensitive to changes in both. Over time,

the debt-to-GDP ratio has varied widely:

• For most of the nation’s history,

through the first half of the 20

century,

the debt-to-GDP ratio has tended to

increase during wartime and decline

during peacetime.

• Chart 7 shows that wartime spending

and borrowing pushed the debt-to-GDP

ratio to an all-time high of 106 percent

in 1946, soon after the end of World

War II, but it decreased rapidly in the

post-war years.

• The ratio grew rapidly from the mid-

1970s until the early 1990s. Strong

economic growth and fundamental

fiscal decisions, including measures to

reduce the federal deficit and

implementation of binding PAYGO

rules (which require that new tax or

spending laws not add to the deficit), generated a significant decline in the debt-to-GDP ratio, from a peak of 48

percent in FYs 1993-1995, to 31 percent in 2001.

• The debt-to-GDP ratio rose significantly in 2008-2009 during the financial crisis and again in 2020-2021 during the

pandemic reflecting the government’s responses to both events and the resulting significant spending and deficit

increases, as well as the economic challenges experienced during both periods.

• During the first decade of the 21

century, PAYGO rules were allowed to lapse, significant tax cuts were

implemented, entitlements were expanded, and spending related to defense and homeland security increased. By

September 2008, the debt-to-GDP ratio was 39 percent of GDP.

• PAYGO rules were reinstated in 2010, but the extraordinary demands of the 2008 economic and financial crisis and

the consequent actions taken by the federal government, combined with slower economic growth in the wake of the

crisis, pushed the debt-to-GDP ratio up to 74 percent by the end of FY 2014.

• The extraordinary demands of the pandemic, the government’s response, and pressures on the economy contributed

to a rise in the debt-to-GDP ratio to approximately 100 percent during FY 2020 and FY 2021.

Beginning in FY 2021 and continuing into FY 2022 and again in FY 2023, Treasury faced two delays in raising the statutory debt limit that required it to

depart from its normal debt management procedures and to invoke legal authorities to avoid exceeding the statutory debt limit. During these periods,

extraordinary measures taken by Treasury have resulted in federal debt securities not being issued to certain federal government accounts with the securities

being restored including lost interest to the affected federal government accounts subsequent to the end of the delay period. During the first delay, Treasury

took extraordinary actions from August 2, 2021, through December 15, 2021. On October 14, 2021, P.L. 117-50 was enacted which raised the statutory debt

limit by $480.0 billion, from $28,401.5 billion to $28,881.5 billion. Even with this increase, extraordinary measures continued in order for Treasury to

manage below the debt limit. On December 16, 2021, P.L. 117-73 was enacted, increasing the debt limit by $2.5 trillion to $31.4 trillion.

Due to a second

delay in raising the debt limit, Treasury began taking extraordinary actions from January 19, 2023, through June 2, 2023. On June 3, 2023, P.L. 118-5 was

enacted, suspending the debt limit through January 1, 2025. See Note 12—Federal Debt and Interest Payable.

MANAGEMENT’S DISCUSSION AND ANALYSIS

• The debt was approximately 97 percent of GDP at the end of FY 2023. This ratio increased during FY 2023 because

debt grew faster than GDP.

15,16

From Chart 7, since 1940, the average debt-to-GDP ratio is 50 percent.

See Note 29—COVID-19 Activity, as well as the referenced agencies’ FY 2023 financial statements for additional

information about the financial effects of the federal government’s response to the pandemic. See Note 30—Subsequent

Events for information about events that occurred after the end of the fiscal year that may affect the government’s financial

results.

The Economy in FY 2023

A consideration of U.S. economic

performance provides useful context when

evaluating the government’s financial

statements. In FY 2023, the economy’s growth

accelerated and yet inflation continued to slow.

Payroll job creation remained relatively strong

even as the rebalancing of labor demand and

supply gained momentum. Personal saving

rates ended up higher over the year—though

they remained below pre-pandemic levels. In

addition, supply chains (which were stressed in

FY 2022 due to lingering effects of the

pandemic and Russia’s invasion of Ukraine)

recovered further, lessening inflationary

pressures. This significant progress on the

inflation front has supported real (inflation-

adjusted) income and wage growth.

As summarized in Table 5, the real GDP

grew by 2.9 percent over the four quarters of

FY 2023. PCE and net exports were the largest contributors to economic growth. Over the four quarters of FY 2023, growth

of PCE accelerated to 2.2 percent, after growing 1.9 percent in the previous fiscal year; net exports added 0.2 percentage

points to growth in FY 2023, stepping up from an 0.1 percentage point contribution in FY 2022. In addition, total government

consumption and investment increased in FY 2023. In the previous fiscal year, government spending had declined 0.6 percent

as pandemic-related financial support programs unwound, but public expenditures rose 4.8 percent in FY 2023—partly

reflecting higher real spending by state and local governments as well as higher federal defense expenditures. Meanwhile,

business fixed investment and inventories made positive, though smaller contributions. Business fixed investment expanded

by 4.1 percent, slowing from a gain of 5.8 percent over the previous four quarters. Inventory investment contributed 0.2

percentage points to growth in FY 2023, or one-half the 0.4 percentage point addition to growth in FY 2022, as firms built up

inventories more slowly. In addition, the drag from residential investment slowed somewhat despite rising mortgage rates:

residential investment growth dropped 11.4 percent in FY 2022, but the decline tapered to 7.2 percent in the most recent

fiscal year. Notably, the final quarter of FY 2023 saw an upturn in residential investment, after nine consecutive quarters of

decline.

Labor markets continued to generate a substantial number of jobs but also showed signs of very gradual easing over the

course of FY 2023. On average, employers added 255,000 payroll jobs per month in FY 2023, a relatively rapid pace but

about one-half the monthly average of 492,000 generated in FY 2022. Twice during FY 2023 the unemployment rate dropped

to a 54-year low of 3.4 percent but climbed to 3.8 percent by the end of the fiscal year, pushed higher by improved labor

force participation rates, including participation among older workers and women. In addition to increased labor supply,

labor demand gradually eased. From September 2022 to September 2023, the number of job openings fell from 10.9 million

to 9.4 million—still elevated but only 1.8 million above the pre-pandemic peak. Moreover, the ratio of vacancies to

unemployed persons declined by 0.4 units to 1.5 job openings per unemployed person, suggesting some loosening of

conditions but still above the 1.2 vacancies per unemployed person averaged in 2018 and 2019.

Inflation slowed markedly during FY 2023, as supply-chain disruptions receded, demand for goods and services became

more balanced, and energy and food prices eased. Nonetheless, shelter price inflation remained very high, partly offsetting

progress in reducing other components of core inflation (which excludes good and energy). The CPI rose 3.7 percent over the

12 months of FY 2023, less than half the 8.2 percent pace during the previous fiscal year. Core inflation was 4.1 percent over

the fiscal year ending September 2023, decelerating from the 6.6 percent pace during FY 2022.

GDP, in this context, refers to nominal GDP.

The increase in debt of $2.0 trillion was greater than the FY 2023 deficit of $1.7 trillion primarily because of the budgetary cost reduction relating to the

broad-based student loan debt relief reversal resulting from the Supreme Court’s determination in Biden v. Nebraska.

MANAGEMENT’S DISCUSSION AND ANALYSIS

Although gains in nominal income and wages slowed to a more normal pace, lower inflation helped to boost purchasing

power in real terms. Real disposable personal income increased 3.8 percent over the 12 months of FY 2023, more than

recovering from the 2.3 percent decline during the previous fiscal year. Although the pace of nominal average hourly

earnings growth for production and non-supervisory workers slowed in FY 2023 to 4.4 percent, it was still relatively strong.

Combined with slower inflation, real average hourly earnings rose 0.8 percent during FY 2023, after declining 2.4 percent in

the previous fiscal year.

An Unsustainable Fiscal Path

An important purpose of the Financial Report is to help citizens understand current fiscal policy and the importance and

magnitude of policy reforms necessary to make it sustainable. This Financial Report includes the SLTFP and a related note

disclosure (Note 24). The Statements display the PV of 75-year projections of the federal government’s receipts and non-

interest spending

for FY 2023 and FY 2022.

Fiscal Sustainability

A sustainable fiscal policy is defined as one where the debt-to-GDP ratio is stable or declining over the long term. The

projections based on the assumptions in this Financial Report indicate that current policy is not sustainable. This Financial

Report presents data, including debt, as a percent of GDP to help readers assess whether current fiscal policy is sustainable.

The debt-to-GDP ratio was approximately 97 percent at the end of FY 2023, which is similar to (but slightly above) the debt-

to-GDP ratio at the end of FY 2022. The long-term fiscal projections in this Financial Report are based on the same

economic and demographic assumptions that underlie the 2023 SOSI, which is as of January 1, 2023. As discussed below, if

current policy is left unchanged and based on this Financial Report’s assumptions, the debt-to-GDP ratio is projected to

exceed 200 percent by 2047 and reach 531 percent in 2098. By comparison, under the 2022 projections, the debt-to-GDP

ratio exceeded 200 percent one year earlier in 2046 and reached 566 percent in 2097. Preventing the debt-to-GDP ratio from

rising over the next 75 years is estimated to require some combination of spending reductions and revenue increases that

amount to 4.5 percent PV of GDP over the period. While this estimate of the “75-year fiscal gap” is highly uncertain, it is

nevertheless nearly certain that current fiscal policies cannot be sustained indefinitely.

Delaying action to reduce the fiscal gap increases the magnitude of spending and/or revenue changes necessary to

stabilize the debt-to-GDP ratio as shown in Table 6 below.

The estimates of the cost of policy delay assume policy does not affect GDP or other economic variables. Delaying

fiscal adjustments for too long raises the risk that growing federal debt would increase interest rates, which would, in turn,

reduce investment and ultimately economic growth.

The projections discussed here assume current policy

remains unchanged, and hence, are neither forecasts nor

predictions. Nevertheless, the projections demonstrate that policy changes must be enacted to move towards fiscal

sustainability.

The Primary Deficit, Interest, and Debt

The primary deficit – the difference between non-interest spending and receipts – is the determinant of the debt-to-GDP

ratio over which the government has the greatest control (the other determinants include interest rates and growth in GDP).

Chart 8 shows receipts, non-interest spending, and the difference – the primary deficit – expressed as a share of GDP. The

primary deficit-to-GDP ratio spiked during 2009 through 2012 due to the 2008-09 financial crisis and the ensuing severe

recession, as well as the effects of the government’s response thereto. These elevated primary deficits resulted in a sharp

increase in the ratio of debt to GDP, which rose from 39 percent at the end of 2008 to 70 percent at the end of 2012. As an

economic recovery took hold, the primary deficit ratio fell, averaging 2.1 percent of GDP over 2013 through 2019. The

primary deficit-to-GDP ratio again spiked in 2020, rising to 13.3 percent of GDP in 2020, due to increased spending to

address the COVID-19 pandemic and lessen the economic impacts of stay-at-home and social distancing orders on

individuals, hard-hit industries, and small businesses. Spending remained elevated in 2021 due to additional funding to

support economic recovery, but increased receipts reduced the primary deficit-to-GDP ratio to 10.8 percent.

The primary deficit-to-GDP ratio in 2023 was 3.8 percent, increasing by 0.2 percentage points from 2022 primarily due

to lower receipts, partially offset by lower non-interest spending. The primary deficit-to-GDP ratio is projected to fall to 3.2

For the purposes of the SLTFP and this analysis, spending is defined in terms of outlays. In the context of federal budgeting, spending can either refer to:

1) budget authority – the authority to commit the government to make a payment; 2) obligations – binding agreements that will result in either immediate or

future payment; or 3) outlays, or actual payments made.

Current policy in the projections is based on current law, but includes certain adjustments, such as extension of certain policies that expire under current

law but are routinely extended or otherwise expected to continue (e.g., reauthorization of the Supplemental Nutrition Assistance Program). See Note 24 for

additional discussion of departures of current policy from current law.

MANAGEMENT’S DISCUSSION AND ANALYSIS

percent in 2024, based on the technical assumptions in this Financial Report, and projected changes in receipts and outlays,

including an estimated decrease in Medicaid outlays as the expiration of temporary measures related to the COVID-19

pandemic winds down. After 2024, increased spending for Social Security and health programs due to the continued

retirement of the baby boom generation, is projected to result in increasing primary deficit ratios that peak at 4.4 percent of

GDP in 2043. Primary deficits as a share of GDP gradually decrease beyond that point, as aging of the population continues

at a slower pace and reach 2.8 percent of GDP in 2098, the last year of the projection period.

Trends in the primary deficit are heavily influenced by tax receipts. The receipt share of GDP was markedly depressed

in 2009 through 2012 because of the recession and tax reductions enacted as part of the ARRA and the Tax Relief,

Unemployment Insurance Reauthorization, and Job Creation Act of 2010. The share subsequently increased to nearly 18.0

percent of GDP by 2015, before falling to 16.3 percent in 2018, after enactment of the TCJA.

Receipts reached 19.6 percent of GDP

in 2022, the highest share of GDP since

2000, then fell to 16.5 percent of GDP in

2023 due to a decrease in individual income

tax receipts and lower deposits of earnings

by the Federal Reserve. Receipts are

projected to gradually increase to 18.1

percent of GDP in 2033 when corporation

income tax and other receipts stabilize as a

share of GDP. After 2033, receipts grow

slightly more rapidly than GDP over the

projection period as increases in real (i.e.,

inflation-adjusted) incomes cause more

taxpayers and a larger share of income to

fall into the higher individual income tax

brackets.

On the spending side, the non-interest

spending share of GDP was 20.3 percent in

2023, 2.9 percentage points below the share

of GDP in 2022, which was 23.2 percent.

The ratio of non-interest spending to GDP

is projected to fall to 20.1 percent in 2024

and then rise gradually, reaching 23.3 percent of GDP in 2076. The ratio of non-interest spending to GDP then declines to

22.7 percent in 2098, the end of the projection period. These increases are principally due to faster growth in Social Security,

Medicare, and Medicaid spending (see Chart 8). The aging of the baby boom generation, among other factors, is projected to

increase the spending shares of GDP of Social Security and Medicare by about 0.7 and 1.7 percentage points, respectively,

from 2024 to 2040. After 2040, the Social Security and Medicare spending shares of GDP continue to increase in most years,

albeit at a slower rate, due to projected increases in health care costs and population aging, before declining toward the end of

the projection period.

On a PV basis, deficit projections reported in the FY 2023 Financial Report decreased in both present-value terms and

as a percent of the current 75-year PV of GDP. As shown in the SLTFP, this year’s estimate of the 75-year PV imbalance of

receipts less non-interest spending is 3.8 percent of the current 75-year PV of GDP ($73.2 trillion), compared to 4.2 percent

($79.5 trillion) as was projected in last year’s Financial Report. As discussed in Note 24, these decreases are attributable to

the net effect of the following factors:

• Changes due to program-specific actuarial assumptions is the effect of new Social Security, Medicare, and Medicaid

program-specific actuarial assumptions, which decrease the fiscal imbalance as a share of the 75-year PV of GDP by

0.6 percentage points ($10.6 trillion). This change is primarily attributable to near-term growth rate assumptions for

Medicaid. In the 2022 projections, growth rates through 2027 followed projections in the 2018 Medicaid Actuarial

Report. Growth rates for the 2023 projections are based on NHE data and reflect the expiration of temporary

measures related to the COVID-19 pandemic.

• Changes due to updated budget data increased the fiscal imbalance by 0.4 percentage points ($7.4 trillion). This

change stems from actual budget results for FY 2023 and baseline estimates published in the FY 2024 President’s

Budget, plus adjustments to discretionary spending and receipts from legislation enacted in the FRA (P.L. 118-5).

This deterioration in the fiscal position is largely due to a higher 75-year PV of discretionary spending on defense

programs and mandatory spending on programs other than Social Security, Medicare, and Medicaid, and lower

Other possible paths for the receipts-to-GDP ratio and projected debt held by the public are shown in the “Alternative Scenarios” RSI section of this

Financial Report.

Legislation enacted toward the end of FY 2022 includes: An act making appropriations for Legislative Branch for the fiscal year ending September 30,

2022, and for other purposes (P.L. 117-167); PACT Act (P.L. 117-168); and an act to provide for reconciliation pursuant to title II of S.Con.Res. 14 (P.L.

117-169).

MANAGEMENT’S DISCUSSION AND ANALYSIS

individual income taxes as a share of wages and salaries. That deterioration is partially offset by a lower 75-year PV

of spending on non-defense discretionary programs—attributable to the FRA caps—and higher other receipts.

• Changes due to economic and demographic assumptions decreased the fiscal imbalance by 0.3 percentage points

($5.0 trillion). Contributing to this improvement in the imbalance are higher wages that increase receipts and GDP

growth rates that lead to reduced spending as a percentage of GDP. The 75-year PV of GDP for this year’s

projections is $1,919.1 trillion, greater than last year’s $1,872.9 trillion.

• Change in reporting period is the effect of shifting calculations from 2023 through 2097 to 2024 through 2098 and

increased the imbalance of the 75-year PV of receipts less non-interest spending by $1.9 trillion, which has a

negligible effect on the 75-year PV of GDP.

The net effect of the changes in the table above, equal to the penultimate row in the SLTFP, shows that this year’s

estimate of the overall 75-year PV of receipts less non-interest spending is negative 3.8 percent of the 75-year PV of GDP

(negative $73.2 trillion, as compared to a GDP of $1,919.1 trillion).

One of the most important assumptions underlying the projections is that current federal policy does not change. The

projections are therefore neither forecasts nor predictions, and do not consider large infrequent events such as natural

disasters, military engagements, or economic crises. By definition, they do not build in future changes to policy. If policy

changes are enacted, perhaps in response to projections like those presented here, then actual fiscal outcomes will be different

than those projected.

Another important assumption is the future growth of health care costs. As discussed in Note 25, these future growth

rates – both for health care costs in the economy generally and for federal health care programs such as Medicare, Medicaid,

and PPACA exchange subsidies – are highly uncertain. In particular, enactment of the PPACA in 2010 and the MACRA in

2015 lowered payment rate updates for Medicare hospital and physician payments whose long-term effectiveness of which is

not yet clear. The Medicare spending projections in the long-term fiscal projections are based on the projections in the 2023

Medicare Trustees Report, which assume the PPACA and MACRA cost control measures will be effective in producing a

substantial slowdown in Medicare cost growth.

As discussed in Note 25, the Medicare projections are subject to much uncertainty about the ultimate effects of these

provisions to reduce health care cost growth. Certain features of current law may result in some challenges for the Medicare

program including physician payments, payment rate updates for most non-physician categories, and productivity

adjustments. Payment rate updates for most non-physician categories of Medicare providers are reduced by the growth in

economy-wide private nonfarm business total factor productivity although these health providers have historically achieved

lower levels of productivity growth. Should payment rates prove to be inadequate for any service, beneficiaries’ access to and

the quality of Medicare benefits would deteriorate over time, or future legislation would need to be enacted that would likely

increase program costs beyond those projected under current law. For the long-term fiscal projections, that uncertainty also

affects the projections for Medicaid and exchange subsidies, because the cost per beneficiary in these programs is assumed to

grow at the same reduced rate as Medicare cost growth per beneficiary. Other key assumptions, as discussed in greater detail

in Note 24—Long-Term Fiscal Projections, include the following:

• Medicaid spending projections start with the NHE projections which are based on recent trends in Medicaid

spending, as well as Trustees Report assumptions. NHE projections, which end in 2031, are adjusted to accord with

the actual Medicaid spending in FY 2023. After 2031, the number of beneficiaries is projected to grow at the same

rate as total population. Medicaid cost per beneficiary is assumed to grow at the same rate as Medicare benefits per

beneficiary after 2034, after a three-year phase-in to the Medicare per beneficiary growth rate over the period 2032-

2034. The most recent Social Security and Medicare Trustees Reports were released in March 2023.

• Other mandatory spending includes federal employee retirement, veterans’ disability benefits, and means-tested

entitlements other than Medicaid. Current mandatory spending components that are judged permanent under current

policy are assumed to increase by the rate of growth in nominal GDP starting in 2024, implying that such spending

will remain constant as a percent of GDP.

• Defense and non-defense discretionary spending follows the FRA caps through 2025, then grows with GDP starting

in 2026.

• Debt and interest spending is determined by projected interest rates and the level of outstanding debt held by the

public. The long-run interest rate assumptions accord with those in the 2023 Social Security Trustees Report. The

average interest rate over this year’s projection period is 4.5 percent, approximately the same as the 2022 Financial

Report. Debt at the end of each year is projected by adding that year’s deficit and other financing requirements to the

debt at the end of the previous year.

• Receipts (other than Social Security and Medicare payroll taxes) is comprised of individual income taxes, corporate

income taxes and other receipts.

o Individual income taxes were based on the share of individual income taxes of salaries and wages in the current

law baseline projection in the FY 2024 President’s Budget, and the salaries and wages projections from the

Social Security 2023 Trustees Report. That baseline accords with the tendency of effective tax rates to increase

as growth in income per capita outpaces inflation (also known as “bracket creep”) and the expiration dates of

individual income and estate and gift tax provisions of the TCJA. Individual income taxes are projected to

MANAGEMENT’S DISCUSSION AND ANALYSIS

increase gradually from 19 percent of wages and salaries in 2024, to 29 percent of wages and salaries in 2098 as

real taxable incomes rise over time and an increasing share of total income is taxed in the higher tax brackets.

o Corporation tax receipts as a percent of GDP reflect the economic and budget assumptions used in developing

the FY 2024 President’s Budget ten-year baseline budgetary estimates through the first ten projection years,

after which they are projected to grow at the same rate as nominal GDP. Corporation tax receipts fall from 1.7

percent of GDP in 2024 to 1.2 percent of GDP in 2033, where they stay for the remainder of the projection

period.

o Other receipts, including excise taxes, estate and gift taxes, customs duties, and miscellaneous receipts, also

reflect the FY 2024 President’s Budget baseline levels as a share of GDP throughout the budget window, and

grow with GDP outside of the budget window. The ratio of other receipts, to GDP is estimated to increase from

1.1 percent in 2024 to 1.2 percent by 2027 where it remains through the projection period.

• Projections for the other categories of receipts and spending are consistent with the economic and demographic

assumptions in the Trustees Reports and include updates for actual budget results for FY 2023 or budgetary

estimates from the FY 2024 President’s Budget.

The primary deficit-to-GDP projections in Chart 8, projections for interest rates, and projections for GDP together

determine the debt-to-GDP ratio projections shown in Chart 9. That ratio was approximately 97 percent at the end of FY

2023 and under current policy is

projected to exceed the historic high of

106 percent in 2028, rise to 200 percent

by 2047 and reach 531 percent by 2098.

The change in debt held by the public

from one year to the next generally

represents the budget deficit, the

difference between total spending and

total receipts. The debt-to-GDP ratio

rises continually in great part because

primary deficits lead to higher levels of

debt, which lead to higher net interest

expenditures, and higher net interest

expenditures lead to higher debt.

The

continuous rise of the debt-to-GDP ratio

indicates that current policy is

unsustainable.

These debt-to-GDP projections are

lower than the corresponding

projections in both the 2022 and 2021

Financial Reports. For example, the last

year of the 75-year projection period used in the FY 2021 Financial Report is 2096. In the FY 2023 Financial Report, the

debt-to-GDP ratio for 2096 is projected to be 518 percent, which compares with 559 and 701 percent for the 2096 projection

year in the FY 2022 Financial Report and the FY 2021 Financial Report, respectively.

The Fiscal Gap and the Cost of Delaying Policy Reform

The 75-year fiscal gap is one measure of the degree to which current policy is unsustainable. It is the amount by which

primary surpluses over the next 75 years must, on average, rise above current-policy levels in order for the debt-to-GDP ratio

in 2098 to remain at its level in 2023. The projections show that projected primary deficits average 3.8 percent of GDP over

the next 75 years under current policy. If policies were adopted to eliminate the fiscal gap, the average primary surplus over

the next 75 years would be 0.6 percent of GDP, 4.5 percentage points higher than the projected PV of receipts less non-

interest spending shown in the financial statements. Hence, the 75-year fiscal gap is estimated to equal to 4.5 percent of GDP.

This amount is, in turn, equivalent to 23.8 percent of 75-year PV receipts and 19.8 percent of 75-year PV non-interest

spending. This estimate of the fiscal gap is 0.4 percentage points smaller than was estimated in the FY 2022 Financial Report

(4.9 percent of GDP).

In these projections, closing the fiscal gap requires running substantially positive primary surpluses, rather than simply

eliminating the primary deficit. The primary reason is that the projections assume future interest rates will exceed the growth

rate of GDP. Achieving primary balance (that is, running a primary surplus of zero) implies that the debt grows each year by

the amount of interest spending, which under these assumptions would result in debt growing faster than GDP.

The change in debt each year is also affected by certain transactions not included in the budget deficit, such as changes in Treasury’s cash balances and the

nonbudgetary activity of federal credit financing accounts. These transactions are assumed to hold constant at about 0.3 percent of GDP each year, with the

same effect on debt as if the primary deficit was higher by that amount.

See the Note 24 of the FY 2022 Financial Report of the U.S. Government for more information about changes in the long-term fiscal projections between

FYs 2022 and 2021.

MANAGEMENT’S DISCUSSION AND ANALYSIS

Table 6 shows the

cost of delaying policy

reform to close the fiscal

gap by comparing policy

reforms that begin in three

different years. Immediate

reform would require

increasing primary

surpluses by 4.5 percent of

GDP on average between

2024 and 2098 (i.e., some

combination of reducing spending and increasing revenue by a combined 4.5 percent of GDP on average over the 75-year

projection period). Table 6 shows that delaying policy reform forces larger and more abrupt policy reforms over shorter

periods. For example, if policy reform is delayed by 10 years, closing the fiscal gap requires increasing the primary surpluses

by 5.3 percent of GDP on average between 2034 and 2098. Similarly, delaying reform by 20 years requires primary surplus

increases of 6.5 percent of GDP on average between 2044 and 2098. The differences between the required primary surplus

increases that start in 2034 and 2044 (5.3 and 6.5 percent of GDP, respectively) and that which starts in 2024 (4.5 percent of

GDP) is a measure of the additional burden that delay would impose on future generations. Future generations are harmed by

policy reform delay, because the higher the primary surplus is during their lifetimes the greater the difference is between the

taxes they pay and the programmatic spending from which they benefit.

Conclusion

The debt-to-GDP ratio is projected to rise over the 75-year projection period and beyond if current policy is unchanged,

based on this Financial Report’s assumptions, which implies that current policy is not sustainable and must ultimately

change. If policy changes are not so abrupt as to slow economic growth, then the sooner policy changes are adopted to avert

these trends, the smaller the changes to revenue and/or spending that would be required to achieve sustainability over the

long term. While the estimated magnitude of the fiscal gap is subject to a substantial amount of uncertainty, it is nevertheless

nearly certain that current fiscal policies cannot be sustained indefinitely.

These long-term fiscal projections and the topic of fiscal sustainability are discussed in further detail in Note 24 and the

RSI section of this Financial Report. The fiscal sustainability under alternative scenarios for the growth rate of health care

costs, interest rates, discretionary spending, and receipts are illustrated in the “Alternative Scenarios” section within the RSI.

Social Insurance

The long-term fiscal projections reflect government receipts and spending as a whole. The SOSI focuses on the

government’s “social insurance” programs: Social Security, Medicare, Railroad Retirement, and Black Lung.

For these

programs, the SOSI reports: 1) the actuarial PV of all future program revenue (mainly taxes and premiums) – excluding

interest – to be received from or on behalf of current and future participants; 2) the estimated future scheduled expenditures

to be paid to or on behalf of current and future participants; and 3) the difference between 1) and 2). Amounts reported in the

SOSI and in the RSI section in this Financial Report are based on each program’s official actuarial calculations.

This year’s projections for Social Security and Medicare are based on the same economic and demographic assumptions

that underlie the 2023 Social Security and Medicare Trustees Reports

and the 2023 SOSI, while comparative information

presented from last year’s report is based on the 2022 Social Security and Medicare Trustees Reports and the 2022 SOSI.

Table 7 summarizes amounts reported in the SOSI, showing that net social insurance expenditures are projected to be $78.4

trillion over 75 years as of January 1, 2023 for the open group, an increase of $2.5 trillion over net expenditures of $75.9

trillion projected in the FY 2022 Financial Report.

The current-law 2023 amounts reported for Medicare reflect the

physician payment levels expected under the MACRA payment rules and the PPACA-mandated reductions in other Medicare

payment rates, but not the payment reductions and/or delays that would result from trust fund depletion.

Similarly, current-

The Black Lung Benefits Act provides for monthly payments and medical benefits to coal miners totally disabled from pneumoconiosis (black lung

disease) arising from their employment in or around the nation's coal mines. See https://www.dol.gov/owcp/regs/compliance/ca_main.htm. RRB’s

projections are based on economic and demographic assumptions that underlie the 28th Actuarial Valuation of the Assets and Liabilities Under the Railroad

Retirement Acts as of December 31, 2019 with Technical Supplement and the 2023 Annual Report on the Railroad Retirement System required by Section

502 of the Railroad Retirement Solvency Act of 1983 (P.L. 98-76).

Closed group and open group differ by the population included in each calculation. From the SOSI, the closed group includes: 1) participants who have

attained eligibility; and 2) participants who have not attained eligibility. The open group adds future participants to the closed group. See ‘Social Insurance’

in the RSI section in this Financial Report for more information.

MACRA permanently replaces the Sustainable Growth Rate formula, which was used to determine payment updates under the Medicare physician fee

schedule with specified payment updates through 2025. The changes specified in MACRA also establish differential payment updates starting in 2026 based

on practitioners’ participation in eligible APM; payments are also subject to adjustments based on the quality of care provided, resource use, use of certified

electronic health records, and clinical practice improvement.

MANAGEMENT’S DISCUSSION AND ANALYSIS

law projections for Social Security do not reflect benefit payment reductions and/or delays that would result from fund

depletion. By accounting convention, the transfers from the General Fund to Medicare Parts B and D are eliminated in the

consolidation of the SOSI at the government-wide level and as such, the General Fund transfers that are used to finance

Medicare Parts B and D are not included in Table 7. For the FYs 2023 and 2022 SOSI, the amounts eliminated totaled $48.5

trillion and $47.5 trillion, respectively. SOSI programs and amounts are included in the broader fiscal sustainability analysis

in the previous section, although on a slightly different basis (as described in Note 24).

In addition, the Medicare projections have been significantly affected by the enactment of the IRA of 2022. This

legislation has wide-ranging provisions, including those that restrain price growth and negotiate drug prices for certain Part B

and Part D drugs and that redesign the Part D benefit structure to decrease beneficiary out-of-pocket costs. The law takes

several years to implement, resulting in very different effects by year. The total effect of the IRA of 2022 is to reduce

government expenditures for Part B, to increase expenditures for Part D through 2030, and to decrease Part D expenditures

beginning in 2031.

The amounts reported in the SOSI provide perspective on the government’s long-term estimated exposures for social

insurance programs. These amounts are not considered liabilities in an accounting context. Future benefit payments will be

recognized as expenses and liabilities as they are incurred based on the continuation of the social insurance programs’

provisions contained in current law. The social insurance trust funds account for all related program income and expenses.

Medicare and Social Security taxes, premiums, and other income are credited to the funds; fund disbursements may only be

made for benefit payments and program administrative costs. Any excess revenues are invested in special nonmarketable

U.S. government securities at a market rate of interest. The trust funds represent the accumulated value, including interest, of

all prior program surpluses, and provide automatic funding authority to pay cover future benefits.

MANAGEMENT’S DISCUSSION AND ANALYSIS

Table 8 identifies the principal

reasons for the changes in projected

social insurance amounts during 2023

and 2022.

The following briefly

summarizes the significant changes for

the current valuation (as of January 1,

2023) as disclosed in Note 25—Social

Insurance. Note 25 is compiled from

disclosures included in the financial

statements of those entities

administering these programs,

including SSA and HHS. See Note 25

for additional information.

• Change in valuation period

(affects both Social Security

and Medicare): This change

replaces a small negative net

cash flow for 2022 with a

much larger negative net cash

flow for 2097. As a result, the

PV of the estimated future net

cash flows decreased (became more negative) by $0.7 trillion and $1.3 trillion for Social Security and Medicare,

respectively.

• Changes in demographic data, assumptions, and methods (affects both Social Security and Medicare): There was

one notable change in demographic methodology. The method for projecting the age distributions of LPR new

arrival and adjustment-of-status immigrants was updated reflecting recent data showing a slightly older population

at the time of attaining LPR status than had previously been estimated. This change decreased the PV of the

estimated future net cash flows. In addition, the starting demographic values and the way these values transition to

the ultimate assumptions were changed. Projected birth rates through 2055, during the period of transition to the

ultimate level, were slightly lower than in the prior valuation. Updates to near-term mortality assumptions to better

reflect the effects of the COVID-19 pandemic led to an increase in death rates through 2024 compared to the prior

valuation. Historical population data, other-than-LPR immigration data, and marriage and divorce data were updated

since the prior valuation. Overall, changes to these assumptions caused the PV of the estimated future net cash flows

to decrease (became more negative) by $0.1 trillion and $0.1 trillion for Social Security and Medicare, respectively.

• Changes in economic data and assumptions (affects Social Security only): Several changes were made to the

ultimate economic assumptions since the last valuation period. The annual percentage change in the average OASDI

covered wage, adjusted for inflation, is assumed to average 1.14 percentage points over the last 65 years of the 75-

year projection period. This is 0.02 percentage point higher than the value assumed for the prior valuation. This

change to the wage growth assumptions increased the PV of estimated future net cash flows. In addition to these

changes in ultimate economic assumptions, the starting economic values and the way these values transition to the

ultimate assumptions were changed. The levels of GDP and labor productivity are assumed to be about 3.0 percent

lower by 2026 and for all years thereafter relative to the prior valuation. The assumed real interest rates over the first

10 years of the projection period are generally higher than those assumed for the prior valuation. The changes to the

GDP and productivity levels decreased the PV of the estimated future net cash flows, while the change to near-term

real interest increased the PV of the estimated future net cash flows. There was one notable change in economic

methodology. The method for estimating the level of OASDI taxable wages for historical years 2000-2021 was

improved by adopting a more consistent approach for estimating completed values across various types of wages.

This change increased the PV of the estimated future net cash flows. Overall, changes to economic data,

assumptions, and methods caused the PV of the estimated future net cash flows to decrease (became more negative)

by $0.8 trillion for Social Security.

• Changes in law or policy (affects both Social Security and Medicare): The monetary effect of the changes in law or

policy caused the PV of the estimated future net cash flows of Medicare to increase by $1.1 trillion; and the effect

on the PV of estimated future net cash flows of OASDI was not significant at the consolidated level. Please refer to

SSA’s and HHS’s financial statements for additional information related to the impact of the changes in law or

policy on the PV of estimated future net cash flows of the OASDI and Medicare programs.

• Changes in methodology and programmatic data (affects Social Security only). Several methodological

improvements and updates of program-specific data are included in the current valuation (beginning on January 1,

2023). The most significant are as follows: Actual disability data for 2022 and slightly lower-near term disability

incidence rate assumptions were incorporated. The sample of new beneficiaries used to project average benefits

MANAGEMENT’S DISCUSSION AND ANALYSIS

level was updated from worker beneficiaries newly entitled in 2018 to those newly entitled in 2019. Updates were

made to the post-entitlement benefit adjustment factors. These factors are used to account for changes in benefit

levels, primarily due to differential mortality by benefit level and earnings after benefit entitlement. Overall, changes

to programmatic data and methods caused the PV of the estimated future net cash flows to decrease by $0.3 trillion

for Social Security.

• Changes in economic and healthcare assumptions (affects Medicare only): The economic assumptions used in the

Medicare projections are the same as those used for the OASDI (described above) and are prepared by the Office of

the Chief Actuary at SSA. In addition to the economic assumptions changes described above, the healthcare

assumptions are specific to the Medicare projections. Changes to these assumptions in the current valuation include

lower projected spending growth because of anticipated effect of negotiating drug prices and other price growth

constraints. Overall, these changes decreased the PV of estimated future net cash flow by $2.6 trillion for Medicare.

• Change in Projection Base (affects Medicare only): Actual income and expenditures in 2022 were different than

what was anticipated when the 2022 Medicare Trustees Report projections were prepared. For Part A and Part B

income and expenditures were lower than estimated based on experience. Part D income and expenditures were

higher than estimated based on actual experience. Actual experience of the Medicare Trust Funds between January

1, 2022, and January 1, 2023, is incorporated in the current valuation and is less than projected in the prior valuation.

Overall, the net impact of Part A, B, and D projection base change is an increase in the estimated future net cash

flows by $2.3 trillion for Medicare.

As reported in Note 25, uncertainty remains about whether the projected cost savings and productivity improvements

will be sustained in a manner consistent with the projected cost growth over time. Note 25 includes an alternative projection

to illustrate the uncertainty of projected Medicare costs. As indicated earlier, GAO disclaimed opinions on the 2023, 2022,

2021, 2020 and 2019 SOSI because of these significant uncertainties.

Costs as a percent of GDP of both Medicare and Social Security, which are analyzed annually in the Medicare and

Social Security Trustees Reports, are projected to increase substantially through the mid-2030s because: 1) the number of

beneficiaries rises rapidly as the baby-boom generation retires; and 2) the lower birth rates that have persisted since the baby

boom cause slower growth in the labor force and GDP.

According to the Medicare Trustees Report, spending on Medicare

is projected to rise from its current level of 3.7 percent of GDP in 2022 to 6.0 percent in 2047 and to 6.1 percent in 2097.

for Social Security, combined spending is projected to generally increase from 5.2 percent of GDP in 2023 to a peak of 6.3

percent for 2076, and then decline to 6.0 percent by 2097. The government collects and maintains funds supporting the Social

Security and Medicare programs in trust funds. A scenario in which projected funds expended exceed projected funds

received, as reported in the SOSI, will cause the balances in those trust funds to deplete over time. Table 9 summarizes

additional current status and projected trend information, including years of projected depletion, for the Medicare HI and

Social Security Trust Funds.

As previously discussed and as noted in the Trustees Reports, these programs are on a fiscally unsustainable path.

Additional information from the Trustees Reports may be found in the RSI section of this Financial Report.

A Summary of the 2023 Annual Social Security and Medicare Trust Fund Reports, page 8.

Percent of GDP amounts are expressed in gross terms (including amounts financed by premiums and state transfers).

MANAGEMENT’S DISCUSSION AND ANALYSIS

Reporting on Climate Change

The Biden-Harris administration has deployed a whole-of-government approach to respond to the climate crisis. From

reducing climate pollution and conserving our lands, waters, and biodiversity to increasing the resilience of federal facilities

and operations to the impacts of climate change, federal entities are tackling the climate crisis. The federal government is on

a path towards CFE by 2030, a zero-emission vehicles fleet by 2035, and a net-zero building portfolio by 2045.

The $1 trillion IIJA, signed in November 2021, and the IRA, signed in August 2022, included historic climate funding.

The IIJA provides funding to protect the country against the detrimental effects of climate change, and the IRA, the largest

climate investment in U.S. history, provides tax incentives and other clean energy initiatives to reduce energy costs for

consumers and small businesses. These investments have put America on track to decrease GHG emissions by about 40

percent below 2005 levels in 2030.

There is also growing recognition that climate-related events and climate-related financial risks will affect the financial

position and condition of the federal government. Many CFO Act entities are engaged in a wide array of climate-related

activities and have, per federal reporting guidance, discussed their responses to the climate crisis in their FY 2023 financial

reports. The breadth of these important efforts is expansive, and the examples immediately below from financial statements

discuss both the physical impacts of climate change on entities (physical risk) and the broader challenges entities face in

transitioning to a lower-carbon economy (transition risk). Many entity climate adaptation and resiliency efforts emphasize the

federal government's physical assets and infrastructure and discuss transition risks in the context of transitioning their

infrastructure so as to reduce GHG emissions. Both of these risks are important and affect government operations in unique

ways, which will be discussed below for a select number of federal entities.

The following illustrates the wide range of federal entity efforts to mitigate the risks of climate change on federal entity

infrastructure:

• The impact of climate change on DOE and its operations and infrastructure is significant and projected to increase

with climate change. In support of the administration’s goals of net-zero GHG emissions by 2050, with power sector

GHG emissions attaining net-zero by 2035; DOE has continued to develop solar and geothermal sourced energy for

heating building space and water. DOE sites have been collaborating with their electricity provider to ensure the

availability of CFE. For example, the National Renewable Energy Laboratory, a DOE national lab, has signed the

first-ever CFE Memorandum of Agreement between DOE and Xcel Energy, committing to the delivery of 100

percent CFE by 2030 to federal entities served by the utility. In partnership with DOE, DOT has leveraged their

newly formed Joint Office of Energy and Transportation to deploy a national network of EV chargers. This supports

the President’s IIJA goal of installing 500,000 EV chargers.

• GSA is also strategically focused on increasing building resilience, reducing overall GHG emissions, improving

energy, water, and waste efficiency, and supporting the transition to CFE. In FY 2023, GSA significantly increased

the number of zero-emission vehicles across government, thereby achieving a 37.1 percent increase in miles per

gallon for vehicle replacements in the GSA leased fleet. GSA is taking steps to build a climate resilient supply chain

by inviting all major Federal Supply Schedule contractors to voluntarily measure, track, and disclose their climate-

related risks to the Carbon Disclosure Project, a not-for-profit charity, that runs the global disclosure system for

companies to measure environmental risks and opportunities.

• DOD is challenged with absorbing the recovery costs from extreme weather events typical of those fueled by

climate change, including: $1 billion to rebuild Offutt Air Force Base, Nebraska after historic floods; $3 billion to

rebuild Camp Lejeune, North Carolina after Hurricane Florence; and $5 billion to rebuild Tyndall Air Force Base,

Florida after Hurricane Michael. To address transition risk, DOD has identified reducing climate impacts to its

installations as an Agency Priority Goal and has invested $35.9 billion in facilities investments, including for

Facilities, Sustainment, Restoration and Modernization with a $3.7 billion investment for installation resiliency and

adaptation focused on military facilities to withstand harsh weather conditions.

• DOC has been actively engaged in planning efforts with the White House Council on Environmental Quality, OMB,

and DOE to identify opportunities to purchase CFE for federal use through federal contracting mechanisms directly

with facilities’ utility providers.

• SSA noted that a source of funding challenge for the agency includes the loss or replacement of facilities, fleet, and

information technology equipment resulting from climate change, as well as the health and safety costs of keeping

operations active during severe climate-related events. Its financial risk exposure mainly concerns the impact of

energy usage to cool and heat its delegated sites.

• Both State and USAID have advanced international climate programs under the auspice of the FY 2022-2026 State-

USAID Joint Strategic Plan with both entities focused on mitigating physical and transition risks. State has more

than 25,000 building assets at 287 locations overseas, with a current replacement value for these assets at $75.2

billion. For managing the risk of exposure to natural hazards of these overseas facilities, State uses a portfolio

https://www.energy.gov/articles/doe-projects-monumental-emissions-reduction-inflation-reduction-act

MANAGEMENT’S DISCUSSION AND ANALYSIS

screening tool that assesses risk level for seven natural hazards: flooding, extreme heat, extreme wind, water stress,

earthquake, tsunami, and landslide.

In-line with several Biden-Harris administration executive orders, including Executive Order 14008, Tackling the

Climate Crisis at Home and Abroad, and other broad performance goals, entities have made strides towards a whole-of-

government approach to the climate crisis affecting the nation. This section summarizes some of the actionable plans that

federal entities are putting in place, and progress that they have seen. It illustrates the broader programmatic efforts that some

entities are undertaking which support the growth of America’s clean energy and clean technology industries.

• The economic impacts of positioning the global economy for a clean and sustainable future are a focus at Treasury.

Treasury’s strategic objectives include aims to promote incentives and policies to encourage the private sector’s

investment in climate-friendly projects. The IRA of 2022 is the most significant investment in climate and clean

energy in U.S. history. As tax incentives deliver most of the law’s investment, Treasury is playing a leading role in

implementing the law. The IRA of 2022 established or modified approximately 20 clean energy-related tax

incentives that will be critical in advancing the nation’s climate goals while lowering costs for consumers and

creating good-paying jobs.

• DOI is concerned about conserving and protecting its natural and cultural resources. By September 30, 2025, DOI

will assist states in reclaiming 1,150 abandoned coal mine lands; and support the plugging of 7,900 identified

orphaned oil and gas wells on state, private, tribal, and federal lands. By reducing legacy pollution with IIJA

investments, DOI is helping to improve community health and safety, create good paying jobs, and address the

climate crisis, all of which is transforming a legacy of pollution into a legacy of environmental stewardship.

• In addition to DOC’s efforts to mitigate the effects of climate change on agency operations, DOC’s financial

statements also references a $799.1 million increase in the entity’s gross costs related to National Oceanic and

Atmospheric Administration’s core mission of enhancing weather forecasting, water quality monitoring, and climate

reporting.

• To relay the importance of mitigating climate change for broader economic resiliency, HHS has discussed its efforts

at addressing the impact of climate change on the health of the American people by identifying vulnerable

communities and populations at risk from climate impacts and fostering climate adaptation and resilience for these

communities. This summer HHS launched the Heat-Related Illness Emergency Medical Services Activation

Surveillance Dashboard to help communities and officials keep people cool and safe through effective heat

mitigation strategies. And its investments into infrastructure and emergency equipment ahead of hurricane season

have ensured communities in hurricane-prone areas have continuous access to primary care services.

• In addition to the joint State-USAID effort to address physical and transition risks referenced above, USAID has

been at the fore of helping other countries phase out fossil fuels and transition to clean energy usage. The entity has

boosted renewable energy through competitive auctions in the Philippines; boosted wind farm generation in South

Africa; and secured renewable energy investment in Pakistan.

Readers are encouraged to review both the financial statements and Climate Adaptation Plans of the entities referenced

above, as well as others for additional information about efforts being employed across the federal government to address the

many risks associated with climate change.

Financial Management

Grants and Cooperative Agreements

In FY 2023, the federal government obligated approximately $1.2 trillion for grants and cooperative agreements,

according to USAspending.gov. This figure does not include obligations for other types of financial assistance, such as loans

or direct appropriations. A large portion of grant funding was provided under the Bipartisan Infrastructure Law and the IRA

of 2022 while additional funding continued to support the nation’s response to the pandemic through the ARP, the CARES

Act, and other COVID-19 funding. Improving access to key financial assistance data continues to be a priority for OMB.

In 2023, OMB undertook an initiative to update the Guidance on Grants and Agreements published in 2 CFR to reduce

the administrative burden for federal agencies and recipients, as well as to clarify the guidance and make it more accessible.

These updates will represent the most substantial changes to the guidance since its release in December 2013 and will reduce

unnecessary compliance requirements and ensure that assistance is delivered in a more effective and impactful way and to the

communities that most need it.

On August 19, 2023, OMB issued M-23-19 Establishment of the COFFA. This council created a leadership body in the

federal government for oversight and management of federal financial assistance. The COFFA launched a partnership among

federal grant-making agencies, providing a single forum to inform federal financial assistance policy, oversight, and

technology activities. The COFFA is also responsible for providing strategic direction, policy recommendations, and priority-

setting for other government-wide grant-related activities.

MANAGEMENT’S DISCUSSION AND ANALYSIS

Payment Integrity

Preventing improper payments in the federal government continues to be a management priority. To be successful in

preventing improper payments, there must be a focus on systemic enhancements intended to make payments correctly the

first time with an emphasis on minimizing monetary loss. An improper payment is any payment that should not have been

made or that was made in an incorrect amount under statutory, contractual, administrative, or other legally applicable

requirement. The term “improper payment” consists of two main components: 1) improper payments resulting in a monetary

loss to the government; and 2) improper payments that do not result in a monetary loss to the government. Monetary loss

occurs when payments are made to the wrong recipient and/or in the wrong amount. Improper payments that do not result in

a monetary loss include under payments and payments made to the right recipient for the right amount, but the payment was

not made in accordance with statute or regulation. The federal government, through the CFO community, continues to

develop strategies to better analyze and prevent monetary loss.

Agencies with programs reporting more than $100.0 million in monetary loss provide a quarterly scorecard at

PaymentAccuracy.gov. These scorecards provide information on the actions taken and progress made on preventing improper

payments that would result in monetary loss to the federal government. Details, including FY 2023 improper payment data,

for programs with at least $100.0 million in monetary loss can also be found at PaymentAccuracy.gov. This website also

includes payment integrity information that had previously been reported in agency financial reports, such as information

about program compliance, corrective actions, and accountability mechanisms.

OMB will continue to work with agencies, the CFO Council, and other stakeholders to improve the identification of the

root causes of improper payments that result in monetary loss and to prevent improper payments from occurring.

Agency Financial Report Audits

Since the passage of the CFO Act, the federal financial community has made significant progress in financial

accounting and reporting. As shown in Table 10, for FY 2023, 19 of the 24 CFO Act agencies obtained an unmodified

opinion from the independent auditors on their financial statements.

In addition, 52 auditor-identified material weaknesses

were identified for FY 2023, two more than in FY 2022. Twenty-eight of these are associated with DOD. The other 24

material weaknesses are associated with non-DOD agencies. Although virtually all federal agencies have adopted and

maintained disciplined financial reporting operations, implemented effective internal controls over financial reporting, and

integrated transaction processing with accounting records, weaknesses in financial management practices continue to prevent

the government as a whole from achieving an audit opinion.

The 19 entities include HHS, which received an unmodified (“clean”) opinion on all statements except the SOSI and the SCSIA.

MANAGEMENT’S DISCUSSION AND ANALYSIS

Financial Management Systems

Federal agencies improved, but continue to face challenges, in implementing financial management systems that meet

federal requirements. The number of CFO Act agencies reporting lack of substantial compliance with one or more of the

three Section 803(a) requirements of the FFMIA remained at seven in FY 2023, and the number of auditors reporting lack of

substantial compliance with one or more of the three Section 803(a) FFMIA requirements remained at eight in FY 2023.

Because of the federal government’s size and diversity, its financial management infrastructure consists of both legacy

and modernized systems and standardized and customized systems. Treasury works closely with agencies to manage systems

for collecting and disbursing the government’s cash and financing disbursements when necessary, recording and reporting on

those collections and disbursements, and reporting on all government revenues, expenses, assets, and liabilities.

Treasury was designated as the Financial Management Systems QSMO in 2020 and continues to pursue financial

management improvement strategies that have government-wide implications. These strategies include standing up a

financial management systems marketplace and developing system standards, standardized processes, system requirements,

and system interfaces. These efforts are providing a path to the decommissioning of legacy systems and migration to updated

systems, leveraging modernized technologies. In addition, agencies continue to coordinate with the Treasury QSMO to

improve their financial management and financial reporting systems as described in their financial reports, congressional

budget justifications, and performance plans. DOD continues to address its material weaknesses in financial reporting, and is

bringing its financial systems into compliance with federal financial management systems requirements, including the

FFMIA.

HHS was designated as the Grants QSMO in 2021 and continues working to modernize and streamline the

government’s vast and aging legacy grants management systems. The goal of this effort is to allow agencies to successfully

manage grants through the entire award cycle and allow grants management systems to interface with agency financial

management systems.

Internal Controls

Federal managers are responsible for developing and maintaining effective internal controls. Internal controls help to

ensure effective and efficient operations, reliable financial reporting, and compliance with applicable laws and regulations.

Safeguarding assets is a goal of each of these three objectives.

OMB Circular No. A-123 implements the requirements of 31 U.S.C. 3512 (c) and (d) (commonly known as the Federal

Managers’ Financial Integrity Act) by providing agencies a framework for assessing and managing risks strategically and

MANAGEMENT’S DISCUSSION AND ANALYSIS

tactically. The Circular reflects GAO’s Standards for Internal Control in the Federal Government and contains multiple

appendices that address one or more of the objectives of effective internal control.

• Appendix A provides for agencies to use a risk-based approach to assess, document, test, and report on internal

controls over reporting and data integrity;

• Appendix B requires agencies to maintain internal controls that reduce the risk of fraud, waste, and error in

government charge card programs;

• Appendix C implements the requirements for effective estimation and remediation of improper payments; and

• Appendix D defines requirements for determining compliance with the FFMIA that are intended to reduce the cost,

risk, and complexity of financial system modernizations.

As noted above, the total number of reported material weaknesses for CFO Act agencies was 52 for FY 2023, two more

than in FY 2022. Effective internal controls are a challenge at the agency level and at the government-wide level, with GAO

reporting that at the government-wide level, material weaknesses resulted in ineffective internal control over financial

reporting. While progress is being made at many agencies and across the government in identifying and resolving internal

control deficiencies, additional work is needed.

Legal Compliance

Federal agencies are required to comply with a wide range of laws and regulations, including appropriations,

employment, and health and safety, among others. Responsibility for compliance rests with agency management and

compliance is addressed as part of agency financial statement audits. Agency auditors test for compliance with selected laws

and regulations related to financial reporting and certain individual agency audit reports contain instances of noncompliance.

None of these instances were material to the government-wide financial statements; however, GAO reported that its work on

compliance with laws and regulations was limited by the material weaknesses and scope limitations discussed in its report.

Conclusion

The federal government has seen significant progress in financial management since the passage of the CFO Act more

than 30 years ago, but significant challenges remain to realizing the intended financial management reforms of the act. The

issues that the federal government faces today require financial managers to improve both the efficiency and effectiveness of

financial management activities, which includes moving toward integrated government operations with standardized business

processes, systems, and data. Together with Treasury and OMB, agencies are building on tools and capabilities to improve

financial accountability and transparency.

Additional Information

This Financial Report’s Appendix contains the names and websites of the significant government agencies included in

the U.S. government’s consolidated financial statements. Details about the information in this Financial Report can be found

in these agencies’ financial statements. This Financial Report, as well as those from previous years, is also available at

Treasury, OMB, and GAO websites at:

https://www.fiscal.treasury.gov/reports-statements/; https://www.whitehouse.gov/omb/management/office-federal-financial-

management/; and https://www.gao.gov/federal-financial-accountability respectively. Other related government resources

include, but are not limited to the:

• Budget of the United States Government;

• Treasury Bulletin;

• Monthly Treasury Statement of Receipts and Outlays of the United States Government;

• Monthly Statement of the Public Debt of the United States;

• Your Guide to America’s Finances;

• Economic Report of the President; and

• Trustees Reports for the Social Security and Medicare Programs.

STATEMENT OF THE COMPTROLLER GENERAL OF THE UNITED STATES

February 15, 2024

The President

The President of the Senate

The Speaker of the House of Representatives

To operate as effectively and efficiently as possible, Congress, the administration, and federal

managers must have ready access to reliable and complete financial and performance information—

both for individual federal entities and for the federal government as a whole. Our report on the U.S.

government’s consolidated financial statements for fiscal years 2023 and 2022 discusses progress that

has been made but also underscores that much work remains to improve federal financial management

and that the federal government continues to face an unsustainable long-term fiscal path.

Our audit report on the U.S. government’s consolidated financial statements is enclosed. In summary,

we found the following:

• Certain material weaknesses

in internal control over financial reporting and other limitations

resulted in conditions that prevented us from expressing an opinion on the accrual-based

consolidated financial statements as of and for the fiscal years ended September 30, 2023, and

2022.

About 48 percent of the federal government’s reported total assets as of September 30,

2023, and approximately 15 percent of the federal government’s reported net cost for fiscal year

2023 relate to significant federal entities that received a disclaimer of opinion

or qualified opinion

As discussed later in this report, an unsustainable long-term fiscal path is a situation where federal debt held by the public

grows faster than gross domestic product (GDP) over the long term.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there

is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected

and corrected, on a timely basis. A deficiency in internal control exists when the design or operation of a control does not allow

management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct,

misstatements on a timely basis.

The accrual-based consolidated financial statements comprise the (1) Statements of Net Cost, Statements of Operations and

Changes in Net Position, Reconciliations of Net Operating Cost and Budget Deficit, and Statements of Changes in Cash

Balance from Budget and Other Activities, for the fiscal years ended September 30, 2023, and 2022; (2) Balance Sheets as of

September 30, 2023, and 2022; and (3) related notes to these financial statements. Most revenues are recorded on a modified

cash basis.

A disclaimer of opinion arises when the auditor is unable to obtain sufficient appropriate audit evidence to provide a basis for

an audit opinion, and the auditor concludes that the possible effects on the financial statements of undetected misstatements,

if any, could be both material and pervasive and accordingly does not express an opinion on the financial statements.

A qualified opinion arises when the auditor is able to express an opinion on the financial statements except for specific areas

where the auditor was unable to obtain sufficient appropriate evidence, and the auditor concludes that the possible effects on

the financial statements of undetected misstatements, if any, could be material but not pervasive.

STATEMENT OF THE COMPTROLLER GENERAL OF THE UNITED STATES

on their fiscal year 2023 financial statements or whose fiscal year 2023 financial information was

unaudited.

• Significant uncertainties (discussed in Note 25, Social Insurance, to the consolidated financial

statements), primarily related to the achievement of projected reductions in Medicare cost growth,

prevented us from expressing an opinion on the sustainability financial statements, which consist of

the 2023 and 2022 Statements of Long-Term Fiscal Projections;

the 2023, 2022, 2021, 2020, and

2019 Statements of Social Insurance;

and the 2023 and 2022 Statements of Changes in Social

Insurance Amounts. About $53.1 trillion, or 68 percent, of the reported total present value of future

expenditures in excess of future revenue presented in the 2023 Statement of Social Insurance

relates to the Medicare program reported in the Department of Health and Human Services’ (HHS)

2023 Statement of Social Insurance, which received a disclaimer of opinion. A material weakness in

internal control also prevented us from expressing an opinion on the 2023 and 2022 Statements of

Long-Term Fiscal Projections.

• Material weaknesses resulted in ineffective internal control over financial reporting for fiscal year

2023.

• Material weaknesses and other scope limitations, discussed above, limited tests of compliance with

selected provisions of applicable laws, regulations, contracts, and grant agreements for fiscal year

2023.

Progress in Federal Financial Management

Overall, the federal government has made significant strides in improving financial management since

key federal financial management reforms were enacted in the 1990s. Nineteen of the 24 Chief

Financial Officers Act of 1990 (CFO Act) agencies received clean opinions on their fiscal year 2023

These entities include the following: (1) The Department of Defense received a disclaimer of opinion on its fiscal years 2023

and 2022 financial statements. (2) The Small Business Administration received a disclaimer of opinion on its fiscal years 2023

and 2022 balance sheets, and its remaining statements were unaudited. (3) The Department of Education received a

disclaimer of opinion on its fiscal year 2023 balance sheet and its remaining statements were unaudited. The department

received a disclaimer of opinion on its fiscal year 2022 financial statements. (4) The Department of Labor received a qualified

opinion on its fiscal years 2023 and 2022 financial statements. (5) The Department of Agriculture received a qualified opinion

on its fiscal year 2023 financial statements but received an unmodified opinion on its fiscal year 2022 financial statements. (6)

The Security Assistance Accounts received a disclaimer of opinion on its fiscal years 2023 and 2022 financial statements. (7)

The fiscal year 2023 Schedules of the General Fund were not audited to allow the Department of the Treasury time to continue

to implement a remediation plan to address the issues we reported as part of our disclaimer of opinion on the fiscal year 2022

Schedules of the General Fund. (8) The Railroad Retirement Board received a disclaimer of opinion on its fiscal years 2023

and 2022 financial statements.

The 2023 and 2022 Statements of Long-Term Fiscal Projections present, for all the activities of the federal government, the

present value of projected receipts and noninterest spending under current policy without change, the relationship of these

amounts to projected gross domestic product (GDP), and changes in the present value of projected receipts and noninterest

spending from the prior year. These statements also present the fiscal gap, which is the combination of receipt increases and

noninterest spending reductions necessary to hold debt held by the public as a share of GDP at the end of the 75-year

projection period to its value at the beginning of the period. The valuation date for the Statements of Long-Term Fiscal

Projections is September 30.

The Statements of Social Insurance present the present value of revenue and expenditures for social benefit programs,

primarily Social Security and Medicare. These statements are presented for the current year and each of the 4 preceding

years as required by U.S. generally accepted accounting principles. For the Statements of Social Insurance, the valuation date

is January 1 for the Social Security and Medicare programs, October 1 for the Railroad Retirement program, and September

30 for the Black Lung program.

STATEMENT OF THE COMPTROLLER GENERAL OF THE UNITED STATES

financial statements, up from six CFO Act agencies that received clean audit opinions for fiscal year

1996.

Accounting and financial reporting standards have continued to evolve to provide greater transparency

and accountability over the federal government’s operations and financial condition, including long-term

sustainability. We have reported areas where financial management can be improved, including

standardizing and clarifying the responsibilities of chief financial officers, preparing government-wide

and agency-level financial management plans, better linking performance and cost information for

decision-making, and strengthening improper payment and fraud risk management reporting.

While the U.S. government’s consolidated financial statements provide a high-level summary of the

financial position, operating results, and financial condition for the federal government as a whole,

substantial benefits have been achieved as a result of agencies’ preparation and audit of financial

statements, including

• useful and necessary insight into government operations, including the agencies’ financial

conditions;

• increased federal agency accountability to Congress and citizens, including independent assurance

about the reliability of reported financial information;

• greater confidence to stakeholders (e.g., governance officials, taxpayers, consumers, and regulated

entities) that federal funds are being properly accounted for and assets are properly safeguarded;

• an assessment of the reliability and effectiveness of systems and related internal controls, including

identifying control deficiencies that could lead to fraud, waste, or abuse;

• a focus on information security;

• early warnings of financial management issues; and

• identification of noncompliance with laws and regulations, which can present challenges to agency

operations.

The preparation and audit of individual federal entities’ financial statements have also identified

numerous deficiencies, leading to corrective actions to strengthen federal entities’ internal controls,

processes, and systems. For instance, in fiscal year 2023 the Department of Housing and Urban

Development’s auditor reported a significant deficiency in internal control over financial reporting, which

was an improvement from the prior year’s reported material weakness.

Financial Management Challenges

Since the federal government began preparing consolidated financial statements, for fiscal year 1997,

three major impediments have continued to prevent us from rendering an opinion on the federal

government’s accrual-based consolidated financial statements: (1) serious financial management

problems at the Department of Defense (DOD), (2) the federal government’s inability to adequately

account for intragovernmental activity and balances between federal entities, and (3) weaknesses in

the federal government’s process for preparing the consolidated financial statements.

The 19 agencies include the Department of Health and Human Services, which received an unmodified (“clean”) opinion on

all statements except the Statements of Social Insurance and the Statements of Changes in Social Insurance Amounts.

GAO, Federal Financial Management: Substantial Progress Made since Enactment of the 1990 CFO Act; Refinements

Would Yield Added Benefits, GAO-20-566 (Washington, D.C.: Aug. 6, 2020), and Emergency Relief Funds: Significant

Improvements Are Needed to Ensure Transparency and Accountability for COVID-19 and Beyond, GAO-22-105715

(Washington, D.C.: Mar. 17, 2022).

A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less

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

STATEMENT OF THE COMPTROLLER GENERAL OF THE UNITED STATES

DOD continues to take positive steps to improve its financial management but faces long-standing

issues.

After many years of working toward financial statement audit readiness, DOD underwent full

financial statement audits for fiscal years 2018 through 2023. These audits resulted in disclaimers of

opinion, material weaknesses in internal control over financial reporting (28 in both fiscal years 2023

and 2022), and thousands of audit findings.

DOD leadership identified a number of financial management-related benefits from these department-

wide audits, as well as operational improvements. Specifically, DOD reported that the annual financial

statement audits (1) are vital to the department’s data transformation and business reform efforts, and

(2) provide objective, independent assessments of the department’s internal controls, financial reporting

practices, and reliability of financial information. DOD also reported that auditor findings help DOD

leadership prioritize improvements, drive efficiencies, identify issues with systems, and measure

progress in modernizing the department’s financial management capabilities. Further, DOD reported

that the audits have been a catalyst for business process and business system reform across DOD,

resulting in greater financial integrity, increased transparency, and a better supported warfighter.

Examples of recent financial management-related benefits DOD identified include:

• Obligations. Better management of budget obligations, resulting in the availability of budget funds

that could be used for more immediate mission-support and mission-critical needs. For example, for

fiscal year 2023, DOD reported that it identified and deobligated $330 million, which allowed the

department to reprogram the funds for other needs.

• Real property. Better real property management, resulting in improved real property records and

redeployment of maintenance costs.

• Inventory. Identification of several billion dollars related to (1) usable inventory that was not tracked

in the inventory system but was available for use in addressing unmet needs, (2) unneeded

inventory that resulted in freeing up storage space, and (3) inventory that was unavailable or

unusable to meet mission needs. For example, initiatives to locate untracked or excess material

identified more than $4.4 billion of material that was made available for redeployment.

