Notes to financial statements > Item 8. Financial Statements and Supplementary Data > PART II > Government 10-K

Government 10-K PART II Item 8. Financial Statements and Supplementary Data

Notes to financial statements

Published on Mon, May 17, 2021 9:00AM PDT | Updated Mon, May 17, 2021 1:39PM PDT

General note on sources

Federal government

Federal government amounts and the related text within Notes 2 through 22 and Note 25 below were copied from the 2018 United States (US) Treasury (Treasury) Financial Report of the United States (the Financial Report). We condensed and reordered the Financial Report information in reproducing it here to reflect the materiality level of this report, generally rounding dollars to the nearest billion, condensing amounts in tables less than 5% of the respective totals, and deleting the corresponding text. We also excluded the following notes of the Financial Report in creating this report:

  • Note 1 – Summary of significant accounting policies – excluded because aggregated accounting policies for state and local governments are not available, and the federal accounting policies are voluminous and less helpful without the associated state and local government information. Rather, we refer you to each of our sources for information on their accounting policies – see Part I, About this Report, Structure and content, Sources of data within this report for more information on our financial statement sources;
  • Note 17 – Collections and refunds of federal revenue – excluded because the footnote provides details on federal government revenues shown in the Financial Report, whereas our revenues come from a different source and therefore this detail is not applicable to our report; and
  • Note 22 – Social insurance and Note 23 – Long-term fiscal projections – excluded because these footnotes primarily contain projections that a company would not normally include in its footnotes, though we have provided some supplemental information on potential future social insurance program (e.g. Medicare, Social Security) obligations in Exhibits 99.06 and 99.07 of this report.

We also reviewed the 2019 US Treasury Financial Report of the United States (the 2019 Financial Report) and noted that the Treasury had adjusted certain 2018 figures after releasing the Financial Report. We made corresponding adjustments in this report, resulting in changes to: Trading Securities – All other equity securities (Note 7 – Debt and equity securities), reflecting a misstatement related to the Smithsonian Institution, and a related decrease to Other assets (Note 9 – Other assets). See the 2019 Financial Report for more details.

Finally, we supplemented the Financial Report information in Note 8 – Investments in government-sponsored enterprises by providing the Fannie Mae and Freddie Mac balance sheets (obtained from their respective Form 10-Ks) and in Note 22 – Stewardship land and heritage assets by providing tables that show revenues generated from federally owned land, including stewardship land (see source in Note 22).

Please see also Note 1 – Accounting policies below.

State and local government

State and local government amounts within these footnotes were sourced from the Federal Reserve. We have aggregated certain figures to reflect the materiality level of this report and grouped the figures to match the federal government categories. The Federal Reserve does not provide definitions or other accompanying text for the state and local government data. Therefore, there is a risk that we mapped the state and local government figures to the federal government categories in a different way than the state and local governments or the Federal Reserve would have mapped them. In addition, we have not provided as much information for state and local governments in these footnotes as we have for the federal government due to this data source limitation. We plan to provide more detailed state and local data in the future.

Note 1 – Accounting policies

Accounting principles

As discussed under General note on sources above, our combined financial statements and accompanying notes represent the aggregation of data prepared by other organizations. The accounting principles, including principles of combination, the preparation of estimates, and the use of assumptions can be found at each respective source. Principles we have applied in addition to theirs are discussed in this note.

Principles of combination

The combined financial statements have been prepared through the aggregation of federal and state and local government data, as described above. Certain intergovernmental amounts have been eliminated (see Note 23 – Intergovernmental transfers) and certain revenues and expenditures have been netted (see Note 24 – Offsetting amounts).

Estimates and assumptions

Preparing financial statements requires management of organizations to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenditures. As our financial statements comprise the combined data of other organizations, the related estimates and assumptions have been made by management of those organizations.

Changes in prior period amounts

Within our financial statements and footnotes, we have adjusted prior period amounts that our sources have adjusted. In addition, we have reclassified certain prior period amounts to conform to the current period presentation, with no impact on combined net deficit. See details in Note 17 – Prior period adjustments.

Note 2 – Cash and other monetary assets

(In billions)

2018

 

2017

 

 

 

 

 

 

Federal

$

508

 

$

271

State and local

 

802

 

 

786

 

 

 

 

 

 

Total cash and other monetary assets

$

1,310

 

$

1,057

 

 

 

 

 

 

Federal government

(In billions)

2018

 

2017

 

 

 

 

 

 

Unrestricted cash

 

 

 

 

 

Cash held by Treasury for federal government-wide operations

$

379

 

$

153

Other

 

4

 

 

4

Restricted cash

 

32

 

 

26

 

 

 

 

 

 

Total cash

 

415

 

 

183

International monetary assets

 

67

 

 

63

Other monetary assets

 

26

 

 

25

 

 

 

 

 

 

Total cash and other monetary assets

$

508

 

$

271

 

 

 

 

 

 

Unrestricted cash includes cash held by Treasury for governmentwide 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 Federal Reserve 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. Operating Cash held by the Treasury increased by $226 billion (an increase of approximately 148%) in fiscal year 2018 due to Treasury’s investment and borrowing decisions to manage the balance and timing of the federal government’s cash position.

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 Security Assistance Accounts (SAA), which execute foreign military sales. The SAA included $26 billion and $21 billion as of September 30, 2018 and 2017, respectively.

International monetary assets include the US reserve position in the International Monetary Fund (IMF) and US holdings of Special Drawing Rights (SDRs). The US reserve position in the IMF is an interest-bearing claim on the IMF that includes the reserve asset portion of the financial subscription that the United States has paid in as part of its participation in the IMF as well as any amounts drawn by the IMF from a letter of credit made available by the United States as part of its financial subscription to the IMF. The IMF promotes international monetary cooperation and a stable payments system to facilitate growth in the world economy. Its primary activities are surveillance of members’ economies, financial assistance, as appropriate, and technical assistance.

