The U.S. Constitution Article I, Section IX mandates a regular statement and account of the receipts and expenditures of all public money shall be pu

DEPARTMENT OF THE TREASURY WASHINGTON, D.C

SECRETARY OF THE TREASURY

February 17, 2022

A Message from the Secretary

During fiscal year 2021, the American economy continued to recover from the COVID-19

pandemic and its adjacent economic crisis. The unemployment rate saw its sharpest one-year

decline on record, while GDP rose to exceed its pre-pandemic levels. The strong recovery is due

in large part to rapid vaccine deployment and robust support provided by the

American Rescue Plan (ARP).

That support included funding for vaccination efforts, support for households through Economic

Impact Payments and the expanded Child Tax Credit, assistance to workers and small businesses

recovering from the economic crisis, efforts to expand access to affordable health care coverage

and childcare, and help for state, local and tribal governments.

In these pages, you will find information about the critical programs launched by the ARP, as

well as related legislative measures like the Coronavirus Aid, Relief, and Economic Security Act

(CARES Act). That support included direct payments to citizens and families; forgivable loans

for small businesses to encourage employee retention; assistance to especially hard-hit

industries; expanded unemployment insurance; help for state, local, and tribal governments; and

funding for the development and purchase of vaccines, therapeutic treatment, testing, and

medical supplies.

This Financial Report discusses current financial results, including federal debt, which increased

during the past year, and interest costs, which as a percent of GDP, remain below historical

levels; and also, importantly, long-term trends affecting our critical social insurance programs

and fiscal health.

It is my duty and pleasure to present this Financial Report to the American people. This

document is a testament to the importance of accountability and transparency in how the nation

handles its finances and economic policymaking.

Janet L. Yellen

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Contents A Message from the Secretary of the Treasury

Executive Summary……………………………………………………………………………………………… 1

Management’s Discussion and Analysis ………………………………………………………………… 12

Statement of the Comptroller General of the United States ……………………………………. 42

Financial Statements

Introduction …………………………………………………………………………………………………… 52

Statement of Net Cost ……………………………………………………………………………………… 59 Statement of Operations and Changes in Net Position …………………………………………. 61

Reconciliations of Net Operating Cost and Budget Deficit …………………………………… 63

Statements of Changes in Cash Balance from Budget and Other Activities ………………………………………………………………………………………………………. 64

Balance Sheets ……………………………………………………………………………………………….. 65 Statements of Long-Term Fiscal Projections………………………………………………………. ………………………… 57 66

Statements of Social Insurance …………………………………………………………………………. 67

Statement of Changes in Social Insurance Amounts ……………………………………………. 70

Notes to the Financial Statements

Note 1. Summary of Significant Accounting Policies ………………………………………….. 72

Note 2. Cash and Other Monetary Assets …………………………………………………………… 85 Note 3. Accounts Receivable, Net …………………………………………………………………….. 86

Note 4. Loans Receivable, Net and Loan Guarantee Liabilities …………………………….. 87 Note 5. Inventory and Related Property, Net ……………………………………………………… 91 Note 6. General Property, Plant, and Equipment, Net ………………………………………….. 93 Note 7. Investments ………………………………………………………………………………………… 94

Note 8. Investments in Special Purpose Vehicles ………………………………………………… 97

Note 9. Investments in Government-Sponsored Enterprises …………………………………. 100 Note 10. Advances and Prepayments ………………………………………………………………… 103

Note 11. Other Assets ……………………………………………………………………………………… 104

Note 12. Accounts Payable ………………………………………………………………………………. 105 Note 13. Federal Debt and Interest Payable ……………………………………………………….. 106 Note 14. Federal Employee and Veteran Benefits Payable …………………………………… 110

Note 15. Environmental and Disposal Liabilities ………………………………………………… 120

Note 16. Benefits Due and Payable …………………………………………………………………… 122 Note 17. Insurance and Guarantee Program Liabilities ………………………………………… 123

Note 18. Advances from Others and Deferred Revenue……………………………………….. 125

Note 19. Other Liabilities ………………………………………………………………………………… 126

Note 20. Collections and Refunds of Federal Revenue ………………………………………… 128 Note 21. Commitments ……………………………………………………………………………………. 131

Note 22. Contingencies …………………………………………………………………………………… 134

Note 23. Funds from Dedicated Collections ……………………………………………………….. 141 Note 24. Fiduciary Activities……………………………………………………………………………. 148 Note 25. Social Insurance ………………………………………………………………………………… 150

Note 26. Long-Term Fiscal Projections……………………………………………………. 159

Note 27. Stewardship Property, Plant, and Equipment …………………………………………. 165 Note 28. Disclosure Entities and Related Parties ………………………………………………… 166