• Systems. Improved accuracy of the systems inventory, consolidation and retirement of systems,

and reduction of maintenance costs for legacy systems. For example, in fiscal year 2023, DOD

retired 10 financial reporting systems.

DOD has acknowledged that achieving a clean audit opinion will take time. DOD management

prioritized certain critical areas for improvement (i.e., for fiscal year 2023, its priorities were to improve

fund balance with Treasury (FBWT), establish user access controls, and create a universe of

transactions).

DOD reported that it uses the number of audit findings closed and material weaknesses

downgraded or resolved from year to year to measure progress toward achieving a clean audit opinion.

For example, while FBWT remains a material weakness at the DOD-wide level, certain components

reported progress in addressing deficiencies in this area in fiscal year 2023. Specifically, the

Department of the Army Working Capital Fund and the Department of the Navy General Fund reduced

their FBWT material weaknesses to significant deficiencies, and the Department of the Air Force

General Fund remediated its FBWT material weakness.

Fund balance with Treasury (FBWT) is the amount in an entity’s accounts with Treasury that is available for making

expenditures and paying liabilities. Universe of transactions relates to transaction-level populations supporting material

financial statement line items.

STATEMENT OF THE COMPTROLLER GENERAL OF THE UNITED STATES

Various efforts are also under way to address the other two major impediments to rendering an opinion

on the accrual-based consolidated financial statements. In addition to Treasury’s and the Office of

Management and Budget’s (OMB) continued leadership, federal entities’ strong and sustained

commitment is critical to fully addressing these impediments.

The Department of the Treasury made progress addressing the material weakness related to the

government’s inability to adequately account for intragovernmental activity and balances between

federal entities. For example, in fiscal year 2023, Treasury was able to work with component entities to

reduce intragovernmental differences to amounts Treasury determined were immaterial to the

consolidated financial statements, although it is uncertain if this outcome can be sustained in the future

due to underlying deficiencies at component entities. Treasury also (1) continued to provide information

and assistance to significant component entities to aid in resolving their intragovernmental differences

and (2) issued additional guidance to federal entities related to accounting for intragovernmental

transactions.

Treasury has also made progress addressing the material weaknesses related to the federal

government’s process for preparing the consolidated financial statements. In recent years, Treasury’s

corrective actions have included implementing new processes for preparing the consolidated financial

statements, enhancing guidance for federal entity financial reporting, and implementing procedures to

address certain previously issued internal control deficiencies.

In addition to the three major impediments, certain federal entities have experienced financial

management challenges in recent years.

• The Small Business Administration (SBA), which had substantial activity related to COVID-19 relief

programs, such as the Paycheck Protection Program and the COVID-19 Economic Injury Disaster

Loan program, was unable to obtain an opinion on its fiscal years 2020 through 2023 financial

statements, after years of receiving clean opinions. SBA’s auditor reported that the urgent need for

SBA to implement COVID-19-related programs led to deficiencies in internal control processes.

SBA’s auditor reported several material weaknesses in internal control in fiscal years 2020 through

2023 related to these programs. These weaknesses limit the reliability of SBA’s financial reporting

and increase the risk of fraud and improper payments. Due to the continuing material weaknesses

in controls associated with the two programs that led to loans going to potentially ineligible

borrowers, we have designated Emergency Loans for Small Businesses as a high-risk area since

2021.

• The Department of Education, after years of receiving clean opinions, was unable to obtain an

opinion on its fiscal years 2022 and 2023 financial statements. Education’s auditor continued to

report a material weakness related to the department’s controls over the data used for estimating

GAO, U.S. Consolidated Financial Statements: Improvements Needed in Internal Controls over Treasury and OMB

Preparation Processes, GAO-23-106707 (Washington, D.C.: Aug. 15, 2023).

Small Business Administration, Agency Financial Report for Fiscal Year 2023 (Washington, D.C.: Nov. 15, 2023).

For more information on GAO’s high-risk area with regards to Emergency Loans for Small Businesses, see GAO, High-Risk

Area: Emergency Loans for Small Businesses, accessed on February 7, 2024, https://www.gao.gov/highrisk/emergency-loans-

small-businesses.

STATEMENT OF THE COMPTROLLER GENERAL OF THE UNITED STATES

the costs of its loan programs.

For example, for fiscal year 2023, errors existed in the underlying

data used for estimating the costs for the department’s student loan program. This weakness limits

the reliability of Education’s financial reporting.

• The Department of Labor received a qualified opinion on its fiscal years 2021 through 2023 financial

statements. Labor was unable to adequately support assumptions used for estimating remaining

obligations and benefit overpayments related to the unemployment insurance program.

• The Department of Agriculture received a qualified opinion on its fiscal year 2023 financial

statements related to the recognition of certain budget obligations for Supplemental Nutrition

Assistance Program benefits.

The material weaknesses underlying the financial management challenges discussed above (1)

hamper the federal government’s ability to reliably report a significant portion of its assets, liabilities,

costs, and other related information; (2) affect the federal government’s ability to reliably measure the

full cost, as well as the financial and nonfinancial performance, of certain programs and activities; (3)

impair the federal government’s ability to adequately safeguard significant assets and properly record

various transactions; and (4) hinder the federal government from having reliable, useful, and timely

financial information to operate effectively and efficiently. We have made a number of

recommendations to OMB, Treasury, DOD, and SBA to address these issues.

These entities have

taken or plan to take actions to address these recommendations.

In addition to the material weaknesses referred to above, we identified two other continuing material

weaknesses. These are the federal government’s inability to (1) determine the full extent to which

improper payments occur and reasonably assure that appropriate actions are taken to reduce them and

(2) identify and resolve information system control deficiencies and manage information security risks

on an ongoing basis. The fiscal year 2023 government-wide total of reported improper payment

estimates was $236 billion. However, this amount does not include improper payment estimates for

certain programs. For example, improper payment estimates were not reported for HHS’s Temporary

Assistance for Needy Families program. As it relates to information system controls, 13 of the 24

agencies covered by the Chief Financial Officers Act of 1990 reported material weaknesses or

significant deficiencies in information system controls.

Our audit report presents additional details concerning these material weaknesses and their effect on

the accrual-based consolidated financial statements, sustainability financial statements, and managing

federal government operations. Until the problems outlined in our audit report are adequately

addressed, they will continue to have adverse implications for the federal government and the

American people.

Department of Education, Agency Financial Report for Fiscal Year 2023 (Washington, D.C.: Nov. 16, 2023).

Department of Labor, Agency Financial Report for Fiscal Year 2023 (Washington, D.C.: Nov. 14, 2023).

Department of Agriculture, Agency Financial Report for Fiscal Year 2023 (Washington, D.C.: Jan. 16, 2024).

See GAO, High Risk Area: DOD Financial Management, accessed February 7, 2024,

https://www.gao.gov/highrisk/dod_financial_management; GAO-23-106707; and High Risk Area: Emergency Loans for Small

Businesses. Further, other auditors have made recommendations to DOD and SBA for improving their financial management.

STATEMENT OF THE COMPTROLLER GENERAL OF THE UNITED STATES

Unsustainable Long-Term Fiscal Path

The 2023 Statement of Long-Term Fiscal Projections and related information in Note 24, Long-Term

Fiscal Projections, to the consolidated financial statements and in the unaudited Required

Supplementary Information section of the 2023 Financial Report of the United States Government

(2023 Financial Report) show that, based on current revenue and spending policies, the federal

government continues to face an unsustainable long-term fiscal path. GAO and the Congressional

Budget Office (CBO) prepare long-term federal fiscal simulations, which also continue to show federal

debt held by the public rising as a share of gross domestic product (GDP) in the long term.

This

situation—in which debt held by the public grows faster than GDP—means the federal government’s

long-term fiscal path is unsustainable.

GAO, CBO, and the 2023 Financial Report, although using somewhat different assumptions, all project

that debt held by the public as a share of GDP (debt-to-GDP) will surpass its historical high (106

percent in 1946) in 2028. Health care and Social Security remain key drivers of federal noninterest

spending in the long-term projections. In addition, GAO, CBO and the 2023 Financial Report project

that growing debt held by the public and increases in interest rates from recent historic lows will lead to

higher spending on net interest (primarily interest on debt held by the public).

The 2023 Financial Report provides an estimate of the magnitude of policy changes needed to achieve

a target debt-to-GDP ratio of 97 percent (the 2023 level) in 2098 (the fiscal gap).

Policymakers could

close the fiscal gap, achieving the target ratio, through a combination of revenue increases and

noninterest spending reductions. To illustrate the magnitude of policy changes needed, if policymakers

choose to close the fiscal gap solely through increased revenues, they would need to make policy

changes over a 75-year period (fiscal years 2024 to 2098) that increase each year’s projected revenues

by 23.8 percent. If policymakers choose to close the fiscal gap solely through reductions in noninterest

spending, they would need to make policy changes over a 75-year period (fiscal years 2024 to 2098)

that reduce each year’s projected noninterest spending by 19.8 percent. The projections show that the

longer policy changes are delayed, the more significant the magnitude of policy changes will need to be

to achieve the debt-to-GDP target.

Since 2017, we have stated that Congress should develop a fiscal plan to place the federal government

on a sustainable fiscal path and ensure that the United States remains in a strong economic position to

meet its social and security needs, as well as to preserve flexibility to address unforeseen events, such

as an economic downturn or large-scale disaster. In developing a fiscal plan, policymakers will need to

consider the entire range of federal activities, both revenue (including tax expenditures) and spending

(entitlement programs, other mandatory spending, and discretionary spending) that affect the debt.

In September 2020, we suggested that a long-term fiscal plan include fiscal rules and targets, such as a

debt-to-GDP target, and identified key considerations for the design, implementation, and enforcement

For more information on GAO’s simulations, see GAO, The Nation’s Fiscal Health: Road Map Needed to Address Projected

Unsustainable Debt Levels, GAO-24-106987 (Washington, D.C.: Feb. 15, 2024). For more information on CBO’s simulations,

see Congressional Budget Office, The Budget and Economic Outlook: 2024 to 2034 (Washington, D.C.: Feb. 7, 2024).

Fiscal gap can also be calculated using different time horizons and different target debt-to-GDP ratios. GAO projects a fiscal

gap for a 30-year period. For more information, see GAO, “Interactive Graphic: Exploring the Tough Choices for a Sustainable

Fiscal Path,” accessed February 7, 2024, https://files.gao.gov/multimedia/gao-23-106201/interactive.

Tax expenditures, as defined by law, are provisions of the federal tax code that reduce taxpayers’ tax liability and therefore

the amount of tax revenue paid to the federal government. Examples include tax credits, deductions, exclusions, exemptions,

deferrals, and preferential tax rates. 2 U.S.C. § 622(3).

STATEMENT OF THE COMPTROLLER GENERAL OF THE UNITED STATES

of fiscal rules and targets.

For example, the design should provide flexibility to address emerging

issues, such as an economic downturn or large-scale disaster. Well-designed fiscal rules and targets

can help manage debt by controlling factors like spending and revenue. GAO issues an annual report

on the fiscal health of the federal government, which provides more information on the federal

government’s unsustainable long-term fiscal path.

We have also previously suggested that Congress consider alternative approaches to the current debt

limit as part of any long-term fiscal plan.

The debt limit is a legal limit on the total amount of federal

debt that can be outstanding at one time.

However, it does not restrict Congress’s ability to pass

spending and revenue legislation that affects the level of debt in the future, nor does it otherwise

constrain fiscal policy. Delays in raising the debt limit could force Treasury to delay payments on

maturing securities and interest until sufficient funds are available, compromising the safety of Treasury

securities. This risk disrupts financial markets, and investors may require higher interest rates to hedge

against the increased risks.

Further, there are other risks—such as natural disasters and climate change, global or regional military

conflicts, housing finance, and public health crises—that could affect the federal government’s financial

condition in the future. These risks are not fully accounted for in the government’s long-term fiscal

projections. Some of the specific risks that could affect the federal government’s financial condition

include the following:

• Federal support of the housing finance market remains significant even though the market has

largely recovered since the 2007 to 2009 financial crisis. In 2008, the federal government placed

the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage

Corporation (Freddie Mac) under conservatorship and entered into preferred stock purchase

agreements with these government-sponsored enterprises (GSE) to help ensure their financial

stability. These agreements could affect the federal government’s financial condition. At the end of

fiscal year 2023, the federal government reported about $240 billion of investments in these GSEs,

which is net of about $70 billion in valuation losses. The reported maximum remaining contractual

commitment to these GSEs, if needed, is about $254 billion.

The ultimate role of these GSEs could affect the federal government’s financial condition and the

financial condition of certain federal entities, including the Federal Housing Administration (FHA),

which in the past expanded its lending role in distressed housing and mortgage markets. Federal

actions and strong housing market conditions have strengthened the financial condition of FHA and

GAO, The Nation’s Fiscal Health: Effective Use of Fiscal Rules and Targets, GAO-20-561 (Washington, D.C.: Sept. 23,

2020).

GAO-24-106987.

GAO, Debt Limit: Market Response to Recent Impasses Underscores Need to Consider Alternative Approaches, GAO-15-

476 (Washington, D.C.: July 9, 2015).

The debt limit is codified at 31 U.S.C. § 3101(b), as amended, and applies to federal debt issued pursuant to authority under

31 U.S.C. chapter 31. A very small amount of total federal debt is not subject to the debt limit. This amount primarily comprises

unamortized discounts on Treasury bills and Zero Coupon Treasury bonds; debt securities issued by agencies other than

Treasury, such as the Tennessee Valley Authority; and debt securities issued by the Federal Financing Bank.

STATEMENT OF THE COMPTROLLER GENERAL OF THE UNITED STATES

these GSEs. However, risks remain that could affect their ability to absorb unexpected losses under

severely adverse conditions.

• Disaster costs are expected to increase as extreme weather events become more frequent and

intense because of climate change, as the U.S. Global Change Research Program and the National

Academies of Sciences, Engineering, and Medicine have observed and projected. Key sources of

exposure include supplemental appropriations to provide disaster assistance, additional losses on

federal insurance programs (e.g., crop and flood insurance), and damage to federal property that

might be affected. For example, as currently structured, the National Flood Insurance Program’s

premiums and dedicated resources are not sufficient to cover expected costs without borrowing

from Treasury.

As of September 30, 2023, the Federal Emergency Management Agency (FEMA),

which administers the National Flood Insurance Program, owed about $21 billion to Treasury for

money borrowed to pay claims and other expenses. We have reported that FEMA is unlikely to

collect enough in premiums in the future to repay this debt.

_________________________

Our audit report on the U.S. government’s consolidated financial statements would not be possible

without the commitment and professionalism of inspectors general throughout the federal government

who are responsible for annually auditing the financial statements of individual federal entities. We also

appreciate the cooperation and assistance of Treasury and OMB officials as well as the federal entities’

chief financial officers’ flexibility, adaptability, and ability to issue their financial statements on a timely

basis. We look forward to continuing to work with these individuals, the administration, and Congress to

achieve the goals and objectives of federal financial management reform.

Our audit report begins on page 218. Our guide, Understanding the Financial Report of the United

States Government, is intended to help those who seek to obtain a better understanding of the financial

report and is available on GAO’s website at https://www.gao.gov.

GAO, Housing Finance System: Future Reforms Should Consider Past Plans and Vulnerabilities Highlighted by Pandemic,

GAO-22-104284 (Washington, D.C.: Jan. 13, 2022).

We have suggested an alternative way to record insurance commitments in the budget such that the federal government’s

commitment would be more fully recognized. See GAO, Fiscal Exposures: Federal Insurance and Other Activities That

Transfer Risk or Losses to the Government, GAO-19-353 (Washington, D.C.: Mar. 27, 2019).

GAO, Flood Insurance: FEMA's New Rate-Setting Methodology Improves Actuarial Soundness but Highlights Need for

Broader Program Reform, GAO-23-105977 (Washington, D.C.: July 31, 2023).

GAO, Understanding the Financial Report of the United States Government, GAO-18-239SP (Washington, D.C.: Feb. 2018).

STATEMENT OF THE COMPTROLLER GENERAL OF THE UNITED STATES

If you have any questions about our audit report, please contact me on (202) 512-5500 or Robert F.

Dacey, Chief Accountant, or Dawn B. Simpson, Director, Financial Management and Assurance, on

(202) 512-3406.

Gene L. Dodaro

Comptroller General

of the United States

cc: The Majority Leader of the Senate

The Minority Leader of the Senate

The Majority Leader of the House of Representatives

The Minority Leader of the House of Representatives

FINANCIAL STATEMENTS

Financial Statements

of the United States Government

for the Fiscal Years Ended September 30,

2023, and 2022

The consolidated financial statements of the U.S. government were prepared using GAAP. These statements include the

accrual-based financial statements and the sustainability financial statements, which are discussed in more detail below, and

the related notes to the consolidated financial statements. Collectively, the accrual-based financial statements, the

sustainability financial statements, and the notes represent basic information that is deemed essential for the consolidated

financial statements to be presented in conformity with GAAP.

ACCRUAL-BASED FINANCIAL STATEMENTS

The accrual-based financial statements present historical information on what the federal government owns (assets) and

owes (liabilities) at the end of the year, what came in (revenues) and what went out (net costs) during the year, and how

accrual-based net operating costs of the federal government reconcile to the budget deficit and changes in its cash balance

during the year. The following sections discuss each of the accrual-based financial statements.

Statements of Net Cost

These statements present the net cost of the government operations for FYs 2023 and 2022. Costs and earned revenues

are categorized on the Statement of Net Cost by significant entity, providing greater accountability by showing the

relationship of the entities’ net cost to the government-wide net cost. Costs and earned revenues are presented in this

Financial Report on an accrual basis, while the Budget presents outlays and receipts, generally on a cash basis. The focus of

the Budget is by entity.

The Statements of Net Cost contain the following four components:

• Gross cost—is the total cost of providing federal goods and services, excluding (gain)/loss from changes in

assumptions and before considering related exchange revenue. The gross costs are the amounts reported by each

entity, adjusted to reflect certain cost assignments made on a cause-and-effect or other reasonable basis (see

discussion below).

• Earned revenue—is exchange revenue resulting from the government providing goods and services to the public at a

price.

• (Gain)/loss from changes in assumptions—is the gain or loss from changes in long-term assumptions used to

measure the liabilities reported for federal civilian and military employee pensions, OPEB, and ORB, including

veterans’ compensation.

• Net cost—is computed by subtracting earned revenue from gross cost, adjusted by the (gain)/loss from changes in

assumptions.

Individual entity net cost amounts will differ from the entity’s financial statements primarily because of the elimination

of intra-governmental activity and the subsequent reallocation of certain costs to individual entities at the government-wide

level. While intra-governmental costs are eliminated from the face of the financial statements, the consolidated Statements of

Net Cost is intended to show the total cost for each entity, therefore, reallocations are completed at the government-wide

level to show costs more accurately at the entity level for employee benefit costs, intra-governmental buy/sell costs and

related revenues, custodial collections, and imputed costs. These reallocated costs have a net effect of zero on the Statements

of Net Cost in the Financial Report.

Because of its specific function, most of the employee benefit costs originally associated with the OPM have been

reallocated to the user entities for government-wide reporting purposes. With regard to intra-governmental buy/sell

FINANCIAL STATEMENTS

transactions the selling entities’ costs are reallocated to the buying entities in order to allocate the costs to the entities that

benefit from such costs.

In addition, the intra-governmental imputed costs recognized for the receipt of goods and services, financed in whole or

part by the providing entities, have been reallocated to the net cost amounts of the individual entities receiving the benefit and

subtracted from the applicable administering entities’ net cost amounts. The most significant types of imputed costs that are

recorded relate to post-retirement and health benefits, FECA, and Treasury’s Judgment Fund.

The interest on securities issued by Treasury and held by the public is reported on Treasury’s financial statements, but

because of its importance and the dollar amounts involved, it is reported separately in these statements.

Statements of Operations and Changes in Net Position

These statements report the results of government operations (net operating costs). They include non-exchange

revenues, which are generated from transactions that do not require a government entity to give value directly in exchange for

the inflow of resources. The government does not “earn” the non-exchange revenue. These are generated principally by the

government’s sovereign power to tax, levy duties, and assess fines and penalties. These statements also include the net cost

reported in the Statements of Net Cost. They further include certain adjustments and unmatched transactions and balances

that affect the net position. These statements present information for funds from dedicated collections and funds other than

those from dedicated collections. Each of these types are presented on a consolidated basis whereby transactions within each

fund type are eliminated. In order to present the activity on a government-wide basis, transactions between funds from

dedicated collections and funds other than those from dedicated collections are eliminated.

Revenue

Inflows of resources to the government that the government demands or that it receives by donations are identified as

non-exchange revenue. The inflows that it demands include individual income tax and tax withholdings, corporate income

taxes, excise taxes, unemployment taxes, custom duties, and estate and gift taxes. The non-exchange revenue is recognized

when collected and adjusted for the change in amounts receivable.

Individual income tax and tax withholdings include FICA/SECA taxes and other taxes. Excise taxes consist of taxes

collected for various items, such as airline tickets, gasoline products, distilled spirits and imported liquor, tobacco, firearms,

and other items.

Other taxes and receipts include FRBs earnings, tax related fines, penalties and interest, and railroad retirement taxes.

Miscellaneous earned revenues consist of earned revenues received from the public with virtually no associated cost.

These revenues include rents and royalties on the Outer Continental Shelf Lands resulting from the leasing and development

of mineral resources on public lands.

Intra-governmental revenue represents interest earned from the investment of surplus dedicated collections, which

finance the deficit spending of all other fund’s non-dedicated operations. These investments are recorded as intra-

governmental debt holdings and are included in Note 12—Federal Debt and Interest Payable, in the table titled Intra-

governmental Debt Holdings: Federal Debt Securities Held as Investments by Government Accounts. These interest earnings

and the associated investments are eliminated in the consolidation process.

Net Cost of Government Operations

The net cost of government operations—gross cost (including gains/losses from changes in assumptions) less earned

revenue—flows through from the Statements of Net Cost.

Intra-governmental cost represents interest expense from the investment of surplus dedicated collections, which finance

the deficit spending of all other fund’s non-dedicated operations. These investments are recorded as intra-governmental debt

holdings. The interest cost and the associated investments are eliminated in the consolidation process.

FINANCIAL STATEMENTS

Intra-governmental Transfers

Intra-governmental transfers are transfers between funds other than those from dedicated collections and funds from

dedicated collections, such as intra-governmental interest and amounts required by statute to be transferred from the General

Fund to funds from dedicated collections. These intra-governmental transfers include appropriations, transfers, and other

financing sources. These amounts are labeled as “other changes in fund balance” in Note 22—Funds from Dedicated

Collections.

Net Operating Cost

The net operating cost equals revenue less net cost of government operations (that flows from the Statement of Net

Cost).

Net Position, Beginning of Period

The net position, beginning of period, reflects the amount reported on the prior year’s Balance Sheet as of the end of

that fiscal year.

Adjustments to beginning net position may include corrections of material errors or changes in accounting principles.

See Note 1.U—Changes in Accounting Principles and Note 1.V—Corrections of Errors for additional information.

Unmatched transactions and balances are adjustments needed to bring the change in net position into balance due

primarily to unresolved intra-governmental differences. See Note 1.T—Unmatched Transactions and Balances for additional

information.

The unmatched transactions are to make the sum of net operating costs and adjustments to beginning net position for the

year equal to the change in net position balance. The unmatched balances are included in the net position, funds other than

those from dedicated collections on the Balance Sheet.

Net Position, End of Period

The net position, end of period, reflects the amount as of the end of the fiscal year. The net position for funds from

dedicated collections is separately shown.

Reconciliations of Net Operating Cost and Budget Deficit

These statements reconcile the results of operations (net operating cost) on the Statements of Operations and Changes in

Net Position to the budget deficit (result of outlays exceeding receipts during a particular fiscal year). The premise of the

reconciliation is that accrual accounting and budgetary accounting often share much of the same transactional data. However,

some transactions differ between the two bases of accounting and are presented as reconciling items from the net operating

cost to the budget deficit.

Receipts and outlays in the Budget are measured primarily on a cash basis and differ from the accrual basis of

accounting used in the Financial Report. Refer to Note 1.B—Basis of Accounting and Revenue Recognition for additional

information on the accrual basis of accounting. These statements begin with the net results of operations (net operating cost)

and report activities where the basis of accounting for the components of net operating cost and the budget deficit differ.

Some presentations of the budget deficit make the distinction between on-budget and off-budget totals. On-budget totals

reflect the transactions of all government entities, except those excluded from the Budget by law. Off-budget totals reflect the

transactions of government entities that are excluded from the on-budget totals by law. Under current law, the off-budget

totals include the Social Security Trust Funds and USPS. The budget deficit, as presented in the Financial Report, combines

the on-budget and off-budget totals to derive consolidated totals for federal activity.

FINANCIAL STATEMENTS

Components of Net Operating Cost Not Part of the Budget Deficit

This information includes the operating components, such as the changes in benefits payable for veterans, military and

civilian employees, environmental and disposal liabilities, and depreciation expense, not included in the budget results.

Components of the Budget Deficit Not Part of Net Operating Cost

This information includes the budget components, such as the acquisition of capital assets (that are recorded as outlays

in the budget when cash is disbursed and reflected in net operating cost through depreciation expense over the useful life of

the asset) and increases in other assets that are not included in the operating results.

Statements of Changes in Cash Balance from Budget and Other

Activities

The primary purpose of these financial statements is to report how the annual budget deficit relates to the change in the

government’s cash and other monetary assets, as well as federal debt. It explains why the budget deficit normally would not

result in an equivalent change in the government’s cash and other monetary assets.

These statements reconcile the budget deficit to the change in cash and other monetary assets during the fiscal year.

They also serve to explain how the budget deficits were financed. These statements show the adjustments for non-cash

outlays included in the Budget, and items affecting the cash balance not included in the Budget, to explain the change in cash

and other monetary assets.

The budget deficit is primarily financed through borrowings from the public. When receipts exceed outlays, the

difference is a surplus. The Budget treats borrowing and debt repayment as a means of financing, not as receipts and

outlays. The Budget records outlays for the interest on the public issues of Treasury debt securities as the interest accrues,

not when the cash is paid.

Non-cash flow amounts in the Budget related to loan financing account activity also reflect intra-governmental

transactions such as interest expense paid or interest revenue received from Treasury, entity year-end credit reform

subsidy reestimates, and the receipt of subsidy expense from program accounts. Cash flow from non-budget activities

related to loan financing account activity includes all cash flows to and from the public, including direct loan

disbursements/default payments to lenders, fees collected, principal and interest repayments, collections on defaulted

guarantee loans, and sale proceeds of foreclosed property. The Budget totals exclude the transactions of the financing

accounts because they are not a cost to the government. However, since loan financing accounts record all credit cash

flows to and from the public, they affect the means of financing a budget deficit.

Balance Sheets

The Balance Sheets show the government’s assets, liabilities, and net position. When combined with stewardship

information, this information presents a more comprehensive understanding of the government’s financial position. The net

position for funds from dedicated collections is shown separately.

Assets

Assets included on the Balance Sheets are resources of the government that remain available to meet future needs. The

most significant assets that are reported on the Balance Sheets are loans receivable, net, general PP&E, net; accounts

receivable, net; and cash and other monetary assets. There are, however, other significant resources available to the

government that extend beyond the assets presented in these Balance Sheets. Those resources include stewardship PP&E in

addition to the government’s sovereign powers to tax and set monetary policy.

FINANCIAL STATEMENTS

Liabilities and Net Position

Liabilities are obligations of the government resulting from prior actions that will require financial resources. The most

significant liabilities reported on the Balance Sheets are federal debt and interest payable and federal employee and veteran

benefits payable. Liabilities also include environmental and disposal liabilities, benefits due and payable, loan guarantee

liabilities, as well as insurance and guarantee program liabilities.

As with reported assets, the government’s responsibilities, policy commitments, and contingencies are much broader

than these reported Balance Sheet liabilities. They include the social insurance programs reported in the SOSI and disclosed

in the unaudited RSI—Social Insurance section, fiscal long-term projections of non-interest spending reported in the SLTFP,

and a wide range of other programs under which the government provides benefits and services to the people of this nation,

as well as certain future loss contingencies.

The government has entered into contractual commitments requiring the future use of financial resources and has

unresolved contingencies where existing conditions, situations, or circumstances create uncertainty about future losses.

Commitments and contingencies that do not meet the criteria for recognition as liabilities on the Balance Sheets, but for

which there is at least a reasonable possibility that losses have been incurred, are disclosed in Note 20—Commitments and

Note 21—Contingencies.

Unmatched transactions and balances are adjustments needed to reconcile differences between assets and liabilities, that

are primarily due to unresolved intra-governmental differences. See Note 1.T—Unmatched Transactions and Balances for

additional information.

The collection of certain taxes and other revenue is credited to the corresponding funds from dedicated collections that

will use these funds to meet a particular government purpose. If the collections from taxes and other sources exceed the

payments to the beneficiaries, the excess revenue is invested in Treasury securities or deposited in the General Fund;

therefore, the trust fund balances do not represent cash. An explanation of the trust funds for social insurance is included in

Note 22—Funds from Dedicated Collections. That note also contains information about trust fund receipts, disbursements,

and assets.

Due to its sovereign power to tax and borrow, and the country’s wide economic base, the government has unique access

to financial resources through generating tax revenues and issuing federal debt securities. This provides the government with

the ability to meet present obligations and those that are anticipated from future operations and are not reflected in net

position.

The net position is the residual difference between assets and liabilities, adjusted for unmatched transactions and

balances reported in the Balance Sheet, and is the cumulative results of operations since inception. For detailed components

that comprise the net position, refer to the section “Statement of Operations and Changes in Net Position.”

SUSTAINABILITY FINANCIAL STATEMENTS

The sustainability financial statements are comprised of the SLTFP, covering all federal government programs, and the

SOSI and the SCSIA, covering social insurance programs (Social Security, Medicare, Railroad Retirement, and Black Lung

programs). The sustainability financial statements are designed to illustrate the relationship between projected receipts and

expenditures if current policy is continued over a 75-year time horizon.

In preparing the sustainability financial statements,

management selects assumptions and data that it believes provide a reasonable basis to illustrate whether current policy is

sustainable. Current policy is based on current law but includes several adjustments. In the SLTFP, notable adjustments to

current law are: 1) projected spending, receipts, and borrowing levels assume raising or suspending the current statutory limit

on federal debt; 2) continued discretionary appropriations are assumed throughout the projections period; 3) scheduled Social

Security and Medicare Part A benefit payments are assumed to occur beyond the projected point of trust fund depletion; and

4) many mandatory programs with expiration dates prior to the end of the 75-year projection period are assumed to be

reauthorized. In the SOSI, the one adjustment to current law is that scheduled Social Security and Medicare Part A benefit

payments are assumed to occur beyond the projected point of trust fund depletions. Assumptions underlying such

sustainability information do not consider changes in policy or all potential future events that could affect future income,

future expenditures, and, hence, sustainability. The projections do not reflect any adverse economic consequences resulting

from continuously rising debt levels. A large number of factors affect the sustainability financial statements and future events

and circumstances cannot be estimated with certainty. Therefore, even if current policy is continued, there will be differences

With the exception of the Black Lung program, which has a rolling 25-year projection period that begins on the September 30 valuation date each year.

FINANCIAL STATEMENTS

between the estimates in the sustainability financial statements and actual results, and those differences may be material. The

unaudited RSI section of this Financial Report includes PV projections using different assumptions to illustrate the

sensitivity of the sustainability financial statements to changes in certain assumptions. The sustainability financial statements

are intended to help the readers understand current policy and the importance and magnitude of policy reforms necessary to

make it sustainable.

By accounting convention, General Fund transfers to Medicare Parts B and D reported in the SOSI are eliminated when

preparing the government-wide consolidated financial statements. The SOSI shows the projected General Fund transfers as

eliminations that, under current law, would be used to finance the remainder of the expenditures in excess of revenues for

Medicare Parts B and D reported in the SOSI. The SLTFP include all revenues (including general revenues) of the federal

government.

Statements of Long-Term Fiscal Projections

The SLTFP, including the corresponding Note and RSI, are intended to help readers of the government’s financial

statements assess the federal government’s financial condition and how it has changed during the year and may change in the

future. The statements and corresponding analysis are specifically designed to help readers assess whether future budgetary

resources will be sufficient to sustain public services and to meet obligations as they come due, assuming that current policy

for federal government services and taxation continues without change.

The SLTFP display the PV of 75-year projections by major category of receipts and non-interest spending. The

projections show the extent to which future receipts of the government exceed or fall short of the government’s non-interest

spending and are presented both in terms of PV dollars and in terms of PV dollars as a percent of PV GDP. The projections

reflect policies currently in place and are neither forecasts nor predictions. The projections are consistent with the projections

for Social Security and Medicare presented in the SOSI and are based on the same economic and demographic assumptions

that underlie the SOSI. The SLTFP display the fiscal gap, which is a summary measure of the change in receipts or non-

interest spending that is necessary to reach a target ratio of debt held by the public to GDP at the end of the projection period.

Note 24—Long-Term Fiscal Projections, explains the methods used to prepare the projections. Unaudited RSI further

assesses the sustainability of current fiscal policy and provides results that are based on alternative assumptions to those used

in the SLTFP.

As discussed further in Note 24, a sustainable policy is one where the debt-to-GDP ratio is stable or declining over the

long term. Because GDP measures the size of the nation’s economy in terms of the total value of all final goods and services

that are produced in a year, the debt-to-GDP ratio is a useful indicator of the economy’s capacity to support federal

government’s services.

Statements of Social Insurance and Changes in Social Insurance

Amounts

SOSI provides estimates of the status of the most significant social insurance programs: Social Security, Medicare,

Railroad Retirement, and Black Lung.

They are administered by SSA, HHS, RRB, and DOL, respectively. The SSA and

HHS projections are based on the intermediate economic and demographic assumptions representing the Trustees’ reasonable

estimates of likely future economic and demographic conditions, as set forth in the applicable Social Security and Medicare

Trustees Reports as well as in the financial statements of HHS and SSA. RRB’s projections are based on assumptions from

the 28

Actuarial Valuation of the Assets and Liabilities Under the Railroad Retirement Acts as of December 31, 2019, the

2023 Annual Report of the Railroad Retirement System required by Section 502 of the Railroad Retirement Solvency Act of

1983 (P.L. 98-76), as well as in RRB’s financial statements and DOL’s projections are based on assumptions disclosed in its

financial statements.

The SCSIA show two reconciliations: 1) change from the period beginning on January 1, 2022 to the period beginning

on January 1, 2023; and 2) change from the period beginning on January 1, 2021 to the period beginning on January 1, 2022.

It reconciles the changes (between the current valuation and the prior valuation) in the PV of estimated future revenue less

estimated future expenditures for current and future participants (the open group measure) over the next 75 years (except

In relation to the amounts presented in the SOSI and SCSIA, because the combined Railroad Retirement and Black Lung programs account for less than

one-quarter of 1.0 percent of the statement totals, they are not material from the government-wide perspective.

FINANCIAL STATEMENTS

Black Lung which has a rolling 25-year projection period through September 30, 2048). The reconciliation identifies several

components of the changes that are significant and provides reasons for the changes in Note 25—Social Insurance.

FINANCIAL STATEMENTS

United States Government

Statement of Net Cost

for the Year Ended September 30, 2023

(Gain)/Loss

from

Gross

Earned

Changes in

Net

(In billions of dollars)

Cost

Revenue

Subtotal

Assumptions

Cost

Department of Health and Human Services

1,875.6

161.2

1,714.4

(0.3)

1,714.1

Department of Veterans Affairs

902.0

5.5

896.5

558.8

1,455.3

Social Security Administration

1,433.1

0.3

1,432.8

Department of Defense

969.0

55.0

914.0

89.3

1,003.3

Interest on Treasury Securities held by the public

678.0

Department of the Treasury

357.4

53.7

303.7

Department of Agriculture

238.1

11.8

226.3

Office of Personnel Management

124.0

29.4

94.6

111.9

206.5

Department of Transportation

108.2

1.5

106.7

Security Assistance Accounts

109.3

6.1

103.2

Department of Homeland Security

111.2

15.6

95.6

1.0

96.6

Department of Energy

86.2

11.3

74.9

Department of Housing and Urban Development

71.4

4.1

67.3

Department of Justice

51.6

3.7

47.9

Department of Labor

45.3

Pension Benefit Guaranty Corporation

55.0

17.0

38.0

Agency for International Development

36.8

Department of State

41.6

6.0

35.6

(0.2)

35.4

Small Business Administration

35.5

5.2

30.3

Department of the Interior

29.5

3.0

26.5

National Aeronautics and Space Administration

24.8

0.4

24.4

Department of Education

50.9

32.4

18.5

Federal Communications Commission

18.6

0.4

18.2

Railroad Retirement Board

15.6

Department of Commerce

17.3

4.3

13.0

Environmental Protection Agency

12.3

0.4

11.9

Federal Deposit Insurance Corporation

21.8

11.9

9.9

National Science Foundation

9.0

United States Postal Service

83.8

77.0

6.8

Smithsonian Institution

2.0

0.5

1.5

Millennium Challenge Corporation

0.7

National Credit Union Administration

0.4

0.1

0.3

U.S. Nuclear Regulatory Commission

0.8

0.7

0.1

General Services Administration

0.9

1.1

(0.2)

Securities and Exchange Commission

2.4

2.6

(0.2)

United States International Development Finance

Corporation

0.3

(0.3)

Farm Credit System Insurance Corporation

0.6

(0.6)

Tennessee Valley Authority

11.4

12.0

(0.6)

Export-Import Bank of the United States

(0.9)

(0.2)

(0.7)

National Railroad Retirement Investment Trust

0.1

2.8

(2.7)

All other entities

31.0

1.8

29.2

0.1

29.3

Total

7,661.7

539.5

7,122.2

760.6

7,882.8

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

FINANCIAL STATEMENTS

United States Government

Statement of Net Cost

for the Year Ended September 30, 2022*

(Gain)/Loss

from

Gross

Earned

Changes in

Net

(In billions of dollars)

Cost

Revenue

Subtotal

Assumptions

Cost

Department of Health and Human Services

1,812.7

154.1

1,658.6

1.4

1,660.0

Department of Veterans Affairs

413.8

5.4

408.4

1,526.5

1,934.9

Social Security Administration

1,294.3

0.3

1,294.0

Department of Defense

979.7

47.8

931.9

527.0

1,458.9

Interest on Treasury Securities held by the public

496.5

Department of the Treasury

557.7

31.3

526.4

Department of Agriculture

250.4

9.7

240.7

Office of Personnel Management

174.1

27.3

146.8

148.2

295.0

Department of Transportation

116.3

1.0

115.3

Security Assistance Accounts

102.1

19.3

82.8

Department of Homeland Security

102.3

14.7

87.6

1.2

88.8

Department of Energy

50.3

22.1

28.2

Department of Housing and Urban Development

28.2

1.9

26.3

Department of Justice

42.4

1.2

41.2

Department of Labor

42.3

Pension Benefit Guaranty Corporation

9.9

16.9

(7.0)

Agency for International Development

29.5

0.1

29.4

Department of State

40.0

4.8

35.2

3.4

38.6

Small Business Administration

47.8

4.3

43.5

Department of the Interior

28.2

2.7

25.5

National Aeronautics and Space Administration

22.3

0.3

22.0

Department of Education

595.1

55.6

539.5

Federal Communications Commission

16.0

0.4

15.6

Railroad Retirement Board

8.2

Department of Commerce

15.8

4.2

11.6

0.1

11.7

Environmental Protection Agency

9.9

0.3

9.6

Federal Deposit Insurance Corporation

1.9

8.2

(6.3)

National Science Foundation

8.2

United States Postal Service

78.7

76.2

2.5

Smithsonian Institution

1.7

0.1

1.6

Millennium Challenge Corporation

0.7

National Credit Union Administration

0.3

0.1

0.2

U.S. Nuclear Regulatory Commission

0.8

0.7

0.1

General Services Administration

0.3

0.9

(0.6)

Securities and Exchange Commission

2.6

2.4

0.2

United States International Development Finance

Corporation

0.3

0.2

0.1

Farm Credit System Insurance Corporation

0.6

(0.6)

Tennessee Valley Authority

11.3

12.4

(1.1)

Export-Import Bank of the United States

0.5

(0.5)

National Railroad Retirement Investment Trust

4.7

1.1

3.6

All other entities

23.4

2.0

21.4

0.1

21.5

Subtotal

7,420.7

531.1

6,889.6

2,207.9

9,097.5

Unmatched transactions and balances (Note 1.T)

(0.6)

Total

7,420.1

531.1

6,889.0

2,207.9

9,096.9

Certain amounts differ from prior year reported amounts due to a change in presentation (see Financial Statement Note 1.W).

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

FINANCIAL STATEMENTS

United States Government

Statement of Operations and Changes in Net Position

for the Year Ended September 30, 2023 (Consolidated)

Funds other than

Funds from

those from

Dedicated

Collections

(Note 22)

Eliminations

Total

(In billions of dollars)

2023

Revenue (Note 19):

Individual income tax and tax withholdings

2,122.4

1,590.7

3,713.1

Corporate income taxes

368.2

Excise taxes

27.4

66.3

93.7

Unemployment taxes

7.8

39.3

47.1

Customs duties

78.1

0.1

78.2

Estate and gift taxes

33.7

Other taxes and receipts

86.6

28.7

115.3

Miscellaneous earned revenues

16.3

Intra-governmental revenue

106.0

(106.0)

Total revenue

2,740.5

1,831.1

(106.0)

4,465.6

Net Cost of Government Operations:

Net cost

5,504.6

2,378.2

7,882.8

Intra-governmental cost

106.0

(106.0)

Total net cost

5,610.6

2,378.2

(106.0)

7,882.8

Intra-governmental transfers

(611.0)

611.0

Net operating (cost)/revenue

(3,481.1)

63.9

(3,417.2)

Net position, beginning of period

(37,757.6)

3,696.4

(34,061.2)

Adjustments to beginning net position

Changes in accounting principles (Note 1.U)

(1.0)

0.2

(0.8)

Net operating (cost)/revenue

(3,481.1)

63.9

(3,417.2)

Net position, end of period

(41,239.7)

3,760.5

(37,479.2)

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

FINANCIAL STATEMENTS

United States Government

Statement of Operations and Changes in Net Position

for the Year Ended September 30, 2022 (Consolidated)*

Funds other than

Funds from

those from

Dedicated

Collections

(Note 22)

Eliminations

Total

(In billions of dollars)

2022

Revenue (Note 19):

Individual income tax and tax withholdings

2,571.1

1,441.5

4,012.6

Corporate income taxes

383.2

Excise taxes

34.4

58.4

92.8

Unemployment taxes

6.9

56.7

63.6

Customs duties

98.6

0.1

98.7

Estate and gift taxes

32.6

Other taxes and receipts

182.3

16.2

198.5

Miscellaneous earned revenues

43.9

Intra-governmental revenue

99.8

(99.8)

Total revenue

3,353.0

1,672.7

(99.8)

4,925.9

Net Cost of Government Operations:

Net cost

6,970.2

2,126.7

9,096.9

Intra-governmental cost

99.8

(99.8)

Total net cost

7,070.0

2,126.7

(99.8)

9,096.9

Intra-governmental transfers

(667.4)

667.4

Net operating (cost)/revenue

(4,384.4)

213.4

(4,171.0)

Net position, beginning of period

(33,368.8)

3,483.0

(29,885.8)

Adjustments to beginning net position

Changes in accounting principles (Note 1.U)

(4.3)

Net operating (cost)/revenue

(4,384.4)

213.4

(4,171.0)

Unmatched transactions and balances

(Note 1.T)

(0.1)

Net position, end of period

(37,757.6)

3,696.4

(34,061.2)

Certain amounts differ from prior year reported amounts due to a change in presentation (see Financial Statement Note 1.W).

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

FINANCIAL STATEMENTS

United States Government

Reconciliations of Net Operating Cost and Budget Deficit

for the Years Ended September 30, 2023, and 2022

(In billions of dollars)

2023

2022*

Net operating cost

(3,417.2)

(4,171.0)

Components of net operating cost not part of the budget deficit:

Excess of accrual-basis expenses over budget outlays:

Federal employee and veteran benefits payable:

Pension and accrued benefits

303.7

774.1

Veterans compensation and burial benefits

1,130.7

1,662.8

Post-retirement health and accrued benefits

49.5

176.3

Other benefits

31.6

15.8

Subtotal - federal employee and veteran benefits payable

1,515.5

2,629.0

Insurance and guarantee program liabilities

(5.2)

(25.3)

Environmental and disposal liabilities

19.0

13.0

Accounts payable

9.6

(8.5)

Benefits due and payable

37.6

14.4

Advances from others and deferred revenue

108.1

45.2

Other liabilities

178.1

(182.0)

Subtotal - excess of accrual-basis expenses over budget outlays

1,862.7

2,485.8

Amortized expenses not included in budget outlays:

Property, plant, and equipment depreciation expense

77.9

78.3

Other expenses that are not reported as budget outlays:

Property, plant, and equipment disposals and revaluations

9.1

15.5

Excess of accrual-basis revenue over budget receipts:

Accounts receivable, net

(18.6)

(20.8)

Taxes receivable, net

55.0

65.5

Other losses/(gains) and cost/(revenue) that are not budget receipts:

Investments in government-sponsored enterprises

(16.7)

(2.8)

Subtotal - components of net operating cost not part of budget deficit

1,969.4

2,621.5

Components of the budget deficit that are not part of net operating cost:

Budget receipts not included in net operating cost:

Credit reform and other loan activities

24.5

(58.5)

Budget outlays not included in net operating cost:

Acquisition of capital assets

(124.5)

(114.4)

Investments

(0.5)

31.3

Inventory and related property, net

(16.1)

(7.7)

Advances and prepayments

45.4

71.3

Other assets

(157.7)

1.0

Subtotal - components of the budget deficit that are not part of net operating cost

(228.9)

(77.0)

Adjustments to beginning net position

(0.8)

(4.3)

Other:

Allocations of special drawing rights

(4.0)

14.8

Effect of uninvested principal from the TSP's G Fund

156.7

All other reconciling items

(13.7)

83.8

Total other

(17.7)

255.3

Budget deficit

(1,695.2)

(1,375.5)

Certain amounts differ from prior year reported amounts due to a change in presentation (see Financial Statement Note 1.W).

The amounts represent the year over year net change in the Balance Sheet line items.

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

FINANCIAL STATEMENTS

United States Government

Statements of Changes in Cash Balance from Budget and Other Activities

for the Years Ended September 30, 2023, and 2022

(In billions of dollars)

2023

2022

Cash flow from budget activities:

Total budget receipts

4,439.3

4,896.1

Total budget outlays

(6,134.5)

(6,271.6)

Budget deficit

(1,695.2)

(1,375.5)

Adjustments for non-cash outlays included in the budget:

Non-cash flow amounts in the budget related to federal debt:

Accrued interest

407.2

311.3

Net amortization

197.4

31.9

Other

47.7

260.0

Subtotal - adjustments for non-cash flow amounts in the budget related to federal debt

652.3

603.2

Non-cash flow amounts in the budget related to loan financing account activity:

Interest revenue on uninvested funds

11.9

12.7

Interest expense on entity borrowings

(45.4)

(45.5)

Downward reestimates/negative subsidy payments

(357.4)

(55.9)

Subsidy expense/upward reestimates

191.4

542.6

Subtotal - adjustments for non-cash flow amounts in the budget related to loan

financing account activity

(199.5)

453.9

Total of adjustments for non-cash outlays included in the budget

452.8

1,057.1

Cash flow from activities not included in the budget:

Cash flow from non-budget activities related to federal debt:

Interest paid

(371.8)

(299.2)

Subtotal - cash flow from non-budget activities related to federal debt

(371.8)

(299.2)

Cash flow from non-budget activities related to loan financing account activity:

Loan disbursements/default payments

(219.5)

(522.6)

Fees

22.1

25.4

Principal and interest repayments

91.3

87.5

Other collections on defaulted loans receivable and sale of foreclosed property

4.6

2.2

Special purpose vehicle disbursements

(0.2)

(4.5)

Repayments of special purpose vehicle investments

4.7

9.1

Subtotal

- cash flow from non-budget activities related to loan financing account activity

(97.0)

(402.9)

Cash flow from financing federal debt:

Borrowings

20,196.0

17,457.5

Repayments

(18,212.8)

(15,701.2)

Discount/premium

(285.5)

(78.7)

Effect of uninvested principal from the TSP's G Fund

(156.7)

Subtotal - cash flow from financing federal debt

1,697.7

1,520.9

Total cash flow from activities not included in the budget

1,228.9

818.8

Other:

Allocations of special drawing rights

4.0

(14.8)

All other reconciling items

53.9

(82.8)

Total other

57.9

(97.6)

Change in cash and other monetary assets balance

44.4

402.8

Beginning cash and other monetary assets balance

877.8

475.0

Ending cash and other monetary assets balance

922.2

877.8

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

FINANCIAL STATEMENTS

United States Government

Balance Sheets

as of September 30, 2023, and 2022

(In billions of dollars)

2023

2022

Assets:

Cash and other monetary assets (Note 2)

922.2

877.8

Accounts receivable, net (Note 3)

319.9

356.3

Loans receivable, net (Note 4)

1,695.1

1,434.1

Negative loan guarantee liabilities (Note 4)

4.6

Inventory and related property, net (Note 5)

423.0

406.9

General property, plant and equipment, net (Note 6)

1,235.0

1,197.5

Investments (Note 7)

130.8

130.3

Investments in government-sponsored enterprises (Note 8)

240.4

223.7

Advances and prepayments (Note 9)

252.7

298.1

Other assets (Note 10)

195.4

37.7

Total assets

5,419.1

4,962.4

Stewardship property, plant, and equipment (Note 26)

Liabilities:

Accounts payable (Note 11)

124.2

114.6

Federal debt and interest payable (Note 12)

26,347.7

24,328.0

Federal employee and veteran benefits payable (Note 13)

14,327.4

12,811.9

Environmental and disposal liabilities (Note 14)

645.3

626.3

Benefits due and payable (Note 15)

325.9

288.3

Loan guarantee liabilities (Note 4)

6.4

Insurance and guarantee program liabilities (Note 16)

99.3

104.5

Advances from others and deferred revenues (Note 17)

355.3

247.2

Other liabilities (Note 18)

673.2

495.1

Total liabilities

42,898.3

39,022.3

Commitments (Note 20) and Contingencies (Note 21)

Unmatched transactions and balances (Note 1.T)

1.3

Net Position:

Funds from Dedicated Collections (Note 22)

3,760.5

3,696.4

Funds other than those from Dedicated Collections

(41,239.7)

(37,757.6)

Total net position

(37,479.2)

(34,061.2)

Total liabilities and net position*

5,419.1

4,962.4

Total liabilities and net position equals Total liabilities, Total net position and Unmatched transactions and balances.

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

FINANCIAL STATEMENTS

United States Government

Statements of Long-Term Fiscal Projections (Note 24)

Present Value of 75-Year Projections as of September 30, 2023, and 2022

In trillions of dollars

Percent of GDP

2023

2022

Change

2023

2022

Change

Receipts:

Social Security payroll taxes

80.8

77.8

2.9

4.2

0.1

Medicare payroll taxes

27.4

26.4

1.0

1.4

Individual income taxes

204.4

201.1

3.3

10.7

(0.1)

Corporation income taxes

24.3

25.0

(0.7)

1.3

(0.1)

Other receipts

23.0

20.2

2.9

1.2

1.1

0.1

Total receipts

360.0

350.6

9.3

18.8

18.7

Non-interest spending:

Social Security

114.2

109.0

5.3

6.0

5.8

0.1

Medicare Part A

37.9

37.1

0.8

2.0

Medicare Parts B & D

52.2

51.1

1.1

2.7

Medicaid

47.3

56.5

(9.2)

2.5

3.0

(0.6)

Other mandatory

62.8

53.4

9.4

3.3

2.8

0.4

Defense discretionary

59.8

56.9

2.9

3.1

3.0

0.1

Non-defense discretionary

58.9

66.2

(7.3)

3.1

3.5

(0.5)

Total non-interest spending

433.1

430.2

3.0

22.6

23.0

(0.4)

Receipts less non-interest spending

(73.2)

(79.5)

6.4

(3.8)

(4.2)

0.4

Fiscal gap

(4.5)

(4.9)

0.4

75-year present value projections for 2023 are as of 9/30/2023 for FYs 2024-2098; projections for 2022 are as of 9/30/2022 for FYs

2023-2097.

The 75-year present value of nominal GDP, which drives the calculations above is $1,919.1 trillion starting in FY 2024, and was

$1,872.9 trillion starting in FY 2023.

Represents portions of Medicare supported by payroll taxes.

Represents portions of Medicare supported by general revenues. Consistent with the President's Budget, outlays for Parts B & D are

presented net of premiums.

To prevent the debt-to-GDP ratio from rising over the next 75 years, a combination of non-interest spending reductions and receipt

increases that amounts to 4.5 percent of GDP on average is needed (4.9 percent of GDP on average in 2022). See Note 24—

Long-Term Fiscal Projections.

Totals may not equal the sum of components due to rounding.

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

FINANCIAL STATEMENTS

United States Government

Statements of Social Insurance (Note 25)

Present Value of Long-Range (75 Years, except Black Lung) Actuarial Projections

(In trillions of dollars)

2023

2022

2021

2020

2019

Federal Old

-Age, Survivors and Disability Insurance (Social

Security):

Revenue (Contributions and Dedicated Taxes) from:

Participants who have attained eligibility age (age 62 and over)

2.2

2.0

1.8

1.7

1.5

Participants who have not attained eligibility age

42.2

40.4

37.5

35.2

33.6

Future participants

43.0

41.8

39.3

37.0

35.3

All current and future participants

87.4

84.2

78.6

73.9

70.4

Expenditures for Scheduled Future Benefits for:

Participants who have attained eligibility age (age 62 and over)

(23.5)

(21.6)

(19.8)

(18.3)

(16.9)

Participants who have not attained eligibility age

(71.2)

(68.5)

(64.9)

(59.8)

(55.8)

Future participants

(17.9)

(17.4)

(16.6)

(15.5)

(14.5)

All current and future participants

(112.6)

(107.5)

(101.3)

(93.6)

(87.2)

Present value of future expenditures in excess of future

revenue

(25.2)

(23.3)

(22.7)

(19.7)

(16.8)

Federal Hospital Insurance (Medicare Part A):

Revenue (Contributions and Dedicated Taxes) from:

Participants who have attained eligibility age (age 65 and over)

0.9

0.8

0.7

0.6

Participants who have not attained eligibility age

15.4

14.8

13.0

12.5

12.0

Future participants

15.0

14.6

13.0

12.5

11.8

All current and future participants

31.3

30.2

26.7

25.6

24.4

Expenditures for Scheduled Future Benefits for:

Participants who have attained eligibility age (age 65 and over)

(7.2)

(7.0)

(6.2)

(6.1)

(5.3)

Participants who have not attained eligibility age

(23.6)

(23.2)

(20.9)

(20.1)

(20.0)

Future participants

(5.1)

(5.0)

(4.6)

(4.2)

(4.5)

All current and future participants

(35.9)

(35.2)

(31.7)

(30.4)

(29.8)

Present value of future expenditures in excess of future

revenue

(4.6)

(5.0)

(4.8)

(5.4)

Federal Supplementary Medical Insurance (Medicare Part B):

Revenue (Premiums) from:

Participants who have attained eligibility age (age 65 and over)

2.1

2.2

1.9

1.7

1.5

Participants who have not attained eligibility age

10.9

11.8

10.0

9.3

7.5

Future participants

2.7

3.1

2.6

2.5

1.9

General Fund transfers

40.9

39.5

35.5

33.1

28.8

All current and future participants

56.6

50.0

46.6

39.7

Expenditures for Scheduled Future Benefits for:

Participants who have attained eligibility age (age 65 and over)

(8.0)

(7.8)

(6.9)

(6.2)

(5.8)

Participants who have not attained eligibility age

(38.5)

(38.6)

(34.1)

(31.8)

(27.3)

Future participants

(10.1)

(10.2)

(9.0)

(8.6)

(6.6)

All current and future participants

(56.6)

(50.0)

(46.6)

(39.7)

Eliminations

(40.9)

(39.5)

(35.5)

(33.1)

(28.8)

Present value of future expenditures in excess of future

revenue (after eliminations)

(40.9)

(39.5)

(35.5)

(33.1)

(28.8)

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

FINANCIAL STATEMENTS

United States Government

Statements of Social Insurance (Note 25), continued

Present Value of Long-Range (75 Years, except Black Lung) Actuarial Projections

(In trillions of dollars)

2023

2022

2021

2020

2019

Federal Supplementary Medical Insurance (Medicare Part D):

Revenue (Premiums and State Transfers) from:

Participants who have attained eligibility age (age 65 and over)

0.4

0.3

0.2

Participants who have not attained eligibility age

1.9

2.3

2.0

2.1

Future participants

0.7

1.0

0.9

General Fund transfers

7.6

8.0

7.7

7.8

8.0

All current and future participants

10.6

11.7

10.9

11.0

11.2

Expenditures for Scheduled Future Benefits for:

Participants who have attained eligibility age (age 65 and over)

(1.3)

(1.2)

(1.1)

(1.0)

Participants who have not attained eligibility age

(6.9)

(7.4)

(6.9)

(7.0)

(7.2)

Future participants

(2.4)

(3.1)

(2.9)

(3.0)

All current and future participants

(10.6)

(11.7)

(10.9)

(11.0)

(11.2)

Eliminations

(7.6)

(8.0)

(7.7)

(7.8)

(8.0)

Present value of future expenditures in excess of future

revenue (after eliminations)

(7.6)

(8.0)

(7.7)

(7.8)

(8.0)

Other:

Present value of future expenditures in excess of future

revenue

(0.1)

Total present value of future expenditures in excess of future

revenue

8, 9, 10

(78.4)

(75.9)

(71.0)

(65.5)

(59.1)

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

FINANCIAL STATEMENTS

United States Government

Statements of Social Insurance (Note 25), continued

Present Value of Long-Range (75 Years, except Black Lung) Actuarial Projections

(In trillions of dollars)

2023

2022

2021

2020

2019

Social Insurance Summary:

Participants who have attained eligibility age:

Revenue (e.g., contributions and dedicated taxes)

5.6

5.4

4.7

4.3

3.8

Expenditures for scheduled future benefits

(40.0)

(37.6)

(34.0)

(31.6)

(29.1)

Present value of future expenditures in excess of

future revenue

(34.4)

(32.2)

(29.3)

(27.3)

(25.3)

Participants who have not attained eligibility age:

Revenue (e.g., contributions and dedicated taxes)

70.4

69.3

62.5

59.0

55.2

Expenditures for scheduled future benefits

(140.2)

(137.7)

(126.8)

(118.7)

(110.3)

Present value of future expenditures in excess of

future revenue

(69.8)

(68.4)

(64.3)

(59.7)

(55.1)

Closed group - Total present value of future expenditures

in excess of future revenue

(104.2)

(100.6)

(93.6)

(87.0)

(80.4)

Future participants:

Revenue (e.g., contributions and dedicated taxes)

61.4

60.5

55.8

52.9

49.9

Expenditures for scheduled future benefits

(35.6)

(35.8)

(33.2)

(31.4)

(28.6)

Present value of future revenue in excess of future

expenditure

25.8

24.7

22.6

21.5

21.3

Open group - Total present value of future expenditures in

excess of future revenue

(78.4)

(75.9)

(71.0)

(65.5)

(59.1)

The projection period for Social Security and Medicare is 1/1/2023 - 12/31/2097 and the valuation date is 1/1/2023.

The projection period for Social Security and Medicare is 1/1/2022 - 12/31/2096 and the valuation date is 1/1/2022.

The projection period for Social Security and Medicare is 1/1/2021 - 12/31/2095 and the valuation date is 1/1/2021.

The projection period for Social Security and Medicare is 1/1/2020 - 12/31/2094 and the valuation date is 1/1/2020.

The projection period for Social Security and Medicare is 1/1/2019 - 12/31/2093 and the valuation date is 1/1/2019.

These amounts represent the PV of the future transfers from the General Fund to the SMI Trust Funds. These future intra-governmental

are included as income in both HHS’s and the CMS’s financial statements but, by accounting convention, are not income from the

government-wide perspective of this report.

Includes Railroad Retirement and Black Lung.

These amounts do not include the PV of the financial interchange between the railroad retirement and social security systems,

which is included as income in the Railroad Retirement Financial Report, but is not included from the government-wide perspective of this

report (See discussion of RRB in the unaudited RSI section of this report).

Does not include interest expense accruing on the outstanding debt of the BLDTF.

For information on the projection periods and valuation dates for the Railroad Retirement and Black Lung programs, refer to the financial

statements of RRB and DOL, respectively.

Current participants for the Social Security and Medicare programs are assumed to be the closed group of individuals who are at least

15 years of age at the start of the projection period, and are participating as either taxpayers, beneficiaries, or both. Amounts shown exclude

General Fund transfers reported by CMS for Medicare's Parts B and D.

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

FINANCIAL STATEMENTS

United States Government

Statement of Changes in Social Insurance Amounts

for the Year Ended September 30, 2023 (Note 25)

Social

Medicare

(In trillions of dollars)

Security

SMI

1, 3

Other

Total

NPV of future revenue less future expenditures

for current and future participants (open group)

over the next 75 years, beginning of the year

(23.3)

(5.0)

(47.5)

(0.1)

(75.9)

Reasons for changes in the NPV during the year:

Changes in valuation period

(0.7)

(0.2)

(1.1)

(2.0)

Changes in demographic data, assumptions, and

methods

(0.1)

(0.3)

0.2

(0.2)

Changes in economic data, assumptions, and

methods

(0.8)

Changes in law or policy

1.1

Changes in methodology and programmatic data

(0.3)

Changes in economic and health care

assumptions

(0.3)

(2.3)

(2.6)

Change in projection base

1.2

1.1

2.3

Net change in open group measure

(1.9)

0.4

(1.0)

(2.5)

Open group measure, end of year

(25.2)

(4.6)

(48.5)

(0.1)

(78.4)

Amounts represent changes between valuation dates 1/1/2022 and 1/1/2023.

Includes Railroad Retirement changes between valuation dates 10/1/2021 and 10/1/2022 and Black Lung changes between 9/30/2022 and

9/30/2023.

Amounts shown exclude General Fund transfers reported by CMS for Medicare's Parts B and D.

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

FINANCIAL STATEMENTS

United States Government

Statement of Changes in Social Insurance Amounts

for the Year Ended September 30, 2022 (Note 25)

Social

Medicare

(In trillions of dollars)

Security

SMI

1, 3

Other

Total

NPV of future revenue less future expenditures

for current and future participants (open group)

over the next 75 years, beginning of the year

(22.7)

(5.0)

(43.2)

(0.1)

(71.0)

Reasons for changes in the NPV during the year:

Changes in valuation period

(0.7)

(0.1)

(0.9)

(1.7)

Changes in demographic data, assumptions, and

methods

(0.3)

(0.5)

(0.8)

Changes in economic data, assumptions, and

methods

(0.2)

Changes in law or policy

Changes in methodology and programmatic data

0.6

Changes in economic and health care

assumptions

(1.9)

(3.4)

(5.3)

Change in projection base

2.0

0.5

2.5

Net change in open group measure

(0.6)

(4.3)

(4.9)

Open group measure, end of year

(23.3)

(5.0)

(47.5)

(0.1)

(75.9)

Amounts represent changes between valuation dates 1/1/2021 and 1/1/2022.

Includes Railroad Retirement changes between valuation dates 10/1/2020 and 10/1/2021 and Black Lung changes between 9/30/2021 and

9/30/2022.

Amounts shown exclude General Fund transfers reported by CMS for Medicare's Parts B and D.

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

NOTES TO THE FINANCIAL STATEMENTS

United States Government

Notes to the Financial Statements

for the Fiscal Years Ended September 30,

2023, and 2022

Note 1. Summary of Significant Accounting Policies

A. Reporting Entity

The government includes the executive branch, the legislative branch, and the judicial branch. This Financial Report

includes the financial status and activities related to the operations of the government. SFFAS No. 47, Reporting Entity

provides criteria for identifying organizations that are included in the Financial Report as consolidation entities or disclosure

entities. The determination as to whether an organization is a consolidation entity or disclosure entity is based on the

assessment of the following characteristics as a whole, the organization: a) is financed through taxes and other non-exchange

revenues; b) is governed by the Congress or the President; c) imposes or may impose risks and rewards to the government;

and d) provides goods and services on a non-market basis.