Only a portion of the US 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 from the United States to the IMF. The balance available under the letter of credit totaled $100 billion and $105 billion as of September 30, 2018, and 2017, respectively. The US reserve position in the IMF had a US dollar equivalent of $15 billion and $10 billion as of September 30, 2018, and 2017, respectively.

The SDR is an international reserve asset created by the IMF to supplement the existing reserve assets of its members. These interest-bearing assets can be obtained by IMF allocations, transactions with IMF member countries, or in the form of interest earnings on SDR holdings and reserve positions in the IMF. US SDR holdings are an interest-bearing asset of Treasury’s Exchange Stabilization Fund (ESF). The total amount of SDR holdings of the United States was the equivalent of $51 billion and $52 billion as of September 30, 2018, and 2017, respectively.

The IMF allocates SDRs to its members in proportion to each member’s quota in the IMF. The SDR Act, enacted in 1968, authorized the Secretary of the Treasury to issue SDR Certificates (SDRCs) to the Federal Reserve in exchange for dollars. The amount of SDRCs outstanding cannot exceed the dollar value of SDR holdings. The Secretary of the Treasury determines when Treasury will issue or redeem SDRCs. SDRCs outstanding totaled $5 billion as of September 30, 2018, and 2017, and are included in Note 16 – Other liabilities.

As of September 30, 2018, and 2017, other liabilities included $49 billion and $50 billion, respectively, of interest-bearing liability to the IMF for SDR allocations. The SDR allocation item represents the cumulative total of SDRs distributed by the IMF to the US in allocations. The US has received no SDR allocations since 2009.

State and local government

(In billions)

2018

 

2017

 

 

 

 

 

 

Non-pension

 

 

 

 

 

Time and savings deposits

$

384

 

$

371

Security repurchase agreements

 

165

 

 

158

Money market fund shares

 

20

 

 

20

Checkable deposits and currency

 

135

 

 

141

 

 

 

 

 

 

Total non-pension cash and other monetary assets

$

704

 

$

690

Pension

 

 

 

 

 

Money market fund shares

$

61

 

$

58

Other

 

37

 

 

38

 

 

 

 

 

 

Total pension cash and other monetary assets

 

98

 

 

96

 

 

 

 

 

 

Total cash and other monetary assets

$

802

 

$

786

 

 

 

 

 

 

Note 3 – Accounts and taxes receivable, net

(In billions)

2018

 

2017

 

 

 

 

 

 

Federal

$

145

 

$

143

State and local

 

374

 

 

348

 

 

 

 

 

 

Total accounts and taxes receivable, net

$

519

 

$

491

 

 

 

 

 

 

Federal government

(In billions)

2018

 

2017

 

 

 

 

 

 

Accounts receivable

 

 

 

 

 

Gross accounts receivable

$

113

 

$

118

Allowance for uncollectible amounts

 

(31)

 

 

(30)

 

 

 

 

 

 

Accounts receivable, net

$

82

 

$

88

Taxes receivable

 

 

 

 

 

Gross taxes receivable

$

227

 

$

204

Allowance for uncollectible amounts

 

(164)

 

 

(149)

 

 

 

 

 

 

Taxes receivable, net

$

63

 

$

55

 

 

 

 

 

 

Total accounts and taxes receivable, net

$

145

 

$

143

 

 

 

 

 

 

Gross accounts receivable include related interest receivable of $4 billion and $3 billion as of September 30, 2018, and 2017, respectively.

Treasury comprises approximately 41% of the federal government’s reported accounts and taxes receivable, net, as of September 30, 2017. The following list of entities comprise 98% of the federal government’s accounts and taxes receivable, net, of $145 billion as of September 30, 2018. Please refer to the following financial statements for details on gross accounts and taxes receivable and the related allowance for uncollectible amounts: of the Department of the Treasury (Treasury), the Department of Health and Human Services (HHS), the Social Security Administration (SSA), the Department of the Interior (DOI), the Department of Homeland Security (DHS), the Department of Defense (DOD), the Pension Benefit Guaranty Corporation (PBGC), the Department of Energy (DOE), the Federal Deposit Insurance Corporation (FDIC), the Department of Veterans Affairs (VA), the Tennessee Valley Authority (TVA), the Office of Personnel Management (OPM), the Department of Labor (DOL), the Department of Agriculture (USDA), the United States Postal Service (USPS), the Federal Communications Commission (FCC), the Department of Housing and Urban Development (HUD), the Federal Trade Commission (FTC), and the Environmental Protection Agency (EPA).

Accounts and taxes receivable, net, have historically included amounts related to criminal restitution owed to the federal government. In fiscal years 2018 and 2017, accounts and taxes receivable, net included $8 billion and $9 billion, respectively, of gross receivables related to criminal restitution orders monitored by responsible entities, of which $0.7 billion and $0.5 billion is determined to be collectible for fiscal years 2018 and 2017, respectively. Of this gross receivable amount as of September 30 2018 and 2017, Treasury, HHS, and SSA collectively account for $5 billion and $8 billion, respectively, of which $0.5 billion is determined to be collectible for both September 30, 2018 and 2017.

State and local government

(In billions)

2018

 

2017

 

 

 

 

 

 

Accounts receivable, net

$

219

 

$

199

Taxes receivable, net

 

155

 

 

149

 

 

 

 

 

 

Total accounts and taxes receivable, net

$

374

 

$

348

 

 

 

 

 

 

Note 4 – Loans receivable and loan guarantee liabilities, net

Loans receivable

(In billions)

2018

  

2017

 

 

 

 

 

 

Federal

$

1,400

 

$

1,332

State and local

 

268

 

 

256

 

 

 

 

 

 

Total loans receivable

$

1,668

 

$

1,588

 

 

 

 

 

 

Loan guarantee liabilities

(In billions)

2018

 

2017

 

 

 

 

 

 

Federal

$

38

 

$

43

State and local

 

 

 

 

 

 

 

 

 

Total loan guarantee liabilities

$

38

 

$

43

 

 

 

 

 

 

Federal government

The federal government has two types of loan programs: direct loans and loan guarantees. One major type of loan is direct loans such as the Department of Education’s (Education) Federal Direct Student Loans. The second type is loan guarantee programs, such as the Department of Housing and Urban Development’s (HUD’s) Federal Housing Administration Loans program.

