Financial Audit
Bureau of the Public Debt's Fiscal Years 2005 and 2004 Schedules of Federal Debt Gao ID: GAO-06-169 November 7, 2005GAO is required to audit the consolidated financial statements of the U.S. government. Due to the significance of the federal debt held by the public to the governmentwide financial statements, GAO has also been auditing the Bureau of the Public Debt's (BPD) Schedules of Federal Debt annually. The audit of these schedules is done to determine whether, in all material respects, (1) the schedules are reliable and (2) BPD management maintained effective internal control relevant to the Schedule of Federal Debt. Further, we test compliance with selected provisions of significant laws related to the Schedule of Federal Debt. Federal debt managed by BPD consists of Treasury securities held by the public and by certain federal government accounts, referred to as intragovernmental debt holdings. The level of debt held by the public reflects how much of the nation's wealth has been absorbed by the federal government to finance prior federal spending in excess of federal revenues. Intragovernmental debt holdings represent balances of Treasury securities held by federal government accounts, primarily federal trust funds such as Social Security, that typically have an obligation to invest their excess annual receipts over disbursements in federal securities.
In GAO's opinion, BPD's Schedules of Federal Debt for fiscal years 2005 and 2004 were fairly presented in all material respects and BPD maintained effective internal control related to the Schedule of Federal Debt as of September 30, 2005. GAO also found no instances of noncompliance in fiscal year 2005 with selected provisions of the statutory debt limit and debt issuance suspension period laws we tested. As of September 30, 2005 and 2004, federal debt managed by BPD totaled about $7,918 billion and $7,379 billion, respectively. At the end of fiscal year 2005, debt held by the public as a percentage of the U.S. economy is estimated at 37.5 percent, compared to 33.0 percent at the end of fiscal year 2001. Further, certain trust funds (e.g., Social Security) continue to run surpluses, resulting in increased intragovernmental debt holdings. These debt holdings are backed by the full faith and credit of the U.S. government and represent a priority call on future budgetary resources. As a result, total gross federal debt has increased 37 percent between the end of fiscal years 2001 and 2005. During fiscal year 2005, a debt issuance suspension period was invoked to avoid breaching the statutory debt limit. On November 19, 2004, legislation was enacted to raise the debt limit by $800 billion to $8,184 billion. Total federal debt increased over each of the last 4 fiscal years. Debt held by the public increased during this 4-year period primarily as a result of annual unified budget deficits. Intragovernmental debt holdings steadily increased during this 4-year period primarily due to excess receipts over disbursements in federal trust funds.
GAO-06-169, Financial Audit: Bureau of the Public Debt's Fiscal Years 2005 and 2004 Schedules of Federal Debt
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Report to the Secretary of the Treasury:
November 2005:
Financial Audit:
Bureau of the Public Debt's Fiscal Years 2005 and 2004 Schedules of
Federal Debt:
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-06-169]:
GAO Highlights:
Highlights of GAO-06-169, a report to the Secretary of the Treasury:
Why GAO Did This Study:
GAO is required to audit the consolidated financial statements of the
U.S. government. Due to the significance of the federal debt held by
the public to the governmentwide financial statements, GAO has also
been auditing the Bureau of the Public Debt‘s (BPD) Schedules of
Federal Debt annually. The audit of these schedules is done to
determine whether, in all material respects, (1) the schedules are
reliable and (2) BPD management maintained effective internal control
relevant to the Schedule of Federal Debt. Further, we test compliance
with selected provisions of significant laws related to the Schedule of
Federal Debt.
Federal debt managed by BPD consists of Treasury securities held by the
public and by certain federal government accounts, referred to as
intragovernmental debt holdings. The level of debt held by the public
reflects how much of the nation‘s wealth has been absorbed by the
federal government to finance prior federal spending in excess of
federal revenues. Intragovernmental debt holdings represent balances of
Treasury securities held by federal government accounts, primarily
federal trust funds such as Social Security, that typically have an
obligation to invest their excess annual receipts over disbursements in
federal securities.
What GAO Found:
In GAO‘s opinion, BPD‘s Schedules of Federal Debt for fiscal years 2005
and 2004 were fairly presented in all material respects and BPD
maintained effective internal control related to the Schedule of
Federal Debt as of September 30, 2005. GAO also found no instances of
noncompliance in fiscal year 2005 with selected provisions of the
statutory debt limit and debt issuance suspension period laws we
tested.