Consolidation entities are organizations that are consolidated in the financial statements. For disclosure entities, data is

not consolidated in the financial statements, instead information is disclosed in the notes to the financial statements

concerning: a) the nature of the government’s relationship with the disclosure entities; b) the nature and magnitude of

relevant activity with the disclosure entities during the period and balances at the end of the period; and c) a description of

financial and non-financial risks, potential benefits and, if possible, the amount of the government’s exposure to gains and

losses from the past or future operations of the disclosure entity or entities.

SFFAS No. 47 also provides guidance for identifying related parties and in determining what information to provide

about related party relationships of such significance that it would be misleading to exclude such information.

Based on the criteria in GAAP for federal entities, the assets, liabilities, and results of operations of Fannie Mae and

Freddie Mac are not consolidated into the government's consolidated financial statements. However, the values of the

investments in such entities, changes in value, and related activity with these entities are included in the government's

consolidated financial statements. Although federal investments in Fannie Mae and Freddie Mac are significant, these entities

do not meet the GAAP criteria for consolidation entities.

Under SFFAS No. 47 criteria, Fannie Mae and Freddie Mac were owned or controlled by the government as a result of:

a) regulatory actions (such as organizations in receivership or conservatorship); or b) other government intervention actions.

Under the regulatory or other intervention actions, the relationship with the government is not expected to be permanent.

These entities are classified as disclosure entities based on their characteristics as a whole (see Note 27—Disclosure Entities

and Related Parties for additional information on these disclosure entities).

Also, under GAAP criteria, the FR System and SPVs are not consolidated into the government's consolidated financial

statements (see Note 7—Investments for additional information on SPVs and Note 27—Disclosure Entities and Related

Parties for additional information concerning the FR System).

For additional information regarding Reporting Entity, see Appendix A—Reporting Entity.

B. Basis of Accounting and Revenue Recognition

Consolidated Financial Statements

The consolidated financial statements of the government are prepared in accordance with the standards established by

FASAB. As permitted by FASAB standards, certain components of the federal government prepare their financial statements

following the standards established by FASB. Information from those components is included within the government's

consolidated financial statements without conversion to FASAB standards. Intra-governmental transactions are eliminated in

NOTES TO THE FINANCIAL STATEMENTS

consolidation, except as described in the Other Information–Unmatched Transactions and Balances. See Note 1.T—

Unmatched Transactions and Balances for additional information. The consolidated financial statements include accrual-

based financial statements and sustainability financial statements, which are discussed in more detail below, and the related

notes to the consolidated financial statements. Collectively, the accrual-based financial statements, the sustainability financial

statements, and the notes represent information that is deemed essential for the financial statements and notes to be presented

in conformity with GAAP.

Accounting standards allow certain presentations and disclosures to be modified, if needed, to prevent the disclosure of

classified information. Accordingly, modifications may have been made to certain presentations and disclosures.

Accrual-Based Financial Statements

The accrual-based financial statements were prepared under the following principles:

• Expenses are generally recognized when incurred.

• Non-exchange revenue, including taxes, duties, fines, and penalties, are recognized when collected and adjusted for

the change in amounts receivable (modified cash basis). Related refunds and other offsets, including those that are

measurable and legally payable, are netted against non-exchange revenue.

• Exchange (earned) revenue is recognized when the government provides goods and services to the public for a price.

Exchange revenue includes user charges such as admission to federal parks and premiums for certain federal

insurance.

The basis of accounting used for budgetary purposes, which is primarily on a cash basis (budget deficit) and follows

budgetary concepts and policies, differs from the basis of accounting used for the financial statements which follow GAAP.

See the Reconciliations of Net Operating Cost and Budget Deficit in the Financial Statements section and Note 29—COVID-

19 Activity in the notes to the financial statements.

Sustainability Financial Statements

The sustainability financial statements were prepared based on the projected PV of the estimated future revenue and

estimated future expenditures, primarily on a cash basis, for a 75-year period. The sustainability financial statements consist

of the: 1) SLTFP, covering all federal government programs and all sources of federal revenue; 2) SOSI; and 3) SCSIA.

New Standards Issued in Prior and Current Years and Implemented in Current Year

In FY 2016, the government began implementing the requirements of new standards related to the reporting for

inventory and related property, net and general PP&E. These standards are available to each reporting entity once per line

item addressed in the standard. The standards being implemented are:

• FASAB issued SFFAS No. 48, Opening Balances for Inventory, Operating Materials and Supplies, and Stockpile

Materials. SFFAS No. 48 permits a reporting entity to apply an alternative valuation method in establishing opening

balances and applies when a reporting entity is presenting financial statements, or one or more line items addressed

by this statement. SFFAS No. 48 was effective beginning in FY 2017. Early implementation was permitted. DOD

did partially implement in 2016 and select component entities have continued to implement in FY 2017 through FY

2023. DOD has not declared full implementation yet; therefore, this standard continues to be partially implemented

each year.

• FASAB issued SFFAS No. 50, Establishing Opening Balances for General Property, Plant and Equipment. SFFAS

No. 50 permits a reporting entity to apply an alternative valuation method in establishing opening balances and

applies when a reporting entity is presenting financial statements, or one or more line items addressed by this

statement. SFFAS No. 50 was effective beginning in FY 2017. Early implementation was permitted. DOD did

partially implement in 2016 and select component entities have continued to implement in FY 2017 through FY

2023. DOD has not declared full implementation yet; therefore, this standard continues to be partially implemented

each year.

In July 2021, FASAB issued SFFAS No. 59, Accounting and Reporting of Government Land. Per SFFAS No. 59,

starting in FY 2026, land and permanent land rights will no longer be capitalized, and the previously capitalized amounts will

be removed from the Balance Sheet. Also, starting in FY 2026, SFFAS No. 59 requires certain disclosures in the notes to the

financial statements, including estimated acreage of land and permanent land rights and its predominant use. For FY 2022

through FY 2025, such disclosures are required to be presented as RSI. These include:

• Estimated acres of general PP&E land and stewardship land using three predominant use sub-categories:

o Conservation and preservation land;

o Operational land; and

o Commercial use land.

NOTES TO THE FINANCIAL STATEMENTS

• Estimated acres of land held for disposal or exchange.

New Standards Issued and Not Yet Implemented

As of September 2023, FASAB has issued the following new standards that are applicable to the Financial Report, but

are not yet implemented at the government-wide level for FY 2023:

In April 2018, FASAB issued SFFAS No. 54, Leases: An Amendment of SFFAS No. 5, Accounting for Liabilities of the

Federal Government, and SFFAS No. 6, Accounting for Property, Plant, and Equipment. SFFAS No. 54 revises the financial

reporting standards for federal lease accounting. It provides a comprehensive set of lease accounting standards to recognize

federal lease activities in the reporting entity’s financial statements and includes appropriate disclosures. This statement

requires that federal lessees recognize a lease liability and a right-to-use lease asset at the commencement of the lease term,

unless it meets any of the scope exclusions or meets the definition/criteria of short-term leases, contracts or agreements that

transfer ownership, or intra-governmental leases. A federal lessor would recognize a lease receivable and deferred revenue,

unless it meets any of the scope exclusions or meets the definition/criteria of short-term leases, contracts or agreements that

transfer ownership, or intra-governmental leases. SFFAS No. 58, Deferral of the Effective Date of SFFAS No. 54, Leases,

issued in June 2020, defers the effective date of SFFAS No. 54 to FY 2024 and early implementation is not permitted. The

following standards were issued to amend SFFAS No. 54, Leases: SFFAS No. 60, Omnibus Amendments 2021, Leases-

Related Topics, SFFAS No. 61, Omnibus Amendments 2023, Leases Related Topics II, and SFFAS No. 62, Transitional

Amendment to SFFAS 54. These amendments are effective for FY 2024.

C. Accounts Receivable, Net

Accounts receivable include the amount of taxes receivable that consist primarily of uncollected tax assessments,

penalties, and interest when taxpayers have agreed, or a court has determined, the assessments are owed. Taxes receivable do

not include unpaid assessments when taxpayers or a court have not agreed that the amounts are owed (compliance

assessments) or the government does not expect further collections due to factors such as the taxpayer’s death, bankruptcy, or

insolvency (write-offs). Taxes receivable are reported net of an allowance for the estimated portion deemed to be

uncollectible.

Other accounts receivable represent claims to cash or other assets from entities outside the government that arise from

the sale of goods or services, duties, fines, certain license fees, recoveries, or other provisions of the law. Accounts receivable

are reported net of an allowance for uncollectible amounts. An allowance is established when it is more likely than not the

receivables will not be totally collected. The allowance method varies among the entities in the government and is usually

based on past collection experience and is reestimated periodically as needed. Methods may include statistical sampling of

receivables, specific identification and intensive analysis of each case, aging methodologies, and percentage of total

receivables based on historical collection. See Note 3—Accounts Receivable, Net for additional information.

D. Loans Receivable, Net

Direct loans committed after FY 1991 are valued at their gross amounts less an allowance for the PV of the amounts not

expected to be recovered, and thus having to be subsidized is called an “allowance for subsidy.”

Direct loans obligated before FY 1992 are valued under the PV method. Under the PV method, the outstanding

principal of direct loans is reduced by an allowance equal to the difference between the outstanding principal and the PV of

the expected net cash flows. See Note 4—Loans Receivable, Net and Loan Guarantee Liabilities for additional information.

E. Loan Guarantee Liabilities

Loan guarantees committed after FY 1991 are valued at the PV of the cash outflows less the PV of the related inflows.

The estimated PV of net long-term cash outflows of an entity for subsidized costs is net of recoveries, interest supplements,

and offsetting fees. The loan guarantee liabilities present the net PV of all future cash flows from loans.

Loan guarantees committed before FY 1992 are valued under the allowance-for-loss method. The allowance for loan

losses is recognized when it is more likely than not that the direct loans will not be totally collected. The allowance of the

uncollectible amounts is reestimated each year. See Note 4—Loans Receivable, Net and Loan Guarantee Liabilities for

additional information.

NOTES TO THE FINANCIAL STATEMENTS

Generally, loan guarantees are recorded as a liability except when cash inflows are expected to exceed cash outflows on

a PV basis. This results in a negative loan guarantee that is reported as an asset on the Balance Sheet.

F. Inventory and Related Property, Net

Inventory is tangible personal property that is categorized as: 1) held for current sale; 2) held in reserve for future sale;

3) held for repair; or 4) excess, obsolete, and unserviceable. Inventory held for current sale and held in reserve for future sale

are valued by the main contributing entities at historical cost using the MAC flow assumption. Historical cost includes all

appropriate purchase, transportation, and production costs incurred to bring the items to their current condition and location.

Any abnormal costs, such as excessive handling or rework costs, are charged to operations of the period. Inventory held for

repair is accounted for by the main contributors using the allowance method which values inventory at the same value as a

serviceable item. However, an allowance for repairs contra-asset account (e.g., allowance for loss) is established to recognize

estimated repair costs in the current period operating expenses. Excess, obsolete, and unserviceable inventory is valued at its

net realizable value.

Related property includes OM&S, stockpile materials, and other miscellaneous related property. OM&S is tangible

personal property to be consumed in normal operations. Stockpile materials are strategic and critical materials being held due

to statutory requirements for use in national defense, conservation, or national emergencies. The main contributing entities

value OM&S and stockpile materials using various methods including MAC, standard price, historical cost, replacement

price, and direct method. The entities also use both the consumption method and purchase method. The consumption method

expenses OM&S when consumed, while the purchase method expenses OM&S when purchased. If OM&S are not significant

amounts, are in the hands of the end user for use in normal operations, or if it is not cost beneficial to apply the consumption

method; then the purchases method is applied.

FASAB issued additional guidance, SFFAS No. 48, Opening Balances for Inventory, Operating Materials and

Supplies, and Stockpile Materials, which permits a reporting entity to apply an alternative valuation method (e.g., deemed

cost) in establishing opening balances for inventory, OM&S, and stockpile materials. This guidance is intended to provide an

alternative valuation method when historical records and systems do not provide a basis for valuation of opening balances in

accordance with SFFAS No. 3, Accounting for Inventory and Related Property. Please refer to Note 5—Inventory and

Related Property, Net, for additional information.

G. General Property, Plant, and Equipment, Net

General PP&E consists of tangible assets (e.g., buildings, structures and facilities, furniture and fixtures, equipment, and

land) that have an estimated useful life of two or more years, are not intended for sale in the ordinary course of business and

are intended for use or available for use by the entity. General PP&E also includes internal use software, land rights, assets

acquired through capital leases, and leasehold improvements.

At the government-wide level, SFFAS No. 6, Accounting for Property, Plant, and Equipment is followed and requires

that general PP&E is recorded at cost and includes all costs incurred to bring the general PP&E to a form and location

suitable for its intended use. The main contributing entities use estimated historical cost for general PP&E. Costs to acquire

general PP&E, extend the useful life of an existing asset, or enlarge or improve its capacity are capitalized and depreciated or

amortized over the remaining useful life. Depreciation expense is recognized on all capitalized general PP&E, except land

and land rights of unlimited duration. In the case of constructed general PP&E, the asset is recorded as construction work in

process until it is placed in service, at which time the balance is transferred to a major class of general PP&E. See Note 6—

General Property, Plant, and Equipment, Net, for additional information.

FASAB issued additional guidance, SFFAS No. 50, Establishing Opening Balances for General Property, Plant, and

Equipment, which states that a reporting entity may choose one of three alternative methods for establishing an opening

balance for general PP&E. The alternative methods include using deemed cost to establish opening balances of general

PP&E, selecting between deemed cost and prospective capitalization of internal use software, and allowing an exclusion of

land and land rights from opening balances with disclosure of acreage information and expensing of future acquisitions. An

entity electing to exclude land and land rights from its general PP&E opening balances must disclose, with a reference on the

Balance Sheet to the related disclosure, the number of acres held at the beginning of each reporting period, the number of

acres added during the period, the number of acres disposed of during the period, and the number of acres held at the end of

each reporting period. Some consolidating DOD contributors used the alternative valuation methods from SFFAS No. 50

NOTES TO THE FINANCIAL STATEMENTS

based on historical records such as expenditure data, contracts, budget information, and engineering documentation. When

applicable, DOD will continue to adopt SFFAS No. 50.

For financial reporting purposes, heritage assets (excluding multi-use heritage assets) and stewardship land are not

recorded as part of general PP&E. Since heritage assets are intended to be preserved as national treasures, it is anticipated

that they will be maintained in reasonable repair and that there will be no diminution in their usefulness over time. Many

assets are clearly heritage assets. For example, the National Park Service manages the Washington Monument, the Lincoln

Memorial and the Mall. Heritage assets that are predominantly used in general government operations are considered multi-

use heritage assets and are included in general PP&E. Stewardship land is also consistent with the treatment of heritage assets

in that much of the government’s land is held for the general welfare of the nation and is intended to be preserved and

protected. Stewardship land is land owned by the government but not acquired for or in connection with general PP&E.

Because most federal land is not directly related to general PP&E, it is deemed to be stewardship land and accordingly, it is

not reported on the Balance Sheet. Examples of stewardship land include national parks and forests. For additional

information on stewardship assets, see Note 26—Stewardship Property, Plant, and Equipment.

H. Investments

Most investments are reported at FV. FV is the estimate of the price at which an orderly transaction to sell the asset

would take place between market participants at the measurement date under current market conditions. Market or observable

inputs are used as the preferred source of values, followed by assumptions based on hypothetical transactions in absence of

market inputs. Certain investments rely on NAV as a practical expedient (i.e., priced without adjustments) to estimate their

FV. NAV is derived from the FV of the underlying investments as of the reporting date. See Note 7—Investments for

additional information.

I. Investments in Government-Sponsored Enterprises

The senior preferred stock and associated warrants for the purchase of common stock in the GSEs (Fannie Mae and

Freddie Mac) are presented at their FV. SPSPAs, which Treasury entered into with each GSE when they were placed under

conservatorship, can result in payments to the GSEs when, at the end of any quarter, the FHFA, acting as the conservator,

determines that the liabilities of either GSE exceed its respective assets. Such payments result in an increase to the liquidation

preference of investment in the GSEs’ senior preferred stock, with a corresponding decrease to cash held by Treasury for

government-wide operations. In addition, the liquidation preference of investments in the GSEs will increase, based on the

quarterly earnings of the GSEs, up to the adjusted capital reserve amounts set for each GSE.

The valuation to estimate the investment’s FV incorporates forecasts, projections, and cash flow analyses. Changes in

valuation, including impairments, are deemed usual and recurring and thus are recorded as exchange transactions on the

Statement of Net Cost (as earned revenue) and investments in GSEs on the Balance Sheet. The government also records

dividends related to these investments as exchange transactions (as earned revenue) which are accrued when declared.

The potential liabilities to the GSEs, if any, are assessed annually and recorded at the gross estimated amount. For

additional information on investments in GSEs, refer to Note 8—Investments in Government-Sponsored Enterprises.

J. Federal Debt and Interest Payable

Federal debt is primarily comprised of Treasury securities, which are debt instruments issued to the public to raise

money needed to operate the federal government and pay off maturing obligations. Treasury issues these debt instruments to

the public in the form of marketable bills, notes, bonds, TIPS and FRNs, and in the form of nonmarketable securities

including Government Account Series securities, U.S. Savings Securities, and SLGS securities. The amount of the debt, or

principal, is also called the security’s face value or par value. To accurately reflect the federal debt, Treasury records

principal transactions with the public at par value at the time of the transaction. 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 (term greater than one year) and the straight-line method for short-term securities (term of one year or

less). In addition, the principal for TIPS is adjusted daily based on the CPI for all Urban Consumers. Certain Treasury

securities also pay interest. For marketable securities, Treasury issues notes and bonds that pay semi-annual interest based on

the security’s stated interest rate. For FRNs, which accrue interest daily and pay the aggregated interest on a quarterly basis,

NOTES TO THE FINANCIAL STATEMENTS

the interest rate is based on two components; the index rate tied to the highest accepted discount rate of the most recent 13-

week marketable bill auction and the spread rate, which is the highest accepted discount rate determined at auction when the

FRN is first offered. TIPS, on the other hand, pay a semi-annual fixed rate of interest applied to the inflation-adjusted

principal. However, for all security types accrued interest is recorded as an expense when incurred, instead of when paid. See

Note 12—Federal Debt and Interest Payable for additional information.

K. Federal Employee and Veteran Benefits Payable

Generally, federal employee and veteran benefits payable are recorded during the time employee services are rendered.

The related liabilities for defined benefit pension plans, veterans’ compensation, burial, education and training benefits, post-

retirement health benefits, and life insurance benefits, are recorded at estimated PV of future benefits, less any estimated PV

of future normal cost contributions. Normal cost is the portion of the actuarial PV of projected benefits allocated as an

expense for employee services rendered in the current year. Actuarial gains and losses (as well as prior service cost, if any)

are recognized immediately in the year they occur without amortization.

VA provides certain veterans and/or their dependents with pension benefits, based on annual eligibility reviews, if the

veteran died or was disabled for nonservice-related causes. The pension program for veterans is not accounted for as a

“federal employee pension plan” under SFFAS No. 5, Accounting for Liabilities of the Federal Government, due to

differences between its eligibility conditions and those of federal employee pensions. Therefore, a future liability for pension

benefits is not recorded. These benefits are recognized as expenses when benefits are paid rather than when employee

services are rendered.

In accordance with 38 CFR § 17.36(c), the VA makes an annual enrollment decision that identifies which veterans, by

priority, will be treated for that fiscal year based on funds appropriated, estimated collections, usage, the severity index of

enrolled veterans, and changes in cost. While VA expects to continue to provide medical care to veterans in future years, an

estimate of this amount cannot be reasonably made. These medical care expenses are recognized in the period the medical

care services are provided.

The actuarial liability for FECA benefits is recorded at estimated PV of future benefits for injuries and deaths that have

already been incurred.

Gains and losses from changes in long-term assumptions used to estimate federal employee pensions, ORB, and OPEB

liabilities are reflected separately on the Statement of Net Cost and the components of the expense related to federal

employee pension, ORB, and OPEB liabilities are disclosed in Note 13—Federal Employee and Veteran Benefits Payable as

prescribed by SFFAS 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. In addition, SFFAS No. 33 also

provides a standard for selecting the discount rate assumption for PV estimates of federal employee pension, ORB, and

OPEB liabilities. See Note 13—Federal Employee and Veteran Benefits Payable for additional information.

L. Environmental and Disposal Liabilities

Environmental and disposal liabilities are estimated costs for anticipated remediation, cleanup, and disposal costs

resulting from the use of the governments assets or operations. Estimated costs for environmental and disposal liabilities can

change over time because of laws and regulation updates, technology updates, inflation or deflation factors, and disposal plan

revisions. Accruals for environmental cleanup costs are the cost of removing, containing, and/or disposing of hazardous

wastes or materials that, because of quantity, concentration, or physical or chemical characteristics, may pose a substantial

present or potential hazard to human health or the environment. Cleanup costs include, but are not limited to

decontamination, decommissioning, site restoration, site monitoring, closure, and post-closure costs. PP&E recognition of an

anticipated environmental disposal liability begins when the asset is placed in service. See Note 14—Environmental and

Disposal Liabilities for additional information.

M. Benefits Due and Payable

A liability for social insurance programs (including but not limited to: Social Security, Medicare, Railroad Retirement,

Black Lung, and Unemployment) is recognized for any unpaid amounts currently due and payable to beneficiaries or service

providers as of the end of the reporting period. See Note 15—Benefits Due and Payable for additional information.

NOTES TO THE FINANCIAL STATEMENTS

N. Insurance and Guarantee Program Liabilities

Insurance programs are authorized by law to financially compensate a designated population of beneficiaries by

accepting all or part of the risk for losses incurred as a result of an adverse event. Certain consolidation entities with

significant insurance and guarantee programs (e.g., PBGC and FDIC) apply FASB standards and are not converted to

FASAB standards in consolidation, as permitted by SFFAS No. 47.

PBGC values its liabilities at the PV of future benefits and PV of nonrecoverable future financial assistance using

assumptions derived from market-based (FV) annuity prices from insurance companies. Assumptions are selected in

accordance with PBGC’s best estimate of anticipated experience for expected retirement ages and the cost of administrative

expenses.

The PV of future benefits is the estimated liability for future pension benefits that PBGC is or will be obligated to pay

the participants of trusteed plans and the net liability for plans pending termination and trusteeship. PBGC recognizes a

single-employer program liability for trusteed or terminated plans and probable plan terminations. The liability is PBGC's

best estimate of the losses, net of plan assets, and the PV of expected recoveries (from sponsors and members of their

controlled group) for plans that are likely to terminate in the future. PBGC uses assumptions to adjust the value of those

future payments to reflect the time value of money (by discounting) and the probability of payment (by means of decrements,

such as for death or retirement). PBGC also includes anticipated expenses to settle the benefit obligation in the determination

of the PV of future benefits. Significant unobservable inputs are incorporated in the calculation of the PV of future benefits as

well. Refer to PBGC’s financial statements for additional information.

PBGC recognizes a multiemployer program liability for future financial assistance to insolvent plans and to plans

deemed probable to becoming insolvent. Projecting a future insolvency requires considering several complex factors, such as

an estimate of future cash flows, future mortality rates, and age of participants not in pay status. In general, if a terminated

plan’s assets are less than the PV of its liabilities, PBGC considers the plan a probable risk of requiring financial assistance in

the future.

FDIC records a liability for FDIC-insured institutions that are likely to fail when the liability is probable and reasonably

estimable, absent some favorable event such as obtaining additional capital or merging. The FDIC liability is derived by

applying expected failure rates and loss rates to the institutions based on supervisory ratings, balance sheet characteristics,

and projected capital levels.

PBGC's exposure to losses from plan terminations and FDIC’s exposure to losses from insured institutions that are

classified as reasonably possible are disclosed in Note 21—Contingencies.

All other insurance and guarantee programs are accounted for in the consolidated financial statements in accordance

with SFFAS No. 51, Insurance Programs.

Insurance programs exclude programs that administer direct loans and loan guarantees; qualify as social insurance; are

authorized to engage in disaster relief activities; provide grants; provide benefits or assistance based on an individual’s or a

household’s income and/or assets; assume the risk of loss arising from federal government operations; pay claims through an

administrative or judicial role for individuals or organizations who claim they have been harmed by a federal entity;

indemnify contractors, agreement partners, and other third parties for loss or damage incurred while or caused by work

performed for a federal entity; or are workers’ or occupational illness compensation programs that compensate current or

former employees (or survivors) and certain third parties for injuries and occupational diseases obtained while working for a

federal entity.

Per SFFAS No. 51, there are three categories of insurance programs: 1) exchange transaction insurance programs other

than life insurance; 2) non-exchange transaction insurance programs; and 3) life insurance programs.

For exchange transaction insurance programs other than life insurance, revenues are recognized when earned over the

insurance arrangement period and liabilities are recognized for unearned premiums, unpaid insurance claims, and for losses

on remaining coverage. Losses on remaining coverage represent estimated amounts to be paid to settle claims for the period

after year-end through the end of insurance coverage in excess of the summation of unearned premiums and premiums due

after the end of the reporting period.

For non-exchange transaction insurance programs, revenue is recognized the same as other non-exchange transaction

revenue, no unearned premium liability is recorded, and a liability is only recognized for unpaid insurance claims.

For life insurance programs, revenue is recognized when due, and liabilities are recognized for unpaid insurance claims

and future policy benefits. The liability for future policy benefits represents the expected PV of future claims to be paid to, or

on behalf of, existing policyholders, less the expected PV of future net premiums to be collected from those policyholders.

Life insurance programs are disclosed in Note 13—Federal Employee and Veteran Benefits Payable. See Note 16—Insurance

and Guarantee Program Liabilities for additional information.

NOTES TO THE FINANCIAL STATEMENTS

O. Deferred Maintenance and Repairs

DM&R are maintenance and repairs that were not performed when they should have been or scheduled maintenance

and repairs that were delayed or postponed. Maintenance is the act of keeping fixed assets in acceptable condition, including

preventative maintenance, normal repairs, and other activities needed to preserve the assets, so they continue to provide

acceptable service and achieve their expected life. Maintenance and repairs exclude activities aimed at expanding the

capacity of assets or otherwise upgrading them to serve needs different from those originally intended. DM&R are not

expensed in the Statements of Net Cost or accrued as liabilities on the Balance Sheet. However, DM&R information is

presented in the unaudited RSI section of this report. Please see unaudited RSI—Deferred Maintenance and Repairs for

additional information including measurement methods.

P. Commitments

Commitments reflect binding agreements that may result in the future expenditure of financial resources that are not

recognized or not fully recognized on the Balance Sheet and should be disclosed. Examples of commitments include certain

long-term leases, undelivered orders, P3s, international or other agreements in support of international economic

development, or agreements in support of financial market stability. See Note 20—Commitments for additional information.

Q. Contingencies

Liabilities for contingencies are recognized on the Balance Sheet when both:

• A past transaction or event has occurred, and

• A future outflow or other sacrifice of resources is probable and measurable.

The estimated contingent liability may be a specific amount or a range of amounts. If some amount within the range is a

better estimate than any other amount within the range, then that amount is recognized. If no amount within the range is a

better estimate than any other amount, then the minimum amount in the range is recognized and the range and a description

of the nature of the contingency is disclosed.

A contingent liability is disclosed if any of the conditions for liability recognition do not meet the above criteria and

there is at least a reasonable possibility that a loss may be incurred. See Note 21—Contingencies for additional information.

R. Funds from Dedicated Collections

Generally, funds from dedicated collections are financed by specifically identified revenues, provided to the

government by non-federal sources, often supplemented by other financing sources that remain available over time. These

specifically identified revenues and other financing sources are required by statute to be used for designated activities,

benefits, or purposes, and must be accounted for separately from the government’s general revenues. The three required

criteria for a fund from dedicated collections are:

• A statute committing the government to use specifically identified revenues and/or other financing sources that are

originally provided to the government by a non-federal source only for designated activities, benefits, or purposes;

• Explicit authority for the fund to retain revenues and/or other financing sources not used in the current period for

future use to finance the designated activities, benefits, or purposes; and

• A requirement to account for and report on the receipt, use, and retention of the revenues and/or other financing

sources that distinguishes the fund from the government’s general revenues.

Funds from dedicated collections on the Statement of Operations and Changes in Net Position are presented on the

consolidated basis. The consolidated dedicated collections presentation eliminates balances and transactions between funds

from dedicated collections held by the entity. For additional information on funds from dedicated collections, see Note 22—

Funds from Dedicated Collections.

NOTES TO THE FINANCIAL STATEMENTS

S. Sustainability Financial Statements

The sustainability financial statements are estimates based on economic as well as demographic assumptions presented

in Note 24—Long-Term Fiscal Projections and 25—Social Insurance. The sustainability financial statements are not

forecasts or predictions. The sustainability financial statements are designed to illustrate the relationship between receipts and

expenditures, if current policy is continued. For this purpose, the projections assume, among other things, that scheduled

social insurance benefit payments would continue after related trust funds are projected to be depleted, contrary to current

law, and that debt could continue to rise indefinitely without severe economic consequences.

SOSI and SCSIA are based on the selection of accounting policies and the application of significant accounting

estimates, some of which require management to make significant assumptions. Further, the estimates are based on current

conditions and expectations of future conditions. Actual results could differ materially from the estimated amounts. Each

statement includes information to assist in understanding the effect of changes in assumptions to the related information.

By accounting convention, General Fund transfers to Medicare Parts B and D reported in the SOSI are eliminated when

preparing the government-wide consolidated financial statements. The SOSI shows the projected General Fund transfer(s) as

eliminations that, under current law, would be used to finance the remainder of the expenditures in excess of revenues for

Medicare Parts B and D that is reported in the SOSI. The SLTFP include all revenues (including general revenues) of the

federal government.

T. Unmatched Transactions and Balances

The reconciliation of the change in net position requires that the difference between ending and beginning net position

equals the difference between revenue and cost, plus or minus prior-period adjustments. The unmatched transactions and

balances includes unmatched intra-governmental balances on the Balance Sheet and includes unmatched intra-governmental

current year transactions on the Statement of Net Cost and the Statement of Operations and Changes in Net Position to

reconcile the change in net position to ensure beginning and ending net position equals the difference between revenue and

cost, plus or minus prior-period adjustments. Unresolved intra-governmental differences (i.e., unmatched transactions and

balances) result in errors in the consolidated financial statements.

The unmatched transactions and balances are needed to balance the accrual-based financial statements. The Statement

of Net Cost, the Statement of Operations and Changes in Net Position and the Balance Sheet include specific lines for the

unmatched transactions and balances. The primary factors affecting this out of balance situation are:

• Unmatched intra-governmental transactions and balances between federal entities; and

• Errors and restatements in federal entities’ reporting.

As intra-governmental transactions and balances reduce to immaterial amounts, the corresponding individual lines in the

“Unmatched Transactions and Balances” table are adjusted to remove the differences for the fiscal year. Please refer to the

table of “Unmatched Transactions and Balances” in Other Information (Unaudited) for examples of the individual lines.

Refer to the Other Information (unaudited)—Unmatched Transactions and Balances for additional information.

U. Changes in Accounting Principles

A change in accounting principle results from either adopting a new accounting pronouncement or an entity adopting an

allowable alternative accounting principle on the basis that is preferable. Generally, as applicable, changes in accounting

principles are shown as an adjustment to beginning net position in the Statement of Operations and Changes in Net Position

of the period in which the change is implemented.

Adjustments to beginning net position in FY 2023 and FY 2022 for changes in accounting principles were ($0.8) billion

and ($4.3) billion, respectively, mostly due to DOD’s continued implementation of SFFAS No. 48, Opening Balances for

Inventory, Operating Materials and Supplies, and Stockpile Materials and SFFAS No. 50, Establishing Opening Balances

for General Property, Plant, and Equipment.

NOTES TO THE FINANCIAL STATEMENTS

V. Corrections of Errors

Corrections of errors in financial statements result from mathematical mistakes, mistakes in the application of

accounting principles, or oversight or misuse of facts that existed at the time financial statements were prepared. When

preparing comparative financial statements, if the material error occurred in the prior period presented and the effect is

known, then the affected line items of the prior period are restated. There were no material corrections of errors identified for

fiscal years ending September 30, 2023, and 2022.

W. Changes in Presentation

Changes in presentation are done to improve clarity of the presentation of the Financial Report and include changes

since the prior year that are not the result of corrections of errors or changes in accounting principles. In FY 2023, due to a

change in presentation of the reported unmatched transactions and balances on the Statement of Net Cost, Statement of

Operations and Changes in Net Position, and Unmatched Transactions and Balances in Other Information (unaudited), the

FY 2022 Statement of Net Cost was adjusted by $.1 billion to report the associated unmatched transactions and balances that

were previously reported on the Statement of Operations and Changes in Net Position unmatched transactions and balances

line and the buy/sell costs that were previously included in the gross cost recorded on the Statement of Net Cost. They are

now reported on the standalone unmatched transaction and balances line on the Statement of Net Cost. Additionally, the

Unmatched Transactions and Balances in Other Information (unaudited) was updated to show the details of the unmatched

transactions and balances by statement. For more information refer to the Statement of Net Cost, Statement of Operations and

Changes in Net Position, Reconciliation of Net Operating Cost and Budget Deficit, and Unmatched Transactions and

Balances in Other Information (unaudited). The FY 2022 presentation was modified to conform to the FY 2023 presentation.

X. Fiduciary Activities

Fiduciary activities are the collection or receipt, as well as the management, protection, accounting, investment and

disposition by the government of cash or other assets in which non-federal individuals or entities have an ownership interest

that the government must uphold. Fiduciary cash and other fiduciary assets are not assets of the government and are not

recognized on the Balance Sheet. See Note 23—Fiduciary Activities, for additional information.

Y. Use of Estimates

The government 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. There are a large number of factors

that affect these assumptions and estimates, which are inherently subject to substantial uncertainty arising from the likelihood

of future changes in general economic, regulatory, and market conditions. As such, actual results will differ from these

estimates and such differences may be material.

Significant transactions subject to estimates are included in the balance of loans receivable, net, federal employee and

veteran benefits payable, investments, investments in SPVs, investments in GSEs, tax receivables, receivables from

resolution activities, loan guarantee liabilities, depreciation, other actuarial liabilities, cost and earned revenue allocations, as

well as contingencies and any related recognized liabilities.

The government 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 reestimates to reflect the most current cost estimate of

the credit programs to the U.S. government. Federal Credit Reform Act of 1990 loan receivables and loan guarantees are

disclosed in Note 4—Loans Receivable, Net and Loan Guarantee Liabilities.

Estimates are also used to determine the FV of investments in SPVs and GSEs. The FV of the SPV preferred equity

investments is estimated based on a discounted cash flow valuation methodology, whereby the primary input is the PV of the

projected annual cash flows associated with these investments. The FV of the GSE senior preferred stock considers

forecasted cash flows to equity holders and the traded prices of the other equity securities, including the GSE’s common

stock and junior preferred stock. The value of the GSE senior preferred stock is estimated by first estimating the FV of the

NOTES TO THE FINANCIAL STATEMENTS

total equity of each GSE (which, in addition to the GSE senior preferred stock, is comprised of other equity instruments

including common stock, common stock warrants, and junior preferred stock). The FV of the GSE total equity is based on a

discounted cash flow valuation methodology, whereby the primary input is the PV of the projected quarterly cash flows to

equity holders. The FV of the GSEs’ other equity instruments are then deducted from its total equity, with the remainder

representing the FV of the GSE senior preferred stock.

Factors impacting the FV of the GSE warrants include the nominal exercise price and the large number of potential

exercise shares, the market trading of the common stock that underlies the warrants as of September 30, the principal market,

and the market participants. Other factors impacting the FV of the GSE warrants include, the holding period risk related

directly to the assumption of the amount of time that it will take to sell the exercised shares without depressing the market.

For additional information on investments in SPVs and GSEs, see Note 7—Investments and Note 8—Investments in

Government-Sponsored Enterprises, respectively.

Treasury performs annual calculations, as of September 30, to assess the need for recording an estimated liability in

accordance with SFFAS No. 5, Accounting for Liabilities of The Federal Government, and to the government’s funding

commitment to the GSEs under the SPSPAs. For additional information on investments in GSEs and the amended SPSPAs,

see Note 8—Investments in Government-Sponsored Enterprises.

Z. 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 government takes on credit risk when it makes direct

loans or guarantees to non-federal entities, provides credits to foreign entities, or becomes exposed to institutions that engage

in financial transactions with foreign countries.

The government also takes on credit risk related to committed, but undisbursed direct loans, CARES Act Section 4003

COVID-19 credit program receivables, funding commitments to GSEs, CARES Act Section 4003 Section 13(3) funding

provided to Corporate Credit Facility LLC, MSF, MLF, TALF, and other activities. Many of these programs were developed

or provided credit support to the pandemic emergency relief programs of the Federal Reserve Board, to provide credit where

borrowers are not able to get access to credit with reasonable terms and conditions. These programs expose the government

to potential costs and losses. The extent of the risk assumed is described in more detail in the notes to the financial

statements, and where applicable, is factored into credit reform models and reflected in FV measurements.

AA. Treaties and Other International Agreements

For financial reporting purposes, treaties and other international agreements may be understood as falling into three

broad categories:

• No present or contingent obligation to provide goods, services, or financial support;

• Present obligation to provide goods, services, or financial support; or

• Contingent obligation to provide goods, services, or financial support.

The proper financial reporting of treaties and other international agreements depends on the probable future outflow or

other sacrifice of resources as a result of entering into the agreement.

In many cases, treaties and other international agreements establish frameworks that govern cooperative activities with

other countries, but leave to the discretion of the parties whether to engage in any such activities. In other cases, the

agreements may contemplate specific cooperative activities, but create no present or contingent obligations to engage in

them. Cooperative activities relevant to these treaties and other international agreements fall under the first category, which

does not result in the U.S. government incurring any financial liability. Since these treaties and other international agreements

have no financial impact, they are not reported or disclosed in this Financial Report.

Some treaties and other international agreements fall under the second category, and involve a present obligation, and

therefore result in liability recognition. Such present obligation may relate to the U.S. government providing financial and in-

kind support, including assessed contributions, voluntary contributions, grants, and other assistance to international

organizations in which it participates as a member. Examples of such agreements include those that establish international

organizations under which the U.S. government undertakes obligations to pay assessed dues to the organization; grant

agreements under which the U.S. government provides foreign assistance funds to other countries; and claims settlement

agreements under which the U.S. government agrees to pay specific sums of money to settle claims.

NOTES TO THE FINANCIAL STATEMENTS

The last category encompasses those treaties or other international agreements which result in contingencies that may

require recognition or disclosure in the financial statements. Such contingencies may stem from commitments in a treaty or

other international agreement to provide goods, services, or financial support when a future event occurs, or from litigation,

claims, or assessments forged by other parties to the agreement. For additional information related to treaties and other

international agreements that fall under the last category, refer to Note 21—Contingencies.

AB. Public-Private Partnerships

SFFAS No. 49, Public-Private Partnerships establishes principles to ensure that disclosures about applicable P3s are

presented in the government’s notes to the financial statements. The principles guide entity financial reporting disclosure by

establishing a P3 definition and identifying risk-based characteristics that need to exist before considering the P3 arrangement

or transaction for disclosure. The standard exempts certain arrangements or transactions from the P3 disclosure requirements,

as such exempt arrangements or transactions are subject to existing disclosure requirements in other accounting standards.

The P3s that are deemed material to the consolidated financial statements and have met the criteria of SFFAS No. 49, Public-

Private Partnerships are disclosed. See Note 28—Public-Private Partnerships for additional information.

NOTES TO THE FINANCIAL STATEMENTS

Note 2. Cash and Other Monetary Assets

Cash and Other Monetary Assets as of September 30, 2023, and 2022

(In billions of dollars)

2023

2022

Unrestricted cash:

Cash held by Treasury for government-wide operations

638.9

617.0

Other

5.9

3.7

Restricted

56.3

46.8

Total cash

701.1

667.5

International monetary assets

195.5

185.3

Gold and silver

11.1

Foreign currency

14.5

13.9

Total cash and other monetary assets

922.2

877.8

Unrestricted cash includes cash held by Treasury for government-wide operations (operating cash) and all other

unrestricted cash held by the federal entities. Operating cash represents balances from tax collections, federal debt receipts,

and other various receipts net of cash outflows for federal debt repayments and other payments. Treasury checks outstanding

are netted against operating cash until they are cleared by the FR System. Other unrestricted cash not included in Treasury’s

operating cash balance includes balances representing cash, cash equivalents, and other funds held by entities, such as

undeposited collections, deposits in transit, demand deposits, amounts held in trust, and imprest funds.

Restrictions on cash are due to the imposition on cash deposits by law, regulation, or agreement. Restricted cash is

primarily composed of cash held by the SAA, which executes Foreign Military Sales. The SAA included $46.1 billion and

$39.9 billion as of September 30, 2023, and 2022, respectively.

International monetary assets include the U.S. reserve position in the IMF and additional U.S. holdings of SDR. The

U.S. reserve position in the IMF (denominated in SDRs) had a U.S. dollar equivalent of $32.0 billion and $31.3 billion as of

September 30, 2023, and 2022, respectively. Only a portion of the U.S. financial subscription to the IMF is made in the form

of reserve assets; the remainder is provided in the form of a letter of credit. The balance available under the letter of credit

totaled $76.6 billion and $74.4 billion as of September 30, 2023, and 2022 respectively. The total amount of SDR holdings of

the U.S. (in addition to the reserve position discussed above) resulting from additional IMF allocations and purchases was the

equivalent of $163.2 billion and $153.6 billion as of September 30, 2023, and 2022, respectively. For more information

regarding the U.S. participation in the IMF and SDR, see Treasury’s financial statements and Note 27—Disclosure Entities

and Related Parties.

The gold reserves that are held by the government are partially offset by a liability for gold certificates issued by the

Secretary to the FRBs at the statutory rate. As of September 30, 2023, and 2022, gold totaling $11.0 billion per statutory

carrying value was pledged as collateral for gold certificates also valued at $11.0 billion. All the gold certificates issued are

payable to the FRBs, and a small portion of gold is in the custody of the FRBs. Additionally, the U.S. Mint holds 100,000

FTOs of gold without certificates. The amount for gold and silver listed in the above table is based on the statutory values

which are $42.2222 per FTO of gold and $1.2929 per FTO of silver. As of September 30, 2023, and 2022, the number of

FTOs of gold and silver held is 261,498,927.0 and 16,000,000.0, respectively. While gold and silver are valued on the

Balance Sheet using statutory rates, the market value of gold on the London Fixing was $1,870.50 and $1,671.75 per FTO as

of September 30, 2023, and 2022, respectively and the market value of silver was $23.08 and $19.02 per FTO as of

September 30, 2023, and 2022, respectively. Please refer to the financial statements of Treasury for additional information

regarding gold reserves and Treasury’s liability for gold.

The foreign currency is maintained by Treasury’s ESF and various U.S. federal entities as well as foreign banks.

Foreign currency is translated into U.S. dollars at the exchange rate at fiscal year-end.

NOTES TO THE FINANCIAL STATEMENTS

Note 3. Accounts Receivable, Net

Accounts Receivable, net as of September 30, 2023, and 2022

(In billions of dollars)

2023

2022

Taxes receivable:

Taxes receivable, gross

419.4

451.4

Allowance for uncollectible amounts

(228.7)

(205.7)

Taxes receivable, net

190.7

245.7

Other accounts receivable:

Other accounts receivable, gross

234.6

204.5

Allowance for uncollectible amounts

(105.4)

(93.9)

Other accounts receivable, net

129.2

110.6

Total accounts receivable, net

319.9

356.3

Taxes receivable is listed first above due to being the significant portion of total accounts receivable, and the rest are

referred to as other accounts receivable. Other accounts receivable, gross includes related interest receivable of $4.2 billion

and $2.8 billion as of September 30, 2023, and 2022, respectively.

Treasury comprises approximately 57.7 percent of the government’s reported accounts receivable, net, as of September

30, 2023. Treasury accounts for nearly all the reported taxes receivable, which consist of receivables (taxes and associated

penalties and interest) supported by a taxpayer agreement, unpaid taxes related to IRC section 965, and deferred payments

resulting from the CARES Act. Examples of receivables supported by a taxpayer agreement are the filing of a tax return

without sufficient payment or a court ruling in favor of the IRS. Section 965(h) of the IRC requires taxpayers who are

shareholders of certain specified foreign corporations to pay a transition tax on foreign earnings as if those earnings had been

repatriated to the U.S. IRC 965(h) allows taxpayers to elect to pay their tax on an eight-year installment schedule. Pursuant to

the CARES Act, employers, through December 31, 2020, could defer payment, without penalty, of their portions of the

Social Security segment of FICA and the employer’s and employee representative’s share of the Railroad Retirement Tax.

Treasury experienced a year over year net decrease of $53.0 billion primarily due to the reduction in IRC 965(h) and to

payments to Treasury of the deferred employer portion of FICA Social Security taxes. Additionally, the $21 billion increase

to Treasury’s allowance for uncollectible amounts was largely due to an increase in delinquent taxes receivable inventory.

Pursuant to Section 13(c)(4)(G) of the Federal Deposit Insurance Act, on March 12, 2023, the Secretary of the Treasury

invoked the statutory systemic risk exception to allow the FDIC to complete its resolution of both Silicon Valley Bank, Santa

Clara, California, and Signature Bank, New York, New York, in a manner that protects uninsured depositors. Accordingly,

the FDIC imposed a special assessment on all insured depository institutions to recover the loss to the DIF arising from the

protection of uninsured depositors. This $16.3 billion receivable was a factor in the year over year increase to other accounts

receivable, gross.

The following entities are the main contributors to the government’s reported accounts receivable, net as of September

30, 2023. Refer to each entity’s financial statements for additional information:

• Treasury

• DOI

• DOJ

• HHS

• DOL

• USPS

• FDIC

• PBGC

• HUD

• DOD

• VA

• FCC

• DHS

• DOE

• SEC

• SSA

• OPM

• EPA

• USDA

• TVA

• FCSIC

NOTES TO THE FINANCIAL STATEMENTS

Note 4. Loans Receivable, Net and Loan Guarantee Liabilities

Loans Receivable, net as of September 30, 2023

Subsidy

Expense

Loans

Subsidy

Loans

(Income)

Receivable,

Interest

Foreclosed

Cost

Receivable,

for the

(In billions of dollars)

Gross

Receivable

Property

Allowance

Net

Fiscal Year

Federal Direct Student Loans -

Education

1,336.2

83.4

(388.7)

1,030.9

(116.5)

Disaster Assistance Loans - SBA

311.3

13.3

(53.9)

270.7

34.4

Federal Housing Admin Loans -

HUD

61.8

25.8

0.7

(17.6)

70.7

(0.1)

Electric Loans - USDA

56.5

0.2

0.7

57.4

(1.3)

FDIC (acting in its capacity as

receiver)

50.0

0.1

50.1

Federal Family Education Loans -

Education

79.0

20.9

(60.5)

39.4

2.3

All other programs

190.1

4.2

0.8

(19.2)

175.9

2.0

Total loans receivable

2,084.9

147.9

1.5

(539.2)

1,695.1

(79.2)

Treasury purchased a $50 billion note issued by a trust created by FDIC in its receivership capacity and guaranteed by FDIC in its

corporate capacity.

Loans Receivable, net as of September 30, 2022

Subsidy

Expense

Loans

Subsidy

Loans

(Income)

Receivable,

Interest

Foreclosed

Cost

Receivable,

for the

(In billions of dollars)

Gross

Receivable

Property

Allowance

Net

Fiscal Year

Federal Direct Student Loans -

Education

1,341.8

86.7

(611.9)

816.6

385.4

Disaster Assistance Loans - SBA

367.0

14.8

(61.5)

320.3

43.0

Federal Housing Admin Loans -

HUD

53.8

20.9

0.5

(14.3)

60.9

(0.1)

Electric Loans - USDA

53.9

(2.2)

51.7

0.7

Federal Family Education Loans -

Education

80.3

21.6

(62.1)

39.8

10.8

All other programs

159.6

4.0

0.8

(19.6)

144.8

0.1

Total loans receivable

2,056.4

148.0

1.3

(771.6)

1,434.1

439.9

Loans Receivable

Loans receivable consists primarily of direct loans disbursed by the government, receivables related to guaranteed loans

that have defaulted, and certain receivables for guaranteed loans that the government has purchased from lenders. Direct

loans are used to promote the nation’s welfare by making financing available to segments of the population not served

adequately by non-federal institutions, or otherwise providing for certain activities or investments. For those unable to afford

NOTES TO THE FINANCIAL STATEMENTS

credit at the market rate, federal credit programs provide subsidies in the form of direct loans offered at an interest rate lower

than the market rate.

The amount of the long-term cost of post-1991 direct loans equals the subsidy cost allowance for direct loans as of

September 30. The amount of the long-term cost of pre-1992 direct loans equals the allowance for subsidy amounts (or PV

allowance) for direct loans. The long-term cost is based on all direct loans disbursed in this fiscal year and previous years that

are outstanding as of September 30. It includes the subsidy cost of these direct loans estimated as of the time of loan

disbursement and subsequent adjustments such as modifications, reestimates, amortizations, and write-offs.

Loans receivable, net includes related interest and foreclosed property. Foreclosed property is property that is

transferred from borrowers to a federal credit program, through foreclosure or other means, in partial or full settlement of

post-1991 direct loans or as compensation for losses that the government sustained under post-1991 loan guarantees. Please

refer to the financial statements of HUD, USDA, and VA for additional information regarding foreclosed property.

The total subsidy expense/(income) is the cost recognized during the fiscal year. It consists of the subsidy

expense/(income) incurred for direct loans disbursed during the fiscal year, for modifications made during the fiscal year of

direct loans outstanding, and for upward or downward reestimates as of the end of the fiscal year. This expense/(income) is

included in the Statements of Net Cost.

The majority of loans receivable programs are provided by Education, SBA, HUD, and USDA. For additional

information regarding the direct loan programs listed in the tables above, please refer to the financial statements of the

entities.

Education has loan programs that are authorized by Title IV of the Higher Education Act of 1965. The William D. Ford

Federal Direct Loan Program (referred to as the Direct Loan Program), was established in FY 1994 and offers four types of

educational loans: Stafford, Unsubsidized Stafford, Parent Loan for Undergraduate Students, and consolidation loans. With

this program, the government makes loans directly to students and parents through participating institutions of higher

education. Education disbursed approximately $122.3 billion in direct loans to eligible borrowers in FY 2023 and

approximately $120.4 billion in FY 2022. In FY 2023, there was a $214.3 billion increase in Education’s Federal Direct Loan

program primarily due to the combination of 1) broad based debt relief announced in FY 2022 causing a decrease in the net

loans receivable reported in FY 2022; and 2) an increase in the net loans receivable balance during FY 2023 largely due to a

downward modification to reverse the inclusion of student loan debt relief as a result of the Supreme Court’s ruling on June

30, 2023. In FY 2023, there were also upward modifications of $23.3 billion related to COVID-19 administrative actions. In

addition, Education stopped all federal wage garnishments and collection actions for borrowers with federally held loans in

default. For additional information regarding the CARES Act refer to the financial statements of Education and Note 29—

COVID-19 Activity.

The SBA makes loans to microloan intermediaries and provides a direct loan program that assists homeowners, renters

and businesses recover from disasters. SBA’s Disaster Assistance Loan Program makes direct loans to disaster survivors

under four categories: physical disaster loans to repair or replace damaged homes and personal property; physical disaster

loans to businesses of any size; EIDLs to eligible small business and nonprofit organizations without credit available

elsewhere; and economic injury loans to eligible small businesses affected by essential employees called up to active duty in

the military reserves. In FY 2023, SBA’s credit program receivables saw a decrease of $49.6 billion from FY 2022 from a

decrease in direct disaster loans as a result of disaster lending activity returning to a comparable level with the pre-pandemic

period due to the EIDL program no longer approving loans for COVID-19 in FY 2023, recoupment of loans previously

dispersed, and current year write-offs.

HUD’s loans receivable balance largely comprises defaulted single-family mortgages and reverse mortgages that were

insured by FHA. In addition, HUD finances mortgages and provides loans to support construction and rehabilitation of low-

rent housing, principally for the elderly and disabled.

USDA’s Rural Development offers direct loans with unique missions to bring prosperity and opportunity to rural areas.

The Rural Housing programs provide affordable, safe, and sanitary housing and essential community facilities to rural

communities. Rural Utility programs help improve the quality of life in rural areas through a variety of loan programs for

electric energy, telecommunications, and water and environmental projects.

In FY 2023, Treasury purchased a $50 billion note guaranteed by the FDIC in its corporate capacity as deposit insurer

and regulator. FDIC as Receiver for the First Republic Bank created a trust and sold a PMN to the trust. JPMorgan had issued

the PMN to the FDIC as Receiver for the First Republic Bank in connection with the resolution of the First Republic Bank

and JPMorgan’s acquisition of certain assets and liabilities of First Republic Bank. The PMN, which matures in 2028, is full-

recourse to JPMorgan and is collateralized by a pool of mortgage loans acquired by JPMorgan through the related

receivership and sale of First Republic Bank. Cash flows from the PMN will be used to repay the principal and interest due

on the Treasury-purchased note issued by the trust. The Treasury-purchased note principal is due to Treasury from the trust

on May 4, 2028, with semi-annual interest payments at 4.445% beginning May 2024. The Treasury-purchased note is

recorded at cost ($50 billion) and considered to be fully collectable by Treasury based on the following factors: 1)

NOTES TO THE FINANCIAL STATEMENTS

JPMorgan’s strength as a counterparty and commitment under the PMN; 2) over-collateralization of the PMN’s underlying

collateral; 3) a funded reserve account to cover shortfalls in interest owed on the Treasury-purchased note relative to the

PMN; and 4) an option to prepay the note at par prior to maturity. For information on additional receivership activity see

Note 30—Subsequent Events.

All other programs saw an increase of $31.2 billion in FY 2023 largely due to fluctuations in loan programs for HUD,

DOT, and DFC. The increase in HUD’s Other Non-Credit Reform Loans of $19.5 billion is primarily due to Ginnie Mae’s

new Home Equity Conversion Mortgage portfolio, as a result of the Reverse Mortgage Funding issuer default.

Loan Guarantee Liabilities as of September 30, 2023, and 2022

Principal

Principal Amount

Amount

Subsidy Expense

Loan Guarantee

of Loans Under

Guaranteed

(Income) for the

Liabilities

Guarantee

by the U.S.

Fiscal Year

(In billions of dollars)

2023

2022

2023

2022

2023

2022

2023

2022

Federal Housing Administration Loans

- HUD

(32.6)

(39.8)

1,669.1

1,533.7

1,481.3

1,368.0

(2.2)

(37.8)

Small Business Loans

7.9

25.7

165.5

187.9

140.3

163.8

(1.1)

(5.0)

Federal Family Education Loans -

Education

10.9

10.4

80.6

98.6

80.6

98.6

5.3

11.2

Veterans Housing Benefit Programs

9.1

9.9

994.7

940.9

250.1

237.3

(4.5)

(2.2)

All other guaranteed loan programs

0.1

0.2

189.0

195.0

172.3

178.3

(1.6)

(2.3)

Total loan guarantee liabilities

(4.6)

6.4

3,098.9

2,956.1

2,124.6

2,046.0

(4.1)

(36.1)

Loan guarantees are recorded as a liability except when cash inflows are expected to exceed cash outflows on a PV basis.

This results in a negative loan guarantee that is reported as an asset on the Balance Sheet.

Loan Guarantee Liabilities

Loan guarantee programs are also used to promote the nation’s welfare by making financing available to segments of

the population not served adequately by non-federal institutions, or otherwise providing for certain activities or investments.

For those to whom non-federal financial institutions are reluctant to grant credit because of the high risk involved, federal

credit programs guarantee the payment of these non-federal loans and absorb the cost of defaults.

The amount of the long-term cost of post-1991 loan guarantees outstanding equals the liability for loan guarantees as of

September 30. The amount of the long-term cost of pre-1992 loan guarantees equals the allowance for subsidy amounts (or

PV allowance) and the liability for loan guarantees. The long-term cost is based on all guaranteed loans disbursed in this

fiscal year and previous years that are outstanding as of September 30. It includes the subsidy cost of the loan guarantees

estimated as of the time of loan disbursement and subsequent adjustments such as modifications, reestimates, amortizations,

and write-offs.

The total subsidy expense/(income) is the cost of loan guarantees recognized during the fiscal year. It consists of the

subsidy expense/(income) incurred for guaranteed loans disbursed during the fiscal year, for modifications made during the

fiscal year of loan guarantees outstanding, and for upward or downward reestimates as of the end of the fiscal year of the cost

of loan guarantees outstanding. This expense/(income) is included in the Statements of Net Cost.

The majority of the loan guarantee programs are provided by HUD, SBA, Education and VA. For additional

information regarding the guaranteed loan programs listed in the tables above, please refer to the financial statements of the

entities.

HUD’s Office of Housing promotes equal housing opportunities. It includes FHA who provides mortgage insurance on

mortgages for single family mortgage loans made by FHA-approved lenders as well as providing mortgage insurance on

multifamily rental housing, healthcare facilities and single-family Title I manufactured housing and property improvement

loans. FHA strives to meet the needs of many first-time and minority homebuyers who, without the FHA guarantee, may find

mortgage credit to be unaffordable or simply unavailable. These programs are a critical component of FHA’s efforts to meet

the nation’s need for decent, safe, and affordable housing. FHA’s total loan guarantee subsidy expense increased by $35.7

billion in FY 2023, primarily due to a smaller downward reestimate in FY 2023 as compared to FY 2022.

NOTES TO THE FINANCIAL STATEMENTS

The SBA provides guarantees that help small businesses obtain bank loans and licensed companies to make investments

in qualifying small businesses. Their business loan programs include the Loan Guaranty program in which the SBA

guaranties up to 90 percent of the amount of loans made by participating banks and other lending institutions to eligible small

businesses not able to obtain credit elsewhere. The CARES Act added the PPP which was designed to provide a direct

incentive for small businesses to keep their workers on the payroll. SBA’s Loan Guarantee Liabilities decreased $17.8 billion

primarily because of claim payments to lenders and miscellaneous recoveries in FY 2023, which are mostly attributable to

PPP purchase guarantee and forgiveness payments. As of September 2023, over 10.6 million applications have been

submitted requesting PPP loan forgiveness, with nearly $760.0 billion total forgiveness paid. Approximately 96 percent of

total PPP loan value has been forgiven, in full or in part.

Education has loan programs that are authorized by Title IV of the Higher Education Act of 1965. The FFEL Program

was established in FY 1965 and operates through state and private, nonprofit guaranty agencies that provided loan guarantees

on loans made by private lenders to eligible students. The Student Aid and Fiscal Responsibility Act, which was enacted as

part of the Health Care Education and Reconciliation Act of 2010 (P.L. 111-152), eliminated the authority to guarantee new

FFEL after June 30, 2010.

VA operates the following loan guarantee programs: Housing Guaranteed Loans and Loan Sale Guarantees. The Home

Loans program provides loan guarantees to veterans, service members, qualifying dependents, and limited non-veterans to

purchase homes and retain homeownership with favorable market terms.

NOTES TO THE FINANCIAL STATEMENTS

Note 5. Inventory and Related Property, Net

Inventory and Related Property, net as of September 30, 2023, and 2022

(In billions of dollars)

2023

2022

Inventory held for current sale

77.7

76.3

Inventory held in reserve for future sale

1.0

0.9

Inventory and operating material and supplies held for repair

77.8

78.3

Inventory—excess, obsolete, and unserviceable

0.8

Operating materials and supplies held for use

168.0

163.5

Operating materials and supplies held in reserve for future use

30.4

29.7

Operating materials and supplies—excess, obsolete, and unserviceable

0.6

Stockpile materials held in reserve for future use

69.5

59.4

Stockpile materials held for sale

1.0

2.1

Other related property

6.8

5.5

Allowance for loss

(10.6)

(10.2)

Total inventory and related property, net

423.0

406.9

Inventory and related property, net includes inventory, OM&S, stockpile materials, forfeited property, commodities,

seized property, and foreclosed property. DOD comprises approximately 80.7 percent of the government’s inventory and

related property, net as of September 30, 2023.

Inventory is tangible personal property that is either held for sale, in the process of production for sale, or to be

consumed in the production of goods for sale or in the provision of services for a fee. Examples of inventory include raw

materials, finished goods, spare and repair parts, clothing and textiles, and fuels.

Inventory is categorized as one of the following:

• Held for current sale – includes items currently for sale or transfer to either entities outside the federal government,

or other federal entities.

• Held in reserve for future sale – includes items being held for sale or transfer to either entities outside the federal

government or other federal entities in the future.

• Held for repair – items that require servicing to make them suitable for sale or use.

• Excess, obsolete, and unserviceable – stock that exceeds the demand expected in the normal course of operations,

items that are no longer needed, and damaged items.

OM&S consists of tangible personal property to be consumed in normal operations (e.g., spare and repair parts,

ammunition, and tactical missiles) and is categorized as one of the above categories or in the additional listed category below:

• Held in reserve for future sale or use – items maintained because they are not readily available in the market or

because there is more than a remote chance that they will eventually be needed.

Stockpile materials are strategic and critical materials held due to statutory requirements for use in national defense,

conservation, or local/national emergencies. Stockpile materials are not held with the intent of selling in the ordinary course

of business and are restricted unless released by congressional action. Once authorized, the materials (e.g., ores, metals,

alloys, and medical supplies) are reclassified to held for sale. Refer to the financial statements of DOD, DOE, and HHS for

additional information regarding stockpile materials.

Other related property includes the following:

• Forfeited property consists of monetary instruments, intangible property, real property, and tangible personal

property acquired through forfeiture proceedings; property acquired by the government to satisfy a tax liability; and

unclaimed and abandoned merchandise. Please refer to the financial statements of DOJ and Treasury for additional

information regarding forfeited property.

• Goods acquired under price support and stabilization programs are referred to as commodities. Commodities are

items of commerce or trade having an exchange value. Please refer to the financial statements of USDA for

additional information regarding commodities.

NOTES TO THE FINANCIAL STATEMENTS

• Seized property includes monetary instruments, real property, and tangible personal property of others in the actual

or constructive possession of the custodial entity. For additional information on seized property, refer to the

financial statements of DOJ and Treasury.

• Foreclosed property consists of any asset received in satisfaction of a loan receivable or as a result of payment of a

claim under a guaranteed or insured loan (excluding commodities acquired under price support programs). For

additional information on foreclosed property, see Note 4—Loans Receivable, Net and Loan Guarantee Liabilities

and refer to the financial statements of USDA, VA, and HUD.

Additional information concerning inventory and related property can be obtained from the financial statements of

DOD, DOE, Treasury, HHS, and DHS.

NOTES TO THE FINANCIAL STATEMENTS

Note 6. General Property, Plant, and Equipment, Net

General Property, Plant, and Equipment, net as of September 30, 2023, and 2022

Accumulated

Depreciation/

Cost

Amortization

Net

Cost

Amortization

Net

(In billions of dollars)

2023

2022

Buildings, structures, and facilities

754.0

448.7

305.3

720.0

421.6

298.4

Furniture, fixtures, and equipment

1,457.6

891.3

566.3

1,442.5

868.2

574.3

Construction in progress

297.8

N/A

297.8

260.4

N/A

260.4

Internal use software

69.3

43.3

26.0

66.1

40.9

25.2

Land

22.9

N/A

22.9

22.4

N/A

22.4

Other general property, plant, and equipment

36.5

19.8

16.7

35.2

18.4

16.8

Total general property, plant, and equipment,

net

2,638.1

1,403.1

1,235.0

2,546.6

1,349.1

1,197.5

Note: "N/A" indicates not applicable.

General PP&E consists of tangible assets, including land. Internal use software, land rights, assets acquired through

capital leases, and leasehold improvements are also included. DOD comprises approximately 67.4 percent of the

government’s reported general PP&E, net as of September 30, 2023. DOD continues to implement SFFAS No. 50,

Establishing Opening Balances for General Property, Plant, and Equipment which permits alternative methods in

establishing opening balances for general PP&E and has elected to exclude land and land rights. The total acreage excluded

was 23,463,823 as of September 30, 2023, and 22,958,006 as of September 30, 2022. Differences year over year are due to

DOD understating general PP&E due to asset balances that had a change in acquisition cost, change in acquisition date,

retrospective depreciation adjustments, and unrecorded asset transfers in prior years.

The following entities are the main contributors to the government’s reported general PP&E net of $1,235.0 billion as of

September 30, 2023. Please refer to each entity’s financial statements for additional information.

