Understanding the Federal Payment Process
The Government Accountability Office (GAO) recently released a report, GAO-25-108129, detailing the federal payment process and its oversight by the Department of the Treasury. Presented by Kristen Kociolek, Managing Director of Financial Management and Assurance, the report provides key insights into the financial infrastructure that underpins federal payments, including cash disbursements, tax collection, and debt issuance. This testimony, delivered before the House Committee on Ways and Means, sheds light on the complexities and ongoing challenges associated with federal financial management.
The Department of the Treasury, through the Bureau of the Fiscal Service, oversees the General Fund of the U.S. government. In fiscal year 2022, this fund recorded cash inflows of $23.2 trillion, primarily from tax collections and debt issuance, and cash outflows of $22.8 trillion, largely comprising debt repayments. The Bureau of the Fiscal Service plays a central role in ensuring the accuracy and security of these financial transactions. The GAO’s report focuses on two main areas: the operational aspects of the payment processes and the audit mechanisms in place to ensure transparency and accountability.
One of the primary takeaways from the report is the structured process through which federal entities disburse payments. Most payments ranging from federal debt redemptions and interest payments to tax refunds, benefit disbursements, and vendor payments are processed through Treasury Disbursing Offices. Federal agencies are responsible for approving payments and maintaining documentation for audit and compliance purposes. Once payment schedules are submitted to the Bureau of the Fiscal Service, various system applications verify and format transactions before they are processed through the Federal Reserve. The process relies heavily on electronic funds transfers, reducing the risk of fraud and inefficiencies.
The GAO report highlights critical challenges in the government’s financial reporting. Since fiscal year 2018, auditors have identified deficiencies in information system controls, including access controls and security management. These weaknesses have prevented the GAO from expressing an opinion on the accuracy of the financial reporting for the General Fund. While Treasury has taken steps to improve its financial reporting processes, additional work is needed to address these systemic issues. Treasury’s Office of Inspector General also conducts annual evaluations of information security measures, ensuring compliance with the Federal Information Security Modernization Act of 2014.
Given the volume and complexity of federal payments, contractors must ensure that their financial transactions comply with Treasury’s strict regulatory framework. This includes maintaining accurate financial records, implementing robust internal controls, and being prepared for audits and compliance reviews. The GAO’s findings suggest that while electronic payment processing has improved efficiency, there remains a risk of delays or discrepancies due to weaknesses in financial oversight. Contractors should remain vigilant about any changes in Treasury’s financial management policies that could impact payment processing timelines or audit requirements.
This blog post is based on GAO-25-108129 and is not intended to provide legal or financial advice. The information presented here is for general informational purposes only and should not be relied upon as an official interpretation of federal financial policies.
