DEPARTMENT OF THE TREASURY

DEPARTMENT OF THE TREASURY

WASHINGTON D.C. SECRETARY OF THE TREASURY

A Message from the Secretary

I am pleased to present the 2019 Financial Report of the United States Government. This Report provides a comprehensive view of the federal government's current financial position and future fiscal projections.

In 2019, the United States economy continued the longest period of economic expansion in U.S. history. By the end of the fiscal year, the unemployment rate was at the lowest level in a half century, and in August 2019, the African-American unemployment was at an all-time low. American workers continue to take home more in their paychecks, with increases in both average hourly earnings and disposable personal income over the past year. With both the historic Phase One Trade Agreement with China and the United States Mexico and Canada Agreement in place, as well as other ongoing efforts to promote fair and reciprocal trade, the Trump Administration has opened markets for American businesses abroad that will further strengthen our economy and create more opportunities for hardworking families. We remain focused on promoting sustained economic growth that will result in more prosperity for the American people, and will lead to higher revenues and a stronger fiscal outlook for the federal government.

This Report highlights trends in government revenues and costs, as well as the government's long-term fiscal challenge of rising debt levels.

When making policy decisions, it is essential that we have transparency with respect to our federal government's finances. This Report reflects that commitment and is presented to facilitate open and productive dialogue so that all Americans can work together towards a more secure and prosperous future.

Steven T. Mnuchin

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Contents

A Message from the Secretary of the Treasury

Results in Brief...................................................................................................

i

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

1

Management's Discussion and Analysis ..........................................................

8

Statement of the Comptroller General of the United States .......................... 36

Financial Statements Introduction ....................................................................................................... 46 Statement of Net Cost........................................................................................ 53 Statement of Operations and Changes in Net Position ...................................... 55 Reconciliations of Net Operating Cost and Budget Deficit............................... 57 Statements of Changes in Cash Balance from Budget and Other Activities ........................................................................................................... 58 Balance Sheets................................................................................................... 59 Statements of Long-Term Fiscal Projections..................................................... 60 Statements of Social Insurance.......................................................................... 61 Statement of Changes in Social Insurance Amounts ......................................... 64

Notes to the Financial Statements Note 1. Summary of Significant Accounting Policies ....................................... 66 Note 2. Cash and Other Monetary Assets.......................................................... 79 Note 3. Accounts and Taxes Receivable, Net.................................................... 80 Note 4. Loans Receivable and Loan Guarantee Liabilities, Net ........................ 81 Note 5. Inventories and Related Property, Net .................................................. 84 Note 6. Property, Plant, and Equipment, Net..................................................... 86 Note 7. Debt and Equity Securities.................................................................... 87 Note 8. Investments in Government-Sponsored Enterprises ............................. 90 Note 9. Other Assets.......................................................................................... 93 Note 10. Accounts Payable................................................................................ 94 Note 11. Federal Debt Securities Held by the Public and Accrued Interest ...... 95 Note 12. Federal Employee and Veteran Benefits Payable ............................... 99 Note 13. Environmental and Disposal Liabilities .............................................. 109 Note 14. Benefits Due and Payable ................................................................... 111 Note 15. Insurance and Guarantee Program Liabilities ..................................... 112 Note 16. Other Liabilities .................................................................................. 114 Note 17. Collections and Refunds of Federal Revenue ..................................... 116 Note 18. Contingencies ..................................................................................... 119 Note 19. Commitments...................................................................................... 126 Note 20. Funds from Dedicated Collections...................................................... 129 Note 21. Fiduciary Activities............................................................................. 135 Note 22. Social Insurance .................................................................................. 137 Note 23. Long-Term Fiscal Projections............................................................. 155 Note 24. Stewardship Land and Heritage Assets............................................... 161

Note 25. Disclosure Entities and Related Parties .............................................. 162 Note 26. Public-Private Partnerships ................................................................. 167 Note 27. 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 .................. 204 Deferred Maintenance and Repairs ................................................................... 207 Other Claims for Refunds.................................................................................. 207 Tax Assessments ............................................................................................... 208 Federal Oil and Gas Resources.......................................................................... 209 Federal Natural Resources Other than Oil and Gas ........................................... 211

Other Information (Unaudited) Tax Burden ........................................................................................................ 212 Tax Gap ............................................................................................................. 213 Tax Expenditures............................................................................................... 214 Unmatched Transactions and Balances ............................................................. 216

Required Supplementary Stewardship Information (Unaudited) Stewardship Investments ................................................................................... 218 Non-Federal Physical Property........................................................................ 219 Human Capital................................................................................................. 219 Research and Development ............................................................................. 219

Appendices Appendix A: Reporting Entity........................................................................... 222 Appendix B: Glossary of Acronyms.................................................................. 226

U.S. Government Accountability Office Independent Auditor's Report...... 232

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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i

RESULTS IN BRIEF ? 2019 FINANCIAL REPORT OF THE U.S. GOVERNMENT

RESULTS IN BRIEF Highlights of the Fiscal Year 2019 Financial Report of the U.S. Government

Where We Are Now

The government's net cost before taxes and other revenues for fiscal year 2019 was $5.1 trillion - an increase of $526.8 billion (11.6 percent) from fiscal year 2018.

Net cost equals gross costs of $5.3 trillion, less earned program revenues (e.g., Medicare premiums, national park entry fees), and then adjusted for gains or losses from assumption changes used to estimate future federal employee and veterans benefits payments.

The increase in net cost is attributable to the combined effect of many offsetting increases and decreases across the government, including, but not limited to: a $210.0 billion increase in program and military retirement costs at DOD, a $70.7 billion increase at VA due mostly to changes in actuarial losses from experience for veteran benefits costs, $79.8 billion and $62.6 billion increases

at HHS and the SSA, respectively,

largely due to benefits payments, and an $87.3 billion net cost decrease at DOE mainly from comparatively lower increases in environmental liability estimates.

Total government tax and other revenues grew by $236.7 billion (7.0 percent) to about $3.6 trillion for fiscal year 2019.

The government deducts the $3.6 trillion in tax and other revenues from its $5.1 trillion net cost (with some adjustments) to derive its fiscal year 2019 "bottom line" net operating cost of $1.4 trillion, a $286.1 billion increase over fiscal year 2018.

By comparison, the government's budget deficit for fiscal year 2019 was $984.4 billion ? an increase of $205.4 billion over fiscal year 2018. The $460.7 billion difference between the budget deficit and net operating cost is primarily due to accrued costs (incurred but not necessarily paid) that are included in net operating cost, but not the budget deficit. These include but are not limited to estimated future costs of federal employee and veteran benefits.

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