As of September 30, 2005 and 2004, federal debt managed by BPD totaled
about $7,918 billion and $7,379 billion, respectively. At the end of
fiscal year 2005, debt held by the public as a percentage of the U.S.
economy is estimated at 37.5 percent, compared to 33.0 percent at the
end of fiscal year 2001. Further, certain trust funds (e.g., Social
Security) continue to run surpluses, resulting in increased
intragovernmental debt holdings. These debt holdings are backed by the
full faith and credit of the U.S. government and represent a priority
call on future budgetary resources. As a result, total gross federal
debt has increased 37 percent between the end of fiscal years 2001 and
2005. During fiscal year 2005, a debt issuance suspension period was
invoked to avoid breaching the statutory debt limit. On November 19,
2004, legislation was enacted to raise the debt limit by $800 billion
to $8,184 billion.
As shown below, total federal debt increased over each of the last 4
fiscal years. Debt held by the public increased during this 4-year
period primarily as a result of annual unified budget deficits.
Intragovernmental debt holdings steadily increased during this 4-year
period primarily due to excess receipts over disbursements in federal
trust funds.
[See PDF for image]
[End of figure]
www.gao.gov/cgi-bin/getrpt?GAO-06-169.
For a fuller understanding of GAO‘s opinion on BPD‘s fiscal years 2005
and 2004 Schedules of Federal Debt, readers should refer to the
complete audit report, available by clicking the link above, which
includes information on audit objectives, scope, and methodology. For
more information, contact Gary T. Engel at (202) 512-3406 or
engelg@gao.gov.
[End of section]
Contents:
Letter:
Auditor's Report:
Opinion on Schedules of Federal Debt:
Opinion on Internal Control:
Compliance with Laws and Regulations:
Consistency of Other Information:
Objectives, Scope, and Methodology:
Agency Comments:
Overview, Schedules, and Notes:
Overview on Federal Debt Managed by the Bureau of the Public Debt:
Schedules of Federal Debt:
Notes to the Schedules of Federal Debt:
Appendixes:
Appendix I: Comments from the Bureau of the Public Debt:
Appendix II: GAO Contact and Staff Acknowledgments:
Abbreviations:
BPD: Bureau of the Public Debt:
GDP: gross domestic product:
OMB: Office of Management and Budget:
TIPS: Treasury Inflation Protected Securities:
Letter November 7, 2005:
The Honorable John W. Snow:
The Secretary of the Treasury:
Dear Mr. Secretary:
The accompanying auditor's report presents the results of our audits of
the Schedules of Federal Debt Managed by the Bureau of the Public Debt
for the fiscal years ended September 30, 2005 and 2004. The Schedules
of Federal Debt present the beginning balances, increases and
decreases, and ending balances for (1) Federal Debt Held by the Public
and Intragovernmental Debt Holdings, (2) the related Accrued Interest
Payables, and (3) the related Net Unamortized Premiums and Discounts
managed by the bureau.[Footnote 1]
The auditor's report contains our (1) opinion on the Schedules of
Federal Debt for the fiscal years ended September 30, 2005 and 2004,
(2) opinion on the effectiveness of related internal control as of
September 30, 2005, (3) conclusion on the bureau's compliance in fiscal
year 2005 with selected provisions of laws we tested, and (4)
conclusion on the consistency between information in the Schedules of
Federal Debt and the accompanying Overview on Federal Debt Managed by
the Bureau of the Public Debt.
As of September 30, 2005 and 2004, federal debt managed by the bureau
totaled about $7,918 billion and $7,379 billion, respectively, for
moneys borrowed to fund the federal government's operations. As shown
on the Schedules of Federal Debt, these balances consisted of
approximately (1) $4,601 billion as of September 30, 2005, and $4,307
billion as of September 30, 2004, of debt held by the public and about
(2) $3,317 billion as of September 30, 2005, and $3,072 billion as of
September 30, 2004, of intragovernmental debt holdings.
The level of debt held by the public reflects how much of the nation's
wealth has been absorbed by the federal government to finance prior
federal spending in excess of federal revenues. It best represents the
cumulative effect of past federal borrowing on today's economy and the
federal budget. To finance a cash deficit, the federal government
borrows from the public. When a cash surplus occurs, the annual excess
funds can then be used to reduce debt held by the public. In other
words, annual cash deficits or surpluses generally approximate the
annual net change in the amount of federal government borrowing from
the public.