• DOD

• DOE

• GSA

• DOC

• Treasury

• HHS

• DOI

• USPS

• DHS

• USDA

• SSA

• NASA

• VA

• TVA

• State

• DOJ

• DOT

Certain PP&E are multi-use heritage assets, see Note 26—Stewardship Property, Plant, and Equipment for additional

information on multi-use heritage assets. Please refer to DM&R and Land and Permanent Land Rights located in the

unaudited RSI for information concerning the estimated maintenance and repair costs related to PP&E and the federal

estimated acreage by predominant use.

NOTES TO THE FINANCIAL STATEMENTS

Note 7. Investments

Investments as of September 30, 2023

(In billions of dollars)

Level 1

Level 2

Level 3

Other

Total

Pension Benefit Guaranty Corporation:

Asset backed/mortgage backed securities

11.6

Corporate bonds and other

17.2

International fixed maturity securities

6.2

Equity securities

3.5

0.1

9.8

13.4

Pooled funds

1.3

Real estate and real estate investment trusts

1.1

0.5

1.6

Other securities

7.3

0.3

2.1

9.7

Total Pension Benefit Guaranty Corporation

4.6

42.4

0.3

13.7

61.0

National Railroad Retirement Investment Trust:

U.S. equity

7.1

Non-U.S. equity

5.5

Private equity

3.6

Global fixed income

0.1

2.2

0.5

2.8

Global real assets

0.3

2.6

2.9

Absolute return mandates

0.9

Opportunistic mandates

0.6

Total National Railroad Retirement Investment Trust

13.0

2.2

8.2

23.4

Department of the Treasury:

Investments in Special Purpose Vehicles

15.1

Other Investments

3.8

2.9

6.7

Total Department of the Treasury

3.8

18.0

21.8

Tennessee Valley Authority:

Commingled funds measured at net asset value

2.1

Equity securities

1.3

Corporate debt securities

1.4

Private equity measured at net asset value

2.4

Private real assets measured at net asset value

1.5

Private credit measured at net asset value

0.9

Other securities

0.6

1.3

0.1

0.5

2.5

Total Tennessee Valley Authority

1.9

2.7

0.1

7.4

12.1

Department of Defense

9.4

Smithsonian Institution

0.5

2.0

2.5

All other

0.6

Total investments

23.8

47.3

18.4

41.3

130.8

NOTES TO THE FINANCIAL STATEMENTS

Investments as of September 30, 2022

(In billions of dollars)

Level 1

Level 2

Level 3

Other

Total

Pension Benefit Guaranty Corporation:

Asset backed/mortgage backed securities

9.7

Corporate bonds and other

18.3

International fixed maturity securities

0.1

5.8

5.9

Equity securities

2.8

9.7

12.5

Pooled funds

2.2

Real estate and real estate investment trusts

1.1

0.4

1.5

Other securities

4.8

0.3

2.3

7.4

Total Pension Benefit Guaranty Corporation

4.0

38.6

0.3

14.6

57.5

Department of the Treasury:

Investments in Special Purpose Vehicles

17.8

Other Investments

3.9

2.9

6.8

Total Department of the Treasury

3.9

20.7

24.6

National Railroad Retirement Investment Trust:

U.S. equity

6.4

Non-U.S. equity

4.9

Private equity

3.8

Global fixed income

2.1

0.5

2.6

Global real assets

0.3

2.5

2.8

Absolute return mandates

1.0

Opportunistic mandates

0.7

Total National Railroad Retirement Investment Trust

11.6

2.1

8.5

22.2

Tennessee Valley Authority:

Commingled funds measured at net asset value

2.4

Equity securities

1.2

Corporate debt securities

1.4

Private equity measured at net asset value

1.9

Private real assets measured at net asset value

1.5

Private credit measured at net asset value

0.6

Other securities

0.7

1.3

0.1

0.5

2.6

Total Tennessee Valley Authority

1.9

2.7

0.1

6.9

11.6

Department of Defense

11.4

Smithsonian Institution

0.5

2.1

2.6

All other

0.1

0.3

0.4

Total investments

21.9

43.4

21.2

43.8

130.3

PBGC, NRRIT, TVA, and Smithsonian apply financial accounting and reporting standards issued by FASB and such

entities, as permitted by SFFAS No. 47, Reporting Entity are consolidated into the U.S. government’s consolidated financial

statements without conversion to accounting and reporting standards issued by FASAB. PBGC, NRRIT, and TVA also hold

investments in Treasury securities which are not included in the above tables, as such investments are eliminated in

consolidation.

PBGC insures pension benefits of participants in covered single-employer and multiemployer defined benefit pension

plans and values its financial assets at estimated FV consistent with the standards issued by FASB. PBGC’s investments are

used to pay future benefits of covered participants.

NOTES TO THE FINANCIAL STATEMENTS

NRRIT on behalf of the RRB, manages and invests railroad retirement assets that are to be used to pay retirement

benefits to the nation’s railroad workers under the Railroad Retirement System. As an investment company, NRRIT is

subject to accounting standards for investment companies issued by FASB.

Treasury’s investments consist of foreign currency holdings invested in interest bearing securities issued or held through

foreign governments or monetary authorities, SPVs, and common stock warrants that include non-federal investment

holdings acquired pursuant to the establishment of emergency relief programs in response to the COVID-19 pandemic that

are valued at FV. Common stock warrants provide Treasury with the right to purchase shares of common stock of either

publicly or non-publicly traded air carriers.

TVA’s investments consist of amounts held in the Nuclear Decommissioning Trust, Asset Retirement Trust,

Supplemental Executive Retirement Plan, Deferred Compensation Plan, and Restoration Plan. TVA’s qualified benefit

pension plan is funded with qualified plan assets.

Certain other investments reported by DOD represent joint ventures with private developers constructing or improving

military housing on behalf of the department. Refer to Note 28—Public-Private Partnerships for additional information.

Please refer to PBGC, NRRIT, TVA, Treasury, DOD, and Smithsonian’s financial statements for additional information

on these investments and FV measurement.

Investments in Special Purpose Vehicles

The SPVs were established by FRBNY and FRBB for the purpose of making loans, purchasing debt, and other

commercial paper of eligible entities affected by COVID-19. The valuation to estimate the investment’s FV incorporates

forecasts, projections, and cash flow analyses. Changes in valuation, including impairments, are deemed usual and recurring

and thus are recorded as exchange transactions on the Statement of Net Cost and investments on the Balance Sheet. For

additional information regarding the recording of revenue and the changes in valuation refer to Treasury’s financial

statements.

Certain lending facilities were implemented through SPVs, which consist of the MSF, MLF, and TALF. The MSF

supports lending to small and medium-sized businesses that were in sound financial condition before the onset of the

COVID-19 pandemic and have good post-pandemic prospects. The MLF helps state and local governments manage cash

flow pressures while continuing to serve households and businesses in their communities. The TALF supports the flow of

credit to consumers and businesses for purposes of stabilizing the U.S. financial system. As of January 8, 2021, the SPVs

have ceased purchasing of loan participations, eligible notes, and no new credit extensions have been made. For additional

information regarding the SPVs refer to Treasury’s financial statements and to Note 27—Disclosure Entities and Related

Parties.

Fair Value Measurement

Investments are recorded at FV and have been categorized based upon a FV hierarchy, in accordance with FASB ASC

Topic 820. FV is a market-based measurement. For some assets, observable market transactions or market information might

be available. For other assets, observable market transactions and market information might not be available. However, the

objective of a FV measurement in both cases is the same—to estimate the price at which an orderly transaction to sell the

asset would take place between market participants at the measurement date under current market conditions.

When a price for an identical asset is not observable, a reporting entity measures FV using another valuation technique

that maximizes the use of relevant observable inputs and minimizes the use of unobservable inputs. Because FV is a market-

based measurement, it is measured using the assumptions that market participants would use when pricing the asset,

including assumptions about risk. As a result, a reporting entity’s intention to hold an asset is not relevant when measuring

FV.

The measurement of FV of an asset is categorized with different levels of FV hierarchy as follows:

• Level 1—Unadjusted quoted prices in active markets for identical assets that the reporting entity can access at the

measurement date.

• Level 2—Inputs other than quoted prices included with Level 1 that are based on observable market data (quoted

prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in

inactive markets), or that are either directly or indirectly observable for substantially the full term of the asset or

liability.

• Level 3—Inputs that are both unobservable and significant to the overall FV measurement.

• Other—This category contains investments in certain commingled funds and partnerships that are measured at FV

using NAV practical expedient that are not classified within the FV hierarchy and joint ventures. Please refer to

PBGC, NRRIT, TVA, and Smithsonian’s financial statements for additional information on investments priced by

NOTES TO THE FINANCIAL STATEMENTS

NAV per share (or its equivalent) practical expedient and DOD’s financial statements for additional information

about joint ventures.

NOTES TO THE FINANCIAL STATEMENTS

Note 8. Investments in Government-Sponsored Enterprises

Investments in GSEs as of September 30, 2023

Cumulative

Gross

Valuation

Fair

(In billions of dollars)

Investments

Gain/(Loss)

Value

Fannie Mae senior preferred stock

190.4

(55.9)

134.5

Freddie Mac senior preferred stock

114.4

(12.7)

101.7

Fannie Mae warrants common stock

3.1

(0.4)

2.7

Freddie Mac warrants common stock

2.3

(0.8)

1.5

Total investments in GSEs

310.2

(69.8)

240.4

Investments in GSEs as of September 30, 2022

Cumulative

Gross

Valuation

Fair

(In billions of dollars)

Investments

Gain/(Loss)

Value

Fannie Mae senior preferred stock 177.7

(62.0)

115.7

Freddie Mac senior preferred stock 106.6

(2.1)

104.5

Fannie Mae warrants common stock

3.1

(0.9)

2.2

Freddie Mac warrants common stock 2.3

(1.0)

1.3

Total investments in GSEs

289.7

(66.0)

223.7

Congress established Fannie Mae and Freddie Mac as GSEs to provide stability and increase liquidity in the secondary

mortgage market and to promote access to mortgage credit throughout the nation. A key function of the GSEs is to purchase

mortgages, package those mortgages into securities, which are subsequently sold to investors, and guarantee the timely

payment of principal and interest on these securities.

Congress passed the Housing and Economic Recovery Act of 2008 (P.L. 110-289) in July 2008 in response to the

financial crisis that year and the increasingly difficult conditions in the housing market which challenged the soundness and

profitability of the GSEs and thereby threatened to undermine the entire housing market. This Act created 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. In September 2008, FHFA placed the GSEs under conservatorship

and Treasury invested in the GSEs by entering into a SPSPA with each GSE. These actions were taken to preserve the GSEs’

assets, ensure a sound and solvent financial condition, and mitigate systemic risks that contributed to market instability.

The purpose of such actions is to maintain the solvency of the GSEs so they can continue to fulfill their vital roles in the

mortgage market while the Administration and Congress determine what structural changes should be made to the housing

finance system. Draws under the SPSPAs would result in an increased investment in the GSEs as further discussed below.

Under SFFAS No. 47, Reporting Entity criteria, Fannie Mae and Freddie Mac were owned or controlled by the government

only as a result of: a) regulatory actions (such as organizations in receivership or conservatorship); or b) other government

intervention actions. Under the regulatory or other intervention actions, the relationship with the government was and is not

expected to be permanent. These entities are classified as disclosure entities based on their characteristics as a whole.

Accordingly, these entities are not consolidated into the government’s consolidated financial statements; however, the value

NOTES TO THE FINANCIAL STATEMENTS

of the investments in these entities, changes in value, and related activity with these entities are included in the government’s

consolidated financial statements. The net change in valuations of the GSEs include both liquidation preference adjustments

and changes in FV, both of which are discussed below and are included on the Statement of Net Cost.

Senior Preferred Stock Purchase Agreements

In return for committing to maintain the GSEs’ solvency by making a quarterly advance of funds to each GSE in an

amount equal to any excess of the GSEs’ total liabilities over its total assets as of the end of the previous quarter, Treasury

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-transferable warrant for the purchase, at a nominal cost,

of 79.9 percent of common stock on a fully-diluted basis. The warrants expire on September 7, 2028. Treasury was entitled to

distributions on the senior preferred stock equal to 10.0 percent per annum fixed rate dividend on the total liquidation

preference (as discussed below). This dividend structure was changed in the third amendment in August 2012 to a variable

equivalent to the GSEs’ positive net worth above a capital reserve amount. The capital reserve amount was initially set at

$3.0 billion for calendar year 2013 and, upon nearing its scheduled decline to zero, was reset at $3.0 billion in calendar year

2017. On September 27, 2019, Treasury and FHFA amended the SPSPAs to increase the capital reserve amounts of Fannie

Mae and Freddie Mac to $25.0 billion and $20.0 billion, respectively. In exchange, Treasury’s liquidation preference in each

GSE was scheduled to gradually increase quarterly up to the adjusted capital reserve amounts based on the quarterly earnings

of each GSE.

On January 14, 2021, Treasury and FHFA further amended the SPSPAs to replace the prior variable dividend with an

alternative compensation plan for Treasury that permits the GSEs to continue their recapitalization efforts, as prescribed by

the GSE capital framework finalized by FHFA in 2020. Under the amended SPSPAs, each GSE is permitted to retain capital

until the GSE has achieved its regulatory minimum capital requirement, including buffers (i.e., the capital reserve end date),

at which point its cash dividend obligations will resume along with the obligation to pay a periodic commitment fee. As

compensation to Treasury for the replacement of the variable dividend, the liquidation preference of Treasury’s senior

preferred stock in each GSE will increase by the amount of retained capital until each GSE has achieved its capital reserve

end date.

Additionally, the January 14 amendment, among other things, imposed restrictions on certain GSE business activities,

including purchases of loans backed by investment properties, second homes, and multifamily properties, and on purchases

of loans with multiple high-risk characteristics or for cash consideration. On September 14, 2021, Treasury and FHFA agreed

to suspend certain business activity restrictions added to the SPSPAs by the January 14 amendment while FHFA undertakes a

review of the extent to which these requirements are redundant or inconsistent with existing FHFA standards, policies, and

directives. The suspension will terminate six months after Treasury notifies the GSEs. As of September 30, 2023, Treasury

has not provided notice to GSEs to terminate the suspension.

For the fiscal year ended September 30, 2023, Treasury’s liquidation preference in Fannie Mae and Freddie Mac

increased by $12.6 billion and $7.9 billion, respectively. For the fiscal year ended September 30, 2022, Treasury’s liquidation

preference in Fannie Mae and Freddie Mac increased by $19.1 billion and $11.7 billion, respectively. The GSEs will not pay

a quarterly dividend until after the capital reserve end date. Treasury received no cash dividends for the fiscal years ended

September 30, 2023, and 2022, as the GSEs had not achieved their capital reserve end date as of September 30, 2023, and

their positive net worth was below the permitted capital reserve amounts as of September 30, 2023.

The SPSPAs, which have no expiration date, require that Treasury will disburse funds to either GSE if, at the end of any

quarter, the FHFA determines that the liabilities of either GSE exceed its assets. Draws from Treasury under the SPSPAs are

designed to ensure that the GSEs maintain positive net worth, with a fixed maximum amount available to each GSE under

this agreement established as of December 31, 2012 (refer to the “Contingent Liability to GSEs” section below and Note

21—Contingencies). Draws against the funding commitment of the SPSPAs do not result in the issuance of additional shares

of senior preferred stock; instead, they increase the liquidation preference of the initial 1,000,000 shares by the amount of the

draw. The combined cumulative liquidation preference totaled $305.0 billion and $284.0 billion as of September 30, 2023,

and 2022, respectively. There were no payments to the GSEs for the fiscal years ended September 30, 2023, and 2022.

NOTES TO THE FINANCIAL STATEMENTS

Senior Preferred Stock and Warrants for Common Stock

In determining the FV of the senior preferred stock and warrants for common stock, Treasury relied on the GSEs’

public filings and press releases concerning their financial statements, as well as non-public, long-term financial forecasts,

monthly summaries, quarterly credit supplements, independent research regarding preferred stock trading, independent

research regarding the GSEs’ common stock trading on the Over-The-Counter Market, discussions with each of the GSEs

and FHFA, and other information pertinent to the valuations. Because the senior preferred stock is not publicly traded, there

is no comparable trading information available. The fair valuation of the senior preferred stock relies on significant Level 3

unobservable inputs that reflect assumptions about the expectations that market participants would use in pricing.

The FV of the senior preferred stock considers forecasted cash flows to equity holders and the traded prices of the other

equity securities, including the GSEs’ common stock and junior preferred stock. The FV of the senior preferred stock-as

measured by unobservable and observable inputs-increased as of September 30, 2023, when compared to September 30,

2022. Fannie Mae’s senior preferred stock drove this increase primarily due to higher projected cash flows and a decrease in

credit-related expenses.

Factors impacting the FV of the warrants include the nominal exercise price and the large number of potential exercise

shares, the market prices and trading volumes of the underlying common stock as of September 30, the principal market, and

the market participants. Other factors impacting the FV include, among other things, the holding period risk related directly

to the assumption of the amount of time that it will take to sell the exercised shares without depressing the market. The FV of

the warrants-as measured by observable inputs-increased at the end of FY 2023, when compared to FY 2022, primarily due

to increases in the Level 1 FV measurement of the market price of the underlying common stock of each GSE.

Estimation Factors

Treasury’s forecasts concerning the GSEs may differ from actual experience. Estimated senior preferred values and

future draw amounts will depend on numerous factors that are difficult to predict including, but not limited to, changes in

government policy with respect to the GSEs, the business cycle, inflation, home prices, unemployment rates, interest rates,

changes in housing preferences, home financing alternatives, availability of debt financing, market rates of guarantee fees,

outcomes of loan refinancings and modifications, new housing programs, and other applicable factors.

Contingent Liability to GSEs

As part of the annual process undertaken by Treasury, a series of long-term financial forecasts are prepared to assess, as

of September 30, the likelihood and magnitude of future draws to be required by the GSEs under the SPSPAs within the

forecast time horizon. Treasury used 25-year financial forecasts prepared through years 2048 and 2047 in assessing if a

contingent liability was required as of September 30, 2023, and 2022, respectively. If future payments under the SPSPAs are

deemed to be probable within the forecast horizon, and Treasury can reasonably estimate such payment, Treasury will accrue

a contingent liability to the GSEs to reflect the forecasted equity deficits of the GSEs. Treasury does not discount this accrued

contingent liability, nor take into account any of the offsetting dividends that could be received, as the dividends, if any,

would be owed directly to the General Fund. Treasury will adjust such recorded accruals in subsequent years as new

information develops or circumstances change.

Based on Treasury’s annual assessment, there were no probable future funding draws as of September 30, 2023, and

2022, and thereby no accrued contingent liability. However, as of September 30, 2023, it is reasonably possible that a period

of sustained economic and housing market volatility could potentially cause the GSEs to generate quarterly losses of

sufficient magnitude to result in future funding draws against the funding commitment. Due to challenges quantifying future

market volatility or the timing, magnitude, and likelihood of such events, Treasury could not estimate the total amount of this

reasonably possible future funding liability as of September 30, 2023, and 2022. There were no payments to the GSEs for

fiscal years ended September 30, 2023, and 2022. At September 30, 2023, and 2022, the maximum remaining contractual

commitment to the GSEs for the remaining life of the SPSPAs was $254.1 billion. Subsequent funding draws will reduce the

remaining commitments. Refer to Note 20—Commitments for a full description of other commitments and risks.

In assessing the need for an estimated contingent liability, Treasury relied on the GSEs’ public filings and press

releases, including their financial statements, monthly business summaries, and quarterly credit supplements, as well as non-

public, long-term financial forecasts, the FHFA House Price Index, discussions with each of the GSEs and FHFA, and other

information pertinent to the liability estimates. The forecasts prepared in assessing the need for an estimated contingent

liability as of September 30, 2023, include two potential scenarios, with varying assumptions regarding the continuation of

the GSEs’ new business activities, including purchasing mortgage loans and issuing new guaranteed MBS. The forecasts as

of September 30, 2023, also assumed the maintenance of the GSEs’ retained mortgage portfolios below the maximum

permitted under the amended SPSPAs.

NOTES TO THE FINANCIAL STATEMENTS

Regulatory Environment

To date, Congress has not passed legislation nor has FHFA taken action to end the GSEs’ conservatorships. The GSEs

continue to operate under the direction of FHFA as conservator.

The Temporary Payroll Tax Cut Continuation Act of 2011 (P.L. 112-78) was funded by an increase of ten basis points

in the GSEs’ guarantee fees (referred to as “the incremental fees”) which began in April 2012 and extended by the

Infrastructure Investment and Jobs Act of 2021 (P.L. 117-58) through September 30, 2032. The incremental fees are remitted

to Treasury and not retained by the GSEs and, thus, do not affect the profitability of the GSEs. For fiscal years ended 2023

and 2022, the GSEs remitted to Treasury incremental fees totaling $6.2 billion and $5.8 billion, respectively.

NOTES TO THE FINANCIAL STATEMENTS

Note 9. Advances and Prepayments

Advances and Prepayments as of September 30, 2023, and 2022

(In billions of dollars)

2023

2022

Department of the Treasury

171.9

225.2

Department of Health and Human Services

45.1

39.2

All other

35.7

33.7

Total advances and prepayments

252.7

298.1

Advances and prepayments are assets that represent funds disbursed in contemplation of the future performance of

services, receipt of goods, the incurrence of expenditures, or the receipt of other assets. These include advances to

contractors, grantees, Medicare providers, and state, local, territorial, and tribal governments; travel advances; and

prepayments for items such as rents, taxes, insurance, royalties, commissions, and supplies.

Until such time as the goods or services are received, contract terms are met or progress has been made, or prepaid

expenses expired these should be recorded as assets. Any amounts that are subject to a refund at the time of completion

should be transferred to accounts receivable.

Treasury had a large decrease to advances and prepayments due to additional liquidation of advances primarily paid to

state, local, territorial, and tribal governments pursuant to the COVID-19 related legislations enacted during FY 2021 and

2020.

NOTES TO THE FINANCIAL STATEMENTS

100

Note 10. Other Assets

Other Assets as of September 30, 2023, and 2022

(In billions of dollars)

2023

2022

FDIC receivables from resolution activity, net

158.4

0.6

Regulatory assets

14.3

15.2

Other

22.7

21.9

Total other assets

195.4

37.7

Other assets are miscellaneous assets that are not reported elsewhere on the Balance Sheet (e.g., receivables from

resolution activity, regulatory assets, investments, and costs related to special projects).

FDIC insures the deposits of insured depository institutions and resolves failed institutions upon appointment of FDIC

as receiver. FDIC, as receiver, is responsible for managing and disposing of the assets of failed institutions in an orderly and

efficient manner. The receivables from resolutions result from payments to cover insured depositors of failed institutions,

advances to resolution entities (receiverships, conservatorships, and bridge institutions) for working capital, and

administrative expenses paid on behalf of resolution entities. Assets held by resolution entities are the main source of

repayment of FDIC’s receivables from resolution activity. Estimates are made for the valuation of the assets held by

resolution entities to compute the allowance for credit losses, including FDIC’s estimate of future payments on losses

incurred on assets sold to an acquiring institution under a shared-loss agreement. Multiple insured institutions failed

throughout FY 2023, including Silicon Valley Bank, Signature Bank of New York, First Republic Bank, and Heartland Tri-

State Bank. These failures caused the net of receivables from resolution activity to increase from $0.6 billion as of September

30, 2022, to $158.4 billion as of September 30, 2023.

The FDIC’s estimated cash recoveries are based on asset recovery rates from several sources, which may include the

following: actual or pending institution-specific asset disposition data, failed institution-specific asset valuation data,

aggregate asset valuation data on several recently failed or troubled institutions, sampled asset valuation data, and empirical

asset recovery data based on failures since 2007. Methodologies for determining the asset recovery rates incorporate

estimating future cash recoveries, net of applicable liquidation cost estimates, and discounting based on market-based risk

factors applicable to a given asset’s type and quality. The resulting estimated asset recoveries are then used to derive the

allowance for credit losses on the receivables from these resolutions. Estimated asset recoveries on assets in liquidation are

regularly evaluated during the year but remain subject to uncertainties because of potential changes in economic and market

conditions, which may cause the actual recoveries to vary significantly from current estimates. Losses on the covered assets

are shared between the acquirer of the failed institution and the FDIC, in its receivership capacity, of the failed institution

when losses occur through the sale, foreclosure, loan modification, or write-down of loans in accordance with the terms of

the shared-loss agreement. The agreements cover a seven- to eight-year period with the receiver covering 50 to 95 percent of

the losses incurred by the acquiring bank. The estimated shared-loss liability is accounted for by the receiver and is included

in the calculation of the allowance for credit losses against the corporate receivable from the resolution. The allowance for

credit losses increased from $50.0 billion as of September 30, 2022, to $67.1 billion as of September 30, 2023.

DOE and TVA record regulatory assets in accordance with FASB ASC Topic 980, Regulated Operations. The

provisions of this standard require that regulated enterprises reflect rate actions of the regulator in their financial statements,

when appropriate. These rate actions can provide reasonable assurance of the existence of an asset, reduce or eliminate the

value of an asset, or impose a liability on a regulated enterprise. In order to defer incurred costs under FASB ASC Topic 980,

a regulated entity must have the statutory authority to establish rates that recover all costs, and those rates must be charged to

and collected from customers. If rates should become market-based, FASB ASC Topic 980 would no longer be applicable,

and all the deferred costs under that standard would be expensed. DOE’s BPA is responsible for repaying Treasury for

transmission and power-generating assets owned by other entities based on this deferred cost. Other regulatory assets for

DOE include BPA’s fixed schedule of benefit payments for investor-owned utility customers, repayment of debt for

terminated nuclear projects, and deferred energy conservation measures relating to fish and wildlife. TVA’s regulatory assets

represent incurred costs that have been deferred because such costs are probable of future recovery in customer rates.

101

NOTES TO THE FINANCIAL STATEMENTS

Items included in other are investments in MDB, DOC’s cost contribution to buildout/continuing enhancement of the

NPSBN, DOE’s operating non-federal generation, and derivative assets. Additional information concerning other assets can

be obtained from the financial statements of FDIC, DOE, TVA, Treasury, DOC, and OPM.

NOTES TO THE FINANCIAL STATEMENTS

102

Note 11. Accounts Payable

Accounts Payable as of September 30, 2023, and 2022

(In billions of dollars)

2023

2022

Department of Defense

44.0

37.4

Security Assistance Accounts

16.9

17.5

Department of the Treasury

8.6

8.4

General Services Administration

6.9

6.3

Department of Energy

6.2

5.1

Department of Agriculture

4.3

2.5

Department of Veterans Affairs

4.3

5.0

Department of Education

3.9

4.5

Department of Homeland Security

3.2

Department of State

3.1

2.9

U.S. Agency for International Development

3.1

Department of Justice

2.8

2.7

U.S. Postal Service

2.3

All other

14.6

13.7

Total accounts payable

124.2

114.6

Accounts payable includes amounts due for goods and property ordered and received, services rendered by other than

federal employees, cancelled appropriations for which the U.S. government has contractual commitments for payment, and

non-debt related interest payable.

103

NOTES TO THE FINANCIAL STATEMENTS

Note 12. Federal Debt and Interest Payable

Federal Debt and Interest Payable as of September 30, 2023, and 2022 (held by the public)

Average Interest

Net

Rate

(In billions of dollars)

2022

Change

2023

2022

Treasury securities:

Marketable securities:

Treasury bills

3,643.7

1,615.6

5,259.3

5.4%

2.5%

Treasury notes

13,696.5

28.4

13,724.9

2.1%

1.6%

Treasury bonds

3,867.7

372.5

4,240.2

3.1%

3.0%

Treasury inflation-protected securities

(TIPS)

1,839.8

95.1

1,934.9

0.6%

0.5%

Treasury floating rate notes (FRN)

625.9

(50.4)

575.5

5.0%

3.3%

Total marketable Treasury securities

23,673.6

2,061.2

25,734.8

Nonmarketable securities

625.6

(30.3)

595.3

3.7%

2.7%

Net unamortized premiums/(discounts)

(71.7)

(47.0)

(118.7)

Total Treasury securities, net (public)

24,227.5

1,983.9

26,211.4

Agency securities:

Tennessee Valley Authority

19.0

0.3

19.3

Total agency securities, net of unamortized

premiums and discounts

19.0

0.3

19.3

Accrued interest payable

81.5

35.5

117.0

Total federal debt and interest payable

24,328.0

2,019.7

26,347.7

Types of marketable securities:

Bills–Short-term obligations issued with a term of 1 year or less.

Notes–Medium-term obligations issued with a term of 2-10 years.

Bonds–Long-term obligations of more than 10 years.

TIPS–Term of 5 years or more.

FRN–Term of 2 years.

Federal debt held by the public consists of securities outside the government held by individuals, corporations, state or

local governments, FRBs, foreign governments, and other non-federal entities. The above table details government borrowing

primarily to finance operations and shows marketable and nonmarketable securities at face value less net unamortized

premiums and discounts including accrued interest.

Securities that represent federal debt held by the public are issued primarily by Treasury and include:

• Interest-bearing marketable securities (bills, notes, bonds, inflation-protected, and FRN).

• Interest-bearing nonmarketable securities (Government Account Series held by fiduciary and certain deposit funds,

foreign series, SLGS, domestic series, and savings bonds).

• Non-interest-bearing marketable and nonmarketable securities (matured and other).

In FY 2020, Treasury expanded its domestic series to include a new special nonmarketable Treasury security, known as

a SPV security. Treasury issued these securities to SPVs, which were established by the Federal Reserve to implement its

NOTES TO THE FINANCIAL STATEMENTS

104

emergency lending facilities under Section 13(3) of the Federal Reserve Act to respond to the COVID-19 pandemic. An SPV

security is a demand deposit certificate of indebtedness for which interest accrues daily and is paid at redemption. The total

amount of SPV redemptions in FY 2023 and 2022 was $4.0 billion and $7.0 billion, including $0.5 billion and $0.1 billion in

capitalized interest, respectively. There were no new issuances of SPV securities in FY 2023 and 2022. As of September 30,

2023, and 2022, the total amount of SPV securities outstanding was $11.9 billion and $15.4 billion, respectively.

Gross federal debt, with some adjustments, is the sum of debt held by the public and intra-governmental debt holdings

(discussed on the next page) and is subject to a statutory ceiling (i.e., the debt limit). Prior to 1917, Congress approved each

debt issuance. In 1917, to facilitate planning in World War I, Congress and the President first enacted a statutory dollar

ceiling for federal borrowing. With the Public Debt Act of 1941 (P.L. 77-7), Congress and the President set an overall limit of

$65.0 billion on Treasury debt obligations that could be outstanding at any one time; since then, Congress and the President

have enacted a number of debt limit increases.

Beginning in FY 2021 and continuing into FY 2022 and again in FY 2023, Treasury faced two delays in raising the debt

limit that required it to depart from its normal debt management procedures and invoke legal authorities to avoid exceeding

the statutory debt limit. During these periods, extraordinary actions taken by Treasury resulted in federal debt securities not

being issued to certain federal government accounts with the securities being restored, including lost interest, to the affected

government accounts subsequent to the end of the delay period. During the first delay, Treasury took extraordinary actions

from August 2, 2021, through December 15, 2021. On October 14, 2021, P.L. 117-50 was enacted, which raised the statutory

debt limit by $480.0 billion, from $28,401.5 billion to $28,881.5 billion. Even with this increase, extraordinary measures

continued for Treasury to manage below the debt limit. On December 16, 2021, P.L. 117-73 was enacted, increasing the debt

limit by $2,500.0 billion, from $28,881.5 billion to $31,381.5 billion. Due to a second delay in raising the statutory debt limit,

Treasury took extraordinary actions from January 19, 2023, through June 2, 2023. On June 3, 2023, P.L. 118-5 was enacted

suspending the debt limit through January 1, 2025.

As of September 30, 2023, and 2022, outstanding debt obligations subject to the statutory debt limit was $33,070.5

billion and $30,869.3 billion, respectively. The debt subject to the limit includes Treasury securities held by the public

(shown in the above table) and intra-governmental debt holdings (shown in the following table), with some adjustments.

From FY 2022 to FY 2023, interest on Treasury securities held by the public increased from $496.5 billion to $678.0 billion.

This $181.5 billion increase primarily resulted from an increase in the outstanding debt held by the public and an increase in

the average interest rate (see table above), which were offset by a decrease in inflation adjustments.

105

NOTES TO THE FINANCIAL STATEMENTS

Intra-governmental Debt Holdings: Federal Debt Securities

Held as Investments by Government Accounts as of September 30, 2023, and 2022

Net

(In billions of dollars)

2022

Change

2023

Social Security Administration, Federal Old-Age and Survivors Insurance Trust

Fund

2,723.6

(49.9)

2,673.7

Department of Defense, Military Retirement Fund

1,194.7

172.1

1,366.8

Office of Personnel Management, Civil Service Retirement and Disability Fund

1,011.7

24.9

1,036.6

Department of Defense, Medicare-Eligible Retiree Health Care Fund

322.0

32.2

354.2

Department of Health and Human Services, Federal Hospital Insurance Trust

Fund

177.4

17.0

194.4

Department of Health and Human Services, Federal Supplementary Medical

Insurance Trust Fund

168.0

(8.5)

159.5

Social Security Administration, Federal Disability Insurance Trust Fund

114.7

28.2

142.9

Department of Housing and Urban Development, FHA, Mutual Mortgage

Insurance Capital Reserve Account

119.9

13.2

133.1

Department of Transportation, Highway Trust Fund

127.5

(11.8)

115.7

Federal Deposit Insurance Corporation, Deposit Insurance Fund

125.5

(41.2)

84.3

Department of Labor, Unemployment Trust Fund

73.6

8.2

81.8

Pension Benefit Guaranty Corporation

55.6

5.6

61.2

Department of Energy, Nuclear Waste Disposal Fund

56.6

3.9

60.5

Office of Personnel Management, Employees Life Insurance Fund

51.0

1.5

52.5

Office of Personnel Management, Postal Service Retiree Health Benefits Fund

35.6

(3.6)

32.0

Office of Personnel Management, Employees Health Benefits Fund

27.3

(1.7)

25.6

U.S. Postal Service, Postal Service Fund

20.9

1.1

22.0

National Credit Union Share Insurance Fund

20.7

0.9

21.6

Department of State, Foreign Service Retirement and Disability Fund

20.7

0.4

21.1

Department of Housing and Urban Development, Guarantees of Mortgage-

Backed Securities Capital Reserve Account

18.4

2.6

21.0

Department of Transportation, Airport and Airway Trust Fund

10.8

5.8

16.6

Department of the Treasury, ESF

18.4

(3.7)

14.7

Department of the Interior, Abandoned Mine Reclamation Fund

14.4

0.3

14.7

Pension Benefit Guaranty Corporation Deposit Fund

13.7

(2.4)

11.3

Environmental Protection Agency, Hazardous Substance Superfund

9.4

1.6

11.0

Army Corps of Engineers, Harbor Maintenance Trust Fund

9.4

1.0

10.4

All other programs and funds

88.3

9.6

97.9

Subtotal

6,629.8

207.3

6,837.1

Total net unamortized premiums/(discounts) for intra-governmental

88.7

(49.8)

38.9

Total intra-governmental debt holdings, net

6,718.5

157.5

6,876.0

Intra-governmental debt holdings represent the portion of the gross federal debt held as investments by government

entities such as trust funds, revolving funds, and special funds.

Government entities that held investments in Treasury securities include trust funds that have funds from dedicated

collections. For additional information on funds from dedicated collections, see Note 22—Funds from Dedicated Collections.

These intra-governmental debt holdings are eliminated in the consolidation of these financial statements.

NOTES TO THE FINANCIAL STATEMENTS

106

Note 13. Federal Employee and Veteran Benefits Payable

Federal Employee and Veteran Benefits Payable as of September 30, 2023, and 2022

Civilian

Military

Total

(In billions of dollars)

2023

2022

2023

2022

2023

2022

Pension benefits

2,756.7

2,556.0

2,616.5

2,513.5

5,373.2

5,069.5

Veterans compensation and burial benefits

N/A

7,095.8

5,965.1

7,095.8

5,965.1

Post-retirement health benefits

396.7

427.4

1,125.2

1,045.0

1,521.9

1,472.4

Veterans education and training benefits

N/A

197.5

170.0

197.5

170.0

Life insurance benefits

66.3

62.9

3.6

3.9

69.9

66.8

FECA benefits

26.7

25.9

7.1

33.8

33.0

Unfunded leave

10.4

10.3

16.8

16.6

27.2

26.9

Liability for other benefits

1.8

6.3

6.4

8.1

8.2

Total federal employee and veteran benefits

payable

3,258.6

3,084.3

11,068.8

9,727.6

14,327.4

12,811.9

Note: "N/A" indicates not applicable.

The government offers its employees retirement and other benefits, as well as health and life insurance. The liabilities

for these benefits, which include both actuarial amounts and amounts due and payable to beneficiaries and health care

carriers, apply to current and former civilian and military employees. The actuarial accrued liability represents an estimate of

the PV of the cost of benefits that have accrued, determined based on future economic and demographic assumptions.

Actuarial accrued liabilities can vary widely from year to year, due to actuarial gains and losses that result from changes to

the assumptions and from experience that has differed from prior assumptions.

OPM administers the largest civilian pension and post-retirement health benefits plans. DOD and VA administer the

military pension and post-retirement health benefit plans. Other significant pension plans with more than $10.0 billion in

actuarial accrued liability include those of Foreign Service (State), TVA, and HHS’s Public Health Service Commissioned

Corps Retirement System. Please refer to the financial statements of the entities listed for additional information regarding

their pension plans and other benefits.

In accordance with SFFAS No. 33, Pension, Other Retirement Benefits, and Other Postemployment Benefits: Reporting

the Gains and Losses from Changes in Assumptions and Selecting Discount Rates and Valuation Dates, entities are required

to separately present gains and losses from changes in long-term assumptions used to estimate liabilities associated with

pensions, ORB, and OPEB on the Statement of Net Cost. SFFAS No. 33 also provides a standard for selecting the discount

rate assumption for PV estimates of federal employee pension, ORB, and OPEB liabilities. The SFFAS No. 33 standard for

selecting the discount rate assumption requires it be based on a historical average of interest rates on marketable Treasury

securities consistent with the cash flows being discounted. Additionally, SFFAS No. 33 provides a standard for selecting

the valuation date for estimates of federal employee pension, ORB, and OPEB liabilities that establishes a consistent method

for such measurements. This SFFAS No. 33 does not apply to the FECA program.

To provide a sustainable, justifiable data resource for the affected entities, Treasury developed a model and

methodology for developing these interest rates in FY 2014.

The model is based on the methodology used to produce the

HQM yield curve pursuant to the Pension Protection Act of 2006.

As of July 2014, Treasury began releasing interest rate

yield curve data using this new Treasury’s TNC yield curve, which is derived from Treasury notes and bonds. The TNC

yield curve provides information on Treasury nominal coupon issues and the methodology extrapolates yields beyond

30 years through 100 years maturity. The TNC yield curve is used to produce a Treasury spot yield curve (a zero coupon

curve), which provides the basis for discounting future cash flows.

In addition to the benefits presented in this note, federal, civilian, and military employees and federal entities contribute

to the TSP. The TSP is administered by an independent government entity, the FRTIB, which is charged with operating the

Treasury’s HQM resource is available at: https://home.treasury.gov/data/treasury-coupon-issues-and-corporate-bond-yield-curves/treasury-coupon-issues.

107

NOTES TO THE FINANCIAL STATEMENTS

TSP prudently and solely in the interest of the participants and their beneficiaries. Please refer to Note 23—Fiduciary

Activities for additional information on the TSP.

Pension Benefits

Change in Pension Benefits

Civilian

Military

Total

(In billions of dollars)

2023

2022

2023

2022

2023

2022

Actuarial accrued pension liability, beginning of

fiscal year

2,556.0

2,361.8

2,513.5

1,933.6

5,069.5

4,295.4

Pension expense:

Prior (and past) service costs from plan

amendments or new plans

Normal costs

64.5

55.9

62.7

38.0

127.2

93.9

Interest on liability

66.8

64.6

70.2

55.6

137.0

120.2

Actuarial (gains)/losses (from experience)

22.9

96.0

33.3

112.9

56.2

208.9

Actuarial (gains)/losses (from assumption

changes)

154.2

142.9

11.2

376.7

165.4

519.6

Other

(63.7)

63.6

(0.1)

Total pension expense 308.4

295.7

177.4

646.8

485.8

942.5

Less benefits paid

(107.7)

(101.5)

(74.4)

(66.9)

(182.1)

(168.4)

Actuarial accrued pension liability, end of fiscal

year

2,756.7

2,556.0

2,616.5

2,513.5

5,373.2

5,069.5

Significant Long-Term Economic Assumptions Used in Determining Pension

Liability and the Related Expense

Civilian

Military

2023

2022

2023

2022

FERS

CSRS

FERS

CSRS

Rate of interest

3.00%

2.40%

2.90%

2.30%

2.90%

2.80%

Rate of inflation

2.60%

2.00%

2.60%

2.30%

Projected salary increases

2.10%

1.60%

2.60%

2.30%

Cost of living adjustment

2.30%

2.60%

1.80%

2.00%

2.60%

2.30%

NOTES TO THE FINANCIAL STATEMENTS

108

Civilian Employees’ Pension

OPM administers the largest civilian pension plan, which covers substantially all full-time, permanent civilian federal

employees. This plan includes two components of defined benefits, the CSRS and the FERS. The basic benefit components

of the CSRS and the FERS are financed and operated through the CSRDF, a trust fund. CSRDF monies are generated

primarily from employees’ contributions, federal entity contributions, payments from the General Fund, and interest on

investments in Treasury securities. As of September 30, 2023, USPS has accrued, but not paid OPM, $22.7 billion in CSRS

and FERS retirement benefit expenses since 2014. USPS made a partial payment of $0.6 billion and $0.5 billion in 2023 and

2022, respectively, towards the required payment for FERS amortization. In order for USPS to preserve liquidity and to

ensure the ability to fulfill its primary universal service mission was not placed at undue risk, USPS has not made all of the

required payments for FERS or CSRS amortization. The cost of each year’s payment, including defaulted payments, along

with other benefit program costs, are included in USPS’ net cost for that year in the consolidated Statements of Net Cost. The

liability is not included on the government-wide Balance Sheet due to the USPS liability being eliminated with OPM’s

corresponding receivable.

The civilian pension liability increased by $200.7 billion, primarily due to higher inflation and salary increase

assumptions.

Military Employees’ Pensions

The Military Retirement System consists of a funded, noncontributory, defined benefit plan for military personnel

(Services of Army, Navy, Air Force, Marine Corps, Space Force, and the USCG) with an entry date prior to January 1, 2018

and the BRS, generally for military personnel with an entry date on or after January 1, 2018. The defined benefit plan

includes non-disability retired pay, disability retired pay, survivor annuity programs, Concurrent Retirement and Disability

Pay, and Combat-Related Special Compensation. The Service Secretaries may approve immediate non-disability retired pay

at any age with credit of at least 20 years of active duty service. Reserve retirees must be at least 60 years old and have at

least 20 qualifying years of service before retired pay commences; however, in some cases, the age can be less than 60 if the

reservist performs certain types of active service. P.L. 110-181 and P.L. 113-291 includes provisions for a three-month

reduction in the reserve retirement age from age 60 for each aggregate of 90 days of certain active-duty service served in any

fiscal year after January 28, 2008, or in any two consecutive fiscal years after September 30, 2014. However, in no case may

the retirement age drop below age 50. There is no vesting of defined benefits before non-disabled retirement. There are

distinct non-disability benefit formulas related to four populations within the Military Retirement System: Final Pay, High-3,

Career Status Bonus/Redux, and the BRS enacted in the NDAA for FY 2016, effective January 1, 2018. The BRS is a

retirement benefit merging aspects of both a defined benefit annuity with a defined contribution account, through the TSP.

The date an individual enters the military generally determines which retirement system they would fall under and if they

have the option to select, via a one-time irrevocable election, their retirement system. Military personnel with a start date on

or after January 1, 2018 are automatically enrolled in BRS. Although all members serving as of December 31, 2017 were

grandfathered under the prior retirement system, Active Duty, National Guard and Reserve personnel meeting established

criteria may have opted into BRS during calendar year 2018. Under the BRS, retiring members are given the option to

receive a portion of their retired pay annuity in the form of a lump sum distribution. For additional information on these

benefits, see DOD’s Office of Military Compensation website https://militarypay.defense.gov.

The DOD MRF was established by P.L. 98-94 (currently 10 U.S.C. §1461-1467) and accumulates funds to finance, on

an accrual basis, the liabilities of DOD military retirement and survivor benefit programs. This fund receives income from

three sources: monthly normal cost payments from the services to pay for DOD’s portion of the current year’s service cost;

annual payments from Treasury to amortize the unfunded liability and pay for the increase in the normal cost attributable to

Concurrent Receipt (certain beneficiaries with combat-related injuries who are receiving payments from VA) per P.L. 108-

136; and investment income.

The NDAA for FY 2021, §§ 8224-8225 requires the USCG be covered by the MRF no later than the beginning of FY

2023. For additional information regarding DOD’s USCG actuarial liability, please refer to DOD’s financial statements.

DOD’s Office of the Actuary calculates the actuarial liability annually using economic and demographic assumptions

about the future (e.g., mortality and retirement rates). The $103.0 billion increase in the Military Retirement Pension liability

is primarily attributable to interest on the liability and normal cost.

The VA provides eligible veterans and/or their dependents with pension benefits if the veteran died, is over age 65 or is

totally disabled, based on annual eligibility reviews. Unlike a traditional pension program, VA pension is only available to

veterans who meet the financial means test. As such, only the amounts currently due and payable are reflected as a liability

on VA’s balance sheet, which is consistent with federal accounting standards. No actuarial liability is recognized for the NPV

of projected future benefit payments.

109

NOTES TO THE FINANCIAL STATEMENTS

Veterans Compensation and Burial Benefits

Change in Veterans Compensation and Burial Benefits

Compensation

Burial

Total

(In billions of dollars)

2023

2022

2023

2022

2023

2022

Actuarial accrued liability, beginning of fiscal year

5,953.4

4,291.7

11.7

10.6

5,965.1

4,302.3

Current year expense:

Prior (and past) service costs from program

amendments or new programs during the

period

468.7

7.0

468.7

7.0

Interest on the liability balance

167.9

126.6

0.3

168.2

126.9

Actuarial (gains)/losses (from experience)

86.3

144.6

(0.1)

(0.4)

86.2

144.2

Actuarial (gains)/losses (from assumption

changes)

549.2

1,505.2

0.2

1.5

549.4

1,506.7

Total current year expense

1,272.1

1,783.4

0.4

1.4

1,272.5

1,784.8

Less benefits paid

(141.5)

(121.7)

(0.3)

(141.8)

(122.0)

Actuarial accrued liability, end of fiscal year

7,084.0

5,953.4

11.8

11.7

7,095.8

5,965.1

Significant Long-Term Economic Assumptions Used in Determining Veterans Compensation and

Burial Benefits as of September 30, 2023, and 2022

2023

2022

Discount Rate, Single Equivalent

2.87%

2.82%

Long-Term COLA Rate

2.40%

The government compensates disabled veterans and their survivors. Veterans’ compensation is payable as a disability

benefit or a survivor’s benefit. Entitlement to compensation depends on the veterans’ disabilities incurred in or aggravated

during active military service, death while on duty, or death resulting from service-connected disabilities after active duty.

Eligible veterans who die or are disabled during active military service-related causes, as well as their dependents, and

dependents of service members who died during active military service, receive compensation benefits. In addition, service

members who die during active military service and veterans who separated under other than dishonorable conditions are

provided with a burial flag, headstone/marker, and grave liner for burial in a VA national cemetery or are provided a burial

flag, headstone/marker and a plot allowance for burial in a private cemetery. These benefits are provided under 38 U.S.C.,

Part 2, §2301-2308, in recognition of a veteran’s military service and are recorded as a liability in the period the requirements

are met.

Several significant actuarial assumptions were used in the valuation of compensation and burial benefits to calculate the

PV of the liability. A liability was recognized for the projected benefit payments to: 1) those beneficiaries, including veterans

and survivors, currently receiving benefit payments; 2) current veterans who are expected in the future to become

beneficiaries of the compensation program; and 3) a proportional share of those in active military service as of the valuation

date who are expected to be future veterans and to become beneficiaries of the compensation program. Future benefit

payments to survivors of those veterans in classes 1, 2, and 3 above are also incorporated into the projection.

The veterans’ compensation and burial benefits liability is developed on an actuarial basis. It is impacted by interest on

the liability balance, experience gains or losses, changes in actuarial assumptions, prior service costs, and amounts paid for

costs included in the liability balance.

The actuarial liability for compensation and burial benefits as of September 30, 2023, was $7.1 trillion, which represents

an increase of $1.1 trillion from September 30, 2022, liability of $6.0 trillion. This increase was primarily the result of

actuarial losses from assumption changes and prior (past) service costs from program amendments or new programs during

the period, which together increased the liability by $1.0 trillion.

NOTES TO THE FINANCIAL STATEMENTS

110

In FY 2023, VA conducted in-depth experience studies and refined several assumptions and methods within the

compensation and burial model. These refinements led to an overall increase from assumption changes of $549.4 billion in

the compensation and burial liability as of September 30, 2023.

On August 10, 2022, the PACT Act, P.L. 117-168, was signed into law expanding and extending eligibility for VA

benefits and health care for veterans with toxic exposures and veterans of the Vietnam, Gulf War and Post-9/11 eras. The

PACT Act is the most significant expansion of benefits for toxic exposed veterans in more than 30 years. Provisions of the

PACT Act that directly impact compensation benefits include the addition of over 20 presumptive medical conditions from

exposures to burn pits and other toxins. VA reviewed the requirements for estimating the liability impact of the new law in

accordance with SFFAS No. 5, Accounting for Liabilities of the Federal Government and determined that the impact on the

compensation liability is measurable using disability compensation claims data to establish an estimate liability impact of the

PACT Act.

In FY 2023, VA assessed the impact of the PACT Act and applied certain updates to the disability compensation model.

These modifications led to an increase of $468.7 billion as prior service costs from plan amendments to the disability

compensation liability as of September 30, 2023.

Post-Retirement Health Benefits

Change in Post-Retirement Health Benefits

Civilian

Military

Total

(In billions of dollars)

2023

2022

2023

2022

2023

2022

Actuarial accrued post-retirement health benefits

liability, beginning of fiscal year

427.4

427.3

1,045.0

868.7

1,472.4

1,296.0

Post-Retirement health benefits expense:

Prior (and past) service costs from plan

amendments or new plans

(28.3)

Normal costs

18.6

21.3

33.7

25.4

52.3

46.7

Interest on liability

13.1

13.5

30.9

29.0

44.0

42.5

Actuarial (gains)/losses (from experience)

(1.9)

0.4

(38.8)

(5.6)

(40.7)

(5.2)

Actuarial (gains)/losses (from assumption

changes)

(43.0)

10.2

78.3

150.2

35.3

160.4

Total post-retirement health benefits expense

(13.2)

17.1

104.1

199.0

90.9

216.1

Less claims paid

(17.5)

(17.0)

(23.9)

(22.7)

(41.4)

(39.7)

Actuarial accrued post-retirement health benefits

liability, end of fiscal year

396.7

427.4

1,125.2

1,045.0

1,521.9

1,472.4

Significant Long-Term Economic Assumptions Used in Determining

Post-Retirement Health Benefits and the Related Expense

Civilian

Military

2023

2022

2023

2022

Rate of interest

3.10%

2.90%

Single equivalent medical trend rate

4.90%

4.50%

4.90%

4.60%

Ultimate medical trend rate

4.00%

3.40%

4.60%

4.30%

Civilian Employees’ Post-Retirement Health Benefits

The post-retirement civilian health benefit liability is an estimate of the government’s future cost of providing post-

retirement health benefits to current employees and retirees. Although active and retired employees pay insurance premiums

111

NOTES TO THE FINANCIAL STATEMENTS

under the Federal Employee Health Benefits Program, these premiums cover only a portion of the costs. The OPM actuary

applies economic and demographic assumptions to historical cost information to estimate the liability. The decrease in post-

retirement health benefit liability of $30.7 billion is primarily attributable to actuarial gains from assumption changes.

Military Employees’ Post-Retirement Health Benefits

Military retirees who are not yet eligible for Medicare (and their non-Medicare eligible dependents) are eligible for

post-retirement medical coverage provided by DOD. Depending on the benefit plan selected, retirees and their eligible

dependents may receive care from MTF on a space-available basis or from civilian providers through TRICARE. This

TRICARE coverage is available as Select (a preferred provider health plan that contracts with medical providers to create a

network of participating providers; member cost-shares are typically higher for services received out-of-network) and Prime

(a health maintenance plan that limits services to a specific network of medical personnel and facilities and usually by

requiring referral by a primary-care physician for specialty care; coverage is also available for non-referred and out-of-

network care, subject to higher cost-sharing). These post-retirement medical benefits are paid by the DOD Defense Health

Program on a pay-as-you-go basis.

Since FY 2002, DOD has provided medical coverage to Medicare-eligible retirees (and their eligible Medicare-eligible

dependents). This coverage, called TFL, is a Medicare Supplement plan which includes inpatient, outpatient and pharmacy

coverage. Enrollment in Medicare Part B is required to maintain eligibility in TFL. Retirees with TFL coverage can obtain

care from MTF on a space-available basis or from civilian providers.

10 U.S.C., Chapter 56 created the DOD MERHCF, which became operative on October 1, 2002. The purpose of this

fund is to account for and accumulate funds for the health benefit costs of Medicare-eligible military retirees, and their

dependents and survivors who are Medicare eligible. The Fund receives revenues from three sources: interest earnings on

MERHCF assets, Uniformed Services normal cost contributions, and Treasury contributions. The DOD Medicare-Eligible

Retiree Health Care Board of Actuaries (the MERHCF Board) approves the methods and assumptions used in actuarial

valuations of the MERHCF for the purpose of calculating the per capita normal cost rates (to fund the annual accrued

benefits) and determining the unfunded liability amortization payment (Treasury contribution).

The Secretary of Defense directs the Secretary of the Treasury to make DOD’s normal cost payments. The MERHCF

pays for medical costs incurred by Medicare-eligible beneficiaries at MTF and civilian providers (including payments to U.S.

Family Health Plans for grandfathered beneficiaries), plus the costs associated with claims administration.

DOD’s Office of the Actuary calculates the actuarial liabilities annually using assumptions and experience (e.g.,

mortality and retirement rates, health care costs, medical trend rates, and the discount rate) in accordance with SFFAS No.

33. Actuarial liabilities are calculated for all DOD retiree medical benefits, including both the benefits funded through the

MERHCF and the benefits for pre-Medicare retirees who are paid on a pay-as-you-go basis. Military post-retirement health

and accrued benefits payable increased $80.2 billion. The increase is primarily attributable to interest on the liability, normal

cost, and changes in assumptions.

In addition to the health care benefits the federal government provides for civilian and military retirees and their

dependents, the VA also provides medical care to veterans on an “as available” basis, subject to the limits of the annual

appropriations. For the FYs 2019 through 2023, the average medical care cost per year was $94.8 billion.

NOTES TO THE FINANCIAL STATEMENTS

112

Veterans Education and Training Benefits

Change in Veterans Education and Training Benefits

(In billions of dollars)

2023

2022

Actuarial accrued liability, beginning of fiscal year

170.0

151.2

Current year expense:

Prior (and past) service costs from plan amendments or new plans

2.0

Interest on liability

4.0

3.7

Actuarial (gains)/losses (from experience)

24.0

7.4

Actuarial (gains)/losses (from assumption changes)

9.4

19.8

Total current year expense

39.5

30.9

Less benefits paid

(11.9)

(12.1)

Actuarial accrued liability, end of fiscal year

197.5

170.0

For eligible veterans and their dependents, the VA provides four education/retraining type programs:

• Post 9/11 GI Bill;

• VR&E;

• DEA; and

• Montgomery GI Bill-Active Duty.

Based on the actuarial estimates of future payments, the total liability for the four education and training programs

increased by $27.5 billion in FY 2023.

In FY 2023, VA performed updates to the Post 9/11 GI Bill, DEA, Montgomery GI Bill-Active Duty and VR&E

programs, which resulted in the liability increase of $27.5 billion with a $24.0 billion attributed to experience losses, $9.4

billion increase attributed to assumption changes, and an offset of $(11.9) billion due to amounts paid.

For additional information regarding actuarial assumptions and the four education and training type programs, please

refer to VA’s financial statements.

113

NOTES TO THE FINANCIAL STATEMENTS

Life Insurance Benefits

Civilian Employees’ Life Insurance Benefits

Change in Civilian Life Insurance Benefits

(In billions of dollars)

2023

2022

Actuarial accrued life insurance benefits liability, beginning of fiscal year

62.9

60.1

Life insurance benefits expense:

New entrant expense

0.7

0.9

Interest on liability

1.7

Actuarial (gains)/losses (from experience)

0.5

(0.4)

Actuarial (gains)/losses (from assumption changes)

1.2

1.3

Total life insurance benefits expense

4.1

3.5

Less costs paid

(0.7)

Actuarial accrued life insurance benefits liability, end of fiscal year

66.3

62.9

Significant Long-Term Economic Assumptions Used in Determining Life

Insurance Benefits and the Related Expense

Civilian

2023

2022

Rate of interest

2.80%

Rate of increase in salary

2.10%

1.60%

One of the other significant employee benefits is the FEGLI Program. Employee and annuitant contributions and

interest on investments fund a portion of this liability. The actuarial life insurance liability is the expected PV of future

benefits to pay to, or on behalf of, existing FEGLI participants, less the expected PV of future contributions to be collected

from those participants. The OPM actuary uses salary increase and interest rate yield curve assumptions that are generally

consistent with the pension liability.

As of September 30, 2023, the total amount of FEGLI insurance in-force is estimated at $800.8 billion ($669.2 billion

for employees and $108.6 billion for annuitants).

Veterans’ Life Insurance Benefits

The largest veterans’ life insurance programs consist of the following:

• National Service Life Insurance covers policyholders who served during World War II.

• Veterans’ Special Life Insurance was established in 1951 to meet the insurance needs of veterans who served during

the Korean Conflict and through the period ending January 1, 1957.

• Service-Disabled Veterans Insurance program was established in 1951 to meet the insurance needs of veterans who

received a service-connected disability rating.

Death benefit liabilities consist of reserves for permanent plan and term policies as well as policy benefits for Veterans

Mortgage Life Insurance. Disability income and waiver liabilities consist of reserves to fund the monthly payments to

disabled insureds under the Total Disability Income Provision and the policy premiums waived for qualifying disabled

veterans. Insurance dividends payable consists of dividends left on deposit with VA and dividends payable to policyholders.

Unpaid policy claims consist of insurance claims that are pending at the end of the reporting period, an estimate of claims

that have been incurred but not yet reported, and disbursements in transit. The veteran’s life insurance liability for future

policy benefits as of September 30, 2022, and 2021, was $3.6 billion and $3.9 billion, respectively. For additional

information on veteran’s life insurance liability, please refer to VA’s financial statements.

The VA supervises SGLI and Veterans Group Life Insurance programs that provide life insurance coverage to members

of the uniformed armed services, reservists, and post-Vietnam Veterans as well as their families. VA has entered into a group

NOTES TO THE FINANCIAL STATEMENTS

114

policy with the Prudential Insurance Company of America to administer and provide the insurance payments under these

programs. All SGLI insureds are automatically covered under the Traumatic Injury Protection program, which provides for

insurance payments to veterans who suffer a serious traumatic injury in service.

The amount of insurance in-force is the total face amount of life insurance coverage provided by each administered and

supervised program at the end of the fiscal year. It includes any paid-up additional coverage provided under these policies.

The supervised programs’ policies and face values are not reflected in VA’s liabilities because the risk of loss on these

programs is assumed by Prudential and its reinsurers through the terms and conditions of the group policy. As a result, the

information provided for the supervised programs is for informational purposes only and is unaudited. The face value for

supervised programs as of September 30, 2022, and 2021, was $1,213.2 billion and $1,219.0 billion, respectively. The face

value for administered programs as of September 30, 2022, and 2021, was $4.8 billion and $5.3 billion, respectively.

Federal Employees’ Compensation Act Benefits

Workers’ Compensation Benefits

DOL determines both civilian and military entities’ liabilities for future workers’ compensation benefits for civilian

federal employees, as mandated by the FECA, for death, disability, medical, and miscellaneous costs for approved

compensation cases, and a component for incurred, but not reported, claims. Actuarial liability includes the non-billable and

unreimbursed costs from claims covered by Section 4016, “Eligibility for Workers’ Compensation Benefits for Federal

Employees Diagnosed with COVID-19,” of the ARP Act. However, claims for COVID-19 diagnosed after January 27, 2023,

are billable to other federal entities. In addition, the NDAA of 2023, P.L. 117-263 enacted December 23, 2022, section 5305,

“Fairness for Federal firefighters,” amended the FECA and established that certain illnesses and diseases are to be deemed to

be proximately caused by the employment in federal fire protection activities and the costs are billable to the entities that

employ federal firefighters.

The FECA liability is determined annually using historical claim data and benefit payment patterns related to injury

years to predict the future payments. The actuarial methodology provides for the effects of inflation and adjusts liability

estimates to constant dollars by applying wage inflation factors (COLA) and medical inflation factors (CPIM) to the

calculation of projected benefits. DOL selects the COLA factors and CPIM factors by averaging over five years the COLA

rates and CPIM rates, respectively. The FY 2023 methodology for averaging the COLA rates used OMB provided rates; the

FY 2023 methodology for averaging the CPIM rates used OMB‐provided rates and information obtained from the Bureau of

Labor Statistics public releases for CPI. Using averaging renders estimates that reflect trends over five years instead of

conditions that exist in one year.

The COLAs and CPIMs used in the projections for FY 2023 are listed below in the table.

DOL selects the discount rates by averaging interest rates for the current and prior four years. Using averaging renders

estimates that reflect historical trends over five years instead of conditions that exist in one year. DOL selected the interest

rate assumptions whereby projected annual payments were discounted to PV based on interest rate assumptions on the TNC

yield curve to reflect the average duration of income payments and medical payments. The average durations for income

payments and medical payments were 14.5 years and 10.3 years, respectively. Based on averaging the TNC yield curves for

the current and prior four years, the interest rate assumptions for income payments and medical payments were 2.3 percent

and 2.1 percent, respectively.

For the COLAs, CPIMs, average durations, and interest rate assumptions used in the projections for FY 2022, refer to

the FY 2022 Financial Report.

115

NOTES TO THE FINANCIAL STATEMENTS

Unfunded Leave

Unfunded leave are the amounts recorded by an employer federal entity for unpaid leave earned that an employee is

entitled to upon separation and that will be funded by future years’ budgetary resources. The total unfunded leave as of

September 30, 2023, and 2022, was $27.2 billion and $26.9 billion, respectively.

Liability for Other Benefits

Liability for other benefits includes several programs. The largest program is VA’s Community Care Program, with an

estimated liability of $4.8 billion and $4.7 billion as of September 30, 2023, and 2022, respectively.

NOTES TO THE FINANCIAL STATEMENTS

116

Note 14. Environmental and Disposal Liabilities

Environmental and Disposal Liabilities as of September 30, 2023, and 2022

(In billions of dollars)

2023

2022

Department of Energy

534.3

519.7

Department of Defense

93.8

90.6

All other entities

17.2

16.0

Total environmental and disposal liabilities

645.3

626.3

After World War II, the U.S. developed a massive industrial complex to research, produce, and test nuclear weapons

and commercial nuclear power reactors. The nuclear complex was comprised of nuclear reactors, chemical-processing

buildings, metal machining plants, laboratories, and maintenance facilities.

At all sites where these activities took place, some environmental contamination occurred. This contamination was

caused by the production, storage, and use of radioactive materials and hazardous chemicals, which resulted in contamination

of soil, surface water, or groundwater. The environmental legacy of nuclear weapons production also includes thousands of

contaminated buildings and large volumes of waste and special nuclear materials requiring treatment, stabilization, and

disposal.

Estimated cleanup costs at sites for which there are no current feasible remediation approaches are excluded from the

estimates, although applicable stewardship and monitoring costs for these sites are included. DOE has not been required

through regulation to establish remediation activities for these sites.