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.

The amount of the long-term cost of post-1991 direct loans and loan guarantees outstanding equals the subsidy cost allowance for direct loans and the liability for loan guarantees (including defaulted guaranteed loans) as of September 30. The amount of the long-term cost of pre-1992 direct loans and loan guarantees equals the allowance for subsidy amounts (or present value allowance) for direct loans and the liability for loan guarantees. The long-term cost is based on all direct loans and guaranteed loans disbursed in this fiscal year and previous years that are outstanding as of September 30. It includes the subsidy cost of these loans and guarantees estimated as of the time of loan disbursement and subsequent adjustments such as modifications, re-estimates, amortizations, and write-offs.

Net loans receivable 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 a compensation for losses that the federal government sustained under post-1991 loan guarantees. Please refer to the financial statements of the USDA, VA, and HUD for significant detailed information regarding foreclosed property. The total subsidy expense/(income) is the cost of direct loans and loan guarantees recognized during the fiscal year. It consists of the subsidy expense/(income) incurred for direct and guaranteed loans disbursed during the fiscal year, for modifications made during the fiscal year of loans and guarantees outstanding, and for upward or downward re-estimates as of the end of the fiscal year of the cost of loans and guarantees outstanding.

Loans receivable

(In billions)

Loans Receivable,

Gross

 

Interest

Receivable

 

Foreclosed

Property

 

Allowance

for Subsidy

 

Net Loans

Receivable

 

Subsidy Expense

(Income) for the

Fiscal Year

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal Direct Student Loans – Education

$

1,084

 

$

72

 

$

 

$

(41)

 

$

1,115

 

$

4

Federal Family Education Loans – Education

 

95

 

 

21

 

 

 

 

(23)

 

 

93

 

 

2

All other programs

 

212

 

 

12

 

 

2

 

 

(34)

 

 

192

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total loans receivable

$

1,391

 

$

105

 

$

2

 

$

(98)

 

$

1,400

 

$

7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In billions)

Loans Receivable,  Gross

 

Interest

Receivable

 

Foreclosed

Property

 

Allowance

for Subsidy

 

Net Loans

Receivable

 

Subsidy Expense

(Income) for the

Fiscal Year

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal Direct Student Loans – Education

$

999

 

$

60

 

$

 

$

(17)

 

$

1,042

 

$

5

Federal Family Education Loans – Education

 

102

 

 

19

 

 

 

 

(19)

 

 

102

 

 

2

All other programs

 

210

 

 

10

 

 

3

 

 

(35)

 

 

188

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total loans receivable

$

1,311

 

$

89

 

$

3

 

$

(71)

 

$

1,332

 

$

7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loan guarantee liabilities

 

Principal Amount

of Loans Under

Guarantee

 

Principal Amount

Guaranteed by the US

 

Loan Guarantee

Liabilities

 

Subsidy Expense

(Income) for the

Fiscal Year

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In billions)

2018

 

2017

 

2018

 

2017

 

2018

 

2017

 

2018

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal Housing Administration Loans – HUD

$

1,471

 

$

1,410

 

$

1,327

 

$

1,278

 

$

19

 

$

21

 

$

(9)

 

$

13

Veterans Housing Benefit Programs – VA

 

664

 

 

597

 

 

168

 

 

152

 

 

9

 

 

10

 

 

(3)

 

 

(1)

All other guaranteed loan programs

 

511

 

 

528

 

 

468

 

 

488

 

 

10

 

 

12

 

 

(2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total loan guarantees

$

2,646

 

$

2,535

 

$

1,963

 

$

1,918

 

$

38

 

$

43

 

$

(14)

 

$

12

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loan programs

The majority of the loan programs are provided by Education, HUD, USDA, Small Business Administration (SBA), VA, and Export-Import Bank. For significant detailed information regarding the direct and guaranteed loan programs listed in the tables above, please refer to the financial statements of the entities.

Education has two major loan programs, authorized by Title IV of the Higher Education Act of 1965 (HEA). The first program is the William D. Ford Federal Direct Loan Program, (referred to as the Direct Loan Program) that was established in fiscal year 1994. The Direct Loan Program offered four types of educational loans: Stafford, Unsubsidized Stafford, PLUS for parents and/or graduate or professional students, and consolidation loans. With this program, the federal government makes loans directly to students and parents through participating institutions of higher education. Direct loans are originated and serviced through contracts with private vendors. Education disbursed approximately $134 billion in Direct Loans to eligible borrowers in fiscal year 2018 and approximately $143 billion in fiscal year 2017. The second program is the Federal Family Education Loan (FFEL) Program. This program was established in fiscal year 1965, and is a guaranteed loan program. Like the Direct Loan Program, it offered four types of loans: Stafford, Unsubsidized Stafford, PLUS for parents and/or graduate or professional students, and consolidation loans. The Student Aid and Fiscal Responsibility Act (SAFRA), 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. During fiscal year 2018, Education net loans receivable increased by $64 billion, largely the result of increased Direct Loan Program disbursements for new loan originations and FFEL consolidations, net of borrower principal and interest collections.

HUD’s Federal Housing Administration (FHA) provides mortgage insurance to encourage lenders to make credit available to expand homeownership. FHA serves many borrowers that the conventional market does not serve adequately. This includes first-time homebuyers, minorities, low-income, and other underserved households to realize the benefits of homeownership. Borrowers obtain an FHA insured mortgage and pay an upfront premium as well as an annual premium to FHA. The proceeds from those premiums are used to fund FHA program costs, including claims on defaulted mortgages and holding costs, property management fees, property sales, and other associated costs.