Cash surpluses during fiscal years 1998 through 2001 enabled Treasury
to reduce debt held by the public by $476 billion, from $3,815 billion
as of September 30, 1997, to $3,339 billion as of September 30, 2001.
Treasury reduced this debt by redeeming maturing debt, reducing the
number of auctions and size of new debt issues, conducting "buybacks"
of debt before its maturity date, and redeeming callable securities
when the opportunities arose.[Footnote 2] However, because of the
return to deficits, in fiscal years 2002 through 2005, debt held by the
public increased by $1,262 billion, with about $294 billion of this
increase occurring in fiscal year 2005. Treasury issued more debt by
increasing the number of auctions and the size of new debt issues.
During fiscal year 2003, Treasury reintroduced the 3-year note, which
will be offered every quarter. In addition, Treasury increased the
offerings of the 5-year note from quarterly to monthly; the 10-year
note from an offering every quarter to eight offerings a year; and the
10-year Treasury Inflation-Protected Security (TIPS) from three
offerings a year to an offering every quarter. During fiscal year 2004,
Treasury introduced a 20-year TIPS, first issued on July 30, 2004, and
a 5-year TIPS, first issued on October 29, 2004. Both securities will
be offered semiannually. During fiscal year 2005, Treasury announced
the reintroduction of the 30-year bond, which was suspended in October
2001. The 30-year bond will be issued semi-annually with the first
issuance to be on February 15, 2006. Notwithstanding the increases in
fiscal years 2002 through 2005, debt held by the public as a percentage
of total federal debt has decreased from approximately 71 percent as of
September 30, 1997, the first year the Schedule of Federal Debt was
audited, to approximately 58 percent as of September 30, 2005.
Intragovernmental debt holdings represent balances of Treasury
securities held by federal government accounts, primarily federal trust
funds, that typically have an obligation to invest their excess annual
receipts over disbursements in federal securities. Most federal trust
funds invest in special U.S. Treasury securities that are guaranteed
for principal and interest by the full faith and credit of the U.S.
government. These securities are nonmarketable; however, they represent
a priority call on future budgetary resources. Certain of these trust
funds, such as the Social Security and federal civilian employee
retirement trust funds, have been running cash surpluses, which are
loaned to the Treasury and reduce the current need for the federal
government to borrow from the public in order to finance current
operations. As a result of total trust fund surpluses,
intragovernmental debt holdings have increased by approximately $1,734
billion during fiscal years 1998 through 2005, from $1,583 billion as
of September 30, 1997, to $3,317 billion as of September 30, 2005, with
about $245 billion of this increase occurring in fiscal year 2005.
Intragovernmental debt holdings as a percentage of total federal debt
have increased from approximately 29 percent as of September 30, 1997,
to approximately 42 percent as of September 30, 2005.
The transactions relating to the use of the federal government
accounts' surpluses net out on the federal government's consolidated
financial statements because, in effect, they represent loans from one
part of the federal government to another. Importantly, these
intragovernmental debt holdings also constitute future obligations of
the Treasury since the Treasury must provide cash to redeem these
securities in order for the individual accounts to pay their benefits
or other obligations as they come due. When this occurs, if sufficient
cash surpluses are not available to redeem the securities, the federal
government would either need to increase borrowing from the public,
raise future taxes, reduce future spending, retire less debt (if the
budget as a whole is in surplus), or some combination thereof. It also
should be noted that the surpluses in the federal government accounts
could have served to reduce interest rates on the debt held by the
public as compared to what the rates might have been had these
surpluses not been available.
While both are important, debt held by the public and intragovernmental
debt holdings are very different. Debt held by the public approximates
the federal government's competition with other sectors in the credit
markets. Federal borrowing absorbs resources available for private
investment and may put upward pressure on interest rates. In addition,
interest on debt held by the public is paid in cash and represents a
burden on current taxpayers. It reflects the amount the federal
government pays to its outside creditors. In contrast,
intragovernmental debt holdings perform an accounting function but
typically do not require cash payments from the current budget or
represent a burden on the current economy. In addition, from the
perspective of the budget as a whole, interest payments to federal
government accounts by the Treasury are entirely offset by the income
received by such accounts--in effect, one part of the federal
government pays the interest and another part receives it. This
intragovernmental debt and the interest on it represents a claim on
future resources and hence a burden on future taxpayers and the future
economy when it has to be redeemed to meet obligations under the
respective programs. However, these intragovernmental debt holdings do
not fully reflect the federal government's total future commitment to
trust fund financed programs. They primarily represent the cumulative
historical surpluses of those trust funds and also reflect future
priority claims on the U.S. Treasury. They do not have the current
economic effects of borrowing from the public and do not currently
compete with the private sector for available funds in the credit
markets. However, when trust funds redeem Treasury securities to obtain
cash to fund expenditures, and Treasury borrows from the public to
finance these redemptions, there is competition with the private sector
and thus an effect on the economy.