Estimating DOE’s environmental cleanup liability requires making assumptions about future activities and is inherently

uncertain. The future course of DOE’s environmental cleanup and disposal will depend on a number of fundamental technical

and policy choices, many of which have not been made. Some contaminated sites and facilities could be restored to a

condition suitable for any desired use or could be restored to a point where they pose no near-term health risks to the

surrounding communities. Achieving the former condition of the sites and facilities would have a higher cost which may or

may not warrant the cost or be legally required. The environmental and disposal liability estimates include contingency

estimates intended to account for the uncertainties associated with the technical cleanup scope of the program. Congressional

appropriations at lower-than anticipated levels or lack of congressional approval, unplanned delays in project completions

including potential delays due to COVID-19, unforeseen technical issues, obtaining regulatory approval, among other things,

could cause increases in life-cycle costs.

DOE’s environmental and disposal liabilities also include the estimated cleanup and post-closure responsibilities,

including surveillance and monitoring activities, soil and groundwater remediation, and disposition of excess material for

sites. DOE is responsible for the post-closure activities at many of the closure sites as well as other sites. The costs for these

post-closure activities are estimated for a period of 75 years after the balance sheet date, i.e., through 2098 in FY 2023 and

through 2097 in FY 2022. While some post-cleanup monitoring and other long-term stewardship activities post-2098 are

included in the liability, there are others DOE expects to continue beyond 2098 for which the costs cannot reasonably be

estimated.

A portion of DOE’s environmental liability at various field sites includes anticipated costs for facilities managed by

DOE’s ongoing program operations, which will ultimately require stabilization, deactivation, and decommissioning. The

estimates are largely based upon a cost-estimating model. Site specific estimates are used in lieu of the cost-estimating

model, when available. Cost estimates for ongoing program facilities are updated each year. For facilities newly

contaminated since FY 1997, cleanup costs allocated to the periods benefiting from the operations of the facilities. Facilities’

cleanup costs allocated to future periods and not included in the environmental and disposal liabilities amounted to $1.1

billion for fiscal years ending September 30, 2023, and 2022.

DOD has cleanup requirements and conducts the cleanup under DERP at active installations, Base Realignment

Closure, and Formerly Used Defense Sites. DOD has additional cleanup requirements for active installations not driven by

DERP, weapon systems programs, and chemical weapons disposal programs. The weapons system program consists of

chemical weapons disposal, nuclear powered aircraft carriers, nuclear powered submarines, and other nuclear ships. All

cleanup efforts are performed in coordination with regulatory entities, other responsible parties, and current property owners,

as applicable.

117

NOTES TO THE FINANCIAL STATEMENTS

DOD follows CERCLA, SARA, RCRA or other applicable federal or state laws to clean up contamination. The

CERCLA, SARA, and RCRA require DOD to clean up contamination in coordination with regulatory entities, current

owners of property damaged by DOD, and third parties that have a partial responsibility for the environmental restoration.

Failure to comply with agreements and legal mandates puts the DOD at risk of incurring fines and penalties.

DOD utilizes an estimating methodology model which includes the use of mathematical equations to convert resources

data into cost data to project environmental cleanup cost. DOD validates the models and estimates liabilities based on data

received during preliminary assessment and site investigation.

For general PP&E placed into service after September 30, 1997, DOD expenses associated environmental cleanup costs

using two methods: physical capacity usage of the assets or systematically recognized over the useful life. DOD expensed

cleanup costs for general PP&E placed into service before October 1, 1997, unless costs are to be recovered through user

charges. As costs are recovered DOD expenses cleanup costs associated with the asset life that has passed since the general

PP&E was placed into service. DOD systematically recognizes the remaining cost over the remaining life of the asset. The

unrecognized portion of the estimated total cleanup costs associated with disposal of general PP&E was $4.7 billion and $3.9

billion for fiscal years ending September 30, 2023, and 2022, respectively.

DOD is responsible for environmental restoration and corrective action for buried chemical munitions and agents;

however, a reasonable estimate is indeterminable because the extent of the buried chemical munitions and agents is unknown.

DOD has ongoing studies for the Formerly Utilized Sites Remedial Action Program and will update its estimate as additional

information is identified. DOD may incur costs for restoration initiatives in conjunction with returning overseas DOD

facilities to host nations. DOD continues its efforts to reasonably estimate required restoration costs.

Environmental liabilities change over time because of laws and regulation updates, technology advances, inflation or

deflation factors and disposal plan revisions. DOD revised estimates resulting from previously unknown contaminants,

reestimation based on different assumptions, and other changes in project scope.

Please refer to the financial statements of the main contributing entities, DOD and DOE, for additional information

regarding environmental and disposal liabilities, including cleanup costs.

Legal contingent liabilities including contingencies related to environmental legal disputes are recognized as an other

liability on the Balance Sheet. See Note 18—Other Liabilities and Note 21—Contingencies for additional information related

to legal contingencies.

NOTES TO THE FINANCIAL STATEMENTS

118

Note 15. Benefits Due and Payable

Benefits Due and Payable as of September 30, 2023, and 2022

(In billions of dollars)

2023

2022

Federal Old-Age and Survivors Insurance - SSA

111.0

98.6

Medicare Insurance (Parts A, B, and D) - HHS

106.2

85.1

Grants to states for Medicaid - HHS

52.0

54.8

Federal Disability Insurance - SSA

29.8

24.2

Unemployment Insurance - DOL

10.7

11.1

All other benefits programs

16.2

14.5

Total benefits due and payable

325.9

288.3

Benefits due and payable are amounts owed to program recipients or medical service providers as of September 30,

2023 that have not been paid. HHS had an increase in entitlement benefits of $18.3 billion or 13 percent over FY 2022 that

was due to an increase in medical services and claims incurred but not reported. Please refer to the financial statements of

SSA, HHS, and DOL for more information.

119

NOTES TO THE FINANCIAL STATEMENTS

Note 16. Insurance and Guarantee Program Liabilities

Insurance and Guarantee Program Liabilities as of September 30, 2023, and 2022

(In billions of dollars)

2023

2022

Single-Employer Program - Pension Benefit Guaranty Corporation

73.9

78.3

Federal Crop Insurance - Department of Agriculture

17.3

Multiemployer Program - Pension Benefit Guaranty Corporation

2.6

2.4

Other insurance and guarantee programs

5.5

6.5

Total insurance and guarantee program liabilities

99.3

104.5

The federal government incurs liabilities related to various insurance and guarantee programs as detailed in the table

above. Note 21—Contingencies includes a discussion of contingencies and other risks related to significant insurance and

guarantee programs. Insurance information and the related liability concerning federal employee and veteran benefits are

included in Note 13—Federal Employee and Veteran Benefits Payable. Social insurance and loan guarantees are not

considered insurance programs under SFFAS No. 51, Insurance Programs, and are accounted for under SFFAS No. 17,

Accounting for Social Insurance, and SFFAS No. 2, Accounting for Direct Loans and Loan Guarantees. Loan guarantees are

disclosed in Note 4—Loans Receivable, Net and Loan Guarantee Liabilities, and social insurance information is included

primarily in the sustainability financial statements and in Note 25—Social Insurance.

Insurance and guarantee program liabilities are recognized for known losses and contingent losses to the extent that the

underlying contingency is deemed probable and a loss amount is reasonably measurable. Please see Note 21—Contingencies

for discussion on the meaning of “probable” depending on the accounting framework used by each significant consolidation

entity. PBGC, which insures defined benefit pensions, has the largest insurance and guarantee program liability.

PBGC insures pension benefits for participants in covered defined benefit pension plans. The FY 2023 decrease of $4.2

billion in PBGC’s liability for its two separate insurance programs is comprised of a decrease of $4.4 billion in the single-

employer program liability and an increase of $0.2 billion in the multiemployer program liability. As of September 30, 2023,

and 2022, PBGC had total liabilities of $88.8 billion and $90.3 billion, respectively. As of September 30, 2023, PBGC’s total

assets exceeded its total liabilities by $46.1 billion, and in FY 2022 its total assets exceeded its total liabilities by $37.6

billion.

On March 11, 2021, the ARP established the SFA program for distressed multiemployer pension plans that meet

specific eligibility criteria. The SFA program is administered by PBGC and paid in a single lump sum rather than in periodic

payments. An application under the ARP must be filed by the eligible plans no later than December 31, 2025. Unlike

PBGC’s insolvency insurance program for multiemployer plans, which is funded by insurance premiums and investment

income, the SFA program is funded by appropriations from the General Fund. The SFA program is intended to enable

eligible plans to pay benefits due through plan year 2051, and, as a result, these plans are no longer considered to be

liabilities to PBGC. PBGC projects the range of total costs for the SFA program to be between $78.6 billion and $81.9

billion, which includes the $45.6 billion paid during FY 2023 and $7.5 billion paid in FY 2022. Refer to PBGC’s financial

statements and FY 2022 Projections Report for additional information.

As of September 30, 2023, and 2022, $17.3 billion pertain to USDA’s FCIP. The FCIP is administered by the FCIC,

which provides insurance to reduce agricultural producers’ economic losses due to natural disasters.

As of September 30, 2023, and 2022, $4.1 billion and $5.8 billion, respectively, pertain to the DHS NFIP, which is

included in other insurance and guarantee programs. The NFIP insurance program liability represents an estimate based on

the loss and loss adjustment expense factors inherent to the NFIP Insurance Underwriting Operations, including trends in

claim severity and frequency. The estimate is driven primarily by the timing and severity of flooding activity in the U.S. and

can significantly vary year over year.

NOTES TO THE FINANCIAL STATEMENTS

120

Note 17. Advances from Others and Deferred Revenue

Advances from Others and Deferred Revenue as of September 30, 2023, and 2022

(In billions of dollars)

2023

2022

Security Assistance Accounts

270.5

167.7

Department of Energy

52.9

50.6

All other

31.9

28.9

Total advances from others and deferred revenue

355.3

247.2

Advances from others and deferred revenue consists of payments received in advance of performance of activities for

which revenue has not been earned and other deferred revenue or income received but not yet earned not otherwise classified

as advances or repayments. Some examples include deferred project revenue funded in advance, funds received in advance

under the terms of a settlement agreement, prepaid postage, and unearned fees, assessments, and surcharges.

SAA advances from others represent liabilities for collections received to cover future expenses or acquisition of assets

and are related to contracts authorizing progress payments based on cost as defined in the Federal Acquisition Regulation. In

accordance with contract terms, specific rights to the contractors’ work vest when a specific type of contract financing

payment is made. Due to the probability the contractors will complete their efforts and deliver satisfactory products, and

because the amount of potential future payments is estimable, the SAA has recognized a contingent liability for estimated

future payments which are conditional pending delivery and government acceptance. SAA had a large increase of $102.8

billion over the previous fiscal year due to increases in cash collections received from foreign partners.

The DOE’s Nuclear Waste Fund collects revenues from owners or generators of high-level radioactive waste and SNF

to pay their share of disposal costs. These revenues are recognized as a financing source as costs are incurred, and revenues

that exceed the expenses are considered deferred revenue.

121

NOTES TO THE FINANCIAL STATEMENTS

Note 18. Other Liabilities

Other Liabilities as of September 30, 2023, and 2022

(In billions of dollars)

2023

2022

Other liabilities with related budgetary obligations

202.0

55.8

Allocation of special drawing rights

151.0

147.0

Other liabilities without related budgetary obligations

83.9

94.6

Actuarial liabilities for Treasury-managed benefit programs

76.6

56.7

Contingent liabilities

67.6

51.6

Liability for non-fiduciary deposit funds and undeposited collections

22.4

19.6

Other miscellaneous liabilities

69.7

69.8

Total other liabilities

673.2

495.1

Other liabilities are the amounts owed to the public and are not reported elsewhere in the Balance Sheet.

• Other liabilities with related budgetary obligations are amounts of liabilities for which there is a related budgetary

obligation. Grant accruals, subsidies, and unpaid obligations related to assistance programs are all part of this

category. Substantial contributors to this category are DOT, HHS, DOD, and USDA. A sharp year over year

increase occurred due to the failures of First Republic Bank, Silicon Valley Bank, and Signature Bank. The FDIC

recorded liabilities totaling $138.0 billion to resolution entities representing the agreed-upon value of assets

transferred from the receiverships, at the time of failure, to the acquiring institutions for use in funding the deposits

assumed by the acquiring institutions. The DIF satisfies these liabilities by sending cash directly to a receivership to

pay claims, liabilities, and other expenses of the receiverships or by offsetting receivables from resolutions when a

receivership declares a dividend.

• Allocation of SDR is the amount of corresponding liability representing the value of the reserve assets allocated by

the IMF to meet global needs to supplement existing reserve assets. SDR derive their quality as reserve assets from

the undertakings of the members to accept them in exchange for “freely useable” currencies (the U.S. dollar,

European euro, Chinese renminbi, Japanese yen, and British pound sterling). Treasury is the sole contributor. For

additional information, refer to Note 27—Disclosure Entities and Related Parties.

• Other liabilities without related budgetary obligations represent those unfunded liabilities for which congressional

action is needed before budgetary resources can be provided. The largest contributions to this category are HUD’s

Home Equity Conversion Mortgage-Backed Security Obligations, at FV, and DOE’s contractor-sponsored pension

plans and other post-retirement benefits.

• Actuarial liabilities for Treasury-managed benefit programs are the amounts recorded by Treasury for actuarial

liabilities of future benefit payments to be paid from programs such as the D.C. Federal Pension Fund and the D.C.

Judicial Retirement Fund. The only contributors are DOL and Treasury.

• Contingent liabilities are amounts that are recognized as a result of a past event where a future outflow or sacrifice

of resource is probable and measurable. These consist of a wide variety of administrative proceedings, legal actions,

and tort claims which may ultimately result in settlements or decisions adverse to the federal government. DOE and

HHS are the top contributors. For additional information, refer to Note 21—Contingencies.

• Liability for non-fiduciary deposit funds and undeposited collections is the amount offsetting undeposited

collections and collections deposited in non-fiduciary deposit funds awaiting disposition. The most substantial

contributions are from DOJ’s seized cash and monetary instruments, SEC’s liability for disgorgement and penalties

from securities law violators, and DOD.

• Other miscellaneous liabilities are the liabilities not otherwise classified above. Many entities reported relatively

small amounts.

NOTES TO THE FINANCIAL STATEMENTS

122

The following entities are the main contributors to the government’s reported other liabilities as of September 30, 2023.

Refer to each entity’s financial statements for additional information:

• Treasury

• HUD

• USDA

• FDIC

• DOJ

• Education

• DOL

• DOT

• DOI

• DOE

• PBGC

• SEC

• HHS

• USPS

• State

• DOD

• DHS

123

NOTES TO THE FINANCIAL STATEMENTS

Note 19. Collections and Refunds of Federal Revenue

Collections of Federal Tax Revenue for the Year Ended September 30, 2023

Federal

Tax Year to Which Collections Relate

Tax

Revenue

Prior

(In billions of dollars)

Collections

2023

2022

2021

Years

Individual income tax and tax withholdings

4,112.0

2,546.8

1,414.1

69.6

81.5

Corporate income taxes

457.0

270.3

155.5

4.9

26.3

Excise taxes

97.1

75.4

21.1

0.2

0.4

Unemployment taxes

47.3

39.0

8.1

0.2

Customs duties

85.1

78.0

7.1

Estate and gift taxes

35.4

1.3

29.9

2.1

Railroad retirement taxes

7.2

5.4

1.6

0.2

Fines, penalties, interest, and other revenue

5.5

5.4

0.1

Subtotal

4,846.6

3,021.6

1,637.5

76.8

110.7

Less: amounts collected for non-federal entities

(0.4)

Total

4,846.2

Treasury is the government’s principal revenue-collecting entity. Collections of individual income and tax withholdings

include FICA/SECA and individual income taxes. These taxes are characterized as non-exchange revenue.

Excise taxes, also characterized as non-exchange revenue, consist of taxes collected for various items, such as airline

tickets, gasoline products, distilled spirits and imported liquor, tobacco, firearms, and others.

Tax and other revenues reported reflect the effects of tax expenditures, which are special exclusions, exemptions,

deductions, tax credits, preferential tax rates, and tax deferrals that allow individuals and businesses to reduce taxes they may

otherwise owe. The Budget Act (P.L. 93-344) requires that a list of tax expenditures be included in the annual Budget. Tax

expenditures may be viewed as alternatives to other policy instruments, such as spending or regulatory programs. For

example, the government supports college attendance through both spending programs and tax expenditures. The government

uses Pell Grants to help low- and moderate-income students afford college and allows certain funds used to meet college

expenses to grow tax free in special college savings accounts.

Tax expenditures include deductions and exclusions, which reduce the amount of income subject to tax. Examples are

the deduction for mortgage interest on personal residences and the exclusion of interest on state and local bonds. Tax

expenditures also include tax credits, which reduce tax liability dollar for dollar for the amount of credit. For example, the

child tax credit reduces liability by $2,000 per child for taxpayers eligible to use it fully. Other credits are targeted at business

activity, such as credits for producing electricity from renewable energy or the research and experimentation credit, which

encourages businesses in the U.S. to increase investment in research activities. In addition, tax expenditures include some

provisions that allow taxpayers to defer tax liability. Examples include provisions that allow immediate expensing or

accelerated depreciation of certain capital investments, and others that allow taxpayers to defer their tax liability, such as the

deferral of recognition of income on contributions to and income accrued within qualified retirement plans.

The total revenues reported in the Statement of Operations and Changes in Net Position and the related information

reported in this note, do not include explicit line items for tax expenditures, but the total revenue amounts and budget results

reflect the effect of these expenditures. Tax expenditures are discussed in this note, the unaudited MD&A, and in the

unaudited Other Information section of the Financial Report.

NOTES TO THE FINANCIAL STATEMENTS

124

Federal Tax Refunds Disbursed and Other Payments for the Year Ended September 30, 2023

Tax Year to Which Refunds Relate

Refunds

Prior

(In billions of dollars)

Disbursed

2023

2022

2021

Years

Individual income tax and tax withholdings

611.0

100.0

302.6

160.6

47.8

Corporate income taxes

43.9

4.4

8.7

11.0

19.8

Other taxes, fines, and penalties

11.7

4.9

3.2

1.5

2.1

Total

666.6

109.3

314.5

173.1

69.7

Reconciliation of Tax Collections to Revenue for the Year Ended September 30, 2023, and 2022

(In billions of dollars)

2023

2022

Total collections of federal tax revenue

4,846.2

5,091.8

Refunds of federal taxes and other payments

(666.6)

(649.1)

Individual and other tax credits

239.8

338.3

Federal Insurance Contributions Act - Tax

(18.6)

(20.7)

Federal Reserve earnings

0.6

106.7

Change in taxes receivable

(55.0)

(65.5)

Nontax-related fines and penalties reported by entities

102.9

80.5

Nontax-related earned revenue

16.3

43.9

Consolidated revenue per the Statement of Operations and Changes

in Net Position

4,465.6

4,925.9

Consolidated revenue in the Statement of Operations and Changes in Net Position is presented on a modified cash basis,

net of tax refunds, and includes other non-tax related revenue. Refunds of federal taxes and other payments and individual

and other tax credits in FY 2023 and FY 2022 include the CARES Act, CAA, 2021 and ARP stimulus disbursements of $2.0

billion and $13.1 billion, respectively, to eligible taxpayers. Individual and other tax credits amounts are included in gross

cost in the Statements of Net Cost. Refer to Note 3—Accounts Receivable, Net for further explanation of line changes in

taxes receivable. The FICA – tax paid by federal entities is included in the individual income and tax withholdings line in the

Collections of Federal Tax Revenue; however, it is not reported on the Statement of Operations and Changes in Net Position

as these collections are intra-governmental revenue and eliminated in consolidation. The table above reconciles federal tax

collections to total revenue.

125

NOTES TO THE FINANCIAL STATEMENTS

Collections of Federal Tax Revenue for the Year Ended September 30, 2022

Federal

Tax Year to Which Collections Relate

Tax

Revenue

Prior

(In billions of dollars)

Collections

2022

2021

2020

Years

Individual income tax and tax withholdings

4,308.1

2,495.6

1,680.0

99.5

33.0

Corporate income taxes

475.8

294.0

156.6

3.4

21.8

Excise taxes

95.3

74.8

20.1

0.4

Unemployment taxes

63.8

49.8

13.8

0.2

Customs duties

104.7

97.9

6.8

Estate and gift taxes

33.4

2.3

25.9

1.8

3.4

Railroad retirement taxes

6.1

4.4

1.3

0.4

Fines, penalties, interest and other revenue

5.0

4.9

0.1

Subtotal

5,092.2

3,023.7

1,904.6

105.1

58.8

Less: amounts collected for non-federal entities

(0.4)

Total

5,091.8

Federal Tax Refunds Disbursed and Other Payments for the Year Ended September 30, 2022

Tax Year to Which Refunds Relate

Refunds

Prior

(In billions of dollars)

Disbursed

2022

2021

2020

Years

Individual income tax and tax withholdings

583.3

85.8

418.5

15.4

63.6

Corporate income taxes

55.7

4.4

12.3

32.9

6.1

Other taxes, fines, and penalties

10.1

4.0

2.0

2.4

1.7

Total

649.1

94.2

432.8

50.7

71.4

NOTES TO THE FINANCIAL STATEMENTS

126

Note 20. Commitments

Long-Term Operating Leases as of September 30, 2023, and 2022

(In billions of dollars)

2023

2022

General Services Administration

29.3

28.5

Department of Veterans Affairs

7.1

6.0

Department of Health and Human Services

1.5

2.9

Department of State

1.4

1.2

Other operating leases

2.9

3.6

Total long-term operating leases

42.2

The government has entered into contractual commitments that require future use of financial resources. It has

significant amounts of long-term lease obligations. Long-term operating leases in this note refer to those leases in which

federal entities do not assume the risks of ownership of the underlying general PP&E, and payments are expensed over the

lease term. The lease liabilities and assets arising from operating leases for FASB-reporting entities who have implemented

FASB ASC 842, Leases, are recorded on the Balance Sheet in other liabilities and PP&E, respectively, and thus are not

included in this Commitments note.

127

NOTES TO THE FINANCIAL STATEMENTS

Undelivered Orders and Other Commitments as of September 30, 2023, and 2022

(In billions of dollars)

2023

2022

Undelivered Orders - Unpaid:

Department of Defense

486.7

440.2

Department of Health and Human Services

240.2

254.6

Department of Education

211.0

262.4

Department of Transportation

176.4

166.7

Department of Housing and Urban Development

101.1

92.6

Department of Homeland Security

98.9

95.4

Department of Agriculture

95.0

83.1

Department of Energy

60.5

41.6

Security Assistance Accounts

52.3

41.2

Environmental Protection Agency

36.8

27.4

Department of State

31.5

30.9

U.S. Agency for International Development

24.8

Department of the Treasury

23.5

26.4

All other entities

191.3

184.1

Total undelivered orders - unpaid

1,830.0

1,771.4

Other Commitments:

GSE Senior Preferred Stock Purchase Agreements

254.1

U.S. participation in the International Monetary Fund

151.0

146.4

Callable capital subscriptions for Multilateral Development Banks

130.2

127.9

All other commitments

19.2

20.8

Total other commitments

554.5

549.2

Undelivered Orders and Other Commitments

Undelivered Orders - Unpaid

Undelivered orders, included in this note disclosure, represent the value of goods and services ordered that have not yet

been received and that have not been prepaid. As of September 30, 2023, and 2022, the total reported unpaid undelivered

orders were $1,830.0 billion and $1,771.4 billion, respectively. In FY 2023, Education had a $51.4 billion decrease that was

primarily due to a decrease in unpaid obligations from COVID-19 appropriations, as a result of payments during FY 2023.

DOD had a $46.5 billion increase that was primarily due to an overall increase in funding from the CAA, 2023.

GSE Senior Preferred Stock Purchase Agreements

As of September 30, 2023, and 2022, the maximum remaining potential commitment to the GSEs for the remaining life

of the SPSPAs was $254.1 billion, which was established on December 31, 2012. Refer to Note 8—Investments in

Government-Sponsored Enterprises for a full description of the SPSPAs related commitments and contingent liability, if any,

as well as additional information.

NOTES TO THE FINANCIAL STATEMENTS

128

U.S. Participation in the International Monetary Fund

The government participates in the IMF through a quota subscription and certain borrowing arrangements that

supplement IMF resources. As of September 30, 2023, and 2022, the financial commitment under the U.S. quota and

borrowing arrangements was $151.0 billion and $146.4 billion, respectively. Refer to Note 2—Cash and Other Monetary

Assets and Note 27—Disclosure Entities and Related Parties for additional information regarding the U.S. participation in the

IMF.

Callable Capital Subscriptions for Multilateral Development Banks

The government has callable subscriptions in certain MDB, which are international financial institutions that finance

economic and social development projects in developing countries. Callable capital in the MDB serves as a supplemental

pool of resources that may be redeemed and converted into ordinary paid in shares, if the MDB cannot otherwise meet certain

obligations through its other available resources. MDB are able to use callable capital as backing to obtain favorable

financing terms when borrowing from international capital markets. To date, there has never been a call on this capital at any

MDB and none is anticipated. As of September 30, 2023, and 2022, the capital commitment to MDB was $130.2 billion and

$127.9 billion, respectively.

129

NOTES TO THE FINANCIAL STATEMENTS

Note 21. Contingencies

Loss contingencies are existing conditions, situations, or sets of circumstances involving uncertainty as to possible loss

to an entity. The uncertainty will ultimately be resolved when one or more future events occur or fail to occur. The

government is subject to loss contingencies related to:

• Legal and environmental and disposal;

• Insurance and guarantees; and

• Other Contingencies.

The government is involved in various litigation, including administrative proceedings, legal actions, and tort claims,

which may ultimately result in settlements or decisions adverse to the government. In addition, the government is subject to

loss contingencies for a variety of environmental cleanup costs for the storage and disposal of hazardous material as well as

the operations and closures of facilities at which environmental contamination may be present. Refer to the Legal

Contingencies and Environmental and Disposal Contingencies section of this note for additional information.

The government provides insurance and guarantees via a variety of programs. At the time an insurance policy or

guarantee is issued, a contingency arises. The contingency is the risk of loss assumed by the insurer, that is, the risk of loss

from events that may occur during the term of the policy. For additional information, refer to the Insurance and Guarantees

sections of this note.

Other contingencies include those related to the government’s establishment of construction budgets without receiving

appropriations from Congress for such projects, appeals of Medicaid audit and program disallowances by the states, potential

draws by GSEs, and whistleblower awards. The government is also a party to treaties and other international agreements.

These treaties and other international agreements address various issues including, but not limited to, trade, commerce,

security, and law enforcement that may involve financial obligations or give rise to possible exposure to losses. Estimated

potential losses for legal claims related to treaties and international agreements are included in the Legal Contingencies and

Environmental and Disposal Contingencies section of this note. For additional information on the government’s other loss

contingencies, refer to the Other Contingencies section of this note.

Financial Treatment of Loss Contingencies

The reporting of loss contingencies depends on the likelihood that a future event or events will confirm the loss or

impairment of an asset or the incurrence of a liability and the likelihood of loss can range from probable to remote. SFFAS

No. 5, Accounting for Liabilities of the Federal Government, identifies the probability classifications used to assess the range

for the likelihood of loss as probable, reasonably possible, and remote. Loss contingencies where a past event or exchange

transaction has occurred, and where a future outflow or other sacrifice of resources is assessed as probable and measurable,

are accrued in the financial statements. Loss contingencies that are assessed to be at least reasonably possible are disclosed in

this note, and loss contingencies that are assessed as remote are neither reported in the financial statements, nor disclosed in

the notes. Federal entities account for loss contingencies based on the likelihood of loss and measurability criteria provided in

the following table.

In addition, a third condition must be met to be a loss contingency: a past event or an exchange transaction must occur.

NOTES TO THE FINANCIAL STATEMENTS

130

Likelihood of future

outflow or sacrifice of

resources

Loss amount can be

reasonably measured

Loss range can be

reasonably measured

Loss amount or range

cannot be reasonably

measured

Probable

Future confirming

event(s) is(are) more

likely than not to occur.

Accrue the liability.

Report on Balance Sheet

and Statement of Net

Cost.

Accrue liability of best

estimate or minimum

amount in loss range if

there is no best estimate,

and disclose nature of

contingency and range of

estimated liability.

Disclose nature of

contingency and include

a statement that an

estimate cannot be

made.

Reasonably possible

Possibility of future

confirming event(s)

occurring is more than

remote but less than

probable.

Disclose nature of

contingency and

estimated amount.

Disclose nature of

contingency and

estimated loss range.

Disclose nature of

contingency and include

a statement that an

estimate cannot be

made.

Remote

Possibility of future

event(s) occurring is

slight.

No action is required. No action is required. No action is required.

Loss contingencies arise in the normal course of operations and their ultimate disposition is unknown. Based on

information currently available, however, it is management’s opinion that the expected outcome of these matters, individually

or in the aggregate, will not have a material adverse effect on the financial statements, except for the litigation and insurance

described in the following sections, which could have a material adverse effect on the financial statements.

Certain significant consolidation entities apply financial accounting and reporting standards issued by FASB, and such

entities, as permitted by SFFAS No. 47, Reporting Entity, are consolidated into the U.S. government’s consolidated financial

statements without conversion to financial and reporting standards issued by FASAB.

Generally, under FASAB standards, a

contingency is considered “probable” if the future event or events are more likely than not to occur. Under FASB standards, a

contingency is considered “probable” if the future event or events are likely to occur. “Likely to occur” is considered to be

more certain than “more likely than not to occur.” Under both accounting frameworks, a contingency is considered

“reasonably possible” if occurrence of the future event or events is more likely than remote, but less likely than “probable”

(“probable” as defined within each corresponding accounting framework).

For pending or threatened litigation and unasserted claims, the future confirming event or events are considered “probable” if such events are likely to

occur.

Significant consolidation entities that apply FASB standards without conversion to FASAB standards are FCSIC, FDIC, NRRIT, PBGC, Smithsonian,

TVA, and USPS.

131

NOTES TO THE FINANCIAL STATEMENTS

Legal Contingencies and Environmental and Disposal Contingencies

Legal Contingencies and Environmental and Disposal Contingencies as of September 30, 2023, and

2022

2023

2022

Estimated Range of Loss

for Certain Cases

Accrued

(In billions of dollars)

Liabilities

Lower End

Upper End

Liabilities

Lower End

Upper End

Probable

55.9

55.4

66.3

41.1

40.6

43.6

Reasonably possible

N/A

10.6

107.4

N/A

17.2

44.5

Accrued liabilities are recorded and presented in other liabilities on the Balance Sheet.

Does not reflect the total range of loss; many cases assessed as reasonably possible of an unfavorable outcome did not include

estimated losses that could be determined.

Note: "N/A" indicates not applicable.

Management and legal counsel have determined that it is “probable” that some legal actions, litigation, tort claims, and

environmental and disposal contingencies will result in a loss to the government and the loss amounts are reasonably

measurable. The estimated liabilities for “probable” cases against the government are $55.9 billion and $41.1 billion as of

September 30, 2023, and 2022, respectively, and are included in “Other Liabilities” on the Balance Sheet. For example, the

U.S. Supreme Court 2012 decision in Salazar v. Ramah Navajo Chapter, and subsequent cases related to contract support

costs have resulted in increased claims against the Indian Health Service, which is a component within HHS. As a result of

this decision, many tribes have filed claims. Some claims have been paid and others have been asserted but not yet settled. It

is expected that some tribes will file additional claims for prior years. The estimated amount recorded for contract support

costs is $6.4 billion in FY 2023 and $6.1 billion in FY 2022.

There are also administrative claims and legal actions pending where adverse decisions are considered by management

and legal counsel as “reasonably possible” with an estimate of potential loss or a range of potential loss. The estimated

potential losses reported for such claims and actions range from $10.6 billion to $107.4 billion as of September 30, 2023, and

from $17.2 billion to $44.5 billion as of September 30, 2022.

The estimated upper range of potential loss for probable and reasonably possible claims and actions increased $22.7

billion, and $62.9 billion, respectively in FY 2023. The increase is primarily due to new cases, a change in the likelihood of

loss, along with the net change in the amount of potential loss, and legal cases that are no longer pending.

In accordance with the NWPA, DOE entered into more than 69 standard contracts with utilities in which, in return for

payment of fees into the Nuclear Waste Fund, DOE agreed to begin disposal of SNF by January 31, 1998. Because DOE has

no facility available to receive SNF under the NWPA, it has been unable to begin disposal of the utilities’ SNF as required by

the contracts. Significant litigation claiming damages for partial breach of contract has ensued as a result of this delay. Based

on settlement estimates, the total liability estimate as of September 30, 2023 is in a range between $44.7 billion and $51.6

billion. After deducting the cumulative amount paid of $10.6 billion as of September 30, 2023 under settlements, and as a

result of final judgments, the remaining accrued liability is estimated to be approximately $34.1 billion, compared to

approximately $31.0 billion as of September 30, 2022.

A number of class action and/or multiple plaintiff tort suits have been filed against current and former DOE contractors

in which the plaintiffs seek damages for alleged exposures to radioactive and/or toxic substances as a result of the historic

operations of DOE’s nuclear facilities. Collectively, in these cases, damages of $1.2 billion are currently sought.

Numerous litigation cases are pending where the outcome is uncertain or it is reasonably possible that a loss has been

incurred and where estimates cannot be made. There are other litigation cases where the plaintiffs have not made claims for

specific dollar amounts, but the settlement may be significant. The ultimate resolution of these legal actions for which the

potential loss could not be determined may materially affect the U.S. government’s financial position or operating results.

A number of cases were filed in the U.S. Court of Federal Claims and U.S. District Courts in which the plaintiffs allege,

among other things, that the U.S. government took their property, breached contractual rights of preferred and common

NOTES TO THE FINANCIAL STATEMENTS

132

stockholders, and breached fiduciary duties when the third amendments to the SPSPAs between Treasury and each GSE were

executed in August 2012 (please refer to Note 8—Investments in Government-Sponsored Enterprises). In the U.S. Court of

Federal Claims, the plaintiffs seek just compensation and other damages from the U.S. government. With respect to certain

cases pending before the U.S. Court of Federal Claims, the U.S. government’s motion to dismiss was granted with respect to

certain claims and denied with respect to certain other claims. The U.S. Court of Appeals for the Federal Circuit dismissed all

of the claims. Certain plaintiffs filed petitions for a writ of certiorari with the Supreme Court, which were denied. While most

of the cases brought before the U.S. Court of Federal Claims have been dismissed, some are still pending. In the U.S. District

Courts, the plaintiffs seek to set aside the third amendments to the SPSPAs as well as damages, and in some cases an

injunction that results in changes to Treasury’s liquidation preference, or that converts Treasury’s GSE senior preferred stock

to common stock. Following the Supreme Court’s decision in June 2021, the Court left open the possibility that the plaintiffs

may be entitled to retrospective relief if the unconstitutional provision inflicted “compensable harm”. The Fifth and Eighth

Circuit Courts of Appeals remanded cases to the U.S. District Court for the Southern District of Texas and the U.S. District

Court for the District of Minnesota, where plaintiffs filed amended complaints alleging that the unconstitutional provision

inflicted “compensable harm”. In the Southern District of Texas litigation, plaintiffs also added claims that FHFA’s funding

structure violates the Appropriations Clause of the U.S. Constitution. The U.S. District Court for the Southern District of

Texas dismissed the amended complaint, and the Fifth Circuit Court of Appeals affirmed the dismissal. The U.S. District

Court for the District of Minnesota also dismissed the amended complaint, and that case is now again pending at the Eighth

Circuit Court of Appeals. The Sixth Circuit Court of Appeals remanded a case to the U.S. District Court for the Western

District of Michigan to determine if the unconstitutional provision inflicted “compensable harm,” while rejecting claims that

an FHFA director had been serving in violation of the Appointments Clause of the U.S. Constitution. The plaintiffs filed a

petition for a writ of certiorari with the Supreme Court regarding the Appointments Clause claim, which was denied. On

remand, plaintiffs are seeking to amend their complaint to add claims that FHFA’s funding structure violates the

Appropriations Clause of the U.S. Constitution. A case in the Eastern District of Pennsylvania remains in litigation, and a

motion to dismiss is pending. Treasury is unable to determine the likelihood of an unfavorable outcome or an estimate of

potential loss in these cases at this time.

Insurance and Guarantees

As discussed in Note 1.N—Insurance and Guarantee Program Liabilities, certain consolidation entities with significant

insurance and guarantee programs apply FASB standards, while other insurance programs are accounted for in the

consolidated financial statements pursuant to FASAB standards. Please refer to Note 16—Insurance and Guarantee Program

Liabilities for insurance and guarantee liabilities and Note 13—Federal Employee and Veteran Benefits Payable for insurance

related to federal employee and veteran benefits.

Entities Reporting under FASB

PBGC, FCSIC, and FDIC are the main contributing consolidation entities with significant insurance or guarantee

programs that apply FASB standards. Insurance in-force estimates and a discussion of PBGC’s coverage are disclosed to

provide an understanding of the magnitude of the programs. Current conditions indicate it is extremely unlikely that losses

equal to the maximum risk exposure described below would be incurred.

PBGC insures pension benefits for participants in covered defined benefit pension plans. Under current law, PBGC's

liabilities may be paid only from PBGC's assets. Accordingly, PBGC's liabilities are not backed by the full faith of the U.S.

government. As of September 30, 2023, PBGC's single-employer and multiemployer pension insurance programs had $130.9

billion and $4.0 billion in total assets, respectively. In FY 2022, PBGC reported pension insurance program total assets for

single-employer and multiemployer of $124.4 billion and $3.5 billion, respectively.

PBGC operates two separate pension insurance programs: a single-employer program and a multiemployer program.

The single-employer program covered about 20.6 million people (excluding those in plans that PBGC has trusteed) in FY

2023, down from about 22.3 million people in FY 2022, and the maximum guaranteed annual benefit for participants who are

in a plan that terminated in FY 2023 and commence benefits at age 65 is $81,000. The maximum guaranteed benefit for

single-employer plan participants is determined by the year the retiree’s plan terminated (if the plan terminated during the

plan sponsor’s bankruptcy, the year the sponsor entered bankruptcy) and the participant’s age at the later of the date the

sponsor entered bankruptcy or the date the participant begins collecting benefits. The number of covered ongoing plans at the

end of FY 2023 was about 23,500.

The multiemployer program covers about 11.0 million participants in about 1,360 insured plans and the maximum

annual benefit is $12,870 to a participant who worked for 30 years in jobs covered by the plan. The maximum benefit for

multiemployer plan participants varies with covered service and would be lower if the participant worked less than 30 years

and higher if the participant worked more than 30 years. On March 11, 2021, the President signed into law the ARP. The

ARP established a new multiemployer SFA program resulting in a new source of financing from the General Fund. PBGC

133

NOTES TO THE FINANCIAL STATEMENTS

receives appropriated SFA funds to disburse to multiemployer plans that meet certain criteria. Unlike traditional financial

assistance where PBGC provides assistance to the multiemployer plans in the form of a loan, the new special financial

assistance will be provided via a transfer of funds with no obligation of repayment. The SFA program is expected to enable

PBGC to satisfy long-term multiemployer obligations by providing SFA to currently insolvent and probable plans. PBGC’s

FY 2022 Projection Report shows that the multiemployer program is likely to remain solvent for more than 40 years.

FCSIC insures the timely payment of principal and interest on Systemwide Debt Securities. Systemwide Debt Securities

are the general unsecured joint and several obligations of the FCSB. Systemwide Debt Securities are not obligations of and

are not guaranteed by the U.S. government. As stated in the Farm Credit Quarterly Information Statement of the Farm Credit

System, outstanding Systemwide Debt Securities reported by the FCSB totaled $401.9 billion and $377.2 billion as of

September 30, 2023, and 2022 respectively. The insurance provided by FCSIC is also not an obligation of and is not

guaranteed by the U.S. government. Under current law, if FCSIC does not have sufficient funds to pay unpaid principal and

interest on insured Systemwide Debt Securities, the FCSB will be required to make payments under joint and several

liability. As of September 30, 2023, and 2022, FCSIC reported an Insurance Fund balance of $7.2 billion and $6.5 billion,

respectively.

FDIC insures bank and savings association deposits, which exposes FDIC to various risks. FDIC has estimated total

insured deposits of $10,592.6 billion and $9,926.3 billion as of September 30, 2023, and 2022 respectively, for the DIF.

As described below, the government also has insurance and guarantee contingencies for PBGC and FDIC that are

reasonably possible in the amount of $26.4 billion and $54.5 billion as of September 30, 2023, and 2022, respectively.

PBGC reported $26.1 billion and $54.2 billion as of September 30, 2023, and 2022, respectively, for the estimated

aggregate unfunded vested benefits exposure to PBGC for private-sector single-employer and multiemployer defined benefit

pension plans that are classified with a reasonably possible exposure to loss. As of September 30, 2023, PBGC’s estimate of

its single-employer reasonably possible exposure decreased to $25.7 billion. The $26.3 billion decrease from the reasonably

possible exposure of $52.0 billion as of September 30, 2022, is primarily due to the significant increase in the interest factors

used for valuing liabilities as of the measurement date.

In FY 2023, PBGC estimated that it is reasonably possible that

multiemployer plans may require future assistance in the amount of $0.4 billion, a $1.8 billion decrease from the $2.2 billion

in FY 2022. The primary reason for the decrease in exposure was a net decrease in the number of plans classified as

reasonably possible.

FDIC reported $0.3 billion as of September 30, 2023, and 2022 for reasonably possible losses to the DIF for additional

risks identified in the financial services industry should potentially vulnerable insured institutions ultimately fail. Actual

losses, if any, will largely depend on future economic and market conditions.

Entities Reporting under FASAB

The total amount of coverage provided by an insurer as of the end of the reporting period is referred to as insurance in-

force. Insurance in-force represents the total amount of unexpired insurance arrangements for the corresponding program as

of a given date. Insurance in-force is presented to provide the reader with a better understanding of the unexpired insurance

arrangements that are not considered a liability. It is extremely unlikely that losses equal to the maximum risk exposure

would be incurred. The table below shows the estimate of insurance in-force for consolidation entities with significant

insurance programs that apply FASAB standards in accordance with SFFAS No. 51, Insurance Programs.

Insurance In-force as of September 30, 2023, and 2022

(In billions of dollars)

2023

2022

Ginnie Mae - HUD ........................................................................................................................

2,472.8

2,284.5

National Credit Union Share Insurance Fund - NCUA .................................................................

1,700.0

National Flood Insurance Program - DHS ....................................................................................

1,281.9

1,286.2

Federal Crop Insurance - USDA ..................................................................................................

206.1

193.2

Ginnie Mae insures MBS and commitments, which exposes Ginnie Mae to various risks. Ginnie Mae’s MBS program

guarantees the timely payment of principal and interest on securities backed by pools of mortgage loans insured by FHA,

Public and Indian Housing, and Rural Housing Service, or guaranteed by the VA. Accordingly, Ginnie Mae’s credit risk

The estimate of the reasonably possible exposure to the loss for the single-employer plans was determined using a measurement date of December 31,

2022.

NOTES TO THE FINANCIAL STATEMENTS

134

related to outstanding MBS is greatly mitigated by guarantees discussed in Note 4—Loans Receivable, Net and Loan

Guarantee Liabilities.

NCUA operates and manages the NCUSIF, insuring the deposits of over 138.8 million account holders in all federal

credit unions and the majority of state-chartered credit unions. NCUSIF insures the balance of each members’ accounts,

dollar-for-dollar, up to at least the standard maximum share insurance amount of $250,000.

NFIP, managed by FEMA, is considered an exchange transaction insurance program and pays claims to policy holders

who experience flood damage due to flooding within the NFIP rules and regulations. FEMA is authorized to secure

reinsurance coverage from private reinsurance and capital markets to maintain the financial ability of the program to pay

claims from major flooding events.

FEMA, a component of DHS, is authorized to borrow from Treasury up to $30.4 billion to fund the payment of flood

insurance claims and claims-related expenses of the NFIP. Amounts borrowed at any time are not predetermined, and

authority is used only as needed to pay existing obligations for claims and expenses. Insurance premiums collected are used

to pay insurance claims and to repay borrowings. As of September 30, 2023, and 2022, FEMA had drawn from Treasury

$20.5 billion, leaving $9.9 billion available to be borrowed. Premiums collected by FEMA are not expected to be sufficient to

cover the debt repayments. Given the current premium rate structure, FEMA is not expected to be able to generate sufficient

resources from premiums to pay its debt in full.

The FCIP, administered by USDA’s FCIC, is considered a short-duration exchange transaction insurance program. The

crop insurance policies insure against unexpected declines in yield and/or price due to natural causes. There were

approximately 1.2 million crop insurance policies in force for crop years 2023, and 2022. The insurance policies are

structured as a contract between approved insurance providers and producers, with the FCIC providing reinsurance to

approved insurance providers. Crop insurance policies automatically renew each year unless producers cancel them by a

published annual deadline. FCIC may request the Secretary of Agriculture to provide borrowing authority funds of the

Commodity Credit Corporation if at any time the amounts in the insurance fund are insufficient to allow FCIC to carry out its

duties. Even though the authority exists, FCIC did not request Commodity Credit Corporation funds in the reporting period.

USDA has a permanent indefinite appropriation for the crop insurance program used to cover premium subsidy, delivery

expenses, losses in excess of premiums, and research and delivery costs. FCIC has no outstanding borrowing as of September

30, 2023.

Please refer to the financial statements of the main contributing entities, HUD, NCUA, DHS, and USDA for additional

information.

Congress originally enacted the Terrorism Risk Insurance Act in November 2002, to address market disruptions

resulting from terrorist attacks on September 11, 2001. Most recently, the Terrorism Risk Insurance Program

Reauthorization Act of 2019 extended TRIP until December 31, 2027. The TRIP helps to ensure available and affordable

commercial property and casualty insurance for terrorism risk, and simultaneously allows private markets to stabilize. The

authority to pay claims under TRIP is activated when the Secretary of the Treasury (in consultation with the Secretary of the

DHS and the U.S. Attorney General) certifies an “act of terrorism.” In the event of certification of an “act of terrorism”

insurers may be eligible to receive reimbursement from the U.S. government for associated insured losses assuming an

aggregate insured loss threshold (“Program Trigger”) has been reached once a particular insurer has satisfied its designated

deductible amount. For calendar years 2023 and 2022, the Program Trigger amount was $200.0 million. Insurance companies

and the U.S. government will share insured losses above insurer deductibles. TRIP includes both mandatory and

discretionary authority for Treasury to recoup federal payments made under TRIP through policyholder surcharges under

certain circumstances, and contains provisions designed to manage litigation arising from or relating to a certified “act of

terrorism.” There were no claims under TRIP as of September 30, 2023 or 2022.

Other Contingencies

DOT, HHS, and Treasury reported the following other contingencies:

FHWA has a reasonably possible contingency due to their authority to approve projects using advance construction

under 23 U.S.C. § 115(a) and 23 CFR 630.701-630.709. FHWA does not guarantee the ultimate funding to the states for

these “advance construction” projects and, accordingly, does not obligate any funds for these projects. The state may submit

a written request to FHWA that a project be converted to a regular federal aid project at any time provided that sufficient

federal aid funds and obligation authority are available. As of September 30, 2023, and 2022, FHWA has $75.4 billion and

$69.3 billion, respectively, of advanced construction authorizations that could be converted to federal obligations subject to

the availability of funds. These authorizations have not been recognized in the DOT consolidated financial statements.

Contingent liabilities have been accrued as a result of Medicaid audit and program disallowances that are currently

being appealed by the states. The Medicaid amounts are $8.2 billion and $7.0 billion for fiscal years ending September 30,

2023, and 2022, respectively. The states could return the funds through payments to HHS, or HHS could recoup the funds by

reducing future grant awards to the states. Conversely, if the appeals are decided in favor of the states, HHS will be required

135

NOTES TO THE FINANCIAL STATEMENTS

to pay these amounts. In addition, certain amounts for payment have been deferred under the Medicaid program when there is

reasonable doubt as to the legitimacy of expenditures claimed by a state. There are also outstanding reviews of the state

expenditures in which a final determination has not been made.

Treasury has a contingency for future draws by the GSEs. There were no probable future draws accrued as of

September 30, 2023, and 2022, and the total amount of reasonably possible future draws is not estimable as of September 30,

2023. Refer to Note 8—Investments in Government-Sponsored Enterprises for additional information.

NOTES TO THE FINANCIAL STATEMENTS

136

Note 22. Funds from Dedicated Collections

Funds from Dedicated Collections as of September 30, 2023

Federal

Old-Age and

Disability

Medicare

All Other

Total Funds

Survivors

Insurance

Funds from

from

Funds from

from

Insurance

Trust

Trust Funds

Dedicated

Trust Fund

Fund

(Part A, B, D)

Collections

(In billions of dollars)

(Combined)

Eliminations

(Consolidated)

Assets:

Cash and other monetary

assets

180.6

Accounts receivable, net

2.3

2.8

24.6

24.7

54.4

Loans receivable, net

21.4

Inventory and related

property, net

3.5

General property, plant and

equipment, net

0.4

40.4

40.8

Investments

27.3

Advances and

prepayments

45.1

11.3

56.4

Other assets

18.5

Investments in Treasury

securities, net of

unamortized

premiums/discounts

2,673.8

142.9

353.9

391.5

3,562.1

Other federal assets

15.8

1.0

400.8

332.0

749.6

(247.6)

502.0

Total assets

2,691.9

146.7

824.8

1,051.2

4,714.6

(247.6)

4,467.0

Liabilities and net

position:

Accounts payable

0.2

6.2

6.4

Federal employee and

veteran benefits payable

6.1

Environmental and disposal

liabilities

26.0

Benefits due and payable

111.0

29.8

106.3

10.1

257.2

Insurance and guarantee

program liabilities

5.2

Advances from others and

deferred revenues

1.8

70.7

72.5

Other liabilities

10.4

219.7

230.1

Federal liabilities

6.7

0.8

130.7

212.4

350.6

(247.6)

103.0

Total liabilities

117.7

30.6

249.4

556.4

954.1

(247.6)

706.5

137

NOTES TO THE FINANCIAL STATEMENTS

Funds from Dedicated Collections as of September 30, 2023, continued

Federal

Old-Age and

Disability

Medicare

All Other

Total Funds

Survivors

Insurance

Funds from

from

Funds from

from

Insurance

Trust

Trust Funds

Dedicated

Trust Fund

Fund

(Part A, B, D)

Collections

(In billions of dollars)

(Combined)

Eliminations

(Consolidated)

Net position:

Total net position

2,574.2

116.1

575.4

494.8

3,760.5

Total liabilities and net

posi

tion

2,691.9

146.7

824.8

1,051.2

4,714.6

(247.6)

4,467.0

Change in net position:

Net position, beginning of

period

2,636.2

93.2

499.4

467.6

3,696.4

Adjustments to beginning

net position

Changes in accounting

principles

0.2

Beginning net position,

adjusted

2,636.2

93.2

499.4

467.8

3,696.6

Individual income taxes and

tax withholdings

1,039.0

176.5

375.1

0.1

1,590.7

Other taxes and

miscellaneous earned

revenue

0.4

134.0

134.4

Other changes in fund

balance (e.g.,

appropriations, transfers)

41.0

(1.7)

564.8

6.9

611.0

Federal non-exchange

revenue

62.7

3.5

39.8

106.0

Total financing sources

1,142.7

178.3

940.3

180.8

2,442.1

Program gross costs and

non-program expenses

1,204.7

155.4

1,006.0

261.0

2,627.1

(0.9)

2,626.2

Less: program revenue

(141.7)

(107.2)

(248.9)

0.9

(248.0)

Net cost

1,204.7

155.4

864.3

153.8

2,378.2

Ending net position

2,574.2

116.1

575.4

494.8

3,760.5

The combined presentation does not eliminate intra-entity balances or transactions between funds from dedicated collections held by the

entity.

The consolidated dedicated collections presentation eliminates balances and transactions between funds from dedicated collections

held by the entity, but does not eliminate balances or

transactions between funds from dedicated collections and funds from other than

dedicated collections.

Other assets and other liabilities include multiple line items on the Balance Sheet.

By law, certain expenses (costs), revenues, and other financing sources related to the administration of the above funds are not charged

to the funds and are therefore financed and/or credited to other sources.

NOTES TO THE FINANCIAL STATEMENTS

138

Funds from Dedicated Collections as of September 30, 2022

Federal

Old-Age and

Disability

Medicare

All Other

Total Funds

Survivors

Insurance

Funds from

from

Funds from

from

Insurance

Trust

Trust Funds

Dedicated

Trust Fund

Fund

(Part A, B, D)

Collections

(In billions of dollars)

(Combined)

Eliminations

(Consolidated)

Assets:

Cash and other monetary

assets

167.8

Accounts receivable, net

2.1

2.9

25.6

26.0

56.6

Loans receivable, net

2.0

Inventory and related

property, net

2.4

General property, plant and

equipment, net

0.5

37.8

38.3

Investments

26.2

Advances and

prepayments

39.0

10.3

49.3

Other assets

18.9

Investments in Treasury

securities, net of

unamortized

premiums/discounts

2,723.6

114.7

345.4

379.9

3,563.6

Other federal assets

15.6

0.7

284.0

323.7

624.0

(205.2)

418.8

Total assets

2,741.3

118.3

694.5

995.0

4,549.1

(205.2)

4,343.9

Liabilities and net

position:

Accounts payable

0.1

4.8

4.9

Federal employee and

veteran benefits payable

6.5

Environmental and disposal

liabilities

26.1

Benefits due and payable

98.7

24.2

85.1

10.2

218.2

Insurance and guarantee

program liabilities

9.6

Advances from others and

deferred revenues

1.3

66.4

67.7

Other liabilities

190.1

Federal liabilities

6.4

0.9

108.6

213.7

329.6

(205.2)

124.4

Total liabilities

105.1

25.1

195.1

527.4

852.7

(205.2)

647.5

139

NOTES TO THE FINANCIAL STATEMENTS

Funds from Dedicated Collections as of September 30, 2022, continued

Federal

Old-Age and

Disability

Medicare

All Other

Total Funds

Survivors

Insurance

Funds from

from

Funds from

from

Insurance

Trust

Trust Funds

Dedicated

Trust Fund

Fund

(Part A, B, D)

Collections

(In billions of dollars)

(Combined)

Eliminations

(Consolidated)

Net position:

Total net position

2,636.2

93.2

499.4

467.6

3,696.4

Total liabilities and net

position

2,741.3

118.3

694.5

995.0

4,549.1

(205.2)

4,343.9

Change in net position:

Net position, beginning of

period

2,681.0

80.5

409.9

311.6

3,483.0

Adjustments to beginning

net position

Beginning net position,

adjusted

2,681.0

80.5

409.9

311.6

3,483.0

Individual income taxes and

tax withholdings

929.0

157.8

354.7

1,441.5

Other taxes and

miscellaneous earned

revenue

(0.8)

132.2

131.4

Other changes in fund

balance (e.g.,

appropriations, transfers)

37.9

(1.2)

504.4

126.3

667.4

Federal non-exchange

revenue

64.1

2.7

33.0

99.8

Total financing sources

1,031.0

159.3

858.3

291.5

2,340.1

Program gross costs and

non-program expenses

1,075.8

146.6

905.7

227.3

2,355.4

(0.8)

2,354.6

Less: program revenue

(136.9)

(91.8)

(228.7)

0.8

(227.9)

Net cost

1,075.8

146.6

768.8

135.5

2,126.7

Ending net position

2,636.2

93.2

499.4

467.6

3,696.4

The combined presentation does not eliminate intra-entity balances or transactions between funds from dedicated collections held by the

entity.

The consolidated dedicated collections presentation eliminates balances and transactions between funds from dedicated collections

held by the entity, but does not eliminate balances or transactions between funds from dedicated collections and funds from other than

dedicated collections.

Other assets and other liabilities include multiple line items on the Balance Sheet.

By law, certain expenses (costs), revenues, and other financing sources related to the administration of the above funds are not charged

to the funds and are therefore financed and/or credited to other sources.

NOTES TO THE FINANCIAL STATEMENTS

140

Generally, funds from dedicated collections are financed by specifically identified revenues, often supplemented by

other financing sources, provided to the government by non-federal sources, which remain available over time. These

specifically identified revenues and other financing sources are required by statute to be used for designated activities,

benefits, or purposes and must be accounted for separately from the government’s general revenues. Funds from dedicated

collections generally include trust funds, public enterprise revolving funds (not including credit reform financing funds), and

special funds. Funds from dedicated collections specifically exclude any fund established to account for pensions, ORB,

OPEB, or other benefits provided for federal employees (civilian and military). In the Budget, the term “trust fund” means

only that the law requires a particular fund to be accounted for separately, used only for a specified purpose, and designated

as a trust fund. A change in law may change the future receipts and the terms under which the fund’s resources are spent. In

the private sector, trust fund refers to funds of one party held and managed by a second party (the trustee) in a fiduciary

capacity. The activity of funds from dedicated collections differs from fiduciary activities primarily in that assets within

funds from dedicated collections are government-owned. For additional information related to fiduciary activities, see Note

23—Fiduciary Activities.

Public enterprise revolving funds include expenditure accounts authorized by law to be credited with offsetting

collections, mostly from the public, that are generated by and dedicated to finance a continuing cycle of business-type

operations. Some of the financing for these funds may be from appropriations.

Special funds are federal funds dedicated by law for a specific purpose. Special funds include the special fund receipt

account and the special fund expenditure account.

Total assets represent the unexpended balance from all sources of receipts and amounts due to the funds from dedicated

collections, regardless of source, including related governmental transactions. These are transactions between two different

entities within the government or intradepartmental (for example, monies received by one entity of the government from

another entity of the government).

The federal assets are comprised of fund balances with Treasury, investments in Treasury securities—including

unamortized amounts, and other assets that include the related accrued interest receivable on federal investments. These

amounts were excluded in preparing the principal financial statements. The non-federal assets include activity with

individuals and organizations outside of the government.

Most of the assets within funds from dedicated collections are invested in intra-governmental debt holdings. The

government does not set aside assets to pay future benefits or other expenditures associated with funds from dedicated

collections. The cash receipts collected from the public for funds from dedicated collections are deposited in the General

Fund, which uses the cash for general government purposes. Treasury securities are issued to federal entities as evidence of

its receipts. Treasury securities are an asset to the federal entities and a liability to Treasury and, therefore, they do not

represent an asset or a liability in the Financial Report. These securities require redemption if a fund’s disbursements exceeds

its receipts. Redeeming these securities will increase the government’s financing needs and require more borrowing from the

public (or less repayment of debt), or will result in higher taxes than otherwise would have been needed, or less spending on

other programs than otherwise would have occurred, or some combination thereof. See Note 12—Federal Debt and Interest

Payable for additional information related to the investments in federal debt securities.

Below is a description of the major funds from dedicated collections, which also identifies the government entities that

administer each particular fund. For additional information regarding funds from dedicated collections, please refer to the

financial statements of the corresponding administering entities. For additional information on the benefits due and payable

liability associated with certain funds from dedicated collections, see Note 15—Benefits Due and Payable.

Federal Old-Age and Survivors Insurance Trust Fund

The OASI Trust Fund, administered by SSA, provides retirement and survivors benefits to qualified workers and their

families.

Payroll and self-employment taxes primarily fund the OASI Trust Fund. Interest earnings on Treasury securities, federal

entities’ payments for the Social Security benefits earned by military and federal civilian employees, and Treasury payments for

a portion of income taxes collected on Social Security benefits provide the fund with additional income. The law establishing the

OASI Trust Fund and authorizing the depositing of amounts to the credit of the fund is set forth in 42 U.S.C. § 401.

141

NOTES TO THE FINANCIAL STATEMENTS

Federal Disability Insurance Trust Fund

The DI Trust Fund, administered by SSA, provides assistance and protection against the loss of earnings due to a wage

earner’s disability in form of monetary payments.

Like the OASI Trust Fund, payroll taxes primarily fund the DI Trust Fund. The fund also receives income from interest

earnings on Treasury securities, federal entities’ payments for the Social Security benefits earned by military and federal

civilian employees, and Treasury payments for a portion of income taxes collected on Social Security benefits. The law

establishing the DI Trust Fund and authorizing the depositing of amounts to the credit of the fund is set forth in 42 U.S.C. §

401.

Federal Medicare Insurance Trust Funds

(Medicare Parts A, B and D)

The HI Trust Fund, administered by HHS, finances Medicare Part A. This program funds the cost of inpatient hospital

and related care for individuals age 65 or older who meet certain insured status requirements and individuals younger than

age 65 with certain disabilities.

The HI Trust Fund is financed primarily by payroll taxes, including those paid by federal entities. It also receives

income from interest earnings on Treasury securities, a portion of income taxes collected on Social Security benefits,

premiums paid by, or on behalf of, aged uninsured beneficiaries, and receipts from fraud and abuse control activities. Section

1817 of the Social Security Act established the Medicare Hospital Trust Fund.

The SMI Trust Fund, administered by HHS, finances the Medicare Part B and the Medicare Prescription Drug Benefit

Program (Medicare Part D). These programs provide SMI benefits for enrolled eligible participants to cover physician and

outpatient services not covered by Medicare Part A and to obtain qualified prescription drug coverage, respectively. Medicare

Part B financing is not based on payroll taxes; it is primarily based on monthly premiums, income from the General Fund,

and interest earnings on Treasury securities. The Medicare SMI Trust Fund was established by Section 1841 of the Social

Security Act.

Medicare Part D was created by the Medicare Modernization Act of 2003 (P.L. 108-173). Medicare Part D financing is

similar to Part B; it is primarily based on monthly premiums and income from the General Fund, not on payroll taxes. The

fund also receives transfers from states.

All Other Funds from Dedicated Collections

The government is responsible for the management of numerous funds from dedicated collections that serve a wide

variety of purposes. The funds from dedicated collections presented on an individual basis in the above tables represent the

majority of the government’s net position attributable to funds from dedicated collections. All other activity attributable to

funds from dedicated collections is aggregated in accordance with SFFAS No. 27, Identifying and Reporting Funds from

Dedicated Collections, as amended by SFFAS No. 43, Funds from Dedicated Collections: Amending Statement of Federal

Financial Accounting Standards 27, Identifying and Reporting Earmarked Funds. The majority entities with funds from

dedicated collections within the “all other” aggregate, include the following:

• DOT

• DOD

• DOJ

• DOC

• RRB

• EPA

• DOI

• DOE

• Treasury

• HUD

In accordance with SFFAS No. 43, any funds established to account for pension, other retirement, or OPEB to civilian

or military personnel are excluded from the reporting requirements related to funds from dedicated collections.

NOTES TO THE FINANCIAL STATEMENTS

142

Note 23. Fiduciary Activities

Fiduciary activities are the collection or receipt, and the management, protection, accounting, investment and

disposition by the government of cash or other assets in which non-federal individuals or entities have an ownership interest

that the government must uphold. Fiduciary cash and other assets are not assets of the government and are not recognized on

the consolidated Balance Sheet. The government’s fiduciary activities include the TSP, which is administered by the FRTIB,

and the Indian Tribal and individual Indian Trust Funds, which are administered by the DOI.

Schedule of Fiduciary Net Assets as of September 30, 2023, and 2022

(In billions of dollars)

2023

2022

Thrift Savings Plan

794.7

726.0

Department of the Interior

9.0

8.5

All other

5.6

5.4

Total fiduciary net assets

809.3

739.9

In accordance with the requirements of SFFAS No. 31, Accounting for Fiduciary Activities, fiduciary investments in

Treasury securities and fund balance with Treasury held by fiduciary funds are to be recognized on the Balance Sheet as

federal debt and interest payable and a liability for fiduciary fund balance with Treasury, respectively.

As of September 30, 2023, total fiduciary investments in Treasury securities and in non-Treasury securities are $296.8 billion

and $496.5 billion, respectively. As of September 30, 2022, total fiduciary investments in Treasury securities and in non-

Treasury securities were $318.4 billion and $406.3 billion, respectively. Refer to Note 12—Federal Debt and Interest Payable

for more information on Treasury securities.

As of September 30, 2023, and 2022, the total fiduciary fund balance with Treasury is $1.7 billion and $1.7 billion,

respectively. A liability for this fiduciary fund balance with Treasury is reflected as other miscellaneous liabilities in Note

18—Other Liabilities.

As of September 30, 2023, and 2022, collectively, the fiduciary investments in Treasury securities and fiduciary fund

balance with Treasury held by all government entities represent $5.1 billion and $4.8 billion, respectively, of unrestricted

cash included within cash held by Treasury for government-wide operations shown in Note 2—Cash and Other Monetary

Assets.

Thrift Savings Plan

The TSF maintains and holds in trust the assets of the TSP. The TSP is administered by an independent government

entity, the FRTIB, which is charged with operating the TSP prudently and solely in the interest of the participants and their

beneficiaries.