VA operates the following direct loan and loan guaranty programs: Home Loans, Insurance Policy Loans, and Vocational Rehabilitation and Employment Loans. The VA Home Loans program is the largest of the VA loan programs. The Home Loans program provides loan guarantees and direct loans to veterans, service members, qualifying dependents, and limited non-veterans to purchase homes and retain homeownership with favorable market terms. During fiscal year 2018, the face value of outstanding principal on loans guaranteed by the VA increased by $67 billion. This increase was primarily due to $146 billion in new loans guaranteed by the VA, partially offset by $78 billion in guaranteed loan terminations.

State and local government

(In billions)

2018

 

2017

 

 

 

 

 

 

Loans (mortgages)

$

259

 

$

247

Loans (mortgages) – pensions

 

9

 

 

9

 

 

 

 

 

 

Total loans receivable

$

268

 

$

256

 

 

 

 

 

 

Note 5 – Inventories and related property, net

(In billions)

2018

 

2017

 

 

 

 

 

 

Federal

$

338

 

$

327

State and local

 

 

 

 

 

 

 

 

 

Total inventories and related property, net

$

338

 

$

327

 

 

 

 

 

 

Federal government

(In billions)

2018

 

2017

 

 

 

 

 

 

Operating materials and supplies held for use

$

125

 

$

144

Inventory and operating material and supplies held for repair

 

71

 

 

67

Inventory purchased for resale

 

68

 

 

62

Stockpile materials held in reserve for future use

 

52

 

 

49

Other inventories and related property

 

31

 

 

13

Allowance for loss

 

(9)

 

 

(8)

 

 

 

 

 

 

Total inventories and related property, net

$

338

 

$

327

 

 

 

 

 

 

Beginning in fiscal year 2018, all entities are now reported together in each line item total for inventories and related property, net. DOD comprises approximately 82% of the government’s inventories and related property, net, as of September 30, 2018. DOD continues to implement Statements of Federal Financial Accounting Standards (SFFAS) No. 48, Opening Balances for Inventory, Operating Materials and Supplies, and Stockpile Materials, which permits alternative methods in establishing opening balances for inventories and related property.

The following entities comprise over 98% of the government’s reported inventories and related property, net of $338 billion as of September 30, 2018. Refer to each entities’ financial statements for details: DOD, DOE, and HHS.

Operating materials and supplies held for use are tangible personal property to be consumed in normal operations.

Inventory and operating materials and supplies held for repair are damaged inventory that require repair to make them suitable for sale (inventory) or is more economical to repair than to dispose of (operating materials and supplies). Excess, obsolete, and unserviceable inventory is reported at net realizable value.

Inventory purchased for resale is the cost or value of tangible personal property purchased by an agency for resale. As of September 30, 2017, DOD values approximately 98% of its resale inventory using the moving average cost (MAC) method. DOD reports the remaining 2% of resale inventories at an approximation of historical cost using LAC adjusted for holding gains and losses. DOD continues to implement SFFAS No. 48, permitting alternative methods in establishing opening balances. Please refer to the financial statements of DOD for more information on its inventories.

Stockpile materials include strategic and critical materials held in reserve for use in national defense, conservation, or national emergencies due to statutory requirements; for example, nuclear materials and oil. The majority of the stockpile materials held in reserve for future use were reported by the Department of Energy (DOE). Please refer to the financial statements of DOE for more information on stockpile materials.

State and local government

Based on our review of specific Comprehensive Annual Financial Reports, we know that the state governments do have inventories and related property, however the Federal Reserve does not provide information on the balances, and we are not aware of another aggregated source of the data.

Note 6 – Property, plant, and equipment, net

(In billions)

2018

  

2017

 

 

 

 

 

 

Federal

$

1,091

 

$

1,087

State and local

 

11,323

 

 

10,725

 

 

 

 

 

 

Total property, plant, and equipment, net

$

12,414

 

$

11,812

 

 

 

 

 

 

Federal government

 

Cost

  

Accumulated

Depreciation/

Amortization

  

Net

  

Cost

  

Accumulated

Depreciation/

Amortization

  

Net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In billions)

2018

  

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Furniture, fixtures, and equipment

$

1,364

 

$

783

 

$

581

 

$

1,321

 

$

753

 

$

568

Buildings, structures, and facilities

 

728

 

 

431

 

 

297

 

 

693

 

 

407

 

 

286

Construction in progress

 

160

 

 

 

 

160

 

 

168

 

 

 

 

168

Land

 

22

 

 

 

 

22

 

 

24

 

 

 

 

24

Other property, plant, and equipment

 

87

 

 

56

 

 

31

 

 

84

 

 

43

 

 

41

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total property, plant, and equipment, net

$

2,361

 

$

1,270

 

$

1,091

 

$

2,290

 

$

1,203

 

$

1,087

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning in fiscal year 2018, all entities are now reported together in each line item total for property, plant and equipment, net (PP&E). DOD comprises approximately 70% of the federal government’s reported PP&E, as of September 30, 2018. DOD continues to implement SFFAS No. 50, Establishing Opening Balances for General Property, Plant and Equipment, which permits alternative methods in establish opening balances for general property, plant and equipment.

The following agencies comprise over 90% of the federal government’s reported PP&E, of $1,091 billion as of September 30, 2018. Refer to each agencies’ financial statements for details: DOD, DOE, General Services Administration (GSA), VA, TVA, DOI, the Department of State (DOS), Department of Transportation (DOT), USPS, DHS, National Aeronautics and Space Administration (NASA), Department of Commerce (DOC), Department of Justice (DOJ), and HHS.