During fiscal year 2005, Treasury faced the challenge of managing the
debt within the statutory debt limit. On October 14, 2004, Treasury
entered into a debt issuance suspension period. A debt issuance
suspension period is any period for which the Secretary of the Treasury
has determined that obligations of the United States may not be issued
without exceeding the debt limit.[Footnote 3] Actions taken by
Treasury, which were consistent with legal authorities provided to the
Secretary, included suspending investment of receipts of the Government
Securities Investment Fund (G-Fund) of the federal employees' Thrift
Savings Plan, the Exchange Stabilization Fund, and the Civil Service
Retirement and Disability Trust Fund (Civil Service fund); redeeming
Civil Service fund securities early; suspending the sales of State and
Local Government Series nonmarketable Treasury securities; exchanging
Treasury securities for Federal Financing Bank securities; and
postponing an auction of Treasury bills. On November 19, 2004,
legislation was enacted to raise the statutory debt limit by $800
billion to $8,184 billion.[Footnote 4] Subsequently, Treasury restored
all losses to the G-Fund and Civil Service fund in accordance with
legal authorities provided to the Secretary of the Treasury.
During our audits, we have noted certain trends--the increase in the
amount of Treasury securities held by foreign and international
investors and the increased costs to finance the federal government's
growing debt. Foreign and international investors are a major holder of
debt held by the public. Over the last 3 years, foreign and
international holdings have significantly increased. According to
amounts reported in the September 2005 Treasury Bulletin, Treasury
estimates that the amount of Treasury securities held by foreign and
international investors has increased from about $1,135 billion as of
June 30, 2002, to $2,030 billion as of June 30, 2005, or $895 billion.
As of June 30, 2005, this represents an estimated 45 percent of total
debt held by the public. During the same 3-year period, debt held by
the public increased by $1,064 billion, from about $3,464 billion to
$4,528 billion. Based on amounts reported in the September 2005
Treasury Bulletin, the estimated increase in holdings by foreign and
international investors represents about 84 percent of the increase in
debt held by the public over the same period. The United States
benefits from foreign purchases of Treasury securities because foreign
investors fill part of the U.S. government's borrowing needs. However,
to service this foreign-held debt, the U.S. government must send
interest payments abroad, which adds to the incomes of residents of
other countries rather than to the incomes of U.S. residents. In
addition, this increasing reliance on foreign investors to finance the
deficits of the U.S. government presents a potential risk to the U.S.
economy, especially since the U.S. gross national saving rate is low by
U.S. historical standards and averages well below that of other major
industrialized nations.
Rising interest rates on Treasury securities--although relatively low
by historical standards--are contributing to an increased cost to
finance the federal government's growing debt. The interest rate for 13-
week Treasury bills increased from a low of 1.68 percent during fiscal
year 2005 to 3.44 percent as of September 29, 2005. Also during fiscal
year 2005, the interest rate on 2-year Treasury notes increased from a
low of 2.50 percent as of November 1, 2004, to 4.00 percent as of
September 30, 2005. About $2,130 billion, or 46 percent, of marketable
Treasury securities held by the public as of September 30, 2005, will
mature at least once during the next 2 years. The Congressional Budget
Office projects that interest rates on Treasury securities, especially
short-term rates, will continue to increase. As such, as the Treasury
securities mature over the next 2 years and are replaced by new debt,
the interest rates on the majority of the new issuances will likely be
higher than the September 30, 2005, rates and result in continued
increased cost to finance the federal government's debt. Thus, the
combined effect of greater levels of debt and higher interest rates
will likely place increasing pressure on the federal budget in the
years ahead.
