US treasury about to record a healthy profit as it sells remaining stake in Citigroup, rescued for $45bn during the financial crisis

US taxpayers are likely to make a $12.3bn (£7.75bn) total profit on their bailout of financial group Citigroup, according to government officials.

The US treasury expects to net $312.2m on Monday when it sells the rest of its stake in Citigroup. The government holds 465.1m warrants in Citi that entitle it to purchase common shares in the banking group.

The warrants, which it is auctioning, represent the remaining part of the US government's $45bn investment in Citi during the financial crisis.

Taxpayers are expected to end up with a $12.3bn profit on the bailout, made under the troubled asset relief programme (Tarp). The treasury sold its 34% stake of common shares of Citi last year.

"As we exit our investments in private companies and recover taxpayer dollars, it's clear that the cost of the Tarp programme will be a fraction of what many had once feared during the depths of the crisis," said Tim Massad, the treasury's acting assistant secretary for financial stability.

The Tarp bailout is proving to be less expensive to taxpayers than first feared. The US government made $13.5bn selling its stake in General Motors. Last week the government chose four Wall Street banks to sell its stake in American Insurance Group (AIG), recipient of $180bn in bailout funds. The sale could be the largest in US history. AIG has already paid back significant chunks of the debt.

The Citi announcement comes as Neil Barofsky, the special inspector-general appointed to oversee Tarp, prepares to testify about the programme in Washington.

In his latest quarterly report, Barofsky says "on the financial side, Tarp's outlook has never been better. Not only did Tarp funds help head off a catastrophic financial collapse, but estimates of Tarp's ultimate direct financial cost to the taxpayer have fallen substantially", from $341bn in August 2009 to $25bn in November 2010.

But Barofsky is expected to sound a warning about future bailouts. His report says the problem of institutions that are "too big to fail" is still unsolved and "a recipe for disaster".

He says: "These institutions and their leaders are incentivised to engage in precisely the sort of behaviour that could trigger the next financial crisis, thus perpetuating a doomsday cycle of booms, busts, and bailouts."

Wall Street and Washington are nervously awaiting what is supposed to be the definitive account of the financial crisis tomorrow. No one looks likely to be spared – not even the authors of the report.

Leaked extracts from the Financial Crisis Inquiry Commission's (FCIC) report heap blame on everyone. Washington's elite is criticised for allowing the crisis to happen. The report also says:

• President Bill Clinton's administration allowed derivatives to escape regulation with terrible consequences.

• Regulators "lacked the political will" to regulate institutions.

• Federal Reserve chairman Alan Greenspan's championing of financial deregulation was a "pivotal failure to stem the flow of toxic mortgages" and a "prime example" of government negligence.

• When the crisis struck the report concludes the politicians were inconsistent, letting Lehman Brothers collapse while other banks were saved:

• Timothy Geithner, US treasury secretary, could have done more to clamp down on excesses at Citigroup while he was president of the Federal Reserve Bank of New York and failed to understand Lehman's problems until it was too late.

• Executives at Citigroup and American Insurance Group, two of the largest recepients of taxpayer bailout funds, were blind to the risks they were taking and managers at Merrill Lynch failed to recognise the gravity of their situation.

The report's conclusions look likely to be passed on to US legal authorities, which will assess whether further action can be taken against executives.

But the report itself is not without its critics. Set up as a bi-partisan investigation and involving hundreds of interviews, it was supposed to be an impartial assessment of the worst financial crisis in living memory. But the commissions members fell out and split along party lines. While the six Democrats have agreed to publish their report, three Republicans are to publish a dissenting version and another Republican on the panel has his own version of accounts.