Note 29. Public-Private Partnerships …………………………………………………………………. 172

Note 30. COVID-19 Activity …………………………………………………………………………… 174 Note 31. Subsequent Events ……………………………………………………………………………. 178

Required Supplementary Information (Unaudited)

The Sustainability of Fiscal Policy ……………………………………………………………………. 180 Social Insurance …………………………………………………………………………………………….. 191

Social Security and Medicare …………………………………………………………………………. 191

Railroad Retirement, Black Lung, and Unemployment Insurance ……………………….. 205

Deferred Maintenance and Repairs …………………………………………………………………… 207 Other Claims for Refunds ………………………………………………………………………………… 207

Tax Assessments ……………………………………………………………………………………………. 208

Federal Oil and Gas Resources …………………………………………………………………………. 208 Federal Natural Resources Other than Oil and Gas ……………………………………. 210

Other Information (Unaudited)

Tax Burden ………………………………………………………………………………………….. 212 Tax Gap ………………………………………………………………………………………………………… 213

Tax Expenditures ……………………………………………………………………………………………. 214

Unmatched Transactions and Balances ……………………………………………………………… 215

Appendices

Appendix A: Reporting Entity ………………………………………………………………………….. 218

Appendix B: Glossary of Acronyms………………………………………………………………….. 222 U.S. Government Accountability Office Independent Auditor’s Report…………….. 228

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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1 EXECUTIVE SUMMARY TO THE 2021 FINANCIAL REPORT OF THE U.S. GOVERNMENT

EXECUTIVE SUMMARY TO THE 2021 FINANCIAL REPORT OF THE U.S. GOVERNMENT 2

Executive Summary to the FY 2021

Financial Report of the United States Government

The FY 2021 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 this Financial Report is

important to all Americans. The first audited Financial Report covered FY 1997, making the FY 2021 Financial

Report the 25th edition of this important vehicle for federal accountability and transparency.

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

ended September 30, 2021 and 2020. Note 31—Subsequent Events discusses events that occurred after the end of

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

Where We Are Now

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 2021:

• The budget deficit decreased by $356.3 billion (11.4 percent) to $2.8 trillion and net operating cost decreased by $746.5 billion (19.4 percent) to $3.1 trillion.

• The government’s gross costs of $7.3 trillion, less $462.3 billion in revenues earned for goods and services provided to the public, plus $518.4 billion in net losses from changes in assumptions yields the

government’s net cost of $7.4 trillion.

• Tax and other revenues increased by $684.3 billion to $4.3 trillion. Deducting these revenues from net cost yields the federal government’s “bottom line” net operating cost of $3.1 trillion referenced above.

• Comparing total government assets of $4.9 trillion to total liabilities of $34.8 trillion (comprised mostly of $22.3 trillion in federal debt and interest payable, and $10.2 trillion of federal employee and veteran

benefits payable) yields a negative net position of $29.9 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 $97.6 trillion (total federal non-interest net expenditures from Table 1).

• The debt-to-GDP ratio was about 100 percent at the end of FY 2021. Under current policy and based on this report’s assumptions, it is projected to reach 701 percent by 2096. 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 $71.0 trillion, a $5.5 trillion increase over 2020 social

insurance projections.

• This Financial Report includes discussion and analysis of the significant impact that the federal government’s response to the COVID-19 pandemic had on the government’s financial position during FY

2021.

3 EXECUTIVE SUMMARY TO THE 2021 FINANCIAL REPORT OF THE U.S. GOVERNMENT

The Federal Government’s Response to the Pandemic

On March 11, 2020, a novel strain of the Coronavirus (COVID-19) was declared a pandemic by the WHO. A

national emergency was declared in the U.S. on March 13, 2020. The global spread of COVID-19, which

continued through FY 2021, resulted in a severe global health and economic crisis. During FY 2020 and FY 2021,

the federal government took broad action to protect public health from the effects of the unprecedented pandemic,

enacting several major pieces of legislation, including:

• Coronavirus Preparedness and Response Supplemental Appropriations Act of 2020 (P.L. 116-123);

• Families First Coronavirus Response Act (FFCRA, P.L. 116-127);

• Coronavirus Aid, Relief, and Economic Security Act (CARES Act, P.L. 116-136);

• Paycheck Protection Program and Health Care Enhancement Act (PPPHCE Act, P.L. 116-139);

• Consolidated Appropriations Act, 2021 (CAA, P.L. 116-260); and

• American Rescue Plan Act of 2021 (ARP, P.L. 117-2).

These laws address the health and economic effects of COVID-19, providing assistance to American workers

and families, small businesses, and state, local, and tribal governments, and preserving jobs for American

industry. As indicated here and in the Financial Report, these essential programs had significant effects on the

federal government’s budgetary and financial results.

*Net of rescissions, transfers, and other adjustments. Does not include indirect appropriations related to COVID-19 activity.