The TSP is a retirement savings and investment plan for federal employees and members of the uniformed services. It

was authorized by the Congress in the Federal Employees’ Retirement System Act of 1986. The plan provides federal

employees and members of the uniformed services with a savings and tax benefit similar to what many private sector

employers offer their employees under 401(k) plans. This includes two fixed income funds, three stock funds and ten

lifecycle funds. Effective June 1, 2022, Accenture Federal Services, as part of its recordkeeping services contract, provides a

Mutual Fund Window that offers participants who meet certain eligibility criteria access to mutual funds. The plan was

primarily designed to be a key part of the retirement package (along with a basic annuity benefit and Social Security) for

employees who are covered by FERS.

As of September 30, 2023, and 2022, the TSP held $794.7 billion and $726.0 billion, respectively, in net assets, which

included $293.4 billion and $315.4 billion, respectively, of nonmarketable Treasury securities. The TSF combines the net

assets of the TSP and the FRTIB in its financial statements. Only the TSP net assets of the TSF financial statements are

disclosed in this note. The most recent audited financial statements for the TSF are as of December 31, 2022, and 2021. For

additional information about FRTIB, the TSP and the investment options of the TSP, please refer to the FRTIB website at

https://www.frtib.gov.

143

NOTES TO THE FINANCIAL STATEMENTS

Department of Interior–Indian Trust Funds

As stated above, DOI has responsibility for the assets held in trust on behalf of American Indian Tribes and individuals.

DOI maintains accounts for Tribal and Other Trust Funds (including the Alaska Native Escrow Fund) and IIM Trust Funds in

accordance with the American Indian Trust Fund Management Reform Act of 1994. The fiduciary balances that have

accumulated in these funds have resulted from land use agreements, royalties on natural resource depletion, other proceeds

derived directly from trust resources, judgment awards, settlements of claims, and investment income. DOI maintains

separate financial statements for these trust funds, which are prepared using a cash or modified cash basis of accounting, a

comprehensive basis of accounting other than GAAP. The independent auditors’ reports on the Tribal and Other Trust Funds

were qualified as it was not practical to extend audit procedures sufficiently to satisfy themselves as to the fairness of the

trust fund balances. The IIM Trust Funds received an unmodified opinion from the auditors. As of September 30, 2023, and

2022, the DOI held $9.0 billion and $8.5 billion, respectively, in net assets. For additional information related to these assets,

please refer to the DOI website at https://www.doi.gov.

All Other Entities with Fiduciary Activities

The government is responsible for the management of other fiduciary net assets on behalf of various non-federal

entities. The entities presented individually in the table on the previous page represent the vast majority of the government’s

fiduciary net assets. All other component entities with fiduciary net assets are aggregated in accordance with SFFAS No. 31.

As of September 30, 2023, and 2022, including TSP and DOI, there are a total of 21 federal entities with fiduciary activities

at a grand total of 62 and 68 fiduciary funds, respectively. SBA and DOD are the largest entities relating to the fiduciary

activities of the remaining entities within the “all other” aggregate balance. As of September 30, 2023, “all other” fiduciary

net assets were $5.6 billion, compared to $5.4 billion as of September 30, 2022.

NOTES TO THE FINANCIAL STATEMENTS

144

Note 24. Long-Term Fiscal Projections

The SLTFP is prepared pursuant to SFFAS No. 36, Comprehensive Long-Term Projections for the U.S. Government.

The financial statements, Note 24, and unaudited RSI provide information to aid readers of the Financial Report in assessing

whether current policies for federal spending and taxation can be sustained and the extent to which the cost of public services

received by current taxpayers will be shifted to future taxpayers. This assessment requires prospective information about

receipts and spending, the resulting debt, and how these amounts relate to the size of the economy. A sustainable policy is

defined as one where the ratio of federal debt held by the public to GDP (the debt-to-GDP ratio) is ultimately stable or

declining. The Financial Report does not address the sustainability of state and local government fiscal policy.

The projections and analysis presented here are extrapolations based on an array of assumptions described in detail

below. A fundamental assumption is that current federal policy will not change. This assumption is made so as to inform the

question of whether current fiscal policy is sustainable and, if it is not sustainable, the magnitude of needed reforms to make

fiscal policy sustainable. The projections are therefore neither forecasts nor predictions. If policy changes are implemented,

perhaps in response to projections like those presented here, then actual financial outcomes will be different than those

projected. The methods and assumptions underlying the projections are subject to continuing refinement.

The projections focus on future cash flows, and do not reflect either the accrual basis or the modified-cash basis of

accounting. These cash-based projections reflect receipts or spending at the time cash is received or when a payment is made

by the government. In contrast, accrual-based projections would reflect amounts in the time period in which income is earned

or when an expense or obligation is incurred. The cash basis accounting underlying the long-term fiscal projections is

consistent with methods used to prepare the SOSI and the generally cash-based federal budget.

The SLTFP displays the PV of 75-year projections for various categories of the federal government’s receipts and non-

interest spending.

The projections for FYs 2023 and 2022 are expressed in PV dollars and as a percent of the PV of GDP

of September 30, 2023 and September 30, 2022, respectively. The PV of a future amount, for example $1.0 billion in October

2098, is the amount of money that if invested on September 30, 2023 in an account earning the government borrowing rate

would have a value of $1.0 billion in October 2098.

The PV of a receipt or spending category over 75 years is the sum of the annual PV amounts. When expressing a receipt

or spending category over 75 years as a percent of GDP, the PV dollar amount is divided by the PV of GDP over 75 years.

Measuring receipts and spending as a percent of GDP is a useful indicator of the economy’s capacity to sustain federal

government programs.

Fiscal Projections

Receipt categories in the long-term fiscal projections include individual and corporation income taxes, Social Security

and Medicare payroll taxes, and a residual category of “other receipts.” Non-interest spending categories include

discretionary spending that is funded through annual appropriations, such as spending for national security, and mandatory

(entitlement) spending that is generally funded with permanent or multi-year appropriations, such as spending for Social

Security and Medicare. This year’s long-term fiscal projections for Social Security and Medicare are based on the same

economic and demographic assumptions that underlie the 2023 SOSI, which is as of January 1, 2023. Accordingly, the

economic and demographic assumptions used in the long-term fiscal projections are not adjusted for the more current near-

term economic information after the time assumptions were set in December 2022. Projections for the other categories of

receipts and spending are consistent with the economic and demographic assumptions in the Trustees Reports and include

updates for actual budget results for FY 2023 or budgetary estimates from the President’s FY 2024 Budget.

Where possible,

those budget totals are adjusted before spending is projected to remove outlays for programs or activities that are judged to be

temporary, such as spending related to the COVID-19 pandemic and economic recovery.

The projections assume the continuance of current policy, which builds off current law, but can be different than current

law in cases where lawmakers have in the past periodically changed the law in a consistent way. The specific assumptions

that depart from current law and are used for the current policy basis of these projections are explained below.

For the purposes of this analysis, spending is defined in terms of outlays. In the context of federal budgeting, spending can either refer to budget authority –

the authority to commit the government to make a payment; to obligations – binding agreements that will result in payments, either immediately or in the

future; or to outlays – actual payments made.

GDP is a standard measure of the overall size of the economy and represents the total market value of all final goods and services produced domestically

during a given period of time. The components of GDP are: private sector consumption and investment, government consumption and investment, and net

exports (exports less imports). Equivalently, GDP is a measure of the gross income generated from domestic production over the same time period.

PVs recognize that a dollar paid or collected in the future is worth less than a dollar today because a dollar today could be invested and earn interest. To

calculate a PV, future amounts are thus reduced using an assumed interest rate, and those reduced amounts are summed.

Social Security and Medicare Trustees Reports can be found at https://www.ssa.gov/OACT/TR/.

145

NOTES TO THE FINANCIAL STATEMENTS

The projections shown in the SLTFP are made over a 75-year time frame, consistent with the time frame featured in the

Social Security and Medicare Trustees Reports. However, these projections are for fiscal years starting on October 1, whereas

the Trustees Reports feature calendar-year projections. Using fiscal years allows the projections to start from the actual

budget results from FYs 2023 and 2022.

This year’s estimate of the 75-year PV imbalance of receipts less non-interest spending is 3.8 percent of the current 75-

year PV of GDP, compared to 4.2 percent as was projected in last year’s Financial Report.

The above table reports the

effects of various factors on the updated projections.

• The largest factor affecting the projections is the effect of new Social Security, Medicare, and Medicaid program-

specific actuarial assumptions, which decrease the fiscal imbalance as a share of the 75-year PV of GDP by 0.6

percentage points ($10.6 trillion)

The change is primarily attributable to near-term growth rate assumptions for

Medicaid. In the 2022 projections, growth rates through 2027 followed projections in the 2018 Medicaid Actuarial

Report.

Growth rates for the 2023 projections are based on the NHE data and reflect the expiration of temporary

measures related to the COVID-19 pandemic.

• The second largest factor affecting the projections—increasing the imbalance as a share of the 75-year PV of GDP

by 0.4 percentage points ($7.4 trillion)—is due to actual budget results for FY 2023 and baseline estimates published

in the FY 2024 President’s Budget, plus adjustments to discretionary spending enacted in the FRA (P.L. 118-5).

This deterioration in the fiscal position is largely due to a higher 75-year PV of discretionary spending on defense

programs and mandatory spending on programs other than Social Security, Medicare, and Medicaid, and lower

individual income taxes as a share of wages and salaries. That deterioration is partially offset by a lower 75-year PV

of spending on non-defense discretionary programs—attributable to the FRA caps—and higher other receipts.

• The next largest factor affecting the projections is the update of economic and demographic assumptions that

decreases the fiscal imbalance by 0.3 percentage points ($5.0 trillion). Contributing to this improvement in the

imbalance are higher wages that increase receipts and GDP growth rates that lead to reduced spending as a

percentage of GDP. The 75-year PV of GDP for this year’s projections is $1,919.1 trillion, greater than last year's

$1,872.9 trillion.

• The fourth largest factor affecting the projected imbalance is the change in reporting period—the effect of shifting

calculations from 2023 through 2097 to 2024 through 2098. The update increases the imbalance of the 75-year PV

The fiscal imbalances reported in the long-term fiscal projections do not include the initial level of publicly held debt, which was $26.2 trillion in 2023 and

$24.3 trillion in 2022, and, therefore, they do not by themselves answer the question of how large fiscal reforms must be to make fiscal policy sustainable.

See “Sustainability and the Fiscal Gap” for additional discussion. More information on the projections in last year’s Financial Report can be found in Note

24 to the financial statements here: https://fiscal.treasury.gov/reports-statements/#.

For more information on Social Security and Medicare actuarial estimates, refer to Note 25—Social Insurance.

Christopher J. Truffer, Kathryn E. Rennie, Lindsey Wilson, and Eric T. Eckstein II, 2018 Actuarial Report on the Financial Outlook for Medicaid, Office

of the Actuary, CMS, and HHS.

NOTES TO THE FINANCIAL STATEMENTS

146

of receipts less non-interest spending by $1.9 trillion, which has a negligible effect as a share of the 75-year PV of

GDP.

The net effect of the changes in the table above, equal to the penultimate row in the SLTFP, shows that this year’s

estimate of the overall 75-year PV of receipts less non-interest spending is negative 3.8 percent of the 75-year PV of GDP

(negative $73.2 trillion, as compared to a GDP of $1,919.1 trillion). This imbalance can be broken down by funding source.

Spending projections exceeded receipts by 2.2 percent of GDP (about $42.2 trillion) among programs funded by the

government’s general revenues, and there is an imbalance of 1.6 percent of GDP (about $30.9 trillion)

for the combination

of Social Security (OASDI) and Medicare Part A, which under current law are funded with payroll taxes and not in any

material respect with general revenues.

14,15

By comparison, the FY 2022 projections showed that programs funded by the

government’s general revenues had an excess of spending over receipts of 2.7 percent of GDP ($50.2 trillion) while the

payroll tax-funded programs had an imbalance of spending over receipts of 1.6 percent of GDP ($29.4 trillion).

Sustainability and the Fiscal Gap

This Financial Report presents data, including debt, as a percent of GDP to help readers assess whether current fiscal

policy is sustainable. The debt-to-GDP ratio was approximately 97 percent at the end of FY 2023. As discussed further in the

unaudited RSI, the projections based on this Financial Report’s assumptions indicate that current policy is not sustainable. If

current policy is left unchanged, the projections show the debt-to-GDP ratio will be approximately 100 percent in 2024, rise

to 200 percent by 2047 and reach 531 percent in 2098. Moreover, if the trends that underlie the 75-year projections were to

continue, the debt-to-GDP ratio would continue to rise beyond the 75-year window.

The fiscal gap measures how much the primary surplus (receipts less non-interest spending) must increase in order for

fiscal policy to achieve a target debt-to-GDP ratio in a particular future year. In these projections, the fiscal gap is estimated

over a 75-year period, from 2024 to 2098, and the target debt-to-GDP ratio is equal to the ratio at the beginning of the

projection period, in this case the estimated debt-to-GDP ratio at the end of FY 2023. The target year is the last year of the

75-year period (2098).

The 75-year fiscal gap under current policy is estimated at 4.5 percent of GDP, which is 23.8 percent of the 75-year PV

of projected receipts and 19.8 percent of the 75-year PV of non-interest spending. This estimate of the fiscal gap is 0.4

percentage points smaller than was estimated in 2022 (4.9 percent of GDP).

The projections show that projected primary deficits average 3.8 percent of GDP over the next 75 years under current

policy. If policies were put in place that would close the fiscal gap, the average primary surplus over the next 75 years would

be 0.6 percent of GDP, 4.5 percentage points higher than the projected PV of receipts less non-interest spending shown in the

SLTFP. In these projections, closing the fiscal gap requires running a substantially positive level of primary surplus, rather

than simply eliminating the primary deficit. The primary reason is that the projections assume future interest rates will exceed

the growth rate of GDP. Achieving primary balance (that is, running a primary surplus of zero) implies that the debt held by

the public grows each year by the amount of interest spending, which under these assumptions would result in debt growing

faster than GDP.

The 75-year PV imbalance for Social Security and Medicare Part A of $30.9 trillion is comprised of several line items from the SLTFP – Social Security

outlays net of Social Security payroll taxes ($33.5 trillion) and Medicare Part A outlays net of Medicare payroll taxes ($10.4 trillion) – as well as

subcomponents of these programs not presented separately in the statement. These subcomponents include Social Security and Medicare Part A

administrative costs that are classified as non-defense discretionary spending ($0.6 trillion) and Social Security and Medicare Part A income other than

payroll taxes: taxation of benefits (-$6.4 trillion), federal employer share (-$1.5 trillion), and other income (-$5.8 trillion).

Social Security and Medicare Part A expenditures can exceed payroll tax revenues in any given year to the extent that there are sufficient balances in the

respective trust funds; these balances derive from past excesses of payroll tax revenues over expenditures and interest earned on those balances and represent

the amount the General Fund owes the respective trust fund programs. When spending does exceed payroll tax revenues, as has occurred each year since

2008 for Medicare Part A and 2010 for Social Security, the excess spending is financed first with interest due from the General Fund and secondly with a

drawdown of the trust fund balance; in either case, the spending is ultimately supported by general revenues or borrowing. Under current law, benefits for

Social Security and Medicare Part A can be paid only to the extent that there are sufficient balances in the respective trust funds. In order for the long-term

fiscal projections to reflect the full size of these programs’ commitments to pay future benefits, the projections assume that all scheduled benefits will be

financed with borrowing to the extent necessary after the trust funds are depleted.

The fiscal imbalances reported in the long-term fiscal projections are limited to future outlays and receipts. They do not include the initial level of

publicly-held debt, $26.2 trillion in 2023 and $24.3 trillion in 2022, and therefore they do not by themselves answer the question of how large fiscal reforms

must be to make fiscal policy sustainable, or how those reforms divide between reforms to Social Security and Medicare Part A and to other programs. Other

things equal, past cash flows (primarily surpluses) for Social Security and Medicare Part A reduced federal debt at the end of 2023 by $3.0 trillion (the trust

fund balances at that time); the contribution of other programs to federal debt at the end of 2023 was therefore $29.2 trillion. Similarly, because the $30.9

trillion imbalance between outlays and receipts over the next 75 years for Social Security and Medicare Part A does not take account of the Social Security

and Medicare Part A trust fund balances, it overstates the magnitude of reforms necessary to make Social Security and Medicare Part A solvent over 75

years by $3.0 trillion. The $3.0 trillion combined Social Security and Medicare Part A trust fund balance represents a claim on future general revenues.

147

NOTES TO THE FINANCIAL STATEMENTS

Assumptions Used and Relationship to Other Financial Statements

A fundamental assumption underlying the projections is that current federal policy (defined below) does not change.

The projections are therefore neither forecasts nor predictions, and do not consider large infrequent events such as natural

disasters, military engagements, or economic crises. By definition, they do not build in future changes to policy. If policy

changes are enacted, perhaps in response to projections like those presented here, then actual fiscal outcomes will be different

than those projected.

Even if policy does not change, actual spending and receipts could differ materially from those projected here. Long-

range projections are inherently uncertain and are necessarily based on simplifying assumptions. For example, one key

simplifying assumption is that interest rates paid on debt held by the public remain unchanged, regardless of the amount of

debt outstanding. To the contrary, it is likely that future interest rates would increase if the debt-to-GDP ratio rises as shown

in these projections. To help illustrate this uncertainty, projections that assume higher and lower interest rates are presented in

the “Alternative Scenarios” discussion in the unaudited RSI section of this Financial Report.

As is true for prior long-term fiscal projections for the Financial Report, the assumptions for GDP, interest rates, and

other economic and demographic variables underlying this year’s projections are the same assumptions that underlie the most

recent Social Security and Medicare Trustees Report projections, adjusted for historical revisions that occur annually. These

assumptions differ from those in the President’s Budget because they extend for 75 years, rather than 25 years. Additionally,

they assume extension of current policy whereas the economic assumptions in the President’s Budget assume full

implementation of policy proposals reflected in the Budget.

The use of discount factors consistent with the Social Security

Trustees rate allows for consistent PV calculations over 75 years between the SLTFP and the SOSI.

The following bullets summarize the key assumptions used for the categories of receipts and spending presented in the

SLTFP and the disclosures:

• Social Security: Projected Social Security (OASDI) spending excludes administrative expenses, which are

classified as discretionary spending, and is based on the projected spending in the 2023 Social Security Trustees

Report for benefits and for the Railroad Retirement interchange. The projections of Social Security payroll taxes and

Social Security spending are based on future spending and payroll taxes projected in the 2023 Social Security

Trustees Report, adjusted for presentational differences and converted to a fiscal year basis. More information about

the assumptions for Social Security cost growth can be found in Note 25 and the unaudited RSI discussion of Social

Insurance.

• Medicare: Projected Medicare spending also excludes administrative expenses, which are classified as discretionary

spending, and is based on projected spending from the 2023 Medicare Trustees Report. The projections here make

some adjustments to the Trustees Report projections. Medicare Part B and D premiums, as well as state

contributions to Part D, are subtracted from gross spending in measuring Part B and Part D spending, just as they are

subtracted from gross cost to yield net cost in the financial statements.

Here, as in the federal budget, premiums are

treated as “negative spending” rather than receipts since they represent payment for a service rather than payments

obtained through the government’s sovereign power to tax. This is similar to the financial statement treatment of

premiums as “earned” revenue as distinct from all other sources of revenue, such as taxes. The projections are based

on Medicare spending in the Medicare Trustees Report, adjusted for presentational differences and converted to a

fiscal year basis. Medicare Part A payroll taxes are projected similarly. More information about the assumptions for

Medicare cost growth can be found in Note 25 and the unaudited RSI discussion of Social Insurance. As discussed

in Note 25, there is uncertainty about whether the reductions in health care cost growth assumed in the Medicare

Trustees Report will be fully achieved. Note 25 illustrates this uncertainty by presenting an illustrative alternative

scenario.

• Medicaid: The Medicaid spending projections start with NHE projections prepared by CMS’s Office of the

Actuary, which were released in June 2023.

These projections are based on recent trends in Medicaid spending

and the demographic, economic, and health cost growth assumptions in the Medicare Trustees Report. The NHE

projections, which end in 2031, are adjusted to accord with the actual Medicaid spending in FY 2023. After 2031,

See the FY 2024 President’s Budget, Analytical Perspectives Volume, Chapter 3 “Long-Term Budget Outlook.”

Medicare Part B and D premiums and state contributions to Part D are subtracted from the Part B and D spending displayed in the SLTFP. The total 75-

year PV of these subtractions is $20.1 trillion, or 1.0 percent of GDP.

This represents an update to the model’s assumptions and methodology. In the 2022 Financial Report, Medicaid projections began with the projections

from the 2018 Medicaid Actuarial Report prepared by the CMS’s Office of Actuary, and those projections were similarly adjusted to account for actual

spending in the most recently completed fiscal year. Actual Medicaid spending in FY 2022 included temporary spending increases due to changes in

enrollment and other temporary measures related to the COVID-19 pandemic. Spending associated with those temporary measures could not be identified

and excluded from budget totals before Medicaid outlays were projected, adding uncertainty to the 2022 long-term fiscal projections.

NHE data are available at https://www.cms.gov/data-research/statistics-trends-and-reports/national-health-expenditure-data.

NOTES TO THE FINANCIAL STATEMENTS

148

the number of beneficiaries is projected to grow at the same rate as total population. Medicaid cost per beneficiary is

assumed to grow at the same rate as Medicare benefits per beneficiary after 2034, after a three-year phase-in to the

Medicare per beneficiary growth rate over the period 2032-2034. Between 1987 and 2017, the average annual

growth rates of spending per beneficiary for Medicaid and Medicare were within 0.3 percentage point of each other.

Projections of Medicaid spending are subject to added uncertainty related to: 1) assumed reductions in health care

cost growth discussed above in the context of Medicare; 2) the projected size of the Medicaid enrolled population,

which depends on a variety of factors, including future state actions regarding the PPACA Medicaid expansion; and

3) any continued effects of the COVID-19 pandemic.

• Other Mandatory Spending: Other mandatory spending includes federal employee retirement, veterans’ disability

benefits, and means-tested entitlements other than Medicaid. Current mandatory spending components that are

judged permanent under current policy are assumed to increase by the rate of growth in nominal GDP starting in

2024, implying that such spending will remain constant as a percent of GDP.

20,21

Projected spending for insurance

exchange subsidies starting in 2024 grows with growth in the non-elderly population and with the NHE projected

per enrollee cost growth for other private health insurance for the NHE projection period (through 2031 for the FY

2023 projections), and with growth in per enrollee health care costs as projected for the Medicare program after that

period. As discussed in Note 25, there is uncertainty about whether the reductions in health care cost growth

projected in the Medicare Trustees Report will be fully achieved. Projected exchange subsidy spending as a percent

of GDP remains below the failsafe provision in the PPACA that limits the federal share of spending to 0.504 percent

of GDP.

• Defense and Non-defense Discretionary Spending: Discretionary spending through 2025 follows the caps enacted

in the FRA, then grows with GDP starting in 2026. To illustrate sensitivity to different assumptions, PV calculations

under alternative discretionary growth scenarios are presented in the unaudited “Alternative Scenarios” RSI section.

• Receipts (Other than Social Security and Medicare Payroll Taxes): Individual income taxes are based on the

share of salaries and wages in the current law baseline projection in the FY 2024 President’s Budget, and the salaries

and wages projections in the Social Security 2023 Trustees Report. That baseline accords with the tendency of

effective tax rates to increase as growth in income per capita outpaces inflation (also known as “bracket creep”) and

the expiration dates of individual income and estate and gift tax provisions of TCJA. Individual income taxes

increase gradually from 19 percent of wages and salaries in 2024 to 29 percent of wages and salaries in 2098 as real

taxable incomes rise over time and an increasing share of total income is taxed in the higher tax brackets. Through

the first 10 years of the projections, corporation tax receipts as a percent of GDP reflect the economic and budget

assumptions used in developing the FY 2024 President’s Budget 10-year baseline budgetary estimates. After this

time, corporation tax receipts grow at the same rate as nominal GDP. Other receipts also reflect the FY 2024

President’s Budget baseline levels as a share of GDP throughout the budget window, and grow with GDP outside of

the budget window. Corporation tax receipts fall from 1.7 percent of GDP in 2024 to 1.2 percent of GDP in 2033,

where they stay for the remainder of the projection period. The ratio of other receipts, including excise taxes, estate

and gift taxes, customs duties, and miscellaneous receipts, to GDP is estimated to increase from 1.1 percent in 2024

to 1.2 percent by 2027 where it remains through the projection period. To illustrate uncertainty, PV calculations

under higher and lower receipts growth scenarios are presented in the “Alternative Scenarios” section.

• Debt and Interest Spending: Interest spending is determined by projected interest rates and the level of outstanding

debt held by the public. The long-run interest rate assumptions accord with those in the 2023 Social Security

Trustees Report.

The average interest rate over this year’s projection period is 4.5 percent, approximately the same

as the 2022 Financial Report. These rates are also used to convert future cash flows to PVs as of the start of FY

2024. Debt at the end of each year is projected by adding that year’s deficit and other financing requirements to the

debt at the end of the previous year.

Departures of Current Policy from Current Law

The long-term fiscal projections are made on the basis of current policy, which in some cases is assumed to be different

from current law. The notable differences between current policy that underlies the projections and current law are: 1)

Other mandatory spending in 2023 from legislation enacted in response to the COVID-19 pandemic is considered temporary and is not assumed to

increase with nominal GDP. Such spending is identified using Disaster Emergency Fund Code attributes in budget execution data for the following: the

Families First Coronavirus Response Act (P.L. 116-127); the CARES Act (P.L. 116-136); the Paycheck Protection Program and Health Care Enhancement

Act (P.L. 116-139); the CAA, 2021 (P.L. 116-260, Division N); and the ARP (P.L. 117-2). Spending data for COVID-19 response legislation are available

on USAspending.gov.

This assumed growth rate for other mandatory programs after 2024 is slightly higher than the average growth rate in the most recent OMB and

Congressional Budget Office 10-year budget baselines.

As indicated in the more detailed discussion of Social Insurance in Note 25 to the financial statements.

149

NOTES TO THE FINANCIAL STATEMENTS

projected spending, receipts, and borrowing levels assume raising or suspending the current statutory limit on federal debt; 2)

continued discretionary appropriations are assumed throughout the projection period; 3) scheduled Social Security and

Medicare Part A benefit payments are assumed to occur beyond the projected point of trust fund depletion; and 4) many

mandatory programs with expiration dates prior to the end of the 75-year projection period are assumed to be reauthorized.

As is true in the Medicare Trustees Report and in the SOSI, the projections incorporate programmatic changes already

scheduled in law, such as the PPACA productivity adjustment for non-physician Medicare services and the expiration of

certain physician bonus payments in 2025.

NOTES TO THE FINANCIAL STATEMENTS

150

Note 25. Social Insurance

SOSI presents the projected actuarial PV of the estimated future revenue and estimated future expenditures of the Social

Security, Medicare, Railroad Retirement, and Black Lung social insurance programs which are administered by the SSA,

HHS, RRB, and DOL, respectively. Social Security and Medicare projections are based on current law and the Social

Security and Medicare trustees intermediate set of assumptions, except that the projections assume full Social Security and

Medicare Part A benefits are paid after fund depletion contrary to current law.

Contributions consist of: payroll, income, and excise taxes, premiums from, and state transfers on behalf of,

participants in Medicare, and miscellaneous reimbursements from the General Fund. Generally, beneficiaries finance the

remainder of Parts B and D costs via monthly premiums to these programs. With the introduction of Part D drug coverage,

Medicaid is no longer the primary payer of drug costs for full-benefit dually eligible beneficiaries of Medicare and Medicaid.

For those beneficiaries, states are subject to a contribution requirement and must pay a portion of their estimated foregone

drug costs into the Part D account (referred to as state transfers). By accounting convention, the General Fund transfers are

eliminated in the consolidation of the SOSI at the government-wide level. These General Fund transfers that are used to

finance Medicare Parts B and D are also shown as eliminations on these calculations. For the FYs 2023 and 2022, the

amounts eliminated totaled $48.5 trillion and $47.5 trillion, respectively.

The SOSI also includes projected general revenues that, under current law, would be used to finance the remainder of

the expenditures in excess of revenues for Medicare Parts B and D that is reported in the SOSI. Expenditures include benefit

payments scheduled under current law and administrative expenses. Current Social Security and Medicare Part A law

provides for full benefit payments only to the extent that there are sufficient balances in the trust funds. Social insurance

programs utilize “trust funds” to account for dedicated collections held for later use to accomplish the program’s purpose.

Expenditures reflect full benefit payments even after the point at which trust fund asset reserves are projected to be depleted.

Refer to the unaudited RSI–Social Insurance section and SSA’s, HHS’s, RRB’s, and DOL’s financial statements for

additional information on Social Security, Medicare, Railroad Retirement, and Black Lung program financing.

The estimates in the consolidated SOSI of the open group measures are for persons who are participants or eventually

will participate in the programs as contributors (workers) or beneficiaries (retired workers, survivors, dependents, and

disabled) during the 75-year projection period. The closed group comprises only current participants which are those who

have attained age 15 at the start of the projection period. Actuarial PV of estimated future income (excluding interest) and

estimated future expenditures for the Social Security and Medicare social insurance programs are presented for three different

groups of participants: 1) current participants who have not yet attained eligibility age; 2) current participants who have

attained eligibility age; and 3) new entrants, who are expected to become participants in the future. Current participants in the

Social Security and Medicare programs are the closed group of taxpayers and/or beneficiaries who are aged at least 15 years

at the start of the projection period. Future participants for Social Security and Medicare include those born during the

projection period and individuals below age 15 as of January 1 of the valuation year. Railroad Retirement’s future

participants are the projected new entrants as of October 1 of the valuation year.

The trust fund balances as of the valuation date for the respective programs, including interest earned, are shown in the

table below.

The PV of estimated future expenditures in excess of estimated future revenue are calculated by subtracting the

actuarial PV of future scheduled contributions as well as dedicated tax income by and on behalf of current and future

participants from the actuarial PV of the future scheduled benefit payments to them or on their behalf. To determine a

program’s funding shortfall over any given period of time, the starting trust fund balance is subtracted from the PV of

expenditures in excess of revenues over the period. The portion of each trust fund not required to pay benefits and

administrative costs is invested, on a daily basis, in interest-bearing obligations of the U.S. government. The Social Security Act

authorizes the issuance by Treasury of special nonmarketable, intra-governmental debt obligations for purchase exclusively by

the trust funds. Although the special issues cannot be bought or sold in the open market, they are redeemable at any time at face

value and thus bear no risk of fluctuation in principal value due to changes in market yield rates. Interest on the bonds is credited

to the trust funds and becomes an asset to the funds and a liability to the General Fund. These Treasury securities and related

interest are eliminated in consolidation at the government-wide level. For additional information, see Note 22—Funds from

Dedicated Collections.

Trust fund balances for the Railroad Retirement and Black Lung programs are not included, as these balances are less than $50.0 billion.

151

NOTES TO THE FINANCIAL STATEMENTS

Social Insurance Programs Trust Fund Balances

(In trillions of dollars)

2023

2022

2021

2020

2019

Social Security

2.8

2.9

Medicare

0.4

0.3

As of the valuation date of the respective programs.

Medicare – Illustrative Alternative Scenario

The financial projections for the Medicare program reflect substantial, but very uncertain, cost savings deriving from

current-law provisions that lowered increases in Medicare payment rates to most categories of health care providers. Certain

features of current law may result in some challenges for the Medicare program including physician payments, payment rate

updates for most non-physician categories, and productivity adjustments. Payment rate updates for most non-physician

categories of Medicare providers are reduced by the growth in economy-wide private nonfarm business total factor

productivity although these health providers have historically achieved lower levels of productivity growth. Should payment

rates prove to be inadequate for any service, beneficiaries’ access to and the quality of Medicare benefits would deteriorate

over time, or future legislation would need to be enacted that would likely increase program costs beyond those projected

under current law. Please refer to the unaudited RSI—Social Insurance and HHS financial statements for additional

information.

The illustrative alternative scenario projections below help to illustrate and quantify the magnitude of the potential cost

understatement under current law. The difference between current-law and illustrative alternative scenario projections is

substantial for Parts A and B. The illustrative alternative scenario projections for Parts A and B illustrate the impact that

would occur if the payment updates that are affected by the productivity adjustments were to gradually transition from

current law to the payment updates assumed for private health plans, the physician updates transition to the Medicare

Economic Index, and the bonuses paid to qualified physicians in advance APM did not expire. The extent to which actual

future Part A and Part B costs exceed the projected amounts due to changes to the productivity adjustments and physician

updates depends on what specific changes might be legislated and whether Congress would pass further provisions to help

offset such costs. This alternative was developed for illustrative purposes only and the calculations have not been audited.

NOTES TO THE FINANCIAL STATEMENTS

152

Medicare Present Values (Unaudited)

2023 Consolidated

Illustrative

SOSI

Alternative

(In trillions of dollars)

Current Law

Scenario

1, 2

Income:

Part A

31.3

Part B

15.7

17.9

Part D

3.0

Total income

50.0

52.2

Expenditures:

Part A

35.9

42.3

Part B

56.6

64.5

Part D

10.6

Total expenditures

103.1

117.4

Income less expenditures:

Part A

(4.6)

(11.0)

Part B

(40.9)

(46.6)

Part D

(7.6)

Excess of expenditures over income

(53.1)

(65.2)

These amounts are not presented in the current fiscal year Trustees Report.

A set of illustrative alternative Medicare projections has been prepared under a hypothetical modification to current law. No

endorsement of the illustrative alternative by the Trustees, CMS, or the Office of the Actuary should be inferred.

Excludes $40.9 trillion and $46.6 trillion of general revenue contributions from the 2023 Consolidated SOSI Current Law projection and

the Illustrative Alternative Scenario's projection, respectively; i.e., to reflect Part B income on a consolidated government-wide basis.

Excludes $7.6 trillion of general revenue contributions from both the 2023 Consolidated SOSI Current Law projection and the Illustrative

Alternative Scenario's projection; i.e., to reflect Part D income on a consolidated government-wide basis.

153

NOTES TO THE FINANCIAL STATEMENTS

Demographic and Economic Assumptions

Social Security and Medicare – Demographic and Economic Assumptions and Summary Measures

Demographic Assumptions

2023

2030

2040

2050

2060

2070

2080

2090

2100

Total Fertility Rate

1.7

1.9

2.0

Age-Sex Adjusted Death Rate

798.0

738.4

679.9

627.3

580.7

539.4

502.7

469.9

440.6

Net Annual Immigration

2,030

1,348

1,291

1,258

1,241

1,228

1,220

1,216

1,214

Period Life Expectancy at Birth - Male

76.1

77.1

78.1

79.2

80.2

81.1

82.0

82.9

83.6

Period Life Expectancy at Birth - Female

81.2

82.1

83.0

83.8

84.7

85.4

86.1

86.8

87.4

Economic Assumptions (percent change)

2023

2030

2040

2050

2060

2070

2080

2090

2100

Real Wage Growth

0.2

1.6

1.2

1.1

Wages

4.2

4.0

3.6

3.5

3.6

CPI

4.0

2.4

Real GDP

0.7

2.0

1.9

2.0

1.9

2.0

2.1

2.0

Total Employment

0.2

0.4

0.3

0.4

0.3

0.4

0.5

0.4

Avg. Annual Interest Rate (percent)

3.5

4.6

4.7

Real Interest Rate (percent)

(1.0)

2.0

2.3

Per Beneficiary Cost - HI

5.3

5.0

4.2

3.4

3.3

3.4

3.5

Per Beneficiary Cost - SMI Part B

7.8

14, 15

5.5

4.9

3.7

3.8

3.5

3.7

Per Beneficiary Cost - SMI Part D

2.5

1.7

3.6

4.1

4.0

3.8

3.9

4.0

Average number of children per woman.

The age-sex-adjusted death rate per 100,000 that would occur in the enumerated population as of April 1, 2010, if that population were

to experience the death rates by age and sex observed in, or assumed for, the selected year.

Includes legal immigration, net of emigration, as well as other, non-legal, immigration per thousand of persons.

Summary measure of average number of years expected prior to death for a person born on January 1 in that year, using the

mortality rates for that year over the course of his or her remaining life. (Social Security)

Difference between percentage increases in wages and the CPI.

Average annual wage in covered employment.

CPI represents a measure of the average change in prices over time in a fixed group of goods and services.

Total dollar value of all goods and services produced in the U.S., adjusted to remove the impact of assumed inflation growth.

Summary measure of average weekly U.S. civilian employment and U.S. Armed Forces. (Social Security)

The average of the nominal interest rates, compounded semi-annually, for special public-debt obligations issuable monthly.

Average rate of interest earned on new trust fund securities, above and beyond rate of inflation. (Medicare)

These increases reflect the overall impact of more detailed assumptions that are made for each of the different type of services provided

by the Medicare program. These assumptions include changes in the payment rates, utilization, and intensity of each type

of services. (Medicare)

The valuation period used for the 2023 Statement of Social Insurance extends to 2097. (Social Security) Medicare did not report

assumptions for 2100.

Reflects the updated expectations for healthcare spending following the COVID-19 pandemic.

Reflects IRA of 2022.

The Boards of Trustees

of the Social Security and Medicare Trust Funds provide in their annual reports to Congress

short-range (10-year) and long-range (75-year) actuarial estimates of each trust fund. Significant uncertainty surrounds the

estimates, especially for a period as long as 75 years. To illustrate the range of uncertainty, the Trustees use three alternative

The boards are composed of six members. Four members serve by virtue of their positions in the federal government: the Secretary of the Treasury, who is

the Managing Trustee; the Secretary of Labor; the Secretary of HHS; and the Commissioner of Social Security. The President appoints and the Senate

confirms the other two members to serve as public representatives. These two positions are currently vacant.

NOTES TO THE FINANCIAL STATEMENTS

154

scenarios (low-cost, intermediate, and high-cost) that use specific assumptions. These assumptions include fertility rates,

rates of change in mortality, LPR and other than LPR immigration levels, emigration levels, changes in real GDP, changes in

the CPI, changes in average real wages, unemployment rates, trust fund real yield rates, and disability incidence and recovery

rates. The assumptions used for the most recent set of projections shown above in the Social Security and Medicare

demographic and economic assumption table are generally referred to as the “intermediate assumptions,” and reflect the

Trustees reasonable estimate of expected future experience. For additional information on Social Security and Medicare

demographic and economic assumptions, refer to SSA’s and HHS’s financial statements.

The RRB’s estimated future revenues and expenditures reflected in the SOSI are based on various economic, employment,

and other actuarial assumptions, and assume that the program will continue as presently constructed. For further details on

actuarial assumptions related to the program and how these assumptions affect amounts presented on the SOSI and SCSIA,

consult the Technical Supplement to the 28th Actuarial Valuation of the Assets and Liabilities Under the Railroad Retirement

Acts as of December 31, 2019, the 2023 Annual Report of the Railroad Retirement System required by Section 502 of the

Railroad Retirement Solvency Act of 1983 (P.L. 98-76), and RRB’s financial statements.

The BLDBP significant assumptions used in the projections are the coal excise tax revenue estimates, the tax rate

structure, the number of beneficiaries, life expectancy, federal civilian pay raises, medical cost inflation, and the interest rates

used to discount future cash flows.

Statement of Changes in Social Insurance Amounts

The SCSIA reconciles the change (between the current valuation and the prior valuation) in the PV of estimated future

revenue less estimated future expenditures for current and future participants (the open group measure) over the next 75 years

(except Black Lung which has a rolling 25-year projection period through September 30, 2048). The reconciliation identifies

several components of the changes that are significant and provides reasons for the changes. The following disclosures relate

to the SCSIA including the reasons for the components of the changes in the open group measure during the reporting period

from the end of the previous reporting period for the government’s social insurance programs.

All estimates relating to the Social Security and Medicare Programs in the SCSIA represent values that are incremental

to the prior change. In general, an increase in the PV of net cash flows represents a positive change (improving financing),

while a decrease in the PV of net cash flows represents a negative change (worsening financing). For additional information

regarding the estimates used to prepare the SCSIA, see SSA’s, HHS’s, RRB’s, and DOL’s financial statements.

Assumptions Used for the Components of the Changes

The PV included in the SCSIA are for the current and prior years and are based on various economic as well as

demographic assumptions used for the intermediate assumptions in the Social Security and Medicare Trustees Report for

these years. The Social Security and Medicare – Demographic and Economic Assumptions table summarizes these

assumptions for the current year. This year’s SOSI projections for Social Security and Medicare, which are as of January 1,

2023, are based on the same demographic and economic assumptions that underlie the 2023 Social Security and Medicare

Trustees Report. The 2023 SOSI projections are not adjusted for the more current near-term economic information after the

time assumptions were set in December 2022.

PV as of January 1, 2022 and January 1, 2021 are calculated using interest rates from the intermediate assumption of the

2022 and 2021 Trustees Reports, respectively. All other PV in this part of the SCSIA are calculated as a PV as of January 1,

2023 and January 1, 2022 respectively.

For the period beginning on January 1, 2022 to the period beginning on January 1, 2023 (current year) and period

beginning on January 1, 2021 to the period beginning on January 1, 2022 (prior year) estimates of the PV of Social Security

and Medicare changes in social insurance amounts due to changing the valuation period, projection base, demographic data

and assumptions, methods, and law are presented using the interest rates under the intermediate assumption of the 2022 and

2021 Trustees Report respectively. Since interest rates are an economic estimate and all estimates in the table are incremental

to the prior change, the estimates of the PV of changes in economic and health care assumptions and all other PV in this part

of the SCSIA are calculated using the interest rates under the intermediate assumptions of the 2023 and 2022 Trustees

Reports, respectively.

Changes in Valuation Period

From the period beginning on January 1, 2022 to the period beginning on January 1, 2023

The effect on the 75-year PV of changing the valuation period from the prior valuation period (2022-2096) to the

current valuation period (2023-2097) is measured by using the assumptions for the prior valuation and extending them to

155

NOTES TO THE FINANCIAL STATEMENTS

cover the current valuation. Changing the valuation period removes a small negative estimated net cash flow for 2022,

replaces it with much larger negative estimated cash flow for 2097, and measures the PV as of January 1, 2023, one year

later. As a result, the PV of the estimated future net cash flows decrease by $0.7 trillion and $1.3 trillion for Social Security

and Medicare, respectively.

From the period beginning on January 1, 2021 to the period beginning on January 1, 2022

The effect on the 75-year PV of changing the valuation period from the prior valuation period (2021-2095) to the

current valuation period (2022-2096) is measured by using the assumptions for the prior valuation and extending them to

cover the current valuation. Changing the valuation period removes a small negative estimated net cash flow for 2021,

replaces it with a much larger negative estimated net cash flow for 2096, and measures the PV as of January 1, 2022, one

year later. As a result, the PV of the estimated future net cash flows decreased by $0.7 trillion and $1.0 trillion for Social

Security and Medicare, respectively.

Changes in Demographic Data, Assumptions, and Methods

From the period beginning on January 1, 2022 to the period beginning on January 1, 2023

For the current valuation (beginning on January 1, 2023), the ultimate demographic assumptions are the same as those

for the prior valuation. However, the starting demographic values and the way these values transition to the ultimate

assumptions were changed.

• Projected birth rates through 2055, during the period of transition to the ultimate level, were slightly lower than in

the prior valuation.

• Updates to near-term mortality assumptions to better reflect the effects of the COVID-19 pandemic led to an

increase in death rates through 2024 compared to the prior valuation.

• Historical population data, other-than-lawful permanent resident immigration data, and marriage and divorce data

were updated since the prior valuation.

There was one notable change in demographic methodology. The method for projecting the age distributions of LPR

new arrival and adjustment-of-status immigrants was updated reflecting recent data showing a slightly older population at the

time of attaining LPR status than had previously been estimated. This change decreased PV of the estimated future net cash

flows.

Overall, changes in demographic data, assumptions, and methods caused the PV of the estimated future net cash flows

to decrease by $0.1 trillion for Social Security and Medicare, respectively.

From the period beginning on January 1, 2021 to the period beginning on January 1, 2022

For the current valuation (beginning on January 1, 2022), the ultimate demographic assumptions are the same as those

for the prior valuation. However, the starting demographic values and the way these values transition to the ultimate

assumptions were changed.

• Final birth rate data for calendar year 2020 indicated slightly lower birth rates than were assumed in the prior

valuation.

• Near-term LPR immigration data were updated since the prior valuation; near-term LPR immigration assumptions

were also updated to better reflect the expected effects of the recovery from the pandemic.

• Historical population data and other-than-LPR immigration data were updated since the prior valuation.

There was one notable change in demographic methodology. An improvement was made to put more emphasis on

recent mortality data by increasing the weights for the most recent years in the regressions used to calculate the starting rates

of improvement and starting death rates. This change decreased the PV of the estimated future net cash flows.

Overall, changes in demographic data, assumptions, and methods caused the PV of the estimated future net cash flows

to decrease by $0.3 trillion and $0.5 trillion for Social Security and Medicare, respectively.

Changes in Economic Data, Assumptions, and Methods (Social Security Only)

From the period beginning on January 1, 2022 to the period beginning on January 1, 2023

For the current valuation (beginning of January 1, 2023), there was one change to the ultimate economic assumptions.

• The annual percentage change in the average OASDI covered wage, adjusted for inflation, is assumed to average

1.14 percentage points over the last 65 years of the 75-year projection period. This is 0.02 percentage point higher

than the value assumed for the prior valuation.

This change to the wage growth assumptions increased the PV of estimated future net cash flows. In addition to this

change, the starting economic values, and the way these values transition to the ultimate assumptions were changed. The

most significant changes are identified below.

NOTES TO THE FINANCIAL STATEMENTS

156

• The levels of GDP and labor productivity are assumed to be about 3.0 percent lower by 2026 and for all years

thereafter relative to the prior valuation.

• The assumed real interest rates over the first 10 years of the projection period are generally higher than those

assumed for the prior valuation.

The changes to the GDP and productivity levels decreased the PV of the estimated future net cash flows, while the

change to near-term real interest increased the PV of the estimated future net cash flows.

There was one notable change in economic methodology. The method for estimating the level of OASDI taxable wages

for historical year 2000-21 was improved by adopting a more consistent approach for estimating completed values across

various types of wages. This change increased the PV of the estimated future net cash flows. Overall, changes to economic

data, assumptions and methods caused the PV of the estimated future net cash flows to decrease by $0.8 trillion for Social

Security.

From the period beginning on January 1, 2021 to the period beginning on January 1, 2022

For the current valuation (beginning on January 1, 2022), the ultimate economic assumptions are the same as those for

the prior valuation. However, the starting economic values and the way these values transition to the ultimate assumptions

were changed. The most significant are identified below.

• Near-term real interest rates are assumed to be slightly higher on average than those for the prior valuation.

• Economic starting values and near-term growth assumptions were updated to reflect the stronger-than-expected

recovery from the pandemic-induced recession.

• The level of potential GDP for years 2021 and later is assumed to be about 1.1 percent higher than the level in the

prior valuation, reflecting the strong recovery and the expectation of a permanent level shift in total economy labor

productivity.

The changes to near-term real interest rates and the resulting effects on PV calculations decreased the PV of the

estimated future net cash flows, while changes to starting values and near-term economic growth assumptions and the level

shift in the assumptions for potential GDP increased the PV of the estimated future net cash flows.

There were no additional notable changes in economic methodology. Overall, changes to economic data, assumptions,

and methods caused the PV of the estimated future net cash flows to decrease by $0.2 trillion for Social Security.

Changes in Law or Policy

From the period beginning on January 1, 2022 to the period beginning on January 1, 2023

For Social Security, between prior valuation (beginning on January 1, 2022) and the current valuation (beginning

January 1, 2023, no notable changes in law or policy are expected to have a significant effect on the long-range cost of

OASDI program.

Most of the provisions enacted as part of the Medicare legislation since prior valuation date had little or no impact on

the program. The following provisions did have a financial impact.

• The Postal Service Reform Act of 2022 (P.L. 117-108, enacted on April 6, 2022) included one provision that affects

Parts B and D of the SMI program.

• The IRA of 2022 (P.L. 117-169, enacted on August 16, 2022) included provisions that affect the SMI programs.

• The Continuing Appropriations and Ukraine Supplemental Appropriations Act, 2023 (P.L. 117-180, enacted on

September 30, 2022) included provisions that affect the HI and SMI programs.

• The Further Continuing Appropriations and Extensions Act, 2023 (P.L. 117-229, enacted on December 16, 2022)

included provisions that affect the HI and SMI programs.

• The CAA, 2023 (P.L. 117-328, enacted on December 29, 2022) included provisions that affect the HI and SMI

programs.

Overall, the changes to these laws, regulations, and policies caused the PV of the estimated future net cash flow to

increase by $1.1 trillion for Medicare.

From the period beginning on January 1, 2021 to the period beginning on January 1, 2022

The monetary effect of the changes in law or policy on the PV of estimated future net cash flows of the OASDI and

Medicare programs was not significant at the consolidated level. Please refer to SSA’s and HHS’s financial statements for

additional information related to the impact of the changes in law or policy on the PV of estimated future net cash flows of

the OASDI and Medicare programs.

157

NOTES TO THE FINANCIAL STATEMENTS

Changes in Methodology and Programmatic Data (Social Security Only)

From the period beginning on January 1, 2022 to the period beginning on January 1, 2023

Several methodological improvements and updates of program-specific data are included in the current valuation

(beginning on January 1, 2023). The most significant are identified below.

• Actual disability data for 2022 and slightly lower-near term disability incidence rate assumptions were incorporated.

• The current valuation uses a 10.0 percent sample of all newly entitled worker beneficiaries in 2019 to project

average benefit levels of retired-worker and disabled-worker beneficiaries.

• Updates were made to the post-entitlement benefit adjustment factors. These factors are used to account for changes

in benefit levels, primarily due to differential mortality by benefit level and earnings after benefit entitlement.

Overall, changes to programmatic data and methods caused the PV of estimated future net cash flows to decrease by

$0.3 trillion for Social Security.

From the period beginning on January 1, 2021 to the period beginning on January 1, 2022

Several methodological improvements and updates of program-specific data are included in the current valuation

(beginning on January 1, 2022). The most significant are identified below.

• The ultimate disability incidence rate was lowered from 5.0 per thousand exposed in the prior valuation to 4.8 in the

current valuation.

• The current valuation is updated using a 10.0 percent sample of all newly entitled worker beneficiaries in 2018 to

project average benefit levels of retired-worker and disabled-worker beneficiaries.

• Recent data and estimates provided by the Office of Tax Analysis at Treasury indicate higher near-term and ultimate

levels of revenue from taxation of OASDI benefits than projected in the prior valuation.

• Updates were made to the post-entitlement benefit adjustment factors. These factors are used to account for changes

in benefit levels, primarily due to differential mortality by benefit level and earnings after benefit entitlement.

Overall, changes to programmatic data and methods caused the PV of the estimated future net cash flows to increase by

$0.6 trillion for Social Security.

Changes in Economic and Health Care Assumptions (Medicare Only)

From the period beginning on January 1, 2022 to the period beginning on January 1, 2023

The economic assumptions used in the Medicare projections are the same as those used for the Social Security program

shown above while the health care assumption are specific to the Medicare projections. The following health care

assumptions were changes in the current valuation.

• Lower projected spending growth because of anticipated effect of negotiating drug prices and other price growth

constraints.

Overall, these changes decrease the PV of the estimated future net cash flow by $2.6 trillion for Medicare.

From the period beginning on January 1, 2021 to the period beginning on January 1, 2022

The economic assumptions used in the Medicare projections are the same as those for the Social Security programs

shown above while the health care assumptions are specific to the Medicare projections. The following health care

assumptions were changed in the current valuation.

• High projected spending growth for outpatient hospital services and for physician-administered drugs.

• Slower price growth and higher direct and indirect remuneration.

Overall, these changes decreased the PV of estimated future net cash flow by $5.3 trillion for Medicare.

Change in Projection Base (Medicare Only)

From the period beginning on January 1, 2022 to the period beginning on January 1, 2023

Actual income and expenditures in 2022 were different from what was anticipated when the 2022 Trustees Report

projections were prepared. For Part A and Part B income and expenditures were lower than estimated based on experience.

Part D income and expenditures were higher than estimated based on actual experience. Actual experience of the Medicare

Trust Funds between January 1, 2022, and January 1, 2023, is incorporated in the current valuation and is less than projected

in the prior valuation. Overall, the net impact of Part A, B, and D projection base change is an increase in the estimated future

net cash flows by $2.3 trillion for Medicare.

NOTES TO THE FINANCIAL STATEMENTS

158

From the period beginning on January 1, 2021 to the period beginning on January 1, 2022

Actual income and expenditures in 2021 were different from what was anticipated when the 2021 Trustees Report

projections were prepared. For Part A, income was higher, and expenditures were lower than anticipated in 2021 based on

actual expenditures. Part B income and expenditures were lower than estimated based on actual experience. Part D income

and expenditures were higher than estimated based on actual experience. Actual experience of the Medicare Trust Funds

between January 1, 2021 and January 1, 2022 is incorporated in the current valuation and is more than projected in the prior

valuation. Overall, the net impact of Part A, B, and D projection base change is an increase in the estimated future net cash

flows by $2.5 trillion for Medicare.

159

NOTES TO THE FINANCIAL STATEMENTS

Note 26. Stewardship Property, Plant, and Equipment

Stewardship PP&E consists of items whose physical properties resemble those of general PP&E traditionally capitalized

in financial statements. However, stewardship PP&E differs from general PP&E in that their values may be indeterminable or

may have little meaning (e.g., museum collections, monuments, assets acquired in the formation of the nation) or that

allocating the cost of such assets to accounting periods that benefit from the ownership of such assets is meaningless.

Stewardship PP&E includes stewardship land (land not acquired for or in connection with general PP&E) and heritage assets

(e.g., federal monuments and memorials and historically or culturally significant property).

Stewardship land is land and land rights owned by the federal government intended to be held indefinitely. The majority

of stewardship land was acquired by the government during the first century of the nation’s existence. Examples of

stewardship land include land reserved, managed, planned, used, or acquired for forests and parks, recreation and

conservation, wildlife and grazing, historical landmarks, multiple purpose ancillary revenue generating activities, and/or

buffer zones. “Land” is defined as the solid part of the surface of the earth. Excluded from the definition are the natural

resources (that is, depletable resources, such as mineral deposits and petroleum; renewable resources, such as timber; and the

outer-continental shelf resources) related to land.

Additional information concerning stewardship land, such as entity stewardship policies, physical units by major

categories, and the condition of stewardship land, can be obtained from the financial statements of DHS, DOC, DOD, DOE,

DOI, DOT, EPA, HHS, TVA, USDA, and VA. Please refer to Land and Permanent Land Rights located in the unaudited RSI

for information concerning the federal estimated acreage.

Heritage assets are government-owned assets that have one or more of the following characteristics: historical or natural

significance; cultural, educational, or artistic importance; or significant architectural characteristics. Entities provide

protection and preservation services to maintain all heritage assets in the best possible condition as part of America’s history.

Examples of heritage assets include the Declaration of Independence, the U.S. Constitution, and the Bill of Rights preserved

by the National Archives. Heritage assets are classified into two categories: collection and non-collection. Collection type

heritage assets include objects gathered and maintained for exhibition, for example, museum collections, art collections, and

library collections. Non-collection type heritage assets include parks, memorials, monuments, and buildings. In some cases,

heritage assets may serve two purposes: a heritage function and general government operations. In those cases, the heritage

asset should be considered a multi-use heritage asset if the predominant use of the asset is in general government operations

(e.g., the main Treasury building used as an office building). The cost of acquisition, improvement, reconstruction, or

renovation of multi-use heritage assets is capitalized as general PP&E and depreciated over its estimated useful life.

Additional information concerning other significant heritage assets, multi-use heritage assets, component federal entity

stewardship policies for heritage assets, physical units by major categories of heritage assets, and the condition of heritage

assets, can be obtained from the financial statements of DHS, DOC, DOD, DOE, DOI, DOT, GSA, NASA, State, Treasury,

USDA, and VA. Please refer to DM&R located in the unaudited RSI for information concerning estimated maintenance and

repair costs.

NOTES TO THE FINANCIAL STATEMENTS

160

Note 27. Disclosure Entities and Related Parties

SFFAS No. 47, Reporting Entity provides criteria for identifying organizations that are consolidation entities, disclosure

entities, and related parties, and how such organizations are reported within the Financial Report. For consolidation entities,

the assets, liabilities, results of operations, and related activity are consolidated into the government’s financial statements.

For disclosure entities and related parties, balances and transactions with such entities are included in the financial statements

and certain information about their relationship with the federal government is disclosed in the notes to the consolidated

financial statements. Disclosure entities and related parties are important to the Financial Report but are not consolidated into

the government’s financial statements.

Disclosure Entities

Disclosure entities are organizations similar to consolidation entities in that they are either: a) in the Budget; b) majority

owned by the government; c) controlled by the government; or d) would be misleading to exclude. Disclosure entities have a

greater degree of autonomy with the government than consolidation entities. In addition, organizations may be owned or

controlled by the government as a result: of a) regulatory actions (such as organizations in receivership or conservatorship);

or b) other government intervention actions. Under such regulatory or other intervention actions, if the relationship with the

government is not expected to be permanent, such entities generally would be classified as disclosure entities based on their

characteristics taken as a

whole.

Based on the criteria in GAAP for federal entities, the disclosure entities in the Financial Report are FR System, SPVs,

Fannie Mae, Freddie Mac, and National Railroad Passenger Corporation (more commonly referred to as Amtrak). In

addition, there are additional disclosure entities reported by component reporting entities that do not meet the qualitative or

quantitative criteria in SFFAS No. 47 to be reported in the Financial Report.

Federal Reserve System

Congress, under the Federal Reserve Act, created the FR System. The FR System includes the Federal Reserve Board,

the FRB, and FOMC. Collectively, the FR System serves as the nation’s central bank and is responsible for formulating and

conducting monetary policy, issuing and distributing currency (Federal Reserve Notes), supervising and regulating financial

institutions, providing nationwide payment systems (including large-dollar transfers of funds, Automated Clearing House

operations, and check collections), providing certain financial services to federal entities and fiscal principals, and serving as

the U.S. government’s bank. Monetary policy includes actions undertaken by the FR System that influence the availability

and cost of money and credit as a means of helping to promote national economic goals. The FR System also conducts

operations in foreign markets in order to counter disorderly conditions in exchange markets or to meet other needs specified

by the FOMC to carry out its central bank responsibilities. The FR System is considered an independent central bank, and the

executive branch of the government does not ratify its decisions.

The 12 FRB are chartered under the Federal Reserve Act, which requires each member bank to own the capital stock of

its FRB. Each FRB has a board of directors that exercises supervision and control of each FRB, with three members

appointed by the Federal Reserve Board, and six board members elected by their member banks. The FRB participate in

formulating and conducting monetary policy, distributing currency and coin, and serving as the government’s fiscal agent, as

well as the fiscal agent for other fiscal principals. Fiscal principals, generally speaking, relate to banks, credit unions, and

savings and loan institutions. Additionally, the FRB provide short-term loans to depository institutions and loans to

participants in programs or facilities with broad-based eligibility in unusual and crucial circumstances when approved by the

Federal Reserve Board and the Secretary of the Treasury.

The government interacts with FRB in a variety of ways, including the following:

• The FRB serve as the government’s fiscal agent and depositary, executing banking and other financial transactions

on the government’s behalf. The government reimburses the FRB for these services, the cost of which is included on

the Statements of Net Cost;

• The FRB hold Treasury and other federal securities in the FRBs’ SOMA for the purpose of conducting monetary

policy (see Note 12—Federal Debt and Interest Payable);

• The FRB hold gold certificates issued by the government in which the certificates are collateralized by gold (see

Note 2—Cash and Other Monetary Assets);

• The FRB hold SDR certificates issued by the government which are collateralized by SDR (see Note 2—Cash and

Other Monetary Assets); and

• The FRB are required by Federal Reserve Board policy to transfer their excess earnings to the government, which

are included in Other Taxes and Receipts on the Statements of Operations and Changes in Net Position.

161

NOTES TO THE FINANCIAL STATEMENTS

• Federal Reserve System Structure

The Federal Reserve Board is an independent organization governed by seven members who are appointed by the

President and confirmed by the Senate. The full term of a Federal Reserve Board member is 14 years, and the

appointments are staggered so that one term expires on January 31 of each even-numbered year. The Federal Reserve

Board has a number of supervisory and regulatory responsibilities for institutions including, among others, state-

chartered banks that are members of the FR System, bank holding companies, and savings and loan holding companies.

In addition, the Federal Reserve Board has general supervisory responsibilities for the 12 FRB, and issues currency

(Federal Reserve Notes) to the FRB for distribution.

The FOMC is comprised of the seven Federal Reserve Board members and five of the 12 FRB presidents, and is

charged with formulating and conducting monetary policy primarily through open market operations (the purchase and

sale of certain securities in the open market), the principal tool of national monetary policy. These operations affect the

amount of reserve balances available to depository institutions, thereby influencing overall monetary and credit

conditions.

• Federal Reserve Monetary Policy Action

Monetary policy comprises the Federal Reserve's actions and communications to promote maximum employment,

stable prices, and moderate long-term interest rates; the economic goals the Congress has instructed the Federal Reserve

to pursue.

During FY 2023, Consumer price inflation, as measured by the 12-month change in the price index for PCE was

4.4 percent in April 2023, down from its peak of 7.0 percent in June 2022, but still well above the FOMC 2.0 percent

objective.

In the beginning of FY 2023, in response to high inflation, the FOMC continued to increase interest rates and

reduce its securities holdings. In November 2022, the FOMC decided to raise the target range for the federal funds rate

by 0.75 percent to 3.75 percent to 4.0 percent. In December 2022, considering the cumulative tightening of monetary

policy and the lags with which monetary policy affects economic activity and inflation, the FOMC slowed the pace of

policy tightening. The FOMC decided to raise the target range for the federal funds rate to 4.25 percent to 4.50 percent

in December 2022. By March 2023, the FOMC decided to raise the target range for the federal funds rate to 4.75

percent to 5.0 percent. In May 2023, the FOMC decided to raise the target range for the federal funds rate to 5.0 percent

to 5.25 percent. In July 2023, the FOMC continued to raise the target range for the federal funds rate reaching 5.25

percent to 5.50 percent.

The FOMC began reducing its securities holdings in June 2022 and, since then, has continued to implement its

plan for significantly reducing the size of the Federal Reserve's balance sheet in a predictable manner. Since September

2022, principal payments from securities held in the SOMA have been reinvested only to the extent that they exceeded

monthly caps of $60.0 billion per month for Treasury securities and $35.0 billion per month for agency mortgage-

backed securities. The FRB balance sheet developments may be obtained at https://www.federalreserve.gov/balance-

sheet.

• Federal Reserve System Assets, Liabilities, Revenues, Expenses, Gains, and Losses

The FRB hold Treasury and other securities in the SOMA for the purpose of conducting monetary policy. As of

September 30, 2023, Treasury securities held by the FRB totaled $2,786.7 billion, which excludes $2,139.0 billion in

Treasury securities used in overnight reverse repurchase transactions. As of September 30, 2022, Treasury securities

held by the FRB totaled $2,731.1 billion, which excludes $2,908.0 billion in Treasury securities used in overnight

reverse repurchase transactions. Such securities are included in federal debt and interest payable (see Note 12—Federal

Debt and Interest Payable). For fiscal years ended September 30, 2023, and 2022, Treasury incurred interest cost

relating to the FRB’s Treasury holdings amounting to $105.1 billion and $114.7 billion, respectively, which is included

in interest on Treasury securities held by the public on the Statement of Net Cost. Unrestricted Cash held on deposit at

the FRB as of September 30, 2023, and 2022, was $638.9 billion and $617.0 billion, respectively, and are included in

cash and other monetary assets. In addition, restricted cash as of September 30, 2023, and 2022, was $56.3 billion and

$46.8 billion, respectively; a significant portion is held on deposit at the FRB (see Note 2—Cash and Other Monetary

Assets). The outstanding SDR certificates issued by the government to the Federal Reserve, valued at $5.2 billion as of

September 30, 2023, and 2022, are reported under Other Liabilities on the government’s Balance Sheet (see Note 18—

Other Liabilities).

Treasury securities are generally subject to the same market condition as other financial instruments. In the open

market, the FRB purchase and sell Treasury securities as a mechanism for controlling the money supply.

Financial and other information concerning the FR System, including financial statements for the Federal Reserve

Board and the FRB, may be obtained at https://federalreserve.gov.