The challenge of managing the federal debt is not likely to diminish
any time soon. Debt held by the public continues to grow at a faster
pace than the economy. At the end of fiscal year 2005, debt held by the
public as a share of gross domestic product (GDP) is estimated at 37.5
percent, compared to 33.0 percent at the end of fiscal year 2001--the
lowest ratio since 1983. In addition, gross federal debt has increased
37 percent during the same period, from $5,792 billion as of September
30, 2001, to $7,918 billion as of September 30, 2005. Further, interest
on debt held by the public grew more rapidly than any other major
spending category in 2005, rising 14 percent above the 2004 level.
While growth in the debt held by the public-to-GDP measure does not
necessarily create problems in the short term, continued growth in the
long term would reduce budgetary flexibility and ultimately lead to an
unsustainable fiscal path.
In fact, GAO's long-range fiscal policy simulations show that the
nation's current fiscal condition is but a prelude to a much more
daunting long-term fiscal challenge.[Footnote 5] The pending retirement
of the Baby Boom generation and rising health care costs will place
unprecedented and long-lasting stress on the federal budget, raising
debt held by the public to unprecedented levels as a share of GDP.
These projected trends are compounded by the presence of near-term
deficits that have arisen from new discretionary and mandatory spending
as well as lower revenues as a share of the economy. Absent significant
changes on the spending and/or revenue sides of the budget, these long-
term deficits will encumber a growing share of federal resources and
test the capacity of current and future generations to afford both
today's and tomorrow's commitments. Continuing on this unsustainable
path will gradually erode, if not suddenly damage, our economy, our
standard of living and ultimately our national security.
As discussed earlier, federal debt managed by the bureau totaled about
$7.9 trillion at the end of the fiscal year, or more than $26,000 for
every man, woman, and child in this country today. But that number
excludes many items, including the gap between future promised and
funded Social Security and Medicare benefits, veterans' health care,
and a range of other commitments and contingencies that the federal
government has pledged to support. If these items are factored in, the
present value of the total burden is about $46 trillion. Stated
differently, the total burden for every American is more than $150,000-
-and every day that burden becomes larger. Our long-term budget
simulations show that without action by 2040, the federal government
may have to either cut federal spending by 60 percent or raise taxes to
about 2.5 times today's level to pay for the mounting cost of the
federal government's long-term commitments. Either option would be
devastating to the economy and the future standard of living for
Americans.
Addressing the nation's long-term fiscal imbalance constitutes a major
transformational challenge that may take a generation or more to
resolve. Given the size of the projected deficit, the U.S. government
will not be able to grow its way out of this problem--tough choices
will be required. Traditional incremental approaches to budgeting will
need to give way to more fundamental and periodic reexaminations of the
base of government. New reporting approaches, budget control
mechanisms, and metrics are also needed to better assess the impact of
spending and tax policies over the long term. While prompted by fiscal
necessity, such a fundamental review could serve to update the federal
government's programs and priorities to meet current and future
challenges. Our report, 21ST Century Challenges: Reexamining the Base
of the Federal Government, is intended to support the Congress in
identifying issues and options that could help address these fiscal
pressures.[Footnote 6]
We are sending copies of this report to the Chairmen and Ranking
Minority Members of the Senate Committee on Appropriations; the Senate
Committee on Homeland Security and Governmental Affairs; the Senate
Committee on the Budget; the Subcommittee on Transportation, Treasury,
the Judiciary, Housing and Urban Development, and Related Agencies,
Senate Committee on Appropriations; the Subcommittee on Federal
Financial Management, Government Information, and International
Security, the Senate Committee on Homeland Security and Governmental
Affairs; the House Committee on Appropriations; the House Committee on
Government Reform; the House Committee on the Budget; the Subcommittee
on Transportation, Treasury, and Housing and Urban Development, The
Judiciary, District of Columbia, House Committee on Appropriations; and
the Subcommittee on Government Management, Finance, and Accountability,
House Committee on Government Reform. We are also sending copies of
this report to the Commissioner of the Bureau of the Public Debt, the
Inspector General of the Department of the Treasury, the Director of
the Office of Management and Budget, and other agency officials. In
addition, the report will be available at no charge on the GAO Web site
at [Hyperlink, http://www.gao.gov]. If I can be of further assistance,
please call me at (202) 512-5500. This report was prepared under the
direction of Gary T. Engel, Director, Financial Management and
Assurance. Should you or members of your staff have any questions
concerning this report, please contact Mr. Engel at (202) 512-3406 or
[Hyperlink, engelg@gao.gov]. Staff acknowledgments are provided in
appendix II.