Source: Appropriation Warrants. See Note 30—COVID-19 Activity and Agency Financial Reports for additional information.

Chart 1 summarizes the more than $4.8 trillion in appropriations (net of rescissions) enacted through

September 30, 2021 (i.e., during FY 2020 and FY 2021) for several key agencies, which include, but are not

limited to:

• Treasury appropriations support multiple efforts. IRS provided a refundable tax credit, the recovery rebate or EIP, and Treasury provides for payments to state, local, and tribal governments for pandemic-related

spending. ($1.6 trillion)

• SBA administers the PPP, a loan guarantee program designed to provide a direct incentive for small businesses to retain employees by providing loan forgiveness for amounts used for eligible expenses for

EXECUTIVE SUMMARY TO THE 2021 FINANCIAL REPORT OF THE U.S. GOVERNMENT 4

payroll and benefit costs, interest on mortgages, rent, and utilities. SBA also provides loans to small

business owners through the EIDL program. ($994.6 billion)

• Through multiple UI Programs, DOL expands the states’ ability to provide unemployment insurance for many workers impacted by the pandemic, including for workers who are not eligible for

regular/traditional unemployment benefits. ($845.8 billion)

• Through the PHSSEF and other efforts, HHS provides broad support, including, but not limited to: reimbursements to health care providers for expenses or lost revenues attributable to the pandemic, and

support for the development and purchase of vaccines, therapeutic treatment, testing, and medical

supplies. ($484.1 billion)

• Education COVID-19 appropriations funded a variety of programs administered primarily through grant programs. COVID-19 relief legislation and administrative actions also provided support for student loan

borrowers primarily by temporarily suspending nearly all federal loan payments. ($282.1 billion)

• Funding for USDA extended modifications to federal nutrition assistance programs; funded programs to support agricultural producers, growers, and processors; and provided additional relief to address the

continued impact of COVID-19 on the economy, public health, state and local governments, individuals,

and businesses. ($164.5 billion)

• DHS funding supports a wide range of efforts, including FEMA’s Disaster Relief Fund. FEMA is authorized to provide many types of assistance including, but not limited to Public Assistance for

emergency protective measures, including vaccination activities, direct federal assistance, personal

protective equipment, and state and local Emergency Operations Center operations. ($115.9 billion)

• DOT funding supports the maintaining and continuing of operations and business needs of various transportation systems in response to COVID-19. ($106.2 billion)

• Many other agencies and programs comprise the “Other” amount in Chart 1. See Note 30—COVID-19 Activity and agency financial statements for additional details concerning federal agency pandemic

response efforts.

The financial effects of the government’s response to the COVID-19 pandemic were broad, impacting many

agencies in a variety of ways and to varying degrees. The Financial Report includes discussion and analysis of the

significant impact that the federal government’s response to the COVID-19 pandemic had on the government’s

financial statements for FY 2021. Additional information can be obtained from individual agency financial

statements.

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. In simple terms, when

total receipts are greater than outlays, then there is a budget surplus; and when total outlays exceed total

receipts, then 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.

5 EXECUTIVE SUMMARY TO THE 2021 FINANCIAL REPORT OF THE U.S. GOVERNMENT

Chart 2 compares the government’s budget deficit (receipts vs. outlays) and net operating cost (revenues vs.

costs) for FYs 2017 – 2021. During FY 2021:

• A $269.7 billion increase in outlays was more than offset by a $626.0

billion increase in receipts resulting in

a $356.3 billion decrease in the budget

deficit from $3.1 trillion to $2.8

trillion.

• Net operating cost decreased $746.5 billion or 19.4 percent from $3.8

trillion to $3.1 trillion, due mostly to a

$62.2 billion or 0.8 percent decrease

in net cost combined with a $684.3

billion or 19.2 percent increase in tax

and other revenues.

The $319.3 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, primarily costs related to

increases in estimated federal employee and veteran benefits liabilities. Other sources of differences include, but

are not limited to increases in taxes receivable and the value of investments in GSE, as well as increases in

advances largely associated with the government’s pandemic response and timing differences related to the

recording of credit reform costs.

Costs and Revenues

The government’s “bottom line” net operating cost decreased $746.5 billion (19.4 percent) during FY 2021

to $3.1 trillion. It is calculated as follows:

• Starting with total gross costs of $7.3 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 $7.4

trillion (see Chart 3), a slight decrease

of $62.2 billion (0.8 percent) from FY

2020. This net decrease is the

combined effect of many offsetting

increases and decreases across the

government, including the ongoing effects of the federal government’s response to the pandemic. For

example:

o A $211.6 billion decrease in net costs at the SBA, driven primarily by a $230.0 billion decrease in loan subsidy costs, including reestimates, attributable to the PPP and Debt Relief programs under the

CARES Act.