State and local government

(In billions)

2018

 

2017

 

 

 

 

 

 

Structures

$

10,929

 

$

10,346

Equipment

 

258

 

 

251

Intellectual property

 

136

 

 

128

 

 

 

 

 

 

Total property, plant, and equipment, net

$

11,323

 

$

10,725

 

 

 

 

 

 

Note 7 – Debt and equity securities

(In billions)

2018

 

2017

 

 

 

 

 

 

Federal

$

112

 

$

116

State and local

 

4,963

 

 

4,629

 

 

 

 

 

 

Total debt and equity securities

$

5,075

 

$

4,745

 

 

 

 

 

 

Federal government

(In billions)

Cost

 

Adjustment

 

Book Value

 

 

 

 

 

 

 

 

 

2018

 

 

 

 

 

 

 

 

Held-to-Maturity

 

 

 

 

 

 

 

 

Equity securities

$

4

 

$

 

$

4

 

 

 

 

 

 

 

 

 

Total held-to-maturity (net investment)

$

4

 

$

 

$

4

Available-for-Sale

 

 

 

 

 

 

 

 

Debt securities

$

4

 

$

 

$

4

 

 

 

 

 

 

 

 

 

Total available-for-sale (fair value)

$

4

 

$

 

$

4

Trading Securities

 

 

 

 

 

 

 

 

Debt securities:

 

 

 

 

 

 

 

 

Non-US Government

$

13

 

$

 

$

13

Corporate and other bonds

 

16

 

 

 

 

16

All other debt securities

 

6

 

 

(1

)

 

5

Equity securities:

 

 

 

 

 

 

 

 

Unit trust

 

16

 

 

10

 

 

26

All other equity securities

 

17

 

 

1

 

 

18

 

 

 

 

 

 

 

 

 

Total trading securities (fair value)

$

68

 

$

10

 

$

78

 

 

 

 

 

 

 

 

 

Total debt and equity securities categorized as held-to-maturity, available-for-sale or trading

 

 

 

 

 

 

$

86

 

 

 

 

 

 

 

 

 

Total Railroad Retirement Board (RRB) debt and equity securities

 

 

 

 

 

 

 

26

 

 

 

 

 

 

 

 

 

Total debt and equity securities

 

 

 

 

 

 

$

112

 

 

 

 

 

 

 

 

 

(In billions)

Cost

 

Adjustment

 

Book Value

 

 

 

 

 

 

 

 

 

2017

 

 

 

 

 

 

 

 

Held-to-Maturity

 

 

 

 

 

 

 

 

Equity securities

$

4

 

$

 

$

4

 

 

 

 

 

 

 

 

 

Total held-to-maturity (net investment)

$

4

 

$

 

$

4

Available-for-Sale

 

 

 

 

 

 

 

 

Debt securities

$

5

 

$

1

 

$

6

 

 

 

 

 

 

 

 

 

Total available-for-sale (fair value)

$

5

 

$

1

 

$

6

Trading Securities

 

 

 

 

 

 

 

 

Debt securities:

 

 

 

 

 

 

 

 

Non-US Government

$

12

 

$

 

$

12

Corporate and other bonds

 

16

 

 

1

 

 

17

All other debt securities

 

9

 

 

 

 

9

Equity securities:

 

 

 

 

 

 

 

 

Unit trust

 

18

 

 

8

 

 

26

All other equity securities

 

16

 

 

 

 

16

 

 

 

 

 

 

 

 

 

Total trading securities (fair value)

$

71

 

$

9

 

$

80

 

 

 

 

 

 

 

 

 

Total debt and equity securities categorized as held-to-maturity, available-for-sale or trading

 

 

 

 

 

 

$

90

 

 

 

 

 

 

 

 

 

Total Railroad Retirement Board (RRB) debt and equity securities

 

 

 

 

 

 

 

26

 

 

 

 

 

 

 

 

 

Total debt and equity securities

 

 

 

 

 

 

$

116

 

 

 

 

 

 

 

 

 

Debt and equity securities by agency

(In billions)

2018

 

2017

 

 

 

 

 

 

Pension Benefit Guaranty Corporation (PBGC)

$

62

 

$

67

Railroad Retirement Board (RRB)

 

26

 

 

26

Tennessee Valley Authority (TVA)

 

12

 

 

11

All other

 

12

 

 

12

 

 

 

 

 

 

Total securities and investments

$

112

 

$

116

 

 

 

 

 

 

These debt and equity securities do not include nonmarketable Treasury securities, which have been eliminated in consolidation. Held to-maturity debt and equity securities are reported total net investment, net of unamortized discounts and premiums. Available-for-sale debt and equity securities are reported at fair value, net of unrealized gain or loss. Trading debt and equity securities are reported at fair value, net of unrealized gain or loss.

The National Railroad Retirement Investment Trust (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 Program. As an investment company, NRRIT is subject to different accounting standards that do not require the classifications presented above. Please refer to NRRIT’s financial statements for more detailed information concerning this specific investment.

Certain significant consolidation entities apply financial accounting and reporting standards issued by the Financial Accounting Standards Board (FASB) (FASB standards), and such entities, as permitted by SFFAS No.47, are consolidated into the consolidated financial statements without conversion to financial and reporting standards issued by the FASAB (FASAB standards). PBGC, NRRIT, and TVA debt and equity securities are recorded at fair value and have been categorized based upon a fair value hierarchy, in accordance with FASB ASC Section 820, Fair Value Measures and Disclosures, in their respective financial statements.

PBGC and TVA invest primarily in fixed maturity and equity securities, classified as trading. PBGC reported an unrealized loss related to trading securities held as of September 30, 2018, of $1 billion and an unrealized gain related to trading securities as of September 30, 2017 of $3 billion. TVA reported gains related to trading securities held as of September 30, 2018 and 2017 of $2 billion and $1 billion, respectively. $9 $10 billion. The TVA balance includes $8 billion and $9 billion as of September 30, 2018, and 2017, respectively, for the Tennessee Valley Authority Retirement System (TVARS). TVARS includes unrealized gains of $0.8 billion as of both September 30, 2018 and 2017. PBGC, NRRIT, and TVA base market values on the last sale of a listed security, on the mean of the “bid-and-ask” for non-listed securities, or on a valuation model in the case of fixed income securities that are not actively traded. These valuations are determined as of the end of each fiscal year. Purchases and sales of securities are recorded on the trade date. Please refer to the individual financial statements of PBGC, NRRIT, and TVA for more detailed information related to debt and equity securities. These agencies comprise 90%54 of the total reported debt and equity securities of $112 billion as of September 30, 2018.