NOTES TO THE FINANCIAL STATEMENTS

162

• FRB Residual Earnings Transferred to the Government

FRB generate income from interest earned on securities, reimbursable services provided to federal entities, and the

provision of priced services to depository institutions, as specified by the Monetary Control Act of 1980. Although the

FRB generate earnings from carrying out open market operations (via the earnings on securities held in the SOMA

account), their execution of these operations is for the purpose of accomplishing monetary policy rather than generating

earnings. Each FRB is required by Federal Reserve Board policy to transfer to the government its residual (or excess)

earnings, after providing for the cost of operations, payment of dividends, and surplus funds not to exceed an FRB’s

allocated portion of an aggregate of $6.8 billion for all FRB. These residual earnings may vary due to, among other

things, changes in the SOMA balance levels that may occur in conducting monetary policy. If an FRB’s earnings for the

year are not sufficient to provide for the cost of operations, payment of dividends, or allocated portion of $6.8 billion

aggregate surplus funds limitation, an FRB will suspend its payments to the government until such earnings become

sufficient. These funds are part of restricted cash at the Federal Reserve (see Note 2—Cash and Other Monetary

Assets). The FRB residual earnings of $0.6 billion and $106.7 billion for fiscal years ended September 30, 2023, and

2022, respectively, are reported as other taxes and receipts on the Statements of Operations and Changes in Net

Position. Accounts receivable, net, includes a receivable for FRB’s residual earnings which represents the earnings due

to the General Fund as of September 30, but not collected by the General Fund until after the end of the month (see

Note 3—Accounts Receivable, Net).

Special Purpose Vehicles

In response to the COVID-19 pandemic, Treasury holds equity investments in SPVs established by the Federal Reserve

Board for the purpose of enhancing the liquidity of the U.S. financial system. Involvement in these programs represents non-

permanent intervention activities designed to help mitigate the economic impacts of the pandemic. Accordingly, the

government’s equity interests in these SPVs meet the SFFAS No. 47 criteria for classifying our SPV investments as

disclosure entities. These entities are not consolidated as part of the government’s consolidated financial statements;

however, the value of the investments in the SPVs, changes in value, and related activity with the SPVs are included in the

government’s consolidated financial statements (see Note 7—Investments).

Fannie Mae and Freddie Mac

In 2008, during the financial crisis, the government placed Fannie Mae and Freddie Mac under conservatorship to help

ensure their financial stability. These entities meet the criteria in SFFAS No. 47, for disclosure entities as both: a)

“receiverships and conservatorships,”; and b) as entities wherein “federal government intervention actions resulted in control

or ownership” with intervention actions not expected to be permanent. Accordingly, these entities are not consolidated into

the government's consolidated financial statements. However, the values of the investments in such entities, changes in value,

and related activity with these entities are included in the government's consolidated financial statements (see Note 8—

Investments in Government-Sponsored Enterprises for additional information).

Amtrak

Amtrak was incorporated in 1971 pursuant to the Rail Passenger Service Act of 1970 and is authorized to operate a

nationwide system of passenger rail transportation. Amtrak is a private, for-profit corporation under 49 U.S.C. § 24301 and

D.C. law. It is not a department, entity, or instrumentality of the government. Amtrak’s classification as a disclosure entity is

attributable to being: a) listed in the Budget; b) financed mostly by sources other than taxes; and c) governed by an

independent Board of Directors, which is comprised of 10 directors. The Secretary of Transportation, who is a director by

statute, and eight of the other Amtrak directors, are appointed by the President with the advice and consent of the U.S.

Senate. The President of Amtrak also is a board member and is appointed by the board. Amtrak does not take actions on

behalf of the government but benefits the national economy by providing a transportation option in 46 states and the D.C.

The government (through the DOT) owns 100.0 percent of Amtrak’s preferred stock (109,396,994 shares of $100.00

par value). Each share of preferred stock is convertible into ten shares of common stock. The common stockholders have

voting rights for “amendments to Amtrak’s Articles of Incorporation proposed by the Board of Directors and for certain other

extraordinary events.” Although Section 4.02(g) of the Amtrak Articles of Incorporation allow for the conversion of preferred

stock to common stock, current government administrative policy is to not convert its holdings without congressional

authorization. Section 4.02(g) of the Amtrak Articles of Incorporation does not limit the timing of conversion or require any

preapprovals. Conversion is effective the business day following receipt of written notice of the holder’s election to convert.

The government does not recognize the Amtrak preferred stock in its financial statements because, under the corporation’s

current financial structure, the preferred shares do not have a liquidation preference over the common shares, the preferred

shares do not have any voting rights, and dividends are neither declared nor in arrears.

163

NOTES TO THE FINANCIAL STATEMENTS

In addition to the purchase/ownership of the Amtrak preferred stock, the government has provided funding to Amtrak,

since 1972, primarily through grants and loans. Amtrak receives grants from the government that cover a portion of the

corporation’s annual operating expenses and capital investments. Funding provided to Amtrak through grant agreements are

included in the Budget and the DOT financial statements. For the fiscal year ended September 30, 2023, the net cost amount

related to grants was $2.9 billion, and total budgetary outlays were $3.2 billion. For the fiscal year ended September 30,

2022, the net cost amount related to grants was $3.2 billion, and total budgetary outlays were $2.3 billion.

The government (through the DOT) has possession of two long-term notes with Amtrak. The first note is for $4.0

billion and matures in 2975 and, the second note is for $1.1 billion and matures in 2082 with renewable 99-year terms.

Interest is not accruing on these notes as long as the current financial structure of Amtrak remains unchanged. If the financial

structure of Amtrak changes, both principal and accrued interest are due and payable. The government does not recognize the

long-term notes in its financial statements since the notes, with maturity dates of 2975 and 2082, are considered fully

uncollectible due to the lengthy terms, Amtrak’s history of operating losses, and ability to generate funds for repayment.

Amtrak’s ability to continue to operate in its current form is dependent upon the continued receipt of subsidies from the

government.

Financial statements and other information (including loans) concerning Amtrak may be obtained at

https://www.amtrak.com/reports-documents and https://www.transportation.gov/fy23-afr.

Related Parties

Related parties exist if the existing relationship, or one party to the existing relationship, has the ability to exercise

significant influence over the party’s policy decisions. Related parties do not meet the principles for inclusion, but are

reported in the Financial Report if they maintain relationships of such significance that it would be misleading to exclude.

Based on the criteria in SFFAS No. 47, the related parties reported in the Financial Report are FHLBanks, IMF,

Multilateral Banks, and PEFCO. In addition, there are additional related parties reported by component reporting entities that

do not meet the criteria to be reported in the Financial Report.

Federal Home Loan Banks

The government is empowered with supervisory and regulatory oversight of the 11 FHLBanks. The government is

responsible for ensuring that each regulated entity operates in a safe and sound manner, including maintenance of adequate

capital and internal control, and carries out its housing and community development finance missions. Each FHLBank

operates as a separate federally chartered corporation with its own board of directors, management, and employees. The

FHLBanks are GSEs that were organized under the Federal Home Loan Bank Act of 1932, to serve the public by enhancing

the availability of credit for residential mortgages and targeted community development. They are financial cooperatives that

provide a readily available, competitively-priced source of funds to their member institutions. The FHLBanks are not

government entities and do not receive financial support from taxpayers. The government does not guarantee, directly or

indirectly, the debt securities or other obligations of FHLBanks.

By law, in the event of certain adverse circumstances, Treasury is authorized to purchase up to $4.0 billion of

obligations of the FHLBanks. This authority may be exercised only if alternative means cannot be effectively employed to

permit the FHLBanks to continue to supply reasonable amounts of funds to the mortgage market, and the ability to supply

such funds is substantially impaired because of monetary stringency and a high level of interest rates. Any funds borrowed

from Treasury shall be repaid by the FHLBanks at the earliest practicable date. Treasury has not used such authority. Also, in

accordance with the Government Corporations Control Act, Treasury prescribes certain terms concerning the FHLBanks

issuance of obligations to the public. Financial and other information concerning FHLBanks including financial statements

may be obtained at http://www.fhlbanks.com/.

International Monetary Fund and Multilateral Development Banks

The IMF’s primary purpose is to ensure the stability of the international monetary system—the system of exchange

rates and international payments that enables countries to transact with each other. Member countries provide resources for

IMF loans through their subscription quotas (quotas). The IMF also has additional pools of resources that can be used in the

event of a crisis that requires lending beyond the level available from quota resources: 1) the NAB; 2) bilateral borrowing

arrangements; and 3) additional allocation of SDRs. Participation in the IMF works like an exchange of monetary assets.

Quotas are the principal component of the IMF’s financial resources and are denominated in SDR. The size of each

member’s quota is based broadly on its relative position in the world economy. The U.S. holds the largest quota of any IMF

member. Since 2016, U.S. quota in the IMF has been about SDR 83 billion. The equivalent dollar value of the quota total

U.S. as of September 30, 2023, and 2022, was approximately $108.9 billion and approximately $106.0 billion, respectively.

The government has funded a portion of U.S. quota to the IMF for lending, represented by U.S. reserve position at the IMF,

while the remainder of the U.S. quota is represented by a letter of credit on which the IMF can draw as needed for lending.

NOTES TO THE FINANCIAL STATEMENTS

164

The U.S. reserve position was approximately $32.0 billion as of September 30, 2023, and approximately $31.3 billion as of

September 30, 2022, with the remaining undrawn letter of credit representing the balance (see Note 2—Cash and Other

Monetary Assets and Note 20—Commitments). The government’s quota serves as the key determinant for its 16.5 percent

share of voting rights in various IMF decisions. Since certain key IMF decisions require approval by at least 85.0 percent of

the voting power, the government (represented by the Secretary of the Treasury) holds a substantial voice in the IMF and

exercises significant influence over IMF policies, including veto power over major IMF decisions.

Some IMF members also supplement the IMF’s resources through the NAB and bilateral borrowing agreements.

Through the NAB, the U.S. and other participating members make additional resources available to the IMF if required to

cope with or forestall an impairment of the international monetary system. In accordance with the CARES Act, effective

January 1, 2021, U.S. participation in the NAB increased by SDR 28.2 billion. Accordingly, the government's participation in

the NAB as of September 30, 2023, and 2022, was SDR 56.4 billion respectively, which is equivalent to $74.2 billion and

$72.2 billion, respectively. When the government transfers funds to the IMF under the NAB, it receives a liquid and interest-

bearing claim on the IMF. As of September 30, 2023, and 2022, loans outstanding to the IMF from the government under the

NAB stood at $0.1 billion and $0.5 billion, respectively. These loans were reported under Loans Receivable, Net on the

Balance Sheet. The NAB is not currently activated, and the U.S. has veto power over its activation, as well as over most

changes to its terms or size. The government does not have a bilateral borrowing agreement with the IMF, though it exercises

indirect control over their activation, since NAB activation is a prerequisite for the IMF to draw on its bilateral borrowing

arrangements.

As of September 30, 2023, and 2022, the government's total undrawn financial commitment to the IMF was $151.0

billion and $146.4 billion, respectively, which is composed of the quota related letter of credit and the undrawn portion of the

NAB (see Note 20—Commitments).

Under the IMF Articles of Agreement, the IMF may allocate SDRs to member countries in proportion to their IMF

quotas. SDR allocations are an international reserve asset created by the IMF to supplement its member countries’ official

reserves. In FY 2021, the IMF approved a historic allocation of SDRs of $650.0 billion to further support the COVID-19

recovery. This was the largest allocation in the IMF’s history, which substantially boosted the reserves and liquidity of the

IMF’s member countries, without adding to their debt burdens. The U.S. received an additional 79.5 billion SDRs valued at

$112.8 billion as a part of this historic allocation. The SDR allocation creates an asset and a liability on the Balance Sheet but

does not increase the IMF’s available lending resources. The SDR asset as of September 30, 2023, and 2022, amounted to

$163.2 billion and $153.6 billion, respectively, and includes the SDR allocation as well as purchased SDR (see Note 2—Cash

and Other Monetary Assets). The SDR liability as of September 30, 2023, and 2022, amounted to $151.0 billion and $147.0

billion, respectively (see Note 18—Other Liabilities).

The value of the SDR is based on a weighted average of the U.S. dollar, euro, Chinese renminbi, Japanese yen, and

pound sterling. More information on the SDR valuation can be found at https://www.imf.org.

Historically, IMF has never experienced a default by a borrowing country. The government, which is not directly

exposed to borrowers from the IMF, has never experienced a loss of value on its IMF quota or an instance of non-repayment,

and it is not likely that the government will experience future losses as a result of its additional commitments.

Additionally, the government invests in and provides funding to the MDBs to support poverty reduction and promote

sustainable economic growth in developing countries. The MDBs provide financial and technical support by means of

strengthening institutions, providing assistance that addresses the root causes of instability in fragile and conflict-affected

countries, responding to global crisis, and fostering economic growth and entrepreneurship. The government’s participation

in the MDBs is in the form of financial contributions used to ensure the effectiveness and impact of the MDBs’ global

development agenda. The U.S. has voting power in each of the MDBs to which it contributes, ranging from approximately

6.0 percent to 50.0 percent (see Note 10—Other Assets and Note 20—Commitments for additional information).

Private Export Funding Corporation

The financial statements reflect the results of agreements with PEFCO. PEFCO, is owned by a consortium of private-

sector banks, industrial companies, and financial services institutions. It makes and purchases from private sector lenders,

medium-term and long-term fixed-rate, and variable-rate loans guaranteed by EXIM Bank to foreign borrowers to purchase

U.S. made equipment “export loans.”

EXIM Bank’s credit and guarantee agreement with PEFCO provides that EXIM Bank will guarantee the due and

punctual payment of interest on PEFCO’s secured debt obligations which EXIM Bank has approved, and it grants to EXIM

Bank a broad measure of supervision over certain of PEFCO's major financial management decisions, including the right to

have representatives be present in all meetings of PEFCO’s Board of Directors, advisory board, and exporters’ council, and

to review PEFCO’s financials and other records. However, EXIM Bank does not have voting rights and does not influence

normal operations. In September 2020, the EXIM Board of Directors unanimously voted to renew its agreement with PEFCO

for 25 years.

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NOTES TO THE FINANCIAL STATEMENTS

PEFCO has an agreement with EXIM Bank which provides that EXIM Bank will generally provide PEFCO with an

unconditional guarantee covering the due and punctual payment of principal and interest on export loans PEFCO makes and

purchases. PEFCO’s guarantees on the export loans plus the guarantees on the secured debt obligations aggregating to

$1,891.0 million at September 30, 2023 and $2,228.6 million at September 30, 2022, are included by EXIM Bank in the total

for guarantee, insurance and undisbursed loans and the allowance related to these transactions is included in the Loan

Guarantee Liabilities on the Balance Sheets.

EXIM Bank received fees totaling $22.4 million in FY 2023 and $29.1 million in FY 2022 for the agreements, which

are included in Earned Revenue on the Statements of Net Cost.

NOTES TO THE FINANCIAL STATEMENTS

166

Note 28. Public-Private Partnerships

The government enters into various collaborative relationships with private sector entities in which the goals, structures,

governance, roles and responsibilities are mutually determined to produce a risk-sharing arrangement. These relationships are

referred to as P3s, in accordance with SFFAS No. 49, Public-Private Partnerships: Disclosure Requirements. Although there

are inherent financial risks to the federal government in these types of complex, risk-sharing arrangements, P3s by nature are

used to manage certain risks, and federal entities take steps to mitigate risks of loss to the government and continue to

evaluate the risks associated with these arrangements. P3 arrangements that federal entities identified are related to energy

savings, broadband network and communication projects, and housing and building rehabilitation projects. While many of

the government’s relationships may be referred to as a P3, only those meeting the disclosure requirements outlined in SFFAS

No. 49 are disclosed.

FirstNet was created to develop, deploy, and enhance wireless broadband communications for first responders; to give

century communication tools to help save lives; and to keep U.S. communities and responders safe. This network must

be designed to be reliable, functional, safe, and secure, and to provide optimal levels of operational capability at all times.

The NPSBN is being built out, deployed, operated, and maintained under a 25-year contract awarded by FirstNet to AT&T in

March 2017. The service will cover all 50 U.S. states, five territories, and D.C., including rural communities and tribal

nations. Under the terms of the contract, total receipts for DOC over the life of the contract are $18.0 billion based on annual

payments AT&T is required to make. FirstNet oversees and monitors the contract with AT&T to ensure it delivers on the

requirements associated with deploying, operating, and maintaining the NPSBN through various mechanisms, including

subscriber adoption targets, successful milestone completion, disincentives, and other mechanisms outlined in the contract.

Additionally, DOC is required to make payments to AT&T for success-based payment milestones under firm-fixed price

buildout and continuing enhancement Task Orders.

DOD identified MHPI agreements as P3s requiring disclosure. The MHPI agreements are with private sector entities

established as LLCs or LPs. These MHPI project LLC and LP entities with Private Partners serve as the project’s managing

members and have direct managerial control allowing DOD to work with the private sector to build, renovate, and sustain

military housing by obtaining private capital to leverage government dollars. By engaging MHPI agreements, DOD benefits

through use of private industry expertise and tools, improving the condition of military housing more expediently and

efficiently than the traditional military construction process would allow. Private Partners serve as the majority managing

member ensuring performance objectives are met over the expected life of the agreement. Military departments generally

serve as the minority member and enter a long-term ground lease (generally 50 years), and convey the associated real

property assets (buildings, structures, facilities, and utilities) to the MHPI project LLC or LP. The contractual terms and

termination clauses vary by agreement. The DOD’s involvement in the operations and management of the MHPI LLC or LP

is governed by evaluating the percentage of ownership interest and analyzing ownership control indicators, which determine

the level of influence over the partnership. The DOD provides funding to the LLC or LP through:

• Equity Investments - Provision of cash and transfer of real property ownership (land, housing units, and other

structures) to a project and, in return, the DOD receives a portion of that project’s profits and losses. If the

investment is sold, the DOD receives compensation. Refer to Note 7—Investments for more information.

• Government Direct Loans - Provision of cash to a project with the expectation of future payment;

• Government Loan Guarantees - Agreement to pay a percentage of the outstanding balance on a non-government

loan in the event of nonpayment by the project;

• Differential Lease Payments - Provision of monthly payments to a project above the Basic Allowance for Housing

paid by the military personnel.

DOD continues to assess agreements using criteria from SFFAS No. 49 to determine if there are additional P3s to

disclose. DOD will report these agreements as soon as these assessments are complete.

The consolidated amounts the government received and paid in FY 2023 were $0.3 billion and $14.7 billion,

respectively. The estimated amounts to be received and paid in the aggregate over the expected life of the P3s is $22.7 billion

and $23.8 billion, respectively. Please refer to the financial statements of DOC, DOD and GSA for additional information.

167

NOTES TO THE FINANCIAL STATEMENTS

Note 29. COVID-19 Activity

The global spread of COVID-19 over the past several years resulted in a severe global health and economic crisis. From

March 2020 until the expiration of the federal Public Health Emergency on May 11, 2023, the COVID-19 pandemic caused

widespread disruption to the American economy. In FY 2020 and 2021, Congress took steps to limit the damage the

pandemic caused in the U.S. by passing several key statutes, including the CARES Act, the CAA, and the ARP. The relief

funding these legislative Acts provided helped reduce the financial burden on individuals, and their families, minimized

business and employment losses and enhance the liquidity of the U.S. financial system. In addition to the FY 2022 and FY

2021 rescission pursuant to the IIJA and the CAA, respectively on June 3, 2023, Congress passed the FRA of 2023 which

rescinded certain unobligated funds that were provided by these legislative acts.

The COVID-19 related legislation provided supplemental appropriations totaling $4.6 trillion for federal entities to

respond to COVID-19 since the beginning of the pandemic and includes enacted rescissions, returns of unused permanent

and indefinite authority and obligation adjustments. Significant impacts of these programs on the government’s FY 2023 and

2022 Balance Sheet and financial results are discussed below. For additional information regarding COVID-19 relief efforts

please refer to Treasury, HHS, and Education’s financial statements.

Treasury’s COVID-19 programs established under the legislative acts enacted in response to the pandemic include

taxpayer support programs through EIPs and tax credits, programs directed through state, local, territorial, and tribal

government to support job retention, renter and homeowners’ assistance, capital projects, and small business initiatives.

Support for the American industry and financial markets was provided to assist with business losses incurred as a result of

COVID-19 through the use of payroll support, loans, and purchasing debt and commercial paper to support key U.S. financial

markets. Additional support was provided to American small businesses through Community Development Financial

Institutions. Treasury’s net costs related to COVID-19 relief efforts were $58.9 billion and $164.4 billion for fiscal years

ending September 30, 2023, and 2022, respectively, and do not include costs related to EIPs and tax credits. The decrease in

Treasury’s COVID-19 net costs is mainly due to the reduction in expense recognition of support to state, local, territorial, and

tribal programs.

The government invested in SPVs for the purpose of enhancing the liquidity of the U.S. financial system. As of

September 30, 2023, and 2022, Treasury had $15.1 billion and $17.8 billion, respectively, of equity investments in SPVs

established through the FRBNY and FRBB. The SPVs were established by the FRBNY and FRBB in 2020 to make loans and

purchase debt and other commercial paper of eligible entities affected by COVID-19. Treasury’s funds remaining in the

SPVs funded under the CARES Act cannot be used for further lending, asset purchase, or extensions of credit.

HHS received funding to support, prevent, prepare for, and respond to COVID-19, both domestically and

internationally, by providing expense reimbursements to assist eligible healthcare providers, advance research, development,

manufacturing, production and purchase of COVID-19 vaccines, testing and related supplies, financial support to childcare

providers, support for contract tracing, and mitigation activities. HHS’s net cost of operations other than CMS decreased by

$62.0 billion primarily due to the Public Health and Social Services Emergency Fund. HHS’s outlays related to COVID-19

activity totaled $60.6 billion and $130.1 billion in FY 2023 and FY 2022, respectively. HHS’s rescission related to the

COVID-19 appropriations that funded several programs totaled $10.3 billion as of September 30, 2023. Remaining amounts

are being used to support R&D for next generation COVID-19 vaccines, strengthening the pharmaceutical supply chain, and

addressing healthcare workforce shortages.

Education’s COVID-19 appropriations provided funding for a variety of programs administered primarily through grant

programs. The COVID-19 relief legislation and administrative actions also provided support for student loan borrowers

primarily by temporarily suspending nearly all federal loan payments. Additional broad-based debt was announced in FY

2022 to address the financial harms of the pandemic. However, the effect of the debt relief was reversed by the Supreme

Court’s ruling as of June 30, 2023. COVID-19 loan modifications are a component of subsidy expense, which increased the

overall loan receivable balances and Education’s net cost decreased by $236.7 billion due to the loan modifications,

reestimates (subsidy expense), and grant expenses. The significant financial statements impact of these programs can be

found within Note 4—Loans Receivable, Net and Loan Guarantee Liabilities. Education’s direct outlays related to COVID-

19 activity totaled $66.1 billion and $80.2 billion in FY 2023 and FY 2022, respectively.

NOTES TO THE FINANCIAL STATEMENTS

168

Note 30. Subsequent Events

Additional Notes Purchased by Treasury

Similar to the transaction that is described in Note 4—Loans Receivable, Net and Loan Guarantee Liabilities, in January

2024, Treasury purchased four additional notes in connection with Silicon Valley Bridge Bank, N.A. for a total of $43.3

billion, guaranteed by the FDIC in its corporate capacity as deposit insurer and regulator.

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NOTES TO THE FINANCIAL STATEMENTS

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United States Government

Required Supplementary Information

(Unaudited) For the Fiscal Years Ended

September 30, 2023, and 2022

The Sustainability of Fiscal Policy

One of the important purposes of the Financial Report is to help citizens and policymakers assess whether current fiscal

policy is sustainable and, if it is not, the urgency and magnitude of policy reforms necessary to make fiscal policy

sustainable. A sustainable policy is defined as one where the ratio of debt held by the public to GDP (the debt-to-GDP ratio)

is ultimately stable or declining.

As discussed below, the projections based on this Financial Report’s assumptions indicate that current policy is not

sustainable. The debt-to-GDP ratio was approximately 97 percent at the end of 2023, which is similar to (but slightly above)

the debt-to-GDP ratio at the end of FY 2022. If current policy is left unchanged, the projections show the debt-to-GDP ratio

will be approximately 100 percent in 2024, exceed 200 percent by 2047 and reach 531 percent in 2098. For comparison,

under the 2022 projections, the debt-to-GDP ratio exceeded 200 percent one year earlier in 2046 and reached 566 percent in

2097.

These conclusions are rooted in the projected trends in receipts, spending, and deficits in the context of current law and

policy, although, as described in the following pages, there is considerable uncertainty surrounding these projections. The

projections are on the basis of policies currently in place and are neither forecasts nor predictions. Changes in policy –

including investments in infrastructure efforts to mitigate the impact of climate change and enhancements to caregiving

services to build a more resilient and sustainable economy – could have a significant effect on eventual fiscal outcomes.

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Current Policy Projections for Primary Deficits

A key determinant of growth in the debt-to-GDP ratio and hence fiscal sustainability is the ratio of the primary deficit to

GDP. The primary deficit is the difference between non-interest spending and receipts, and the primary deficit-to-GDP ratio

is the primary deficit expressed as a percent of GDP. As shown in Chart 1, the primary deficit-to-GDP ratio spiked during

2009 through 2012 due to the 2008-09 financial crisis and the ensuing severe recession, and rose again in 2020 due to the

COVID-19 pandemic. Increased spending and temporary tax reductions enacted to stimulate the economy and support

recovery contributed to elevated primary deficits, resulting in sharp increases in the ratio of debt to GDP. The debt-to-GDP

ratio rose from 39 percent at the end of 2008 to 70 percent at the end of 2012 and then from 79 percent at the end of 2019 to

approximately 100 percent at the end of 2020.

The primary deficit-to-GDP ratio in 2023 was 3.8 percent, increasing by 0.2 percentage points from 2022, partially due

to lower receipts. The primary deficit-to-GDP ratio is projected to fall to 3.2 percent in 2024, based on the technical

assumptions in this Financial Report and projected changes in receipts and outlays, including an estimated decrease in

Medicaid outlays following the expiration of temporary measures related to the COVID-19 pandemic. After 2024, increased

spending for Social Security and health programs due in part to the continued retirement of the baby boom generation, is

projected to result in increasing primary deficits that peak at 4.4 percent of GDP in 2043. Primary deficits as a share of GDP

gradually decrease beyond that point as the aging of the population continues at a slower pace, and reach 2.8 percent in 2098,

the last year of the projection period.

Trends in the primary deficit are heavily influenced by tax receipts. The receipt share of GDP was markedly depressed

in 2009 through 2012 because of the recession and tax reductions enacted as part of the ARRA and the Tax Relief,

Unemployment Insurance Reauthorization, and Job Creation Act of 2010. The share subsequently increased to nearly 18.0

percent of GDP by 2015 before falling to 16.3 percent in 2018, after enactment of the TCJA. Receipts reached 19.6 percent of

GDP in 2022—the highest share of GDP since 2000—then fell to 16.5 percent of GDP in 2023 due to a decrease in

Individual income tax receipts and lower deposits of earning by the Federal Reserve. Receipts are projected to gradually

increase and equal 18.1 percent of GDP in 2033 when corporation income tax and other receipts stabilize as a share of GDP.

After 2033, receipts grow slightly more rapidly than GDP over the projection period as increases in real (i.e., inflation-

adjusted) incomes cause more taxpayers and a larger share of income to fall into the higher individual income tax brackets.

Other possible paths for the receipts-to-GDP ratio and the implications for projected debt held by the public are analyzed in

the “Alternative Scenarios” section.

On the spending side, the non-interest spending share of GDP was 20.3 percent in 2023, 2.9 percentage points below the

share of GDP in 2022, which was 23.2 percent. The ratio of non-interest spending to GDP is projected to fall to 20.1 percent

in 2024 and then rise gradually, reaching 23.3 percent of GDP in 2076. The ratio of non-interest spending to GDP then

declines to 22.7 percent in 2098, the end of the projection period. These increases are principally due to faster growth in

Social Security, Medicare, and Medicaid spending (see Chart 1). The aging of the baby boom generation, among other

factors, is projected to increase the Social Security and Medicare spending shares of GDP by about 0.7 percentage points and

1.7 percentage points, respectively, from 2024 to 2040. After 2040, the Social Security and Medicare spending shares of

GDP continue to increase in most years, albeit at a slower rate, due to projected increases in health care costs and population

aging, before declining toward the end of the projection period.

Current Policy Projections for Debt and Interest Payments

The primary deficit projections in Chart 1, along with projections for interest rates and GDP, determine the projections

for the debt-to-GDP ratio shown in Chart 2. That ratio was approximately 97 percent at the end of FY 2023, and under

current policy and based on this Financial Report’s assumptions is projected to reach 531 percent in 2098. The continuous

rise of the debt-to-GDP ratio indicates that current policy under this Financial Report’s assumptions is unsustainable.

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

172

As a general approximation, the change in debt held by the public from one year to the next is the budget deficit, the

difference between total receipts and total spending.

Total spending is non-interest spending plus interest spending. Chart 3

shows that the rapid rise in total spending and the unified deficit (total receipts less total spending) is almost entirely due to

projected net interest, which results from the growing debt. As a percent of GDP, interest spending was 2.4 percent in 2023,

and under current policy is projected to reach 5.3 percent in 2034, 15.0 percent in 2068, and 24.0 percent in 2098.

The change in debt each year is also affected by certain transactions not included in the budget deficit, such as changes in Treasury’s cash balances and the

non-budgetary activity of federal credit financing accounts. These transactions are assumed to hold constant at about 0.3 percent of GDP each year, with the

same effect on debt as if the primary deficit was higher by that amount.

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Another way of viewing the change in the financial outlook in this year’s Financial Report relative to previous years’

Financial Reports is in terms of the projected debt-to-GDP ratio in 2096, the last year of the 75-year projection period used in

the FY 2021 Financial Report. This ratio is projected based on this Financial Report’s assumptions to reach 518 percent in

the FY 2023 projections, which compares with 559 percent projected in the FY 2022 projections and 701 percent projected in

the FY 2021 projections.

The Cost of Delay in Closing the 75-Year Fiscal Gap

The longer policy action to close the fiscal gap

is delayed, the larger the post-reform primary surpluses must be to

achieve the target debt-to-GDP ratio at the end of the 75-year period. This can be illustrated by varying the years in which

reforms closing the fiscal gap are initiated while holding the target ratio of debt to GDP in 2098 equal to the 2023 ratio. Three

timeframes for reforms are considered, each one beginning in a different year, and each one increasing the primary surplus

relative to current policy by a fixed percent of GDP starting in the reform year. The analysis shows that the longer policy

action is delayed, the larger the post-reform primary surplus must be to bring the debt-to-GDP ratio in 2098 equal to its level

in 2023. Future generations are burdened by delays in policy changes because delay necessitates higher primary surpluses

during their lifetimes, and those higher primary surpluses must be achieved through some combination of lower spending and

higher revenue.

As previously shown in Chart 1, under current policy, primary deficits occur throughout the projection period. Table 1

shows primary surplus changes necessary to make the debt-to-GDP ratio in 2098 equal to its level in 2023 under each of the

For additional information on changes from the 2021 projections, see the unaudited RSI in the 2022 Financial Report.

The fiscal gap reflects how much the primary surplus (receipts less non-interest spending) must increase to maintain the debt-to-GDP ratio at the 2023

level. See Note 24 for a more complete discussion of the fiscal gap.

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

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three timeframes. If reform begins in 2024, then it is sufficient to raise the primary surplus share of GDP by 4.5 percentage

points in every year between 2024 and 2098 in order for the debt-to-GDP ratio in 2098 to equal its level in 2023. This policy

raises the average 2024-2098 primary surplus-to-GDP ratio from -3.8 percent to +0.6 percent.

In contrast to a reform that begins immediately, if reform begins in 2034 or 2044, then the primary surpluses must be

raised by 5.3 percent and 6.5 percent of GDP, respectively, in order for the debt-to-GDP ratio in 2098 to equal its level at the

end of 2023. The difference between the primary surplus increase necessary if reform begins in 2034 or 2044 and the increase

necessary if reform begins in 2024, an additional 0.8 and 2.0 percentage points, respectively, is a measure of the additional

burden policy delay would impose on future generations. The costs of delay are due to the additional debt that accumulates

between the end of 2023 and the year reform is initiated, in comparison to the scenario in which reform begins immediately.

Alternative Scenarios

The long-run projections are highly uncertain. This section illustrates this inherent uncertainty by presenting alternative

scenarios for the growth rate of health care costs, interest rates, discretionary spending, and receipts. (Not considered here are

the effects of alternative assumptions for long-run trends in birth rates, mortality, and immigration, among other factors.)

The population is aging rapidly and will continue to do so over the next several decades, which puts pressure on

programs such as Social Security, Medicare, and Medicaid. A shift in projected fertility, mortality, or immigration rates could

have important effects on the long-run projections. Higher-than-projected immigration, fertility, or mortality rates would

improve the long-term fiscal outlook. Conversely, lower-than-projected immigration, fertility, or mortality rates would result

in deterioration in the long-term fiscal outlook.

Effect of Changes in Health Care Cost Growth

One of the most important assumptions underlying the projections is the future growth of health care costs. These future

growth rates – both for health care costs in the economy generally and for federal health care programs such as Medicare,

Medicaid, and PPACA exchange subsidies – are highly uncertain. In particular, PPACA in 2010 and MACRA in 2015

lowered increases in payment rates for Medicare hospital and physician payments. The Medicare spending projections in the

long-term fiscal projections are based on the projections in the 2023 Medicare Trustees Report, which assume the PPACA

and MACRA payment rates will be effective in producing a substantial slowdown in Medicare input cost growth. As

discussed in Note 25—Social Insurance, the Medicare projections are subject to much uncertainty about the ultimate effects

of these provisions to reduce health care cost growth. For the long-term fiscal projections, that uncertainty also affects the

projections for Medicaid and exchange subsidies, because the cost per beneficiary in these programs grows at the same

reduced rate as Medicare cost growth per beneficiary.

As an illustration of the dramatic effect of variations in health care cost growth rates, Table 2 shows the effect on the

size of reforms necessary to close the fiscal gap under per capita health care cost growth rates that are one percentage point

higher or two percentage points higher than the growth rates in the base projection, as well as the effect of delaying closure of

the fiscal gap.

As indicated earlier, if reform is initiated in 2024, eliminating the fiscal gap requires that the 2024-2098

primary surplus increase by an average of 4.5 percent of GDP in the base case. However, that figure increases to 8.0 percent

of GDP if per capita health cost growth is assumed to be 1.0 percentage point higher, and 14.2 percent of GDP if per capita

The base case health cost growth rates are derived from the projections in the 2023 Medicare Trustees Report. These projections are summarized and

discussed in Note 25 and the “Medicare Projections” section of the unaudited RSI for the SOSI.

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REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

health cost growth is 2.0 percentage points higher. The cost of delaying reform is also increased if health care cost growth is

higher because debt accumulates more rapidly during the period of inaction. For example, the lower part of Table 2 shows

that delaying reform initiation from 2024 to 2034 requires that 2034-2098 primary surpluses be higher by an average of 0.8

percent of GDP in the base case, 1.4 percent of GDP if per capita health cost growth is 1.0 percentage point higher, and 2.6

percent of GDP if per capita health cost growth is 2.0 percentage points higher. The dramatic deterioration of the long-run

fiscal outlook caused by higher health care cost growth shows the critical importance of managing health care cost growth.

Effects of Changes in Interest Rates

A higher debt-to-GDP ratio is likely to increase the interest rate on government debt, making it costlier for the

government to service its debt than if the debt-to-GDP ratio were lower. Table 3 displays the effect of several alternative

scenarios using different nominal interest rates than assumed in the base case on the size of reforms to close the fiscal gap as

well as the effect of delaying closure of the fiscal gap. If reform is initiated in 2024, eliminating the fiscal gap requires that

the 2024-2098 primary surplus increase by an average of 4.5 percent of GDP in the base case, 6.1 percent of GDP if the

interest rate is 2.0 percentage points higher in every year, and 5.3 percent of GDP if the interest rate is 1.0 percentage point

higher in every year. The required increase in the 2024-2098 primary surplus decreases to an average of 3.6 percent of GDP

if the interest rate is 1.0 percentage point lower in every year and 2.6 percent of GDP if the interest rate is 2.0 percentage

points lower in every year. The cost of delaying reform is also increased if interest rates are higher, due to the fact that

interest paid on debt accumulates more rapidly during the period of inaction. For example, the lower part of Table 3 shows

that delaying reform initiation from 2024 to 2034 requires that 2034-2098 primary surpluses be higher by an average of 0.8

percent of GDP in the base case, 2.0 percent of GDP if the interest rate is 2.0 percentage points higher in every year, and 1.3

percent of GDP if the interest rate is 1.0 percentage point higher in every year. The required increase in the 2034-2098

primary surplus is higher by an average of 0.5 percent of GDP if the interest rate is 1.0 percentage point lower in every year

and 0.2 percent of GDP if the interest rate is 2.0 percentage points lower in every year.

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Effects of Changes in Discretionary Spending Growth

The rate of growth of discretionary spending has a large impact on long-term fiscal sustainability. The current base

projection for discretionary spending assumes that spending stays within statutory caps for 2024 and 2025 under the FRA

then grows with nominal GDP starting in 2026. Under the base projection, discretionary spending is approximately 6.2

percent of GDP each year over the projection period. The implications of an alternative scenario are shown in Table 4. In the

alternative scenario, discretionary spending grows with inflation and population beginning in 2026 so as to hold discretionary

spending constant on a real per capita basis. (This growth rate assumption is slower than growth with GDP but is still higher

than the standard 10-year budget baseline assumption, which assumes that discretionary spending grows with inflation but

not with population.) As shown in Table 4, if discretionary spending grows with nominal GDP, eliminating the fiscal gap

requires that the 2024-2098 primary surplus increase by an average of 4.5 percent of GDP. If discretionary spending grows

with inflation and population, the fiscal gap is 2.2 percent of GDP. The cost of delaying reform is greater when discretionary

spending levels are higher. Initiating reforms in 2034 requires that the primary surplus increase by an average of 0.8 percent

of GDP per year in the base case and by an average of 0.4 percent of GDP if discretionary levels grow with inflation and

population. If delayed until 2044, the primary surplus must increase by an average of 2.0 percent of GDP in the base case and

by an average of 1.0 percent of GDP when spending grows with inflation and population.

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Effects of Changes in Individual Income Receipt Growth

The growth rate of receipts, specifically individual income taxes, is another key determinant of long-term sustainability.

The base projections assume growth in individual income taxes over time to account primarily for the slow shift of

individuals into higher tax brackets due to real wage growth (“real bracket creep”). This assumption approximates the long-

term historical growth in individual income taxes relative to wages and salaries and is consistent with current policy without

change, as future legislation would be required to prevent real bracket creep. As an illustration of the effect of variations in

individual income tax growth, Table 5 shows the effect on the size of reforms necessary to close the fiscal gap and the effect

of delaying closure of the fiscal gap if long-term receipt growth as a share of wages and salaries is 0.1 percentage point

higher than the base case, as well as 0.1 percentage point lower than the base case. If reform is initiated in 2024, eliminating

the fiscal gap requires that the 2024-2098 primary surplus increase by an average of 4.5 percent of GDP in the base case, 3.4

percent of GDP if receipt growth is 0.1 percentage point higher, and 5.6 percent of GDP if receipt growth is 0.1 percentage

point lower. The cost of delaying reform is also affected if receipt growth assumptions change, much as was the case in the

previous alternative scenarios.

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178

Fiscal Projections in Context

In this Financial Report, a sustainable fiscal policy is defined as one where the federal debt-to-GDP ratio is stable or

declining over the projection period. However, this definition does not indicate what a sustainable debt-to-GDP ratio might

be. Any particular debt ratio is not the ultimate goal of fiscal policy. Rather, the goals of fiscal policy are many. They include

financing public goods, such as infrastructure and government services; promoting a strong and growing economy; and

managing the debt so that it is not a burden on future generations. These goals are interrelated, and readers should consider

how policies intended to affect one might depend on or affect another.

This Financial Report shows that current policy under this Financial Report’s assumptions is not sustainable. In

evaluating policies that could make policy sustainable, note that debt may play roles in both facilitating and hindering a

healthy economy. For example, government deficit spending supports demand and allows the economy to emerge from

recessions more quickly. Debt may also be a cost-effective means of financing capital investment that promotes future

economic growth, which may in turn make future debt levels more manageable. However, economic theory also suggests that

high levels of debt may contribute to higher interest rates, leading to lower private investment and a smaller capital stock that

the economy can use to grow. Unfortunately, it is unclear what debt-to-GDP ratio would be sufficiently high to produce these

negative outcomes, or whether the key concern is the level of debt per se, or a trend that shows debt increasing over time.

While several empirical studies have attempted to discern a definite relationship between debt and economic growth

from the past experience of countries, the evidence is mixed. One study suggested that debt-to-GDP ratios in excess of 90

percent had significant negative consequences for real GDP growth across advanced countries.

Real GDP growth is

generally lower by about 1 percent when the countries’ debt-to-GDP ratios are above 90 percent relative to the times when

they are below 90 percent.

However, after removing sample countries with very high indebtedness – those with debt-to-GDP

ratios of more than 120 percent – and very low indebtedness – those with debt-to-GDP ratios of less than 30 percent – the

negative relationship between growth and debt is difficult to determine. Another study reports that differences in average

GDP growth in countries with debt-to-GDP ratios between 30-60 percent, 60-90 percent, and 90-120 percent cannot be

statistically distinguished.

Some countries with high debt-to-GDP ratios have been observed to experience lower-than-

average growth, while other countries with similarly high debt-to-GDP ratios have continued to enjoy robust growth.

Analogously, low debt-to-GDP ratios are no guarantee of strong economic growth. Moreover, the direction of causality is

Reinhart, Carmen M., Vincent R. Reinhart and Kenneth S. Rogoff. 2012. “Public Debt Overhangs: Advanced-Economy Episodes Since 1800.” Journal of

Economic Perspectives, 26(3):69.86.

Errata: “Growth in a Time of Debt,” Carmen M. Reinhart and Kenneth S. Rogoff. Harvard University, 2013.

Herndon, Thomas, Michael Ash, and Robert Pollard, “Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff,”

Cambridge Journal of Economics, 2013.

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REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

unclear. High debt may undermine growth through increased interest rates and lower business confidence, or low growth may

contribute to high debt by depressing tax revenues and increasing deficit spending on social safety net programs.

Nevertheless, to put the current and projected debt-to-GDP ratios in context, it is instructive to examine how the U.S.

experience compares with that of other countries. The U.S. government’s debt as a percent of GDP is relatively large

compared with central government debt of other countries, but far from the largest among developed countries. Based on

historical data as reported by the IMF for 29 advanced economies, the debt-to-GDP ratio in 2019 ranged from 5.8 percent of

GDP to 194.8 percent of GDP.

The U.S. is not included in this set of statistics, which underscores the difficulty in

calculating debt ratios under consistent definitions, but the 2023 debt-to-GDP ratio for the U.S. government was

approximately 97 percent. Despite using consistent definitions where available, these debt measures are not strictly

comparable due to differences in the share of government debt that is debt of the central government, how government

responsibilities are shared between central and local governments, how current policies compare with the past policies that

determine the current level of debt, and how robustly each economy grows.

The historical experience of the U.S. may also provide some perspective. As Chart 4 shows, the debt-to-GDP ratio was

highest in the 1940s, following the debt buildup during World War II. In the projections in this Financial Report, the U.S.

would reach the previous peak debt ratio in 2028. However, the origins of current and future federal debt are quite different

from the wartime debt of the 1940s, which limits the pertinence of past experience.

As the cross-country and historical comparisons suggest, there is a very imperfect relationship between the current level

of central government debt and the sustainability of overall government policy. Past accrual of debt is certainly important, but

current policies and their implications for future debt accumulation and future growth are as well.

Government Finance Statistics Yearbook, Main Aggregates and Balances, available at https://data.imf.org. Data are for D1 debt liabilities for the central

government, excluding social security funds, for Advanced Economies. While more current data are available, the recent pandemic has substantially

distorted debt-to-GDP ratios. Pre-pandemic levels likely provide a better basis of comparison.

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

180

Conclusion

The projections in this Financial Report indicate that if policy remains unchanged, the debt-to-GDP ratio will steadily

increase throughout the projection period and beyond, which implies current policy under this Financial Report’s

assumptions is not sustainable and must ultimately change. Subject to the important caveat that policy changes are not so

abrupt that they slow economic growth, the sooner policies are put in place to avert these trends, the smaller are the

adjustments necessary to return the nation to a sustainable fiscal path, and the lower the burden of the debt will be to future

generations.

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Social Insurance

The social insurance programs consisting of Social Security, Medicare, Railroad Retirement, Black Lung, and UI were

developed to provide income security and health care coverage to citizens under specific circumstances as a responsibility of

the government. Because taxpayers rely on these programs in their long-term planning, social insurance program information

should indicate whether the current statutory provisions of the programs can be sustained, and more generally what effect

these provisions likely have on the government’s financial condition. The resources needed to run these programs are raised

through taxes and fees. Eligibility for benefits depends in part on earnings and time worked by the individuals. Social

Security benefits are generally redistributed intentionally toward lower-wage workers (i.e., benefits are progressive). In

addition, each social insurance program has a uniform set of eligibility events and schedules that apply to all participants.

RSI material is generally drawn from the 2023 Annual Reports of the Boards of Trustees, which represents the official

government evaluation of the financial and actuarial status of the Social Security and Medicare Trust Funds. Unless

otherwise noted, all data are for calendar years, all projections are based on current law and the Trustees intermediate set of

assumptions. A significant exception is that the projections disregard benefit payment reductions that would result from the

projected depletion of the OASDI and HI Trust Funds. Under current law, benefit payments would be reduced to levels that

could be covered by incoming tax and premium revenues when the trust fund balances have been depleted.

Social Security and Medicare

Social Security

The OASI and DI Trust Funds were established on January 1, 1940 and August 1, 1956 respectively as separate

accounts in Treasury. The OASI fund pays cash retirement benefits to eligible retirees and their eligible dependents and

survivors, and the much smaller DI fund pays cash benefits to eligible individuals who are unable to work because of medical

conditions and certain family members of such eligible individuals. All financial operations of the OASI and DI Programs are

handled through these respective funds. The two funds are often referred to as the combined OASDI Trust Funds or “Social

Security.” At the end of calendar year 2022, Social Security benefits were paid to approximately 66 million beneficiaries.

The events that trigger benefit payments are quite different however, both trust funds have the same dedicated financing

structure: taxes paid by workers, their employers, and individuals with self-employment income, based on work covered by

the Social Security Program. Currently, employers and employees each pay 6.2 percent of taxable earnings, and the self-

employed pay 12.4 percent of taxable earnings. Payroll taxes are levied on wages and net earnings from self-employment up

to a specified maximum annual amount, referred to as maximum taxable earnings ($160,200.00 in 2023), that increases each

year with economy-wide average wages.

Legislation passed in 1984 subjected up to half of Social Security benefits to income tax and allocated the revenue to

the OASDI Trust Funds. In 1993 legislation increased the potentially taxed portion of benefits to 85.0 percent and allocated

the additional revenue to the Medicare’s HI Trust Fund.

Medicare

The Medicare Program, created in 1965, has two separate trust funds: the HI Trust Fund (otherwise known as Medicare

Part A) and the SMI Trust Funds (which consists of the Medicare Part B and Part D

accounts). HI helps pay for inpatient

hospital skilled nursing facility, home health, and hospice. SMI helps pay for hospital outpatient services, physician services,

and assorted other services and products through Part B and for prescription drugs through Part D.

Though the events that trigger benefit payments are similar, HI and SMI have different dedicated financing structures.

Similar to Social Security, HI is financed primarily by payroll contributions. Currently, employers and employees each pay

1.45 percent of earnings, while self-employed workers pay 2.9 percent of their net earnings. SMI is financed primarily by

direct transfers from the General Fund. Additional financing sources include premiums paid by beneficiaries and, for Part D

state transfers.

Medicare legislation in 2003 created the new Part D account in the Medicare Part B and D Trust Fund to track the finances of a new prescription drug

benefit that began in 2006. As is the case for Medicare Part B, a little less than three-quarters of revenues to the Part D account will come from future

transfers from the General Fund. Consequently, the nature of the relationship between the Medicare Part B and D Trust Fund and the Budget described

below is largely unaffected by the presence of the Part D account though the magnitude will be greater.

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

182

Surplus

Borrowed

Interest

Credited

Benefit

Taxes

Interest

Credited

Surplus

Borrowed

General

Government

Expenditures,

Net Interest

SMI Trust

Fund

Account

Other

Government

Accounts

HI, OASDI

Trust Fund

Accounts

SMI

Premiums and

State Transfers

Income Taxes,

Benefit Taxes,

Other Revenues,

Borrowing from

the Public

Payroll Taxes and

Premiums

HI, OASDI, SMI

Benefits

Other

Government

Transfers

Social Security, Medicare, and Government-wide Finances

Figure 1—Social Security, Medicare, and Government-wide Finances

• Other Government Transfers: Intra-governmental transfers to the Medicare SMI Trust Fund from other government

accounts.

• Surplus Borrowed: Program revenue loaned to the General Fund and treated as if it borrowed the money from the

public.

• Interest Credited: Interest earned when the excess of program revenue over expenses is loaned to the General Fund

becoming a future obligation to the General Fund.

The current and future financial status of the separate Social Security and Medicare Trust Funds is the focus of the

Social Security and Medicare Trustees Reports, a focus that may appropriately be referred to as the “trust fund perspective.”

In contrast, the government primarily uses the budget concept, appropriately referred to as the “budget perspective” or the

“government-wide perspective” as the framework for budgetary analysis and presentation. It represents a comprehensive

display of all federal activities, regardless of fund type or on- and off-budget status and has a broader focus than the trust

fund perspective. Social Security and Medicare are among the largest expenditure categories of the Budget. This section

describes the important relationship between the trust fund perspective and the government-wide perspective.

Figure 1 is a simplified depiction of the interaction of the Social Security and Medicare Trust Funds with the rest of the

Budget.

The boxes on the left show sources of funding, those in the middle represent the trust funds and other government

accounts, including the General Fund into which that funding flows, and the boxes on the right show simplified expenditure

categories. The figure is intended to illustrate how the various sources of program revenue flow through the Budget to

beneficiaries. The general approach is to group revenues and expenditures that are linked specifically to Social Security

and/or Medicare separately from those for other government programs.

Each of the trust funds has its own sources and types of revenue. With the exception of General Fund transfers to

Medicare Parts B and D, each of these revenue sources represents revenue from the public that is dedicated specifically for

the respective trust fund and cannot be used for other purposes. In contrast, personal and corporate income taxes as well as

other revenue go into General Fund and are drawn down for any government program for which Congress has approved

spending.

The Medicare SMI Trust Fund is shown separately from the Social Security OASDI Trust Funds and the

Medicare HI Trust Fund to highlight the unique financing of Medicare Parts B and D. Currently, Medicare Parts B and D are

The Budget encompasses all government financing and is synonymous with a government-wide perspective.

Other programs also have dedicated revenues in the form of taxes and fees (and other forms of receipt) and there are a large number of dedicated trust

funds in the Budget.

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the only programs that are funded through transfers from the General Fund. The transfers are automatic and; their size

depends on program expenses, not on how much revenue comes into Treasury. If General Fund revenues become insufficient

to cover both the mandated transfer to Medicare Parts B and D and expenditures on other general government programs,

Treasury needs to borrow to make up the difference. In the longer run, if transfers to Medicare Parts B and D increase beyond

growth in general revenues is as projected, then Congress must either raise taxes, cut other government spending, reduce

Medicare Parts B and D benefits, or borrow even more.

Intra-governmental transfers (surplus) is a form of “borrowing/lending” between the government accounts. How loans

from the trust funds to the General Fund and later repayments of those loans affect tax income and expenditures of the

General Fund is uncertain. Two extreme cases encompass the possibilities. At one extreme, each dollar the trust funds loan to

the General Fund might reduce borrowing from the public by a dollar at the time the loan is extended, in which case the

General Fund could repay all trust fund loans by borrowing from the public without raising the level of public debt above the

level that would have occurred in the absence of the loans. At the other extreme, the trust fund loans result in additional

largess (i.e., higher spending and/or lower taxes) in General Fund programs at the time the loans are extended, but ultimately

that additional largess is financed with additional austerity (i.e., lower spending and/or higher taxes). The actual impact of

trust fund loans to the General Fund and their repayment on General Fund programs is at one of these two extremes or

somewhere in between.

Actual dollar amounts roughly corresponding to the flows presented in Figure 1 are shown in the following table for FY

2023. From the government-wide perspective, only revenues received from the public and state transfers less expenditures

made to the public are important for the final balance. From the trust fund perspective which is captured in the bottom section

of each of the three trust fund columns, revenue also includes amounts transferred from the General Fund and interest earned

from the lending/borrowing activity between the General Fund and the trust funds. Transfers to the SMI Program from the

General Fund are obligated under current law and therefore, appropriately viewed as revenue from the trust fund perspective.

Revenues and Expenditures for Medicare and Social Security Trust Funds and the Total Federal

Budget for the Fiscal Year ended September 30, 2023

Trust Funds

(In billions of dollars)

SMI

OASDI

Total

All Other

Total

Payroll taxes and other public revenues:

Payroll and benefit taxes

397.5

1,266.3

1,663.8

Premiums

6.1

150.3

156.4

Other taxes and fees

17.9

2,600.9

2,618.8

Total

403.6

168.2

1,266.3

1,838.1

2,600.9

4,439.0

Total expenditures to the public

396.3

621.5

1,354.6

2,372.4

3,761.6

6,134.0

Net results for budget perspective

7.3

(453.3)

(88.3)

(534.3)

(1,160.7)

(1,695.0)

Revenues from other government accounts:

Transfers

1.2

439.0

440.2

(440.2)

Interest credits

5.3

4.4

66.7

76.4

(76.4)

Total

6.5

443.4

66.7

516.6

(516.6)

Net results for trust fund perspective

13.8

(9.9)

(21.6)

(17.7)

N/A

This column is the sum of the preceding two columns and shows data for the total Budget. The figure $1,695.0 billion was

the total federal deficit in FY 2023.

The OASDI figure includes $5.6 billion transferred to the RRB for benefit program payments and is therefore an expenditure to the

public.

Net results are computed as revenues less expenditures.

Transfers and interest credits received by the trust funds appear as a negative entry under “all other” and the column is offset when

summed for the total

Budget

Note: "N/A" indicates not applicable.

Medicare Part A: From the government-wide perspective, the difference between expenditures made to the public and

revenues was $7.3 billion. From the trust fund perspective, after revenues from transfers and interest from the General Fund,

revenues exceeded expenditures by $13.8 billion.

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

184

Medicare Parts B and D: From the government-wide perspective, the difference between expenditures made to the

public and revenues was $453.3 billion resulting in a net draw on the overall budget balance. From the trust fund perspective,

after revenues from transfers and interest from the General Fund, revenues exceeded expenditures by $9.9 billion.

Social Security: From the government-wide perspective, the difference between expenditures made to the public and

revenues was $88.3 billion. From the trust fund perspective, after revenues from transfers and interest from the General Fund,

expenditures exceeded revenues by $21.6 billion.

Cash Flow Projections

Economic and Demographic Assumptions. The Boards of Trustees of the OASDI and Medicare Trust Funds provide in

their annual reports to Congress short-range (10-year) and long-range (75-year) actuarial estimates of each trust fund.

Because of their inherent uncertainty in estimating 75 years into the future, the boards use three alternative sets of economic

and demographic assumptions to show a range of possibilities. The economic and demographic assumptions used for the

most recent set of intermediate projections for Social Security and Medicare are shown in the demographic and economic

assumption section of Note 25—Social Insurance.

Worker-to-Beneficiary Ratio. For the most part, current workers’ pay for current benefits. The relatively smaller number

of persons born after the baby boom will therefore finance the retirement of the baby boom generation. Chart 1 shows the

estimated number of covered workers per OASDI beneficiary using the Trustees intermediate assumptions. Covered workers

are persons having earnings creditable for OASDI purposes based on wages in covered employment or income from covered

self-employment. The estimated number of workers per beneficiary declines from 2.8 in 2022 to 2.1 in 2097. A similar

demographic pattern confronts the Medicare Program. In 2022 every HI beneficiary had about 2.9 workers to pay for his or

her benefit and continues to decline until there are only 2.2 workers per beneficiary by 2097.

Chart 1—Number of Covered Workers per OASDI Beneficiary

2017-2097

Social Security Projections

Income and Expenditures as a Percent of Taxable Payroll. Chart 2 shows annual non-interest income and expenditures

expressed as percentages of taxable payroll. Estimated cost continues to exceed income excluding interest in years 2023

through 2034. Estimated cost increases through about 2078, declines slowly in years 2079-2096, and then increases slightly

in 2097. The estimated income at the end of the 75-year period is sufficient to cover 74.0 percent of the estimated cost.

In any year, to meet all OASDI cost on a timely basis, the combined OASI and DI Trust Funds will need to redeem

Treasury securities. This redemption differs from the situation of prior years when the combined OASI and DI Trust Funds

had been net lenders to the General Fund. Because the program lacks the authority to borrow to continue paying benefits,

benefit payments would be limited to the available noninterest income.

Solvency could be achieved by: 1) increasing revenue equivalent to an immediate and permanent payroll tax rate

increase of 3.44 percentage points; or by 2) reducing scheduled benefits by an amount equivalent to an immediate and

permanent reduction of about 21.3 percent applied to all current and future beneficiaries, or about 25.4 percent if the

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REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

reductions were applied only to newly entitled beneficiaries. Alternatively, some combination of tax increases and benefit

reductions could be adopted.

Chart 2—OASDI Income (Excluding Interest) and Expenditures

as a Percent of Taxable Payroll

2017-2097

Income and Expenditures as a Percent of GDP. Chart 3 shows estimated annual non-interest income and expenditures,

expressed as a percent of GDP. Analyzing these cash flows in terms of percentage of the estimated GDP, which represents

the total value of goods and services produced in the U.S., provides a measure of the cost of the OASDI program in relation

to the size of the national economy that must finance it.

In calendar year 2022, OASDI cost was about $1.2 trillion, which was about 4.9 percent of GDP. The cost of the

program (based on current law) rises to a peak of 6.3 percent of GDP in 2076, then declines to 6.0 percent by 2097. The

increase from 2022 to 2040 is projected to occur as baby boomers continue to become eligible for OASDI benefits, lower

birth rates result in fewer workers per beneficiary, and beneficiaries continue to live longer.

Chart 3—OASDI Income (Excluding Interest) and Expenditures

as a Percent of GDP

2017-2097

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

186

Medicare Projections

Medicare Legislation. The projections presented here are based on current law, certain features of which may result in

some challenges for the Medicare program. In 2010 the PPACA was signed into law and contains the most significant

changes to health care coverage since the Social Security Act. The PPACA provided funding for the establishment of a Center

for Medicare and Medicaid Innovation to test innovative payment and service delivery models to reduce program

expenditures while preserving or enhancing the quality of care furnished to individuals. In addition, the Medicare projections

have been significantly affected by the enactment of the enactment of the IRA of 2022. This legislation has wide-ranging

provisions, including those that restrain price growth and negotiate drug prices for certain Part B and Part D drugs and that

redesign the Part D benefit structure to decrease beneficiary out-of-pocket costs. The law takes several years to implement,

resulting in very different effects by year. The total effect of the IRA of 2022 is to reduce government expenditures for Part

B, to increase expenditures for Part D through 2030, and to decrease Part D expenditures beginning in 2031.

Incorporated in these projections is the sequestration of non-salary Medicare expenditures as required by the following

laws:

• Budget Control Act of 2011 (P.L. 112-25, enacted on August 2, 2011), as amended by the American Taxpayer Relief

Act of 2012 (P.L. 112-240, enacted on January 2, 2013);

• Continuing Appropriations Resolution, 2014 (P.L. 113-67, enacted on December 26, 2013);

• Sections 1 and 3 of P.L. 113-82, enacted on February 15, 2014;

• Protecting Access to Medicare Act of 2014 (P.L. 113-93, enacted on April 1, 2014);

• BBA of 2015 (P.L. 114-74, enacted on November 2, 2015);

• BBA of 2018 (P.L. 115-123, enacted on February 9, 2018);

• BBA of 2019 (P.L. 116-37, enacted on August 2, 2019);

• The CARES Act (P.L. 116-136, enacted on March 27, 2020);

• The CAA, 2021 (P.L. 116-260, enacted on December 27, 2020);

• An Act to Prevent Across-the-Board Direct Spending Cuts, and for Other Purposes (P.L. 117-7, enacted on April 14,

2021);

• IIJA (P.L. 117-58, enacted on November 15, 2021);

• The Protecting Medicare and American Farmers from Sequester Cuts Act (P.L. 117-71, enacted on December 10,

2021); and

• The CAA, 2023 (P.L. 117-328, enacted on December 29, 2022).

The sequestration reduces benefit payments by 2.0 percent from April 1, 2013 through April 30, 2020, by 1.0 percent

from April 1, 2022 through June 30, 2022, by 2.0 percent from July 1, 2022 through September 30, 2032. Because of

sequestration, non-salary administrative expenses are reduced by an estimated 5.0 to 7.0 percent from March 1, 2013 through

September 30, 2032, excluding May 1, 2020 through March 31, 2022 when it was suspended.

The financial projections for the Medicare program reflect substantial, but very uncertain, cost savings deriving from

current law provisions that lower increases in Medicare payment rates to most categories of health care providers, but such

adjustments would probably not be viable indefinitely without fundamental change in the current delivery system. In view of

the factors described above, it is important to note that Medicare’s actual future costs are highly uncertain for reasons apart

from the inherent challenges in projecting health care cost growth over time. For additional information refer to the

“Medicare – Illustrative Alternative Scenario” section of Note 25—Social Insurance and HHS’s financial statements.

Changes in Projection Methods. The long-range cost growth rates must be modified to reflect demographic impacts. In

the 2021 report, these impacts reflected the changing distribution of Medicare enrollment by age and sex, and the

beneficiary’s proximity to death, which is referred to as a TTD adjustment. The TTD adjustment reflects the fact that the

closer an individual is to death, the higher his or her health care spending is.

Total Medicare. Chart 4 shows expenditures and current-law non-interest revenue sources for HI and SMI combined as

a percent of GDP. Under the PPACA, beginning in 2013 the HI Trust Fund receives an additional 0.9 percent tax on earnings

in excess of $250,000 for joint tax return filers and $200,000 for individual tax return filers. As a result of this provision, it is

projected that payroll taxes will grow slightly faster than GDP. Beginning in 2022, HI revenue from income taxes on Social

Security benefits will gradually increase as a share of GDP as the share of benefits subject to such taxes increase. General

revenues are projected to gradually increase from 43.0 percent of Medicare financing in 2022 to about 49.0 percent in 2040,

stabilizing thereafter. SMI premiums will also grow in proportion to general revenue transfers, placing a growing burden on

beneficiaries. Medicare Part B and D general revenues equal 1.7 percent of GDP in 2022 and will increase to an estimated 3.0

percent in 2097 under current law.

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REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

Chart 4—Total Medicare (HI and SMI) Expenditures and Non-interest Income

as a Percent of GDP

2017-2097

Medicare, Part A Income and Expenditures as a Percent of Taxable Payroll. Chart 5 illustrates Medicare Part A income

(excluding interest) and expenditures as a percentage of taxable payroll. The standard HI payroll tax rate is not scheduled to

change in the future under current law and payroll tax income as a percentage of taxable payroll is estimated to remain

constant at 2.9 percent. Income from taxation of Social Security benefits will also increase faster than taxable payroll because

the income thresholds determining taxable benefits are not indexed for price inflation. Since these income thresholds are not

indexed, over time an increasing proportion of workers and their earnings will become subject to the additional HI tax rate.

In 2023 and beyond, as indicated in Chart 5, the cost rate is projected to rise, primarily due to the continued retirements

of those in the baby boom generation and partly due to an acceleration of health services cost growth. This cost rate increase

is moderated by the accumulating effect of the productivity adjustments to provider price updates, which are estimated to

reduce annual HI per capita cost growth by an average of 0.5 percent through 2032 and 1.0 percent thereafter.

Chart 5—Medicare Part A Income (Excluding Interest) and Expenditures

as a Percent of Taxable Payroll

2017-2097

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

188

Medicare, Part A Income and Expenditures as a Percent of GDP. Chart 6 shows estimated annual Medicare Part A non-

interest income and expenditures, expressed as a percent of GDP. This measure provides an idea of the relative financial

resources that will be necessary to pay for Medicare Part A services. In 2022, the expenditures were $342.7 billion, which

was 1.3 percent of GDP. This percentage is projected to increase steadily until about 2046 and then remain fairly level

throughout the rest of the 75-year period, as the accumulated effects of the price update reductions are realized.