EXECUTIVE SUMMARY TO THE 2021 FINANCIAL REPORT OF THE U.S. GOVERNMENT 6

o A $270.1 billion increase in Treasury net costs largely due to increased disbursement of refundable tax credits or EIPs ($569.5 billion in FY 2021 compared to $274.7 billion in FY 2020), to eligible

recipients in every state and territory and at foreign addresses.

o A $96.4 billion decrease at DOL, much of which is attributable to a $100.7 billion decrease in Income Maintenance programs costs, primarily due to decreases in unemployment benefits as less jobless

claims are filed.

o A $100.8 billion net cost increase at HHS primarily due to a $115.4 billion increase across the Medicare and Medicaid benefits programs, including an increase in Medicaid grants to states to

continue COVID-19 relief efforts. These cost increases were offset by cost decreases due to the

PHSSEF receiving less funding during FY 2021 for COVID-19.

o Entities administering federal employee and veteran benefits programs, including the OPM, VA, and DOD 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 $518.4 billion in FY 2021, a loss decrease (and a corresponding net cost

decrease) of $161.1 billion compared to FY 2020.

o VA net costs decreased $291.8 billion due largely to changes in benefits program experience and assumptions as referenced above, including, but not limited to a lower than anticipated number of

veterans.

o DOD net costs increased $144.8 billion due to a $100.2 billion loss increase from changes in assumptions referenced above, as well as slight increases in net costs across DOD’s major programs,

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

o SSA net costs increased $36.5 billion due largely to a cost of living increase in benefits expenses for the OASI program, partially offset by a decrease in the number of beneficiaries and, consequently,

expenses for the DI program.

o Interest costs related to federal debt securities held by the public increased by $20.9 billion due largely to an increase in inflation adjustments and an increase in outstanding debt held by the public.

• The government deducts tax and other revenues from net cost (with some adjustments) to derive its FY 2021 “bottom line” net operating cost

of $3.1 trillion.

o From Chart 4, total government tax and other revenues increased by

$684.3 billion (19.2 percent) to

about $4.3 trillion for FY 2021 due

primarily to overall growth in

income taxes collections, partially

offset by increased refunds.

o Together, individual income tax

and tax withholdings, and

corporate taxes accounted for about

87.7 percent of total tax and other

revenues in FY 2021. Other

revenues include Federal Reserve

earnings, excise taxes, and customs

duties.

7 EXECUTIVE SUMMARY TO THE 2021 FINANCIAL REPORT OF THE U.S. GOVERNMENT

Assets and Liabilities

Chart 5 summarizes the assets and liabilities that the government reports on its Balance Sheet. As of

September 30, 2021:

• More than three-fourths of the federal government’s total assets ($4.9

trillion) consist of: 1) $475.0 billion in

cash and monetary assets; 2) $401.0

billion in net accounts receivable; 3)

$1.7 trillion in net loans receivable

(primarily student loans); and 4) $1.2

trillion in net PP&E.

o Cash and monetary assets ($475.0 billion) is comprised largely of the

operating cash of the U.S.

government. Operating cash held

by Treasury decreased $1.6 trillion

(88.8 percent) to $198.4 billion

during FY 2021 due to Treasury

maintaining an elevated cash

balance in FY 2020 to maintain prudent liquidity in light of the size and relative uncertainty of

COVID-19 related outflows, combined with needing to reduce the cash balance to well under

Treasury’s prudent policy level at the end of FY 2021 due to debt ceiling constraints.

o Treasury comprises approximately 76.0 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, resulting from the CARES Act. Other accounts receivable, gross increased significantly

year to year, primarily as a result of DOL’s $18.6 billion increase in benefit overpayments from

programs related to COVID-19 as well as a $7.0 billion increase in HHS receivables, primarily due to

Medicare.

o Loans receivable, net increased by $73.6 billion (4.7 percent) during FY 2021. This increase was primarily attributable to an increase in direct disaster COVID-19 EIDL-funded loans and direct

student loans, offset by an increase in the estimated subsidy cost of direct student loans largely due to

administrative action to temporarily suspend payments during FY 2021.

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 68.8 percent of the government’s

reported general PP&E of $1.2 trillion as of September 30, 2021.

o Other significant government resources not reported on the Balance Sheet include stewardship assets, natural resources, and the government’s power to tax and set monetary policy.

• Total liabilities ($34.8 trillion) consist mostly of: 1) $22.3 trillion in federal debt and interest payable; and 2) $10.2 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, FRB, foreign governments, and other non-federal entities.

o The government borrows from the public (increases federal debt levels) to finance deficits. During FY 2021, federal debt held by the public increased $1.3 trillion (6.0 percent) to $22.3 trillion.

o The government also reports about $6.2 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 annual receipts, including interest

EXECUTIVE SUMMARY TO THE 2021 FINANCIAL REPORT OF THE U.S. GOVERNMENT 8

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