State and local government

(In billions)

 

  2018

 

2017

 

 

 

 

 

 

Pension

 

 

 

 

 

Corporate equities

$

2,708

 

$

2,491

Corporate and foreign bonds

 

462

 

 

507

Mutual fund shares

 

292

 

 

243

Other

 

383

 

 

328

 

 

 

 

 

 

Total pension debt and equity securities

$

3,845

 

$

3,569

Non-pension

 

 

 

 

 

Agency and GSE-backed securities

$

514

 

$

481

Corporate equities

 

153

 

 

139

Other

 

451

 

 

440

 

 

 

 

 

 

Total non-pension debt and equity securities

$

1,118

 

$

1,060

 

 

 

 

 

 

Total debt and equity securities

$

4,963

 

$

4,629

 

 

 

 

 

 

Note 8 – Investments in government-sponsored enterprises

(In billions)

2018

 

2017

 

 

 

 

 

 

Federal

$

113

 

$

93

State and local

 

 

 

 

 

 

 

 

 

Total investments in government-sponsored enterprises

$

113

 

$

93

 

 

 

 

 

 

Federal government

(In billions)

2018

Gross Investments

 

Cumulative Valuation

Gain/(Loss)

 

Fair Value

 

 

 

 

 

 

 

 

 

Fannie Mae senior preferred stock

$

124

 

$

(65)

 

$

59

Freddie Mac senior preferred stock

 

75

 

 

(30)

 

 

45

Fannie Mae warrants common stock

 

3

 

 

3

 

 

6

Freddie Mac warrants common stock

 

2

 

 

1

 

 

3

 

 

 

 

 

 

 

 

 

Total investments in GSEs

$

204

 

$

(91)

 

$

113

 

 

 

 

 

 

 

 

 

(In billions)

2017

Gross Investments

 

Cumulative Valuation

Gain/(Loss)

 

Fair Value

 

 

 

 

 

 

 

 

 

Fannie Mae senior preferred stock

$

117

 

$

(75)

 

$

42

Freddie Mac senior preferred stock

 

72

 

 

(39)

 

 

33

Fannie Mae warrants common stock

 

3

 

 

9

 

 

12

Freddie Mac warrants common stock

 

2

 

 

4

 

 

6

 

 

 

 

 

 

 

 

 

Total investments in GSEs

$

194

 

$

(101)

 

$

93

 

 

 

 

 

 

 

 

 

Congress established Fannie Mae and Freddie Mac as government sponsored enterprises (GSEs) to support mortgage lending. 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.

Leading up to the financial crisis, increasingly difficult conditions in the housing market challenged the soundness and profitability of the GSEs, thereby threatening to undermine the entire housing market. In response Congress passed Housing and Economic Recovery Act of 2008 (P.L.110-289) in July 2008. 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 home mortgage market while the Administration and Congress determine what structural changes should be made to the housing finance system. Draws under the SPSPAs result in an increased investment in the GSEs as further discussed below. For fiscal year 2018, under SFFAS No. 47 criteria Fannie Mae and Freddie Mac were owned or controlled by the federal government only as a result of (a) regulatory actions (such as organizations in receivership or conservatorship) or (b) other federal government intervention actions. Under the regulatory or other intervention actions, the relationship with the federal 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 financial statements of the government; however, the value of the investments in these entities, changes in value, and related activity with these entities are included in the consolidated financial statements. This treatment is consistent with how these entities were reported prior to fiscal year 2018 under Statement of Federal Financial Accounting Concepts (SFFAC) No. 2, Entity and Display.

Senior preferred stock purchase agreements

Under the SPSPAs, 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 80% of common stock on a fully-diluted basis. The warrants expire on September 7, 2028. Under the amended SPSPAs, the quarterly dividend payment changed from a 10% per annum fixed rate dividend on the total liquidation preference (as discussed below) to an amount equivalent to the GSE’s positive net worth above a capital reserve amount. The capital reserve amount, which was initially set at $3 billion for calendar year 2013, declined by $600 million at the beginning of each calendar year thereafter, and was scheduled to reach zero by calendar year 2018. On December 21, 2017, Treasury and FHFA agreed to modify the SPSPAs between Treasury and the GSEs to increase the capital reserve amount for each GSE back to $3 billion, effective with the December 2017 dividend payment. In exchange for the increase in the capital reserve, Treasury’s liquidation preference in each GSE increased by $3 billion on December 31, 2017. The GSEs will not pay a quarterly dividend if their positive net worth is below the required capital reserve threshold. Cash dividends of $9 billion and $25 billion were received during fiscal years ended September 30, 2018, and 2017, respectively.

The SPSPAs, which have no expiration date, require that Treasury will disburse funds to the GSEs 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). Draws against the funding commitment of the SPSPAs do not result in the issuance of additional shares of senior preferred stock; instead, it increases the liquidation preference of the initial 1,000,000 shares by the amount of the draw. The combined cumulative liquidation preference totaled $199 billion and $189 billion as of September 30, 2018 and 2017, respectively. Actual payments of $4 billion were made to the GSEs for the fiscal year ended September 30, 2018. There were no payments to the GSEs for the fiscal years ended September 30, 2017 and 2016.

Senior preferred stock and warrants for common stock

In determining the fair value 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 OTC Bulletin Board, discussions with each of the GSEs and FHFA, and other information pertinent to the valuations. Because the instruments are not publicly traded, there is no comparable trading information available. The fair valuations rely on significant unobservable inputs that reflect assumptions about the expectations that market participants would use in pricing.

