U.S. Department of the Treasury | Fiscal Year 2013

[Pages:237]U.S. Department of the Treasury | Fiscal Year 2013

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U.S. Department of the Treasury | Fiscal Year 2013

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U.S. Department of the Treasury | Fiscal Year 2013

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U.S. Department of the Treasury | Fiscal Year 2013

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U.S. Department of the Treasury | Fiscal Year 2013

TABLE OF CONTENTS

Message from the Secretary of the Treasury...................................................................................................................... iv Part 1: Management's Discussion and Analysis (Unaudited) Introduction........................................................................................................................................................................ 3 Organization........................................................................................................................................................................ 3 Treasury's Fiscal Year 2012-2015 Strategic Framework and Key Performance Indicators.............................................. 6 Fiscal Year 2013 Performance by Strategic Goal............................................................................................................... 8 Performance by Agency Priority Goal............................................................................................................................... 22 Highlights of Management and Performance Challenges ............................................................................................... 24 Financial Highlights.......................................................................................................................................................... 25 Management Assurances ................................................................................................................................................. 30 Part 2: Annual Financial Report Message from the Assistant Secretary for Management and Deputy Chief Financial Officer ....................................... 38 Inspector General's Transmittal Letter ........................................................................................................................... 39 Independent Auditors' Report on the Department's Financial Statements.................................................................. 41 Management's Response to Independent Auditors' Report............................................................................................ 48 Financial Statements......................................................................................................................................................... 49 Notes to the Financial Statements.................................................................................................................................... 56 Required Supplemental Information (Unaudited) ........................................................................................................ 135 Part 3: Other Information (Unaudited) Section A: Schedule of Spending ................................................................................................................................... 143 Section B: Tax Gap and Tax Burden............................................................................................................................... 144 Section C: Management and Performance Challenges Identified by the Inspectors General and the Secretary's Responses........................................................................................................................................................................ 146 Section D: Summary of Financial Statement Audit and Management Assurances ..................................................... 203 Section E: IPIA (as amended by IPERA) Reporting Details ......................................................................................... 204 Section F: Material Weaknesses and Audit Follow up .................................................................................................. 215 Appendix: Glossary of Acronyms ................................................................................................................................... 223

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U.S. Department of the Treasury | Fiscal Year 2013

MESSAGE FROM THE SECRETARY OF THE TREASURY

Five years ago, our economy faced challenges on a scale not seen since the Great Depression. In the span of a few weeks, many of our nation's largest financial institutions failed or were forced to merge to avoid insolvency. Capital markets ? essential for helping families and businesses meet their everyday financing needs ? were freezing up, dramatically reducing the availability of credit, such as student, auto, and small business loans. Market participants, consumers, and investors were rapidly losing trust in the stability of America's financial system. Our economy was shedding hundreds of thousands of jobs each month.

Since then, thanks to the tenacity of the American people and the bold, decisive, and bipartisan actions taken across the U.S. government, the U.S. economy has returned to a path of stability and steady growth. We have added more than 2 million jobs in the past year alone and our deficits are half of what they were when President Obama took office in 2009. And the end of this year and beginning of next year show signs of further progress.

As we continue on this path to recovery, I am proud of what the Treasury Department has achieved during the past fiscal year. Treasury made significant progress toward achieving its five strategic goals. As demonstrated in this report and by the following highlights, we have effectively pursued policies that will build a strong foundation for future growth and prepare for the challenges ahead ? both at home and abroad.

? To meet our goal of repairing and reforming the financial system, we have worked diligently with federal regulators, as chair of the Financial Stability Oversight Council, to implement historic reforms designed to make the financial system safe, stronger, and more resilient;

? To pursue our goal of enhancing U.S. competitiveness and promoting international financial stability, we have successfully promoted free trade and open markets. Negotiating with the European Union to successfully launch a Transatlantic Trade and Investment Partnership, committing China to undertake future bi-lateral negotiations, and supporting development programs in the Middle East and Northern Africa;

? To protect our national security, we have helped to combat and prevent financial crimes and terrorist financing by conducting evaluations of various countries' compliance with international standards and providing training to international counterparts and we have made great strides to bolster cyber security in the public and private sectors alike;

? To pursue comprehensive tax and fiscal reform, we have worked tirelessly to increase international cooperation in implementing the Foreign Account Tax Compliance Act by signing intergovernmental agreements with eight countries, which will bolster our efforts to combat offshore tax evasion; and

? To manage the government's finances in a fiscally responsible manner, in fiscal year 2013, the Fiscal Service collected over $7.02 billion of delinquent debt, an increase of more than 13 percent over fiscal year 2012 and its highest annual collection to date.

While these accomplishments are worth noting, we cannot afford to be complacent. In fiscal year 2014, Treasury staff will continue to implement reforms and lay the foundation for stable economic growth both at home and abroad. Within the Department, we will continue to focus on a comprehensive set of management priorities, including recruiting and retaining outstanding employees, increasing shared services, using data to make better decisions, and

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U.S. Department of the Treasury | Fiscal Year 2013

improving customer service, which will better enable us to lead and support government-wide financial management efforts to increase productivity, reduce waste and non-essential expenses, and modernize processes and systems. As evidenced in this report, and for the fourteenth consecutive year, the Treasury Department received an unmodified opinion on its consolidated financial statements and, for the fifth consecutive year, on the financial statements of the Office of Financial Stability/Troubled Asset Relief Program. Treasury also made progress in reducing management control weaknesses and in achieving U.S. financial systems and control objectives. The financial and performance data in this report have been validated as accurate, complete, and reliable. To streamline the Department's reporting efforts, we are not providing a single Performance and Accountability Report for Fiscal Year 2013. The Annual Performance Report will be included in the Congressional Budget Justification in February 2014. I look forward to building on the accomplishments contained in this year's Agency Financial Report, and leading the Treasury Department as it pursues policies to fuel our economy into the future and chart a course to expand opportunities for the next generation.

Jacob J. Lew Secretary of the Treasury December 16, 2013

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U.S. Department of the Treasury | Fiscal Year 2013

(UNAUDITED)

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