Chart 6—Medicare Part A Income (Excluding Interest) and Expenditures

as a Percent of GDP

2017-2097

Medicare Part B and Part D Premium as well as State Transfer Income and Expenditures as a Percent of GDP. Chart 7

shows expenditures for the Part B and D Program expressed as a percent of GDP. It is important to examine the projected rise

in expenditures and the implications for beneficiary premiums and General Fund transfers.

In 2022, SMI expenditures were $562.4 billion, or about 2.2 percent of GDP. Under current law, they would grow to

about 3.9 percent of GDP within 25 years and to 4.2 percent by the end of the projection period. To match the faster growth

rates for SMI expenditures, beneficiary premiums, along with general revenue contributions, would increase more rapidly

than GDP over time but at a slower rate compared to the last 10 years. Average per beneficiary costs for Part B and Part D

benefits are projected to increase after 2022 by about 4.2 percent annually. The associated beneficiary premiums—and

General Fund transfers would increase by approximately the same rate. The special state payments to the Part D account are

set by law at a declining portion of the states’ forgone Medicaid expenditures attributable to the Medicare drug benefit.

189

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

Chart 7—Medicare Part B and Part D Premium and State Transfer

Income and Expenditures as a Percent of GDP

2017-2097

Social Security and Medicare Sensitivity Analysis

Projections of the future financial status of the Social Insurance programs depend on many demographic and economic

assumptions. The estimates presented here are based on the assumption that the programs will continue under current law

except that the full amount of Social Security and Medicare HI scheduled benefits are paid after trust fund depletion contrary

to current law. Income will depend on how these factors affect the size and composition of the working population and the

level and distribution of wages and earnings. Similarly, the cost will depend on how these factors affect the size and

composition of the beneficiary population and the general level of benefits.

Because actual experience is likely to differ from the estimated or assumed values of these factors, this section is

included to illustrate the sensitivity of the long-range projections to changes in assumptions by analyzing key assumptions:

average annual reduction in death rates for Social Security, average annual growth in health costs for Medicare, total fertility

rate, real-wage differential, CPI change, net immigration, and real interest rate.

For this analysis, the intermediate assumptions are used as the reference point, and each selected assumption is varied

individually. The variation used for each individual assumption reflects the levels used for that assumption in the low-cost

and high-cost projections. For example, when analyzing sensitivity with respect to variation in real wages, income, and

expenditure projections using the intermediate assumptions are compared to the outcome when projections are done by

changing only the real wage assumption to either low-cost or high-cost alternatives.

The following tables show the PV of the estimated excess of Social Security and Medicare cost over income for the 75-

year period, using various assumptions, which are shown in parentheses. The low-cost alternative is characterized by

assumptions that improve the financial status of the program (relative to the intermediate assumption) such as slower

improvement in mortality (beneficiaries die younger). In contrast, assumptions under the high-cost alternative worsen the

financial outlook. All PV are calculated as of January 1, 2023 and are based on estimates of income and cost during the 75-

year projection period 2023-2097. Refer to SSA’s and HHS’s unaudited RSI—Social Insurance section for additional

information on the Social Insurance programs sensitivity analysis.

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

190

Present Values of Estimated OASDI Expenditures in Excess of Income Under Various Assumptions,

2023-2097

(Dollar values in trillions; values of assumptions shown in parentheses)

Financing Shortfall Range

Assumption

Low

Intermediate

High

Average annual reduction in death rates

20.5

25.2

30.9

(0.3)

(0.7)

(1.2)

Total fertility rate

22.9

25.2

28.6

(2.2)

(2.0)

(1.7)

Real-wage growth

20.7

25.2

28.2

(1.7)

(1.1)

(0.5)

CPI change

24.6

25.2

25.9

(3.0)

(2.4)

(1.8)

Net immigration

23.6

25.2

26.8

(1,683)

(1,245)

(829)

Real interest rate

21.5

25.2

30.0

(2.8)

(2.3)

(1.8)

The amounts shown represent averages from 2032 to 2097 of the 75-year projection period.

The amounts shown represent averages from 2033 to 2097 of the 75-year projection period.

Per thousands of persons.

Source: SSA

The decrease and increase discussed below represent how much the low and high alternatives differ from the

intermediate alternative shown in the table above over the 75-year projection period.

• The average annual reduction in death rates: If people die at younger ages Social Security income relative to cost

would decrease by $4.7 trillion; if people live longer the shortfall would increase by $5.7 trillion.

• Total fertility rate: Higher rates of fertility increase the ratio of workers to beneficiaries, all else equal. If there are

more workers compared to beneficiaries Social Security income relative to cost would decrease by $2.3 trillion; if

there are fewer workers compared to beneficiaries the shortfall would increase by $3.4 trillion.

• Real-wage growth: Higher real wage growth results in faster income growth relative to expenditure growth; if real-

wage growth is higher Social Security income relative to cost would decrease by $4.5 trillion; if real-wage growth is

lower the shortfall would increase by $3.0 trillion.

• CPI change: If the ultimate annual increase in the CPI percentage is higher Social Security income relative to cost

would decrease by $0.6 trillion; if the ultimate annual increase in the CPI percentage is lower shortfall would

increase by $0.7 trillion.

• Net immigration: If there is a larger increase in immigration levels then Social Security income relative to cost

would decrease by $1.6 trillion; if there is a smaller increase in immigration levels the shortfall would increase by

$1.6 trillion.

• Real interest rate: If the ultimate real interest rate is higher, then Social Security income relative to cost would

decrease by $3.7 trillion; if the ultimate annual real interest rate is lower, then the shortfall would increase by $4.8

trillion.

191

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

Present Values of Estimated Medicare Part A Expenditures in Excess of Income Under Various

Assumptions, 2023-2097

(Dollar values in trillions; values of assumptions shown in parentheses)

Financing Shortfall Range

Assumption

Low

Intermediate

High

Average annual growth in health costs

(5.6)

4.6

21.0

(2.7)

(3.7)

(4.7)

Total fertility rate

3.8

4.6

5.8

(2.2)

(2.0)

(1.7)

Real wage growth

0.9

4.6

7.2

(1.7)

(1.1)

(0.5)

CPI change

3.4

4.6

6.2

(3.0)

(2.4)

(1.8)

Net immigration

4.0

4.6

5.3

(1,732)

(1,277)

(845)

Real interest rate

4.0

4.6

5.4

(2.8)

(2.3)

(1.8)

Average annual growth in health cost is projected to be negative for 2023.

Per thousands of persons.

Source: Centers for Medicare & Medicaid Services

The decrease and increase discussed below represent how much the low and high alternatives differ from the

intermediate alternative shown in the table above over the 75-year projection period.

• Average annual growth in health care costs: The financial status of the HI Trust Fund is extremely sensitive to the

growth rates for health care service costs. Slower growth rates will produce a lower aggregate cost of providing

covered health care services. If a slower growth rate is attained Medicare Part A income relative to cost would

decrease by $10.2 trillion; if the growth rate is higher the shortfall would increase by $16.4 trillion.

• Total fertility rate: Higher rates of fertility increase the ratio of workers to beneficiaries, all else equal. If there are

more workers compared to beneficiaries Medicare Part A income relative to cost would decrease by $0.8 trillion; if

there are fewer workers compared to beneficiaries, the shortfall would increase by $1.2 trillion.

• Real-wage growth: Faster real-wage growth results in smaller HI cash flow deficits. If real-wage growth is higher

Medicare Part A income relative to cost would decrease by $3.7 trillion; if real wage growth is lower, the shortfall

would increase by $2.6 trillion.

• CPI change: If the ultimate annual increase in the CPI percentage is higher Medicare Part A income relative to cost

would decrease by $1.2 trillion; if the ultimate annual increase in the CPI percentage is lower the shortfall would

increase by $1.6 trillion.

• Net immigration: If there is a larger increase in immigration levels then Medicare Part A income relative to cost

would decrease by $0.6 trillion; if there is a smaller increase in immigration levels the shortfall would increase by

$0.7 trillion.

• Real interest rate: If the ultimate real interest rate is higher, Medicare Part A income relative to cost would decrease

by $0.6 trillion; if the ultimate real interest rate is lower, then the shortfall would increase by $0.8 trillion.

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

192

Present Values of Estimated Medicare Parts B and D Future Expenditures Less Premium Income

and State Transfers Under Three Health Care Cost Growth Assumptions, 2023-2097

Medicare Program

Government-wide Resources Needed

Low

Intermediate

High

(in trillions of dollars)

2.7

3.7

4.7

Part B

29.1

40.9

59.4

Part D

5.4

7.6

11.1

Annual growth rate is the aggregate cost of providing covered health care services to beneficiaries. The low and high scenarios

assume that costs increase 1.0 percent slower or faster, respectively, than the intermediate assumption.

Source: Centers for Medicare & Medicaid Services

The table above shows the effects of various assumptions about the growth in health care costs on the PV of estimated

Part B and D expenditures in excess of income in the terms of government-wide resources needed due to the financing

mechanism (General Fund transfers) for Medicare Parts B and D. As with Part A, net Part B and D expenditures are very

sensitive to the health care cost growth assumption. If a slower growth rate is attained government-wide resources needed for

Part B would decrease by $11.8 trillion and Part D by $2.2 trillion; if the growth rate is higher, government-wide resources

needed would increase to $18.5 trillion for Part B and to $3.5 trillion for Part D.

Sustainability of Social Security and Medicare

75-Year Horizon

According to the 2023 Medicare Trustees Report, the HI Trust Fund is projected to remain solvent until 2031 and,

according to the 2023 Social Security Trustees Report, the OASI Trust Fund is projected to have sufficient reserves to pay

full benefits on time until 2033 while the DI Trust Fund is not projected to be depleted within the projection period. In each

case, some trust fund interest income and balances accumulated during prior years are needed to pay benefits. This leads to a

repayment of loans made to the General Fund by the trust funds. The General Fund will pay back the trust funds and then the

monies will be paid out to beneficiaries. Moreover, under current law, General Fund transfers to the SMI Trust Fund will

occur into the indefinite future and will continue to grow with the growth in health care expenditures.

The potential magnitude of future financial obligations under these three social insurance programs is, therefore,

important from a budget perspective as well as for understanding generally the growing resource demands of the programs on

the economy. From the 75-year budget perspective, the PV of the additional resources that would be necessary to meet

projected expenditures, for the three programs combined, is $78.4 trillion. To put this figure in perspective, it would represent

4.4 percent of the PV of projected GDP over the same period ($1,766.0 trillion). These resource needs would be in addition

to the payroll taxes, benefit taxes, and premium payments. Asset redemptions and Medicare Part B and D general revenue

transfers represent formal budget commitments, but no provision exists for covering the Medicare Part A and Social Security

Trust Fund deficits once assets are depleted.

The table below shows the magnitudes of the primary expenditures and sources of financing for the three trust funds

computed on an open-group basis for the next 75 years and expressed in PV terms. The data are consistent with the SOSI

included in the principal financial statements.

From the government-wide perspective, the PV of the total resources needed for the Social Security and Medicare

Programs over and above current-law funding sources (payroll taxes, benefit taxes, and premium payments from the public)

is $78.4 trillion. From the trust fund perspective, which counts the trust funds ($3.2 trillion) and the general revenue transfers

to the SMI Program ($48.5 trillion) as dedicated funding sources, additional resources needed to fund the programs are $26.6

trillion.

193

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

Present Values of Costs Less Revenues of 75-Year Open Group Obligations HI, SMI, and OASDI as of

January 1, 2023

SMI

(In trillions of dollars)

Part B

Part D

OASDI

Total

Revenues from the public:

Taxes

30.9

87.4

118.3

Premiums and state transfers

0.4

15.7

3.0

19.1

Total

31.3

15.7

3.0

87.4

137.4

Total costs to the public

35.9

56.6

10.6

112.6

215.7

Net results - budget perspective

4.6

40.9

7.6

25.2

78.3

Revenues from other government accounts

40.9

7.6

48.5

Trust fund balances as of 1/1/2023

0.2

2.8

3.2

Net results - trust fund perspective

4.4

(0.2)

22.4

26.6

Net results are computed as costs less revenues and trust fund balances. Negative values are indicative of surpluses.

Source: 2023 OASDI Trustees Reports and Centers for Medicare & Medicaid Services

Infinite Horizon

The 75-year horizon is consistent with the primary focus of the Social Security and Medicare Trustees Reports. Experts

have noted that limiting the projections to 75 years understates the magnitude of the long-range unfunded obligations because

summary measures (such as the actuarial balance and open-group unfunded obligations) reflect the full amount of taxes paid

by the next two or three generations of workers, but not the full amount of their benefits. One approach to addressing the

limitation of 75-year summary measures is to extend the projections horizon indefinitely, so that the overall results reflect the

projected costs and revenues after the first 75 years. The open-group infinite horizon net obligation is the PV of all expected

future program outlays less the PV of all expected future program tax and premium revenues. Such a measure is provided in

the following table for the three trust funds represented above.

From the Budget or government-wide perspective, the values in line 1 plus the values in line 4 are summed in the last

line of the table and represent the value of resources needed to finance each of the programs into the infinite future. The total

resources needed for all the programs sums to $175.3 trillion in PV terms. This need can be satisfied only through increased

borrowing, higher taxes, reduced program spending, or some combination.

The second line shows the value of the trust fund at the beginning of 2023. For the HI and OASDI Programs this

represents the extent the programs are funded from the trust fund perspective. From that perspective, when the trust fund is

subtracted, an additional $66.0 trillion is needed to sustain the Social Security program into the infinite future, while the

Medicare Part A program reflects a projected surplus of $15.3 trillion over the infinite horizon. As described above, from the

trust fund perspective, the SMI Program is fully funded; from a government-wide basis, the substantial gap that exists

between premiums, state transfer revenue, and program expenditures in the Part B and D Program ($99.3 trillion and $22.1

trillion, respectively) represents future general revenue obligations of the Budget.

In comparison to the analogous 75-year number in the table above, extending the calculations beyond 2097, captures the

full lifetime benefits, plus taxes and premiums of all current and future participants. The shorter horizon understates the total

financial needs by capturing relatively more of the revenues from current and future workers and not capturing all the

benefits that are scheduled to be paid to them.

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

194

Present Values of Costs Less Tax, Premium and State Transfer Revenue Through the Infinite Horizon,

HI, SMI, OASDI as of January 1, 2023

SMI

(In trillions of dollars)

Part B

Part D

OASDI

Total

Present value of future costs less future taxes,

premiums, and state transfers for current participants

14.6

33.6

5.9

51.3

105.4

Less current trust fund balance

0.2

2.8

3.2

Equals net obligations for past and current participants

14.4

33.4

5.9

48.5

102.2

Plus net obligations for future participants

(29.7)

65.9

16.2

17.5

69.9

Equals net obligations through the infinite future for

all participants

(15.3)

99.3

22.1

66.0

172.1

Present values of future costs less the present

values of future income over the infinite horizon

(15.1)

99.5

22.1

68.8

175.3

Source: 2023 OASDI and Medicare Trustees Reports

195

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

Railroad Retirement, Black Lung, and Unemployment Insurance

Railroad Retirement

The RRB was created in the 1930s to establish a retirement benefit program for the nation’s railroad workers. The RRB

and the SSA share jurisdiction over the payment of retirement and survivor benefits. Railroad retirement pays full retirement

annuities at age 60 to railroad workers with 30 years of service and disability annuities based on total or occupational

disability. It also pays annuities to certain beneficiaries of deceased railroad workers.

Payroll taxes paid by railroad employers and their employees provide a primary source of income for the Railroad

Retirement and Survivors’ Benefit Program. Other sources of program income include: the RRB-SSA-CMS Financial

Interchanges with the Social Security and Medicare Trust Funds, federal income taxes on railroad retirement benefits,

appropriations, and earnings on investments.

Revenues in excess of benefit payments are invested to provide additional trust fund income. Legislation enacted in

2001 allowed for Railroad Retirement Account funds transferred to the NRRIT to be invested in non-governmental assets, as

well as in governmental securities.

Since its inception, NRRIT has received $21.3 billion from RRB and returned $33.2 billion. During FY 2023, the

NRRIT made net transfers of $1.4 billion to the RRB to pay retirement benefits. Administrative expenses of the trust are paid

out of trust assets. The balance as of September 30, 2023, and 2022, of non-federal securities and investments of the NRRIT

are disclosed in Note 7—Investments.

Black Lung

The Federal Coal Mine Health and Safety Act of 1969 created the BLDBP to provide compensation, medical, and

survivor benefits for eligible coal miners who are totally disabled due to pneumoconiosis (Black Lung Disease) arising out of

their coal mine employment and the BLDTF provides benefit payments when no responsible mine operator can be assigned

the liability.

Black lung disability benefit payments are funded by excise taxes from coal mine operators based on the domestic sale

of coal, as are the program’s administrative costs. These taxes are collected by the IRS and transferred to the BLDTF.

P.L. 110-343, Division B-Energy Improvement and Extension Act of 2008, enacted on October 3, 2008, among other

things, restructured the BLDTF debt by refinancing the outstanding high interest rate repayable advances with low interest

rate discounted debt instruments similar in form to zero-coupon bonds, plus a one-time appropriation. This Act also allowed

that any subsequent debt issued by the BLDTF may be used to make benefit payments, other authorized expenditures, or to

repay debt and interest from the initial refinancing.

Unemployment Insurance

The UI Program was created in 1935 to provide income assistance to unemployed workers who lose their jobs generally

through no fault of their own and are unemployed due to a lack of suitable work. The program protects workers during

temporary periods of unemployment through the provision of unemployment compensation benefits. The program is

administered through a unique system of federal and state partnerships established in federal law but executed through

conforming state laws by state officials. The federal government provides broad policy guidance and program direction

through the oversight of DOL, while program details are established through individual state UI statutes, administered

through state UI entities.

The UI Program is financed through the collection of federal and state unemployment taxes levied on subject employers

and deposited in the UTF and federal appropriations. The fund was established to account for the receipt, investment, and

disbursement of unemployment taxes. Federal unemployment taxes are used to pay for the administrative costs of the UI

Program, including grants to each state to cover the costs of state UI operations and the federal share of extended UI benefits.

Federal unemployment taxes are also used to fund an account within the UTF to make advances to state UI accounts when a

state’s UI account balance has been exhausted and the state is unable to make benefit payments.

Cash Flow Projections

Railroad Retirement Income and Expenditures. Railroad retirement cash flow projections are based on the intermediate

set of assumptions used in the RRB’s actuarial valuation of the program. Estimated railroad retirement annual revenue

exceeds annual expenditures in the years 2036 through 2040 and 2043 through 2097. Without investment income, however,

annual expenditures are greater than annual revenue throughout the entire period.

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

196

Sensitivity Analysis. The projections of the future financial status of the RRP depend on many economic and

demographic assumptions. For additional information on the sensitivity of the long-range projections of the RRP and how the

projections are impacted by changes in certain key assumptions, refer to RRB’s financial statements.

Black Lung Projected Cash Inflows and Outflows, in Constant Dollars, for the Open Group. The significant

assumptions used in the projections show that cash inflows from excise taxes will exceed cash outflows for benefit payments

and administrative expenses only for the first four years in the projection period. For FYs 2028 through 2040, the cash

outflows for benefit payments and administrative expenses are projected to exceed cash inflows from excise taxes.

Sensitivity Analysis. For the projected cash inflows and outflows with sensitivity analysis, in constant dollars for the

open group, the significant assumption for medical cost inflation was increased while other significant assumptions were left

unchanged. For additional information on the sensitivity of the projections of the BLDBP and how the projections are

impacted by changes in assumptions, refer to DOL’s financial statements.

Unemployment Insurance Projected Cash Inflows and Outflows, in Constant Dollars, Under Expected Economic

Conditions. The significant assumptions used in the cash flow projections of the UTF show total cash inflow exceeds total

cash outflow in all years in the projection period.

Sensitivity Analysis. The effect on the accumulated UTF assets of projected total cash inflows and cash outflows of the

UTF, in constant dollars, over the ten-year period ending September 30, 2033, are demonstrated in two sensitivity analyses.

Each sensitivity analysis uses an open group, which includes current and future participants in the UI Program. Sensitivity

Analysis I assumes higher rates of unemployment and Sensitivity Analysis II assumes even higher rates of unemployment. In

Sensitivity Analysis I, there is a net cash inflow in FY 2024, net cash outflows in FYs 2025 and 2026, and then net cash

inflows again in FYs 2027 through 2033. In Sensitivity Analysis II, net cash outflows are projected in FYs 2024 through

2028, but inflows exceed outflows in FYs 2029 through 2033; net cash inflows are reestablished in FY 2029 and peak in FY

2033 with a decrease in unemployment rate in FY 2033. For additional information on the sensitivity of the projections of the

UI Program, refer to DOL’s financial statements.

Sustainability

Sustainability of Railroad Retirement from a trust fund perspective, when the trust fund balance ($24.9 billion) and the

financial interchange and transfers ($104.5 billion) are included, the combined balance of the NRRIT, the Railroad

Retirement Account, and the Social Security Equivalent Benefit Account show a slight surplus ($1.4 billion). For additional

information related to the sustainability of the RRP, refer to RRB’s financial statements.

On September 30, 2023, total liabilities of the BLDTF exceeded assets by nearly $6.4 billion. This net position deficit

represents the accumulated shortfall of excise taxes necessary to meet benefit payments, administrative costs, and interest

expense incurred prior to and subsequent to the debt refinancing pursuant to P.L. 110-343. Prior to the enactment of P.L. 110-

343, this shortfall was funded by repayable advances to the BLDTF, which were repayable with interest. Pursuant to P.L.

110-343, any shortfall will be financed with debt instruments similar in form to zero-coupon bonds, with a maturity date of

one year and bear interest at Treasury’s 1-year rate.

The ability of the UI Program to meet a participant’s future benefit payment needs depends on the availability of

accumulated taxes and earnings within the UTF. The effect of projected benefit payments on the accumulated net assets of

the UTF is measured, under an open group scenario, which includes current and future participants in the UI Program. As of

September 30, 2023, total assets within the UTF exceeded total liabilities by nearly $54.4 billion. At the present time there is

a surplus; any surplus of tax revenues and earnings on these revenues over benefit payment expenses is available to finance

benefit payments in future periods when tax revenues may be insufficient.

For additional information related to the sustainability of the RRP, BLDBP, and UI refer to RRB’s and DOL’s financial

statements.

Unemployment Trust Fund Solvency

Each state’s accumulated UTF net assets or reserve balance should provide a defined level of benefit payments over a

defined period. To be minimally solvent, a state’s reserve balance should provide for one year’s projected benefit payment

needs based on the highest levels of benefit payments experienced by the state over the last 20 years. A ratio of 1.00 or

greater indicates that the state UTF account balance is minimally solvent. States below this level are vulnerable to exhausting

their funds in a recession. States exhausting their reserve balance must borrow funds from either FUA or the private markets

to make benefit payments. FUA and Extended Unemployment Compensation Account outstanding advances were $23.0

billion and $8.5 billion, respectively, as of September 30, 2023.

The results of DOL’s state by state analysis indicate 36 state UTF accounts and the accounts of the D.C., Puerto Rico,

and the Virgin Islands were below the minimal solvency ratio of 1.00 at September 30, 2023.

197

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

Deferred Maintenance and Repairs

DM&R result from maintenance not being performed on a timely basis and is the estimated cost to bring government-

owned PP&E to an acceptable condition. DM&R exclude the cost of expanding the capacity of assets or upgrading them to

serve needs different from those originally intended. The consequences of not performing regular maintenance and repairs

could include increased safety hazards, poor service to the public, higher costs in the future, and inefficient operations.

Estimated DM&R costs are not accrued in the Statements of Net Cost or recognized as a liability on the Balance Sheets.

The amounts presented for DM&R are allowed to be measured using one of the following three methods:

• Condition assessment surveys which are periodic inspections of government-owned property to determine the

current condition and estimated cost to bring the property to an acceptable condition.

• Life-cycle cost forecast that is an acquisition or procurement technique that considers operation, maintenance, and

other costs in addition to the acquisition cost of assets.

• Any other method of choice that is similar to the condition assessment survey or life-cycle costing methods.

The table below of DM&R is presented as a single estimate in accordance with SFFAS No. 42, Deferred Maintenance

and Repairs: Amending Statements of Federal Financial Accounting Standards 6, 14, 29, and 32. These amounts were all

measured using the condition assessment survey method. Please refer to the individual financial statements of DOD, DOI,

VA, DOE, USDA, NASA, HHS, GSA, DHS, State, and DOT for additional information on DM&R.

Deferred Maintenance and Repairs as of September 30, 2023, and 2022

(In billions of dollars)

2023

2022

Asset category:

General property, plant, and equipment

250.3

186.8

Heritage assets

32.0

28.1

Stewardship land

1.0

0.8

Total deferred maintenance and repairs

283.3

215.7

Other Claims for Refunds

Other claims for refunds are claims filed for which specific administrative actions such as review by the courts are

required before payments can be made and unasserted claims for refund by taxpayers or importers that may or may not

become payable depending upon the resolution of subsequent events. As stated in SFFAS No. 7, Accounting for Revenue and

Other Financing Sources and Concepts for Reconciling Budgetary and Financial Accounting, unasserted claims for refund

such as unfiled claims for refunds or drawbacks for which no claim has been filed, are not known, therefore estimates are not

able to be determined, and are not recognized on the Balance Sheet. Claims filed for refunds where required administrative

actions are not yet complete as of the close of the reporting period may not be known however, the refunds, may be

reasonably estimable.

Management has estimated amounts that may be paid out as other claims for tax refunds. This estimate represents an

amount (principal and interest) that may be paid for claims pending judicial review by the federal courts or, internally, by

appeals. The total estimated payout (including principal and interest) for claims pending judicial review by the federal courts

is $1.1 billion and $2.1 billion for FYs 2023 and 2022, respectively. For those under appeal, the estimated payout is $1.3

billion for both FYs 2023 and 2022, respectively. To the extent judgments against the government for these claims prompt

other similarly situated taxpayers to file similar refund claims, these amounts could become significantly greater.

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

198

Tax Assessments

The government is authorized and required to make inquiries, determinations, and assessments of all taxes that have not

been duly paid. Unpaid assessments result from taxpayers filing returns without sufficient payment, as well as enforcement

programs such as examination, under-reporter, substitute for return, and combined annual wage reporting. Under federal

accounting standards, unpaid assessments are categorized as taxes receivable if taxpayers agree or a court has determined the

assessments are owed. If neither of these conditions are met, the unpaid assessments are categorized as compliance

assessments. Assessments with little or no future collection potential are called write-offs. Although compliance assessments

and write-offs are not considered receivables under federal accounting standards, they represent legally enforceable claims of

the government. There is, however, a significant difference in the collection potential between compliance assessments and

receivables.

Compliance assessments and pre-assessment work in process are $97.7 billion and $90.9 billion for FYs 2023 and 2022,

respectively. The amount of allowance for uncollectible amounts pertaining to compliance assessments cannot be reasonably

estimated, and thus the net realizable value of the pre-assessment work-in-process cannot be determined. The amount of

assessments that entities have statutory authority to collect at the end of the period but that have been written off and

excluded from accounts receivable are $76.6 billion and $77.3 billion for FYs 2023 and 2022, respectively.

Federal Oil and Gas Resources

The DOI is responsible for managing the nation’s oil and natural gas resources and the mineral revenues on federal

lands, both onshore and on the Outer Continental Shelf. This management process can be broken down into six essential

analysis components: pre-leasing, post-leasing and pre-production, production and post-production, revenue collection, fund

disbursement, and compliance.

Federal Oil and Gas Resources as of September 30, 2023, and 2022

Offshore

Onshore

Total

(In billions of dollars)

2023

2022

2023

2022

2023

2022

Oil and lease condensate

33.3

34.7

29.4

29.1

62.7

63.8

Natural gas, wet after lease separation

1.8

2.0

14.2

22.4

16.0

24.4

Total

35.1

36.7

43.6

51.5

78.7

88.2

The above table presents the estimated PV of future federal royalty receipts on estimated proved reserves

as of

September 30, 2023, and 2022. The federal government’s estimated petroleum royalties have as their basis the DOE’s EIA

estimates of proved reserves. The EIA provides such estimates directly for federal offshore areas and they are adjusted to

extract the federal subset of onshore proved reserves. The federal proved reserves were then further adjusted to correspond

with the effective date of the actual production for calendar year 2021, the most recently published EIA proved reserves

report and then are projected, separately for oil and natural gas, over time to simulate a schedule of when the reserves would

be produced. Future royalties are then calculated from these production streams by applying future price estimates by the

OMB, production growth estimates from the EIA’s 2023 Annual Energy Outlook, and effective royalty rates. The valuation

method used for gas captures royalties from three products–dry gas, wet gas, and natural gas liquids–which collectively are

reported as natural gas, wet after lease separation. The PV of these royalties are then determined by discounting the revenue

Per the EIA, lease condensate is a mixture consisting primarily of pentanes and heavier hydrocarbons which is recovered as a liquid from natural gas in

lease separation facilities. This category excludes natural gas plant liquids, such as butane and propane, which are recovered at downstream natural gas

processing plants or facilities. Also, per the EIA, natural gas, wet after lease separation, is the volume of natural gas remaining after removal of lease

condensate in lease and/or field separation facilities, if any, and after exclusion of nonhydrocarbon gases where they occur in sufficient quantity to render the

gas unmarketable. Natural gas liquids may be recovered from volume of natural gas, wet after lease separation, and at natural gas processing plants

(https://www.eia.gov/dnav/ng/TblDefs/ng_prod_deep_tbldef2.asp).

199

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

stream back to the effective date at a public discount rate assumed to be equal to the OMB’s estimates of future 30-year

Treasury bill rates for offshore, and a weighted average of the U.S. Treasury yield curve from trading dates for the most

recently completed fiscal year for onshore. The 30-year rate was chosen because this maturity life most closely approximates

the productive lives of the proved reserves estimates.

Estimated Federal Oil and Gas Petroleum Royalties (Proved Reserves)

as of September 30, 2023, and 2022

Average Purchase

Average Royalty

Quantity (In millions)

Price ($)

Rate (%)

Petroleum Category

2023

2022

2023

2022

2023

2022

Oil and lease condensate (Bbl):

Offshore

4,434.0

4,142.4

78.52

92.74

13.45

13.29

Onshore

4,645.3

2,946.7

78.40

93.43

12.33

12.38

Total

9,079.3

7,089.1

Natural gas, wet after lease separation

(Mcf):

Offshore

4,203.1

3,911.4

5.16

6.92

11.19

12.41

Onshore

43,543.2

37,663.1

5.70

6.96

11.00

11.22

Total

47,746.3

41,574.5

Bbl = barrels

Mcf = 1,000 cubic feet

The table above provides the estimated quantity, a weighted average purchase price, and a weighted average royalty rate

by category of estimated federal petroleum royalties at the end of FYs 2023 and 2022.

The estimated quantities, average

purchase prices and royalty rates vary by region; the above table reflects an overall weighted average purchase price and

royalty rate, and is not presented on a regional basis, but is instead calculated based on regional averages. The prices and

royalty rates are based upon historical (or estimated) averages, excluding prior-period adjustments, if any, and are affected by

such factors as accounting adjustments and transportation allowances, resulting in effective average prices and royalty rates.

Prices are valued at the lease rather than at the market center and differ from those used to compute the asset estimated PV,

which are forecasted and discounted based upon OMB economic assumptions. For additional details on federal oil and gas

resources, refer to the financial statements of DOI. In addition to the oil and gas resources discussed above, the federal

government also owns oil and gas resources that are not currently under lease.

Gulf of Mexico proved reserves are royalty-bearing volumes. In the Gulf of Mexico, an additional 503.5 million Bbl for FY 2023 and 522.5 million Bbl

for FY 2022 of proved oil reserves, and 426.2 million Mcf for FY 2023 and 412 million Mcf for FY 2022 of proved gas reserves are not reflected in these

totals as they are estimated to be producible royalty-free under various royalty relief provisions. The NPV of the royalty value of the royalty-free proved

reserves volumes in the Gulf of Mexico is estimated to be $3.8 billion for FY 2023 and $4.6 billion for FY 2022.

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

200

Federal Natural Resources Other than Oil and Gas

Federal Natural Resources Other than Oil and Gas as of September 30, 2023, and 2022

(In billions of dollars)

2023

2022

Coal royalties

8.5

9.5

Total

8.5

9.5

The ONRR within DOI is responsible for the management and collection of revenues associated with federal coal leases

which are managed by the BLM within DOI. The ONRR achieves optimal value by ensuring that all natural resource

revenues are efficiently and accurately collected as well as disbursed to recipients in a timely manner by performing audit and

revenue compliance activities.

The Mineral Leasing Act of 1920, as amended, and the Mineral Leasing Act for Acquired Lands of 1947, as amended,

gives DOI the responsibility for coal leasing on approximately 700 million acres of federal mineral estate which includes 570

million of acres where coal development is allowed. The surface estate of these lands may be under the control of BLM, the

U.S. Forest Service (within USDA), private or state landowners, or other federal entities.

Public lands are available for coal leasing after the lands have been evaluated through a multiple-use planning process.

DOI receives coal leasing revenues from a bonus paid at the time of the lease, an annual rent payment of $3.0 per acre, and

royalties paid on the value of the coal after it has been mined. The royalty rate for surface-mining methods is 12.5 percent

and is 8.0 percent for underground mining, and the BLM can approve reduced royalty rates based on maximum economic

recovery. Regulations that govern BLM’s coal leasing program are contained in Title 43, Groups 3000 and 3400 of the CFR.

The above table presents the estimated PV of future federal coal royalty receipts on estimated recoverable reserves as of

September 30, 2023, and 2022. The federal government’s estimated coal royalties have as their basis the DOI’s BLM

estimates of recoverable reserves. The federal recoverable reserves are then further adjusted to correspond with the effective

date of the analysis and then are projected over time to simulate a schedule of when the reserves would be produced. Future

royalties are then calculated by applying future price estimates and effective royalty rates, adjusted for transportation

allowances and other allowable deductions. The PV of these royalties are then determined by discounting the revenue stream

back to the effective date at a public discount rate assumed to be equal to the OMB’s estimates of future 30-year Treasury bill

rates. The 30-year rate was chosen because this maturity life most closely approximates the productive lives of the

recoverable reserves estimates.

In addition to the coal resources discussed above, the federal government has other natural resources under lease

contract whereby the lessee is required to pay royalties on the sale of the natural resource. These natural resources include

soda ash, potash (including muriates of potash and langbeinite phosphate), lead concentrate, copper concentrate, and zinc

concentrate. Soda ash and potash have the largest estimated PV of future royalties. The federal government also owns coal

resources and certain other natural resources that are not currently under lease. For additional details on federal natural

resources-other than oil and gas, refer to the financial statements of DOI.

201

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

Land and Permanent Land Rights

Estimated Acreage by Predominant Use as of September 30, 2023, and 2022

Property,

Plant, &

Equipment

Stewardship

Total Land

Equipment

Stewardship

Total Land

(In thousands of acres)

2023

2022

Commercial Use

205

192,406

192,611

192,810

192,865

Conservation and Preservation

291

1,082,998

1,083,289

263

1,081,832

1,082,095

Operational

30,299

20,608

50,907

36,414

12,886

49,300

Total

30,795

1,296,012

1,326,807

36,732

1,287,528

1,324,260

Acreage held for disposal or

exchange

Estimated acreage includes land and permanent land rights. Acreage of temporary land rights (those for a specified period of

time or a

limited duration) are not included pursuant to SFFAS No. 59, paragraphs 4 and 5.

Department of Interior's U.S. Fish and Wildlife Service manages 670,980 thousand acres of submerged lands in marine national

monuments primarily for the

benefit of fish and wildlife.

SFFAS No. 59, Accounting and Reporting of Government Land requires that the estimated acres of land and permanent

land rights of general PP&E land and stewardship land be presented as unaudited RSI for FYs 2022 through 2025. The

estimated acreage will transition to note disclosures in FY 2026.

As defined in SFFAS No. 59, general PP&E land is land used within the ordinary course of business to support the

mission of the federal government and includes land acquired for or in connection with other general PP&E. General PP&E

land excludes withdrawn public lands or land restricted for conservation, preservation, historical, or other like restrictions.

Such land is categorized as stewardship land. Stewardship land includes both public domain and acquired land and land

rights owned by the federal government intended to be held indefinitely and the majority was acquired by the government

during the first century of the nation’s existence. Land rights are interests and privileges held by the entity in land owned by

others, such as leaseholds, easements, water and waterpower rights, diversion rights, submersion rights, rights-of-way,

mineral rights, and other like interests in land. General PP&E land rights and stewardship land rights that are for an

unspecified period of time or unlimited duration are considered permanent land rights and are included in the estimated

acreage table above. Land rights that are only for a specified period of time or a limited duration are considered temporary

land rights. All temporary land rights will continue to be recorded under general PP&E and depreciated over their time period

after SFFAS No. 59 implementation.

All land and permanent land rights are reported in estimated acres using three predominant use categories including

commercial use, conservation and preservation, and operational. The reporting of estimated acres of land held for disposal or

exchange is also required. Commercial use land includes land or land rights that are predominantly used to generate inflows

of resources from non-federal third parties, usually through special use permits, right-of-way grants, and leases. Examples of

commercial use land are concession arrangements, grants for specific projects, and sales or land exchanges. Conservation and

preservation land includes land or land rights that are predominantly used for the conservation of natural resources and

preservation of buildings, objects, and landscapes. Examples of conservation and preservation land are national parks,

geological resource sites, and wildlife and plant life refuges. Within the conservation and preservation reported acres, DOI’s

U.S. Fish and Wildlife Service manages 670,980 thousand acres of submerged lands in marine national monuments primarily

for the benefit of fish and wildlife. Operational land includes land or land rights predominantly used for general or

administrative purposes. Examples of operational land include land used for military, scientific, and nuclear functions.

Additional information concerning the estimated acres of land and permanent land rights can be obtained from the

financial statements of DOD, DOI, and USDA. Please refer to Note 6—General Property, Plant, and Equipment, Net and

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

202

Note 26—Stewardship Property, Plant, and Equipment for additional information concerning general PP&E land and

stewardship land.

203

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

This page is intentionally blank.

OTHER INFORMATION (UNAUDITED)

204

United States Government

Other Information (Unaudited) for the

Years Ended September 30, 2023, and 2022

Tax Burden

The IRC provides for progressive tax rates, whereby higher earned income is generally subject to higher tax rates. The

following tables present the latest available information on income tax and related income, deductions, and credit for

individuals by income level, and for corporations by size of assets.

Individual Income Tax Liability for Tax Year 2021

Average

Total

Adjusted

Income

Number of

Adjusted

Income

Gross Income

Tax per

Tax as a

Taxable

Gross Income

Tax

per Return

Return

Percentage

Returns

(In millions

(In whole

of Adjusted

Adjusted Gross Income

(In thousands)

of dollars)

dollars)

Gross Income

Under $15,000

30,714

160,421

535

5,223

0.3%

$15,000 under $30,000

27,410

610,846

12,033

22,286

439

2.0%

$30,000 under $50,000

28,926

1,135,403

50,662

39,252

1,751

4.5%

$50,000 under $100,000

37,547

2,681,108

200,702

71,407

5,345

7.5%

$100,000 under $200,000

24,180

3,318,595

367,380

137,245

15,194

11.1%

$200,000 under $500,000

3,728

828,814

123,563

222,321

33,145

14.9%

$500,000 or more

7,888

6,117,860

1,421,518

775,591

180,213

23.2%

Total

160,393

14,853,047

2,176,393

205

OTHER INFORMATION (UNAUDITED)

Corporate Income Tax Liability for Tax Year 2020

Percentage of

Income Subject

Total Income Tax

Income Tax After

Total Assets

to Tax

After Credits

Credits to

(In thousands of dollars)

(In millions of dollars)

Taxable Income

Zero assets

21,064

4,439

21.1%

$1 under $500

6,908

1,426

20.6%

$500 under $1,000

4,364

886

20.3%

$1,000 under $5,000

21,444

4,312

20.1%

$5,000 under $10,000

13,079

2,640

20.2%

$10,000 under $25,000

19,851

3,900

19.6%

$25,000 under $50,000

17,342

3,389

19.5%

$50,000 under $100,000

19,750

3,854

19.5%

$100,000 under $250,000

33,865

6,584

19.4%

$250,000 under $500,000

32,033

6,189

19.3%

$500,000 under $2,500,000

117,758

21,388

18.2%

$2,500,000 or more

1,472,847

217,604

14.8%

Total

1,780,305

276,611

Tax Gap

The gross tax gap is the difference between the amount of tax imposed by law and what taxpayers actually pay on time

and/or timely. The tax gap provides an estimate of the level of overall noncompliance compliance during the relevant tax

periods. Tax gap estimates provide periodic appraisals about the nature and extent of noncompliance for use in formulating

tax administration strategies. Given the complexity of the tax system and available data, a single approach cannot be used for

estimating all the components of the tax gap. The most recent estimates covering the tax year 2014-2016 timeframe were

released in FY 2023. In October 2023, the tax gap projections were issued for tax year 2020 and 2021. The tax gap

projections for tax years 2020 and 2021 assume compliance behavior that has not changed since the 2014-2016 tax gap

estimates.

The gross tax gap is the amount of a tax liability that is not paid voluntarily and on time. The projected gross tax gap

increased to $688.0 billion in tax year 2021. The gross tax gap is comprised of three components: non-filing, underreporting,

and underpayment. The projected gross tax gap for each of these components is $77.0 billion, $542.0 billion, and $68.0

billion, respectively. The gross tax gap projections are also segmented by type of tax: individual income tax, corporation

income tax, employment tax, and estate and excise tax. The projected gross tax gap for each of these types of tax is $520.0

billion, $45.0 billion, $118.0 billion, and $4.0 billion, respectively.

The net tax gap is the gross tax gap less tax that subsequently will be paid either late through voluntary payments or

collected through IRS administrative and enforcement activities and is the portion of the gross tax gap that will not be paid. It

is projected that $63.0 billion of the gross tax gap will eventually be paid resulting in a net tax gap of $625.0 billion. The net

tax gap projections are also segmented by type of tax: individual income tax, corporation income tax, employment tax, and

estate and excise tax. The projected net tax gap for each of these types of tax is $475.0 billion, $37.0 billion, $112.0 billion,

and $1.0 billion, respectively.

For additional information on the tax gap, refer to Treasury’s financial statements.

Tax Expenditures

As discussed in greater detail in Note 19—Collections and Refunds of Federal Revenue, tax and other revenues reported

reflect the effects of tax expenditures, which are special exclusions, exemptions, deductions, tax credits, preferential tax rates,

and tax deferrals that allow individuals and businesses to reduce taxes they may otherwise owe.

Individual amounts may not add to totals due to rounding.

OTHER INFORMATION (UNAUDITED)

206

Tax expenditures are estimated using data from previous years and the economic forecast from the FY 2023 Midsession

Review as reported in the FY 2024 Budget. The largest tax expenditures in FY 2023 are the following (and see the table

below):

• The exclusion from workers’ taxable income of employers’ contributions for health care, health insurance

premiums, and premiums for long-term care insurance;

• The exclusion of contributions to and the earnings of employer defined benefit and defined contribution pension

funds (minus pension benefits that are included in taxable income);

• Imputed rental income forms part of the total value of goods and services produced in a country. But unlike returns

from other investments, the return on homeownership “imputed rent” is excluded from taxable income. In contrast,

landlords must count as income the rent they receive, and renters may not deduct the rent they pay. A homeowner is

effectively both landlord and renter, but the tax code treats homeowners the same as renters while ignoring their

simultaneous role as their own landlords and exempting potential rent they would have paid themselves;

• Preferential tax rates on long-term capital gains; and

• In taxable years 2022 through 2025, a taxpayer may claim a $2,000 per child partially refundable child tax credit. In

2023, up to $1,600 per child of unclaimed credit due to insufficient tax liability may be refundable; a taxpayer may

claim a refund for 15 percent of earnings in excess of a $2,500 floor, up to the lesser of the amount of unused credit

or $1,600 per child. A taxpayer may also claim a nonrefundable credit of $500 for each qualifying child not eligible

for the $2,000 credit.

Largest Income Tax Expenditures

(In billions of dollars)

2023

Exclusion of employer contributions for medical insurance premiums & health care

237.4

Defined benefit & defined contribution pension funds

185.1

Exclusion of net imputed rental income

133.7

Preferential tax rates on long-term capital gains

118.3

Child tax credit

67.5

Generally, identifying and measuring a tax expenditure requires defining a baseline tax system against which identified

tax provisions are exceptions. The tax expenditures prepared for the Budget are estimated relative to a simplified

comprehensive income tax, which defines income as the sum of consumption and the change in net wealth in a given period

of time. Tax expenditure estimates do not necessarily equal the increase in federal revenues (or the change in the Budget

balance) that would result from repealing these special provisions, for the following reasons:

• Eliminating a tax expenditure may have incentive effects that alter economic behavior, which can affect the resulting

magnitudes of the activity or of other tax provisions or government programs. For example, if capital gains were

taxed at ordinary rates, capital gain realizations would be expected to decline, resulting in lower tax receipts. Such

behavioral effects are not reflected in the estimates.

• Tax expenditures are interdependent even without incentive effects. Repeal of a tax expenditure provision can

increase or decrease the tax revenue effect of other provisions. For example, even if behavior does not change,

repeal of an itemized deduction could increase revenue costs from other deductions as some taxpayers move into

higher tax brackets. Alternatively, an itemized deduction repeal could lower the revenue foregone from other

deductions if taxpayers choose to claim the standard deduction over itemizing. Similarly, if two provisions were

repealed simultaneously, the tax liability increase could be greater or less than the sum of the two separate tax

expenditures, because each is estimated assuming that the other remains in force.

• Repeal effects may depend on concurrent tax rate changes. Lowering or raising tax rates can decrease or increase the

estimated revenues from a particular provision. A $10,000 charitable contributions deduction is worth $3,500 in

corporate tax revenues at a 35.0 percent tax rate, but only $2,100 at a 21.0 percent tax rate.

A more comprehensive ranking, including rankings over a 10-year period, and descriptions of tax expenditures can be

found at the following location from Treasury’s Office of Tax Policy: https://home.treasury.gov/policy-issues/tax-policy/tax-

expenditures.

207

OTHER INFORMATION (UNAUDITED)

Unmatched Transactions and Balances

Unmatched Transactions and Balances as of September 30, 2023, and 2022

(In millions of dollars)

2023

2022

Statement of Net Cost:

Buy/sell cost/revenue

603.5

Benefit program revenue/cost

309.6

Non-reciprocating

(357.0)

556.1

Statement of Operations and Changes in Net Position:

Non-reciprocating

(1,630.2)

Custodial and non-entity collections transferred out/in

586.8

Accrual amounts collected/transferred in

(83.9)

Other

1,000.9

(126.4)

Balance Sheet:

Accounts payable/receivable

270.2

Advances from/to others & deferred credits/prepayments

(778.8)

Non-reciprocating

(205.6)

Other

(576.4)

(1,290.6)

Unmatched transactions and balances, net

(860.9)

( ) Parentheses indicate a decrease to Net Position.

The unmatched transactions and balances are needed to balance the accrual-based financial statements. The Statement

of Net Cost, the Statement of Operations and Changes in Net Position and the Balance Sheet include a line for the unmatched

transactions and balances. Transactions and balances between federal entities must be eliminated in consolidation to calculate

the financial position of the government. The amounts included in the table represent intra-governmental activity and

balances that differed between federal entity trading partners and often totaled significantly more in the absolute than the net

amounts shown. The table also reflects other consolidating adjustments and other adjustments that contributed to the

unmatched transactions and balances amount. The adjustments were added to, or subtracted from, gross cost in the Statement

of Net Cost and other liabilities in the Balance Sheet in the year they were recorded. Unresolved intra-governmental

differences (i.e., unmatched transactions and balances) result in errors in the consolidated financial statements.

Unmatched transactions and balances between federal entities impact not only in the period in which differences

originate but also in the periods where differences are resolved. As a result, it would not be proper to conclude that increases

or decreases in the unmatched amounts shown in the “Unmatched Transactions and Balances” table reflect improvements or

deteriorations in the government’s ability to resolve intra-governmental transactions. The federal community considers the

identification and accurate reporting of intra-governmental activity a priority.

Due to the change in presentation of the reported unmatched transactions and balances on the Statement of Net Cost,

Statement of Operations and Changes in Net Position, and Unmatched Transactions and Balances in Other Information

(unaudited), the FY 2022 Statement of Net Cost was adjusted by $0.1 billion to report the associated unmatched transactions

and balances that were previously reported on the Statement of Operations and Changes in Net Position unmatched

transactions and balances line and the buy/sell costs that were previously included in the gross cost recorded on the Statement

of Net Cost. They are now reported on the standalone unmatched transaction and balances line on the Statement of Net Cost.

Additionally, the Unmatched Transactions and Balances table was updated to show the details of the unmatched transactions

and balances by statement.

The unmatched transactions and balances, net reflects the combined impact that each statement line has on the overall

net position of the Financial Report.

APPENDIX A

208

Appendix A: Reporting Entity

This appendix lists the entities (consolidation entities, disclosure entities, or related parties) included in the U.S.

government’s Financial Report. SFFAS No. 47, Reporting Entity, provides guidance for identifying entities that are

consolidation entities, disclosure entities, and related parties.

The Financial Report includes all organizations meeting the inclusion principles of: a) budgeted for by elected officials

of the government; b) owned by the government; and c) controlled by the government with risk of loss or expectation of

benefits. In addition, the Financial Report includes organizations where it would be misleading to exclude even though the

organization does not meet any of the three inclusion principles. If an organization meets the inclusion principles, a

determination of consolidation or disclosure is made.

SFFAS No. 47 identifies consolidation entities as organizations that are consolidated in the financial statements based

on the assessment of the following characteristics as a whole, the organization: a) is financed through taxes and other non-

exchange revenues; b) is governed by the Congress or the President; c) imposes or may impose risks and rewards to the

government; and d) provides goods and services on a non-market basis. It also includes organizations that would result in

misleading or incomplete financial statements, if excluded.

Disclosure entities are entities with which the federal government has relationships that meet the inclusion criteria in

SFFAS No. 47, but are afforded a greater degree of autonomy than consolidation entities. These entities may maintain a

separate legal identity, have a governance structure that vests most decision-making authorities in a governing body to

insulate the organization from political influence, and/or have relative financial independence. Other organizations that are

owned or controlled by the government as a result of regulatory actions, or other government intervention actions are,

generally, deemed to be disclosure entities if the relationship with the government is not expected to be permanent.

Related parties exist if the existing relationship, or one party to the existing relationship, has the ability to exercise

significant influence over the other party’s policy decisions. Related parties do not meet the principles for inclusion, but are

reported in the Financial Report, if they maintain relationships of such significance that it would be misleading to exclude.

1. Consolidation Entities included in the Financial Report:

There are a total of 166 entities that meet the consolidation criteria, and as such are included in the Financial Report.

The lists below describe three groups of consolidation entities that comprise the consolidated government-wide reporting

entity for the Financial Report and include entities from all three branches of government.

Twenty-Four Chief Financial Officer Act Consolidation Entities

Department of Agriculture

www.usda.gov

Department of Labor

www.dol.gov

Department of Commerce

www.doc.gov

Department of State

www.state.gov

Department of Defense

www.defense.gov

Department of Transportation

www.dot.gov

Department of Education

www.ed.gov

Department of the Treasury

www.treasury.gov

Department of Energy

www.energy.gov

Department of Veterans Affairs

www.va.gov

Department of Health and Human Services

www.hhs.gov

Environmental Protection Agency

www.epa.gov

Department of Homeland Security

www.dhs.gov

General Services Administration

www.gsa.gov

Department of Housing and Urban Development

www.hud.gov

National Aeronautics and Space Administration

www.nasa.gov

Department of the Interior

www.doi.gov

National Science Foundation

www.nsf.gov

Department of Justice

www.usdoj.gov

Office of Personnel Management

www.opm.gov

Small Business Administration

www.sba.gov

U.S. Agency for International Development

www.usaid.gov

Social Security Administration

www.ssa.gov

U.S. Nuclear Regulatory Commission

www.nrc.gov

209

APPENDIX A

Sixteen Additional Significant Consolidation Entities

Export-Import Bank of the U.S.

www.exim.gov

Farm Credit System Insurance Corporation

www.fcsic.gov

Federal Communications Commission

www.fcc.gov

Federal Deposit Insurance Corporation

www.fdic.gov

General Fund of the U.S. Government

www.fiscal.treasury.gov/general-fund

Millennium Challenge Corporation

www.mcc.gov

National Credit Union Administration

www.ncua.gov

National Railroad Retirement Investment Trust

www.rrb.gov

Pension Benefit Guaranty Corporation

www.pbgc.gov

Railroad Retirement Board

www.rrb.gov

Securities and Exchange Commission

www.sec.gov

Security Assistance Accounts

www.dsca.mil

Smithsonian Institution

www.si.edu

Tennessee Valley Authority

www.tva.com

U.S. International Development Finance Corporation

www.dfc.gov

U.S. Postal Service

www.usps.com

One Hundred Twenty-six Additional Consolidation Entities

400 Years of African-American History

Committee for Purchase from People Who Are Blind or

Commission

Severely Disabled

Access Board

Commodity Futures Trading Commission

Administrative Conference of the U.S.

Congressional Budget Office

Advisory Council on Historic Preservation

Congressional-Executive Commission on the People’s

African Development Foundation

Republic of China

Alyce Spotted Bear and Walter Soboleff

Consumer Product Safety Commission

Commission on Native Children

Corporation for National and Community Service

American Battle Monuments Commission

Council of the Inspectors General on Integrity and

Appalachian Regional Commission

Efficiency

Architect of the Capitol

Court of Appeals for Veterans Claims

Armed Forces Retirement Home

Court Services and Offender Supervision Agency for DC

Barry Goldwater Scholarship and Excellence in

DC Courts

Education Foundation

DC Courts–Defender Services

Bureau of Consumer Financial Protection

Defense Nuclear Facilities Safety Board

Central Intelligence Agency

Delta Regional Authority

Chemical Safety and Hazard Investigation Board

Denali Commission

Christopher Columbus Fellowship Foundation

Dwight D. Eisenhower Memorial Commission

Civil Rights Cold Case Records Review Board

Election Assistance Commission

Commission for the Preservation of America’s

Environmental Dispute Resolution Fund

Heritage Abroad

Equal Employment Opportunity Commission

Commission of Fine Arts

Executive Office of the President

Commission on Civil Rights

Farm Credit Administration

Commission on Combating Synthetic Opioid

Federal Election Commission

Trafficking

Federal Financial Institutions Examination Council

Commission on International Religious Freedom

Federal Housing Finance Agency

Commission on Security and Cooperation in Europe

Federal Labor Relations Authority

Commission on the State of U.S. Olympics

Federal Maritime Commission

and Paralympics

Federal Mediation and Conciliation Service

APPENDIX A

210

Federal Mine Safety and Health Review Commission

National Transportation Safety Board

Federal Permitting Improvement Steering Council

Neighborhood Reinvestment Corporation

Federal Trade Commission

Northern Border Regional Commission

Government Accountability Office

Nuclear Waste Technical Review Board

Government Publishing Office

Occupational Safety and Health Review Commission

Gulf Coast Ecosystem Restoration Council

Office of Congressional Workplace Rights

Harry S. Truman Scholarship Foundation

Office of Government Ethics

House of Representatives

Office of Navajo and Hopi Indian Relocation

Institute of Museum and Library Services

Office of Nuclear Waste Negotiator*

Intelligence Community Management Account

Office of Special Counsel

Inter-American Foundation

Open World Leadership Center

International Trade Commission

Patient Centered Outcomes Research Trust Fund

James Madison Memorial Fellowship Foundation

Peace Corps

Japan-U.S. Friendship Commission

Presidio Trust

John C. Stennis Center for Public Service

Privacy and Civil Liberties Oversight Board

Training and Development

Public Buildings Reform Board

John F. Kennedy Center for the Performing Arts

Public Defender Service for the DC

Judiciary

Selective Service System

Library of Congress

Senate Commission on Art

Marine Mammal Commission

Southeast Crescent Regional Commission

Medicaid and Children’s Health Insurance Program

Southwest Border Regional Commission

Payment and Access Commission

St. Lawrence Seaway Development Corporation

Medicare Payment Advisory Commission

State Justice Institute

Merit Systems Protection Board

Surface Transportation Board

Military Compensation and Retirement Modernization

Thrift Savings Fund

Commission*

U.S. Agency for Global Media

Morris K. Udall and Stewart L. Udall

U.S. Capitol Police

Foundation

U.S. Capitol Preservation Commission

National Archives and Records Administration

U.S. China Economic and Security Review Commission

National Capital Planning Commission

U.S. Holocaust Memorial Museum

National Commission on Military Aviation Safety

U.S. Institute of Peace

National Commission on Military, National and Public

U.S. Interagency Council on Homelessness

Service

U.S. Semiquincentennial Commission

National Council on Disability

U.S. Senate

National Endowment for the Arts

U.S. Tax Court

National Endowment for the Humanities

U.S. Trade and Development Agency

National Gallery of Art

Vietnam Education Foundation

National Labor Relations Board

Western Hemisphere Drug Policy Commission

National Mediation Board

Women’s Suffrage Centennial Commission

National Railroad Passenger Corporation, Office of the

Woodrow Wilson International Center for Scholars

Inspector General

WWI Centennial Commission

National Security Commission on Artificial Intelligence

*These entities are no longer active and have either returned all remaining fund balances to Treasury during FY 2023 or have

remaining fund balances pending final return to Treasury as of September 30, 2023.

211

APPENDIX A

2. Disclosure Entities and Related Parties of the Financial Report

The entities included below, after considering various factors including quantitative and qualitative materiality, meet the

criteria of SFFAS No. 47 to be reported as disclosure entities or related parties in the Financial Report. Information about the

government’s relationship with these entities is disclosed in Note 27—Disclosure Entities and Related Parties. Additionally,

component entities have also identified additional disclosure entities and related parties that do not meet the qualitative or

quantitative criteria in SFFAS No. 47 to be reported in the Financial Report and are not included in the entities below. The

component entity of each disclosure entity is provided in the brackets below. Refer to the financial statements of the

component entities for more information on additional disclosure entities and related parties.

Disclosure Entities

Amtrak (National Railroad Passenger Service Corp) [DOT]

Federal Home Loan Mortgage Corporation (Freddie Mac) [Treasury]/[FHFA]

Federal National Mortgage Association (Fannie Mae) [Treasury]/[FHFA]

Federal Reserve System [Treasury]

Special Purpose Vehicles [Treasury]

Related Parties

Federal Home Loan Banks [FHFA]

International Monetary Fund and Multilateral Development Banks [Treasury]

Private Export Funding Corporation [EXIM]

APPENDIX B

212

Appendix B: Glossary of Acronyms

This is the current list of acronyms used in the Financial Report.

APM

Alternative Payment Models

ARP

American Rescue Plan Act of 2021

ASC

Accounting Standards Codification

AT&T

American Telephone & Telegraph Company

BBA

Bipartisan Budget Act

Bbl

Barrels

BLDBP

Black Lung Disability Benefit Program

BLDTF

Black Lung Disability Trust Fund

BLM

Bureau of Land Management

BPA

Bonneville Power Administration

BRS

Blended Retirement System

Budget

Budget of the U.S. Government

CAA

Consolidated Appropriations Act

CARES Act

Coronavirus Aid, Relief and Economic Security Act

CERCLA

Comprehensive Environmental Response, Compensation, and Liability Act

CFE

Carbon Pollution-Free Electricity

CFO

Chief Financial Officers

CFO Act

Chief Financial Officers Act of 1990

CFR

Code of Federal Regulations

CMS

Centers for Medicare & Medicaid Services

COFFA

Council of Federal Financial Assistance

COLA

Cost of Living Adjustments

COVID-19

Coronavirus Disease 2019

CPI

Consumer Price Index

CPIM

Consumer Price Index–Medical

CSRDF

Civil Service Retirement and Disability Fund

CSRS

Civil Service Retirement System

D.C.

District of Columbia

DERP

Defense Environmental Restoration Program

DFC

United States International Development Finance Corporation

DHS

Department of Homeland Security

Disability Insurance

DIF

Deposit Insurance Fund

DM&R

Deferred Maintenance and Repairs

DOC

Department of Commerce

DOD

Department of Defense

DOE

Department of Energy

DOI

Department of the Interior

DOJ

Department of Justice

DOL

Department of Labor

213

APPENDIX B

DOT

Department of Transportation

Education

Department of Education

EIA

Energy Information Administration

EIDL

Economic Injury Disaster Loan

EIP

Economic Impact Payment

EPA

Environmental Protection Agency

ESF

Exchange Stabilization Fund

Electric Vehicle

EXIM Bank

Export-Import Bank of the U.S.

Fannie Mae

Federal National Mortgage Association

FASAB

Federal Accounting Standards Advisory Board

FASB

Financial Accounting Standards Board

FCC

Federal Communications Commission

FCIC

Federal Crop Insurance Corporation

FCIP

Federal Crop Insurance Program

FCSB

Farm Credit System Banks

FCSIC

Farm Credit System Insurance Corporation

FDIC

Federal Deposit Insurance Corporation

FECA

Federal Employees’ Compensation Act

Federal Reserve Act

Federal Reserve Act of 1913

Federal Reserve Board

Federal Reserve Board of Governors

FEGLI

Federal Employees’ Group Life Insurance

FEMA

Federal Emergency Management Agency

FERS

Federal Employees’ Retirement System

FFEL

Federal Family Education Loan

FFMIA

Federal Financial Management Improvement Act of 1996

FHA

Federal Housing Administration

FHFA

Federal Housing Finance Agency

FHLBanks

Federal Home Loan Banks

FHWA

Federal Highway Administration

FICA

Federal Insurance Contribution Act

Financial Report

Financial Report of the U.S. Government

FirstNet

First Responder Network Authority

FOMC

Federal Open Market Committee

FRA

Fiscal Responsibility Act of 2023

FR System

Federal Reserve System

FRB

Federal Reserve Banks

FRBB

Federal Reserve Bank of Boston

FRBNY

Federal Reserve Bank of New York

Freddie Mac

Federal Home Loan Mortgage Corporation

FRN

Floating Rate Notes

FRTIB

Federal Retirement Thrift Investment Board

FTO

Fine Troy Ounce

FUA

Federal Unemployment Account

APPENDIX B

214

Fair Value

Fiscal Year

GAAP

U.S. Generally Accepted Accounting Principles

GAO

U.S. Government Accountability Office

GDP

Gross Domestic Product

General Fund

General Fund of the U.S. Government

GHG

Greenhouse Gases

Ginnie Mae

Government National Mortgage Association

GSA

General Services Administration

GSE

Government-Sponsored Enterprise

HHS

Department of Health and Human Services

Hospital Insurance

HQM

High Quality Market

HUD

Department of Housing and Urban Development

IIJA

Infrastructure Investment and Jobs Act

IIM

Individual Indian Monies

IMF

International Monetary Fund

IRA

Inflation Reduction Act

IRC

Internal Revenue Code

IRS

Internal Revenue Service

JPMorgan

JP Morgan Chase Bank

LLC

Limited Liability Company

Limited Partnership

LPR

Lawful Permanent Resident

MAC

Moving Average Cost

MACRA

Medicare Access and Children’s Health Insurance Program Reauthorization Act of 2015

MBS

Mortgage-Backed Securities

Mcf

One Thousand Cubic Feet

MD&A

Management Discussion & Analysis

MDB

Multilateral Development Banks

MERHCF

Medicare Eligible Retiree Health Care Fund

MHPI

Military Housing Privatization Initiative

MLF

Municipal Liquidity Facility LLC

MRF

Military Retirement Fund

MSF

Main Street Facilities LLC

MTF

Military Treatment Facilities

MTS

Monthly Treasury Statement

NAB

New Arrangements to Borrow

NASA

National Aeronautics and Space Administration

NAV

Net Asset Value

NCUA

National Credit Union Administration

NCUSIF

The National Credit Union Share Insurance Fund

NDAA

National Defense Authorization Act

NFIP

National Flood Insurance Program

NHE

National Health Expenditure

NPSBN

Nationwide Public Safety Broadband Network

NPV

Net Present Value

215

APPENDIX B

NRRIT

National Railroad Retirement Investment Trust

NWPA

Nuclear Waste Policy Act of 1982

OASDI

Old-Age, Survivors, and Disability Insurance

OASI

Old-Age and Survivors Insurance

OM&S

Operating Materials and Supplies

OMB

Office of Management and Budget

ONRR

Office of Natural Resources Revenue

OPEB