The fair value of the senior preferred stock considers the amount of forecasted dividend payments. The fair valuations assume that a hypothetical buyer would acquire the discounted dividend stream as of the transaction date. The fair value of the senior preferred stock increased as of September 30, 2018 when compared to September 30, 2017, reflecting a higher forecasted GSE net income, mainly driven by the reduction in the US corporate tax rate resulting from the December 22, 2017 enactment of the Tax Cuts and Jobs Act (PL 115-97), a lower discount rate driven by lower volatility among comparable companies, as well as a reduction in the market value of the GSEs’ other equity securities that comprise their total equity value.

Factors impacting the fair value of the 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 fair value 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 fair value of the warrants decreased at the end of fiscal year 2018, when compared to 2017, primarily due to decreases in the market price of the underlying common stock of each GSE.

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 2043 and 2042 in assessing if a contingent liability was required as of September 30, 2018 and 2017, respectively. If future payments under the SPSPAs are deemed to be probable within the forecast horizon, and Treasury can reasonably estimate such payment, they will accrue a contingent liability to the GSEs to reflect the forecasted equity deficits of the GSEs. This accrued contingent liability will be undiscounted and will not 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. Such recorded accruals will be adjusted in subsequent years as new information develops or circumstances change. If future payments are reasonably possible, they are disclosed but not recorded as an accrued contingent liability.

Based on the annual forecasts as of September 30, 2018 and 2017, Treasury estimated there was no probable future funding draws. As of September 30, 2018, it is reasonably possible that market volatility or non-recurring events—for instance, changes to accounting policies that impact credit loss provisions—could potentially cause the GSEs to generate quarterly losses and, therefore, result in future funding draws against the funding commitment. Due to challenges quantifying future market volatility or the timing, magnitude, and likelihood of non-recurring events, the total amount of this reasonably possible future funding liability could not be estimated as of September 30, 2018. P.L. 115-97 caused each GSE to reduce the value of its deferred tax assets in the quarter in which the legislation was enacted. The reduction of the GSEs deferred tax assets resulted in $4.0 billion in actual payments made to the GSEs to ensure they maintained positive net worth, which reduced the remaining funding commitment. At September 30, 2018 and 2017, the maximum remaining funding commitment to the GSEs for the remaining life of the SPSPAs was $254 billion and $258 billion, respectively. Subsequent funding draws will reduce the remaining commitments. Refer to Note 19 – 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 concerning their financial statements, monthly 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, 2018 include three potential wind-down scenarios, with varying assumptions regarding the timing as to when the GSEs would cease new business activities, including purchasing mortgage loans and issuing new guaranteed mortgage-backed securities. The forecasts also assume a continued gradual wind-down of the retained portfolios (and corresponding net interest income) through 2018, as directed under the amended SPSPAs for each GSE to reduce the maximum balance of its retained mortgage portfolio by 15% per annum beginning December 31, 2013. The maximum balance of each GSE’s retained mortgage portfolio was initially set at $650 billion as of December 31, 2012, and the amended SPSPAs requires that each GSE reduce this maximum balance to $250 billion by December 31, 2018.

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.

Regulatory environment

To date, Congress has not approved a plan to address the future of the GSEs, thus the GSEs continue to operate under the direction of their conservator, the FHFA, whose stated strategic goals for the GSEs are to: (1) maintain, in a safe and sound manner, foreclosure prevention activities and credit availability for new and refinanced mortgages to foster liquid, efficient, competitive, and resilient national housing finance markets; (2) reduce taxpayer risk through increasing the role of private capital in the mortgage market, and (3) build a new single-family securitization infrastructure for use by the GSEs and adaptable for the use by other participants in the secondary market in the future.

The Temporary Payroll Tax Cut Continuation Act of 2011 (P.L. 112-78) was funded by an increase of 10-basis points in the GSEs’ guarantee fees (referred to as “the incremental fees”) which began in April 2012, and is effective through October 1, 2021. The incremental fees are to be remitted to Treasury and not retained by the GSEs and, thus, do not affect the profitability of the GSEs. For fiscal years 2018 and 2017, the GSEs remitted to Treasury the incremental fees totaling $4 billion and $3 billion, respectively.

Fannie Mae balance sheet

 

As of December 31,

 

 

 

 

 

 

 (In billions)

2018

 

2017

 

 

 

 

 

 

Assets

 

 

 

 

 

Cash and cash equivalents

$

58

 

$

52

Restricted cash

 

24

 

 

28

Investments in securities 1

 

45

 

 

40

Mortgage loans:

 

 

 

 

 

Of Fannie Mae

 

121

 

 

168

Of consolidated trusts

 

3,143

 

 

3,030

Allowance for loan losses

 

(14)

 

 

(19)

 

 

 

 

 

 

Mortgage loans, net of allowance for loan losses

 

3,250

 

 

3,179

Deferred tax assets, net

 

13

 

 

17

Other assets

 

28

 

 

30

 

 

 

 

 

 

Total assets

$

3,418

 

$

3,346

 

 

 

 

 

 

Liabilities and equity

 

 

 

 

 

Debt:

 

 

 

 

 

Of Fannie Mae

$

232

 

$

277

Of consolidated trusts

 

3,160

 

 

3,053

Other liabilities

 

20

 

 

20

 

 

 

 

 

 

Total liabilities

 

3,412

 

 

3,350

 

 

 

 

 

 

Senior preferred stock

 

121

 

 

117

Other 2

 

(115)

 

 

(121)

 

 

 

 

 

 

Total equity

 

6

 

 

(4)

 

 

 

 

 

 

Total liabilities and equity

$

3,418

 

$

3,346

 

 

 

 

 

 

1 Includes $36 billion as of December 31, 2018 and $29 billion as of December 31, 2017 of Treasury securities that are included in Fannie Mae’s other investment portfolio.

2 Consists of preferred stock, common stock, accumulated deficit, accumulated other comprehensive income, Treasury stock and noncontrolling interest.

