PDF DEPARTMENT OF THE TREASURY Agency Financial Report

DEPARTMENT OF THE TREASURY

Agency Financial Report

Fiscal Year 2014

November 17, 2014

DEPARTMENT OF THE TREASURY

Agency Financial Report

Fiscal Year 2014

Department of the Treasury

Mission Statement

Maintain a strong economy and create economic and job opportunities by promoting conditions that enable economic growth and stability at home and abroad; strengthen national security by combating threats and protecting the integrity of the financial system; and manage the U.S. government's finances and resources effectively.

Treasury's Strategic Goals

1. Promote domestic economic growth and stability while continuing

reforms of the financial system

2. Enhance U.S. competitiveness

and job creation, and promote

international financial stability and more balanced global growth

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3. Fairly and effectively reform and modernize federal financial

management, accounting, and tax systems

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4. Safeguard the financial

system and use financial measures to counter

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national security threats

5. Create a 21st-century

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approach to government by improving efficiency,

effectiveness, and

customer interaction

TABLE OF CONTENTS

U.S. Department of the Treasury | Fiscal Year 2014

MESSAGE FROM THE SECRETARY OF THE TREASURY................................................................................................................... 1 PART 1: MANAGEMENT'S DISCUSSION AND ANALYSIS (UNAUDITED) INTRODUCTION ........................................................................................................................................................................ 3 ORGANIZATION ........................................................................................................................................................................ 4 TREASURY'S FISCAL YEAR 2014-2017 STRATEGIC FRAMEWORK................................................................................................. 7 FISCAL YEAR 2014 PERFORMANCE BY STRATEGIC GOAL ............................................................................................................ 8 PERFORMANCE TREND HIGHLIGHTS ......................................................................................................................................... 18 MANAGEMENT AND PERFORMANCE CHALLENGES HIGHLIGHTS.................................................................................................. 21 FINANCIAL HIGHLIGHTS........................................................................................................................................................... 22 MANAGEMENT ASSURANCES ..................................................................................................................................................... 29 PART 2: ANNUAL FINANCIAL REPORT MESSAGE FROM THE ASSISTANT SECRETARY FOR MANAGEMENT AND DEPUTY CHIEF FINANCIAL OFFICER .................................. 36 INSPECTOR GENERAL'S TRANSMITTAL LETTER .......................................................................................................................... 37 INDEPENDENT AUDITORS' REPORT ON THE DEPARTMENT'S FINANCIAL STATEMENTS.................................................................. 39 MANAGEMENT'S RESPONSE TO INDEPENDENT AUDITORS' REPORT............................................................................................. 46 FINANCIAL STATEMENTS .......................................................................................................................................................... 47 NOTES TO THE FINANCIAL STATEMENTS .................................................................................................................................... 54 REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) ........................................................................................................ 128 PART 3: OTHER INFORMATION (UNAUDITED) SECTION A: SCHEDULE OF SPENDING........................................................................................................................................ 135 SECTION B: TAX GAP AND TAX BURDEN .................................................................................................................................... 136 SECTION C: MANAGEMENT AND PERFORMANCE CHALLENGES IDENTIFIED BY THE INSPECTORS GENERAL AND THE SECRETARY'S RESPONSES .............................................................................................................................................................................. 139 SECTION D: SUMMARY OF FINANCIAL STATEMENT AUDIT AND MANAGEMENT ASSURANCES........................................................ 195 SECTION E: IMPROPER PAYMENTS DETAILED REPORT ............................................................................................................... 196 SECTION F: MATERIAL WEAKNESSES AND AUDIT FOLLOW UP .................................................................................................... 208 SECTION G: FREEZE THE FOOTPRINT ........................................................................................................................................ 216 APPENDIX: GLOSSARY OF ACRONYMS ........................................................................................................................................ 217

U.S. Department of the Treasury | Fiscal Year 2014

MESSAGE FROM THE SECRETARY OF THE TREASURY

As we issue the Agency Financial Report for the Department of the Treasury this year, our nation's economy is growing and moving forward steadily. We have seen significant progress in strengthening the economy, thanks to the spirit of the American people and the reforms put in place by the Administration to reform the financial sector since the depths of the financial crisis.

The signs of recovery are clear. This Administration's policies have helped set in motion the fastest pace of U.S. fiscal consolidation in more than 60 years, reducing the deficit from a peak of 9.8 percent of GDP in 2009 to 2.8 percent of GDP in 2014. Fiscal Year 2014 concluded with unemployment below 6 percent -- its lowest point since July 2008. The October employment report showed that over the past twelve months, the number of private-sector jobs increased by 2.6 million and private employment has risen by at least 200,000 for nine consecutive months -- the first time that has happened since the 1990s. These economic indicators emphasize what is possible if we continue to invest in growth and create opportunities for more Americans. This year, we also have continued to protect our international financial system and advance key national security objectives, through regulation, enforcement, financial intelligence analysis, and targeted financial measures.

While the ongoing economic recovery is strong, there is still more work to do. The Treasury Department released a new strategic plan earlier this year that set five goals for the Department so we can meet our obligations to the American people and help secure America's economic future. These goals are: promoting domestic growth and stability; promoting international stability and balanced global growth; modernizing the management of the country's finances; safeguarding and protecting the financial system; and instilling a culture of excellence across the Treasury Department.

As demonstrated in this report, we have already made significant progress toward achieving these goals in fiscal year 2014.

? Promoting domestic growth and stability: We made major strides in winding down emergency financial crisis response programs, coordinated the final rules designed to make the financial system stronger and more resilient, and extended affordable housing programs to more Americans;

? Promoting international financial stability and balanced global growth: We advanced negotiations for critical free trade agreements, including the Transatlantic Trade and Investment Partnership, and helped improve economic conditions in Europe;

? Reforming and modernizing federal financial management, accounting, and tax systems: We implemented tax-related provisions of both the Patient Protection and Affordable Care Act and the Foreign Account Tax Compliance Act, among many other critical tax regulations;

? Protecting our national security: We increased coordination with key industry and government partners worldwide, including providing critical support to fragile economies in the Middle East and Africa that are threatened by extremism and terrorism; put in place sophisticated sanctions regimes in response to the Ukraine crisis, and continued efforts to address Iran's nuclear program; and

? Creating a 21st century approach to government: We established a Data Steward Group to improve data quality and designated Federal Financial Management Shared Service Providers, which will improve efficiency government-wide.

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U.S. Department of the Treasury | Fiscal Year 2014

Looking forward, we need to build on these accomplishments. To get this done, we will continue to work with businesses, industries, and organizations as well as international, federal, state, and local officials to meet the challenges ahead. We will also continue to work with Congress on legislation that can make rules and government oversight more effective. Within the Treasury Department, we will focus on a comprehensive set of management priorities, including recruiting and retaining outstanding employees and improving the customer experience, which will allow us to continue to lead and support government-wide efforts to increase productivity, reduce waste, and modernize processes and systems. As part of this report, the Treasury Department received an unmodified audit opinion on its consolidated financial statements. Treasury validated the financial and performance data as accurate, complete, and reliable. Treasury strengthened its management controls and made progress toward achieving U.S. financial systems and control objectives. We provide this report as a comprehensive review of the Treasury Department's important work as well as its finances. I look forward to building on the progress described in this year's Agency Financial Report and leading our efforts to achieve the Treasury Department's strategic goals for stronger, more sustainable economic growth for years to come.

Jacob J. Lew Secretary of the Treasury November 17, 2014

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PART 1:

Management's Discussion

and Analysis

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