Freddie Mac balance sheet

 

As of December 31,

 

 

 

 

 

 

 (In billions)

2018

 

2017

 

 

 

 

 

 

Assets

 

 

 

 

 

Cash and cash equivalents

$

7

 

$

7

Restricted cash

 

1

 

 

3

Federal funds sold and securities purchased under agreements to resell

 

35

 

 

56

Investments in securities:

 

 

 

 

 

Available-for-sale, at fair value

 

34

 

 

44

Trading, at fair value

 

36

 

 

41

 

 

 

 

 

 

Total investments in securities

 

70

 

 

85

Mortgage loans:

 

 

 

 

 

Held-for-investment, at amortized cost: By consolidated trusts

 

1,843

 

 

1,774

Held-for-investment, at amortized cost: Unsecuritized

 

43

 

 

62

Held-for-sale, at lower-of-cost-or-fair-value

 

42

 

 

35

 

 

 

 

 

 

Total mortgage loans, net

 

1,928

 

 

1,871

Other assets

 

21

 

 

28

 

 

 

 

 

 

Total assets

$

2,062

 

$

2,050

 

 

 

 

 

 

Liabilities and equity

 

 

 

 

 

Accrued interest payable

$

7

 

$

6

Debt, net:

 

 

 

 

 

Debt securities of consolidated trusts held by third parties

 

1,793

 

 

1,721

Other debt

 

252

 

 

314

 

 

 

 

 

 

Total debt, net

 

2,045

 

 

2,035

Other liabilities

 

6

 

 

9

 

 

 

 

 

 

Total liabilities

 

2,058

 

 

2,050

Total equity

 

4

 

 

 

 

 

 

 

 

Total liabilities and equity

$

2,062

 

$

2,050

 

 

 

 

 

 

State and local government

The Federal Reserve does not provide amounts for investments in GSEs at the state and local government level. We do not know if states have these investments, and if they do, we are not aware of another aggregated source for this data.

Note 9 – Other assets

(In billions)

2018

 

2017

 

 

 

 

 

 

Federal

$

115

 

$

150

State and local

 

 

 

 

 

 

 

 

 

Total other assets

$

115

 

$

150

 

 

 

 

 

 

Federal government

(In billions)

2018

 

2017

 

 

 

 

 

 

Advances and prepayments

$

70

 

$

97

Regulatory assets

 

17

 

 

20

FDIC receivable from resolution activity

 

3

 

 

9

Other

 

25

 

 

24

 

 

 

 

 

 

Total other assets

$

115

 

$

150

 

 

 

 

 

 

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 and grantees, travel advances, and prepayments for items such as rents, taxes, insurance, royalties, commissions, and supplies.

With regard to regulatory assets, the DOE’s Power Marketing Administrations (PMAs) and TVA record certain amounts as assets in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 980, Regulated Operations. The provisions of FASB ASC Topic 980 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 the PMAs’ or TVA’s rates should become market-based, FASB ASC Topic 980 would no longer be applicable, and all of the deferred costs under that standard would be expensed.

On behalf of the US, Treasury invests in certain Multilateral Development Banks (MDB), through subscriptions to capital, which allows the MDBs to issue loans at market-based rates to middle-income developing countries. These paid-in capital investments are non-marketable equity investments valued at cost.

The FDIC has the responsibility for resolving failed institutions in an orderly and efficient manner. The resolution process involves valuing a failing institution, marketing it, soliciting and accepting bids for the sale of the institution, determining which bid is least costly to the insurance fund, and working with the acquiring institution through the closing process. FDIC records receivables for resolutions that include payments by the Deposit Insurance Fund to cover obligations to insured depositors, advances to receiverships and conservatorships for working capital, and administrative expenses paid on behalf of receiverships and conservatorships.

State and local government

Based on our review of specific state Comprehensive Annual Financial Reports, we know that the state governments do have other assets, however the Federal Reserve does not provide information on the balances, and we are not aware of another aggregated source of this data.

Note 10 – Accounts payable

(In billions)

2018

 

2017

 

 

 

 

 

 

Federal

$

87

 

$

71

State and local

 

977

 

 

931

 

 

 

 

 

 

Total accounts payable

$

1,064

 

$

1,002

 

 

 

 

 

 

Federal government

(In billions)

2018

 

2017

 

 

 

 

 

 

Department of Defense

$

29

 

$

26

Department of Veterans Affairs

 

14

 

 

4

Department of Justice

 

5

 

 

6

All other

 

39

 

 

35

 

 

 

 

 

 

Total accounts payable

$

87

 

$

71

 

 

 

 

 

 

Accounts payable includes amounts due for goods and property ordered and received, services rendered by other than federal employees, cancelled appropriations for which the US government has contractual commitments for payments, and non-debt related interest payable.

State and local government

The Federal Reserve does not provide additional detailed information on the composition of the state and local government accounts payable balance, and we are not aware of another aggregated source of this data.

Note 11 – Debt securities held by the public and accrued interest

(In billions)

2018

   

2017

 

 

 

 

 

 

Federal

$

14,721

 

$

13,725

State and local

 

3,077

 

 

3,083

 

 

 

 

 

 

Total debt securities held by the public and accrued interest

$

17,798

 

$

16,808

 

 

 

 

 

 

Federal government

 

 

Balance

 

Net Change

during Fiscal

 

Balance

 

Average Interest Rate

(In billions)

 

2017

 

Year 2018

 

2018

 

2018

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Treasury securities (public)

 

 

 

 

 

 

 

 

 

 

 

 

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Treasury bills 1

 

$

1,800

 

$

440

 

$

2,240

 

1.1%

 

1.1%

 

Treasury notes 2

 

 

7,800

 

 

258

 

 

8,058

 

1.8%

 

1.8%

 

Treasury bonds 3

 

 

1,948

 

 

167

 

 

2,115

 

4.2%

 

4.2%

 

Treasury inflation-protected securities (TIPS) 4

 

 

1,286

 

 

90

 

 

1,376

 

0.8%

 

0.8%

 

Treasury floating rate notes (FRN) 5

 

 

342

 

 

27

 

 

369

 

1.2%