Sincerely yours,
Signed by:
David M. Walker:
Comptroller General of the United States:
[End of section]
Auditor's Report:
To the Commissioner of the Bureau of the Public Debt:
In connection with fulfilling our requirement to audit the financial
statements of the U.S. government,[Footnote 7] we audited the Schedules
of Federal Debt Managed by the Bureau of the Public Debt (BPD) because
of the significance of the federal debt to the federal government's
financial statements.
This auditor's report presents the results of our audits of the
Schedules of Federal Debt Managed by BPD for the fiscal years ended
September 30, 2005 and 2004. The Schedules of Federal Debt present the
beginning balances, increases and decreases, and ending balances for
(1) Federal Debt Held by the Public and Intragovernmental Debt
Holdings, (2) the related Accrued Interest Payables, and (3) the
related Net Unamortized Premiums and Discounts managed by BPD.[Footnote
8]
In our audits of the Schedules of Federal Debt for the fiscal years
ended September 30, 2005 and 2004, we found the following:
* the Schedules of Federal Debt are presented fairly, in all material
respects, in conformity with U.S. generally accepted accounting
principles;
* BPD had effective internal control over financial reporting and
compliance with laws and regulations related to the Schedule of Federal
Debt as of September 30, 2005; and:
* no reportable noncompliance in fiscal year 2005 with selected
provisions of laws we tested.
The following sections discuss, in more detail, (1) these conclusions
and our conclusion on the Overview on Federal Debt Managed by the
Bureau of the Public Debt and (2) the scope of our audits.
Opinion on Schedules of Federal Debt:
The Schedules of Federal Debt including the accompanying notes present
fairly, in all material respects, in conformity with U.S. generally
accepted accounting principles, the balances as of September 30, 2005,
2004, and 2003, for Federal Debt Managed by BPD; the related Accrued
Interest Payables and Net Unamortized Premiums and Discounts; and the
related increases and decreases for the fiscal years ended September
30, 2005 and 2004.
Opinion on Internal Control:
BPD maintained, in all material respects, effective internal control
relevant to the Schedule of Federal Debt related to financial reporting
and compliance with applicable laws and regulations as of September 30,
2005, that provided reasonable assurance that misstatements, losses, or
noncompliance material in relation to the Schedule of Federal Debt
would be prevented or detected on a timely basis. Our opinion is based
on criteria established under 31 U.S.C. § 3512 (c), (d) (commonly
referred to as the Federal Managers' Financial Integrity Act) and the
Office of Management and Budget (OMB) Circular A-123, revised June 21,
1995, Management Accountability and Control.
We found matters involving information security controls that we
consider not to be reportable conditions.[Footnote 9] We will
communicate these matters to BPD's management, along with our
recommendations for improvement, in a separate letter to be issued at a
later date.
Compliance with Laws and Regulations:
Our tests for compliance in fiscal year 2005 with selected provisions
of laws disclosed no instances of noncompliance that would be
reportable under U.S. generally accepted government auditing standards
or OMB audit guidance. However, the objective of our audit of the
Schedule of Federal Debt for the fiscal year ended September 30, 2005,
was not to provide an opinion on overall compliance with laws and
regulations. Accordingly, we do not express such an opinion.
Consistency of Other Information:
BPD's Overview on Federal Debt Managed by the Bureau of the Public Debt
contains information, some of which is not directly related to the
Schedules of Federal Debt. We do not express an opinion on this
information. However, we compared this information for consistency with
the schedules and discussed the methods of measurement and presentation
with BPD officials. Based on this limited work, we found no material
inconsistencies with the schedules.
Objectives, Scope, and Methodology:
Management is responsible for the following:
* preparing the Schedules of Federal Debt in conformity with U.S.
generally accepted accounting principles;
* establishing, maintaining, and assessing internal control to provide
reasonable assurance that the broad control objectives of the Federal
Managers' Financial Integrity Act are met; and:
* complying with applicable laws and regulations.
We are responsible for obtaining reasonable assurance about whether (1)
the Schedules of Federal Debt are presented fairly, in all material
respects, in conformity with U.S. generally accepted accounting
principles and (2) management maintained effective related internal
control as of September 30, 2005, the objectives of which are the
following:
* Financial reporting: Transactions are properly recorded, processed,
and summarized to permit the preparation of the Schedule of Federal
Debt for the fiscal year ended September 30, 2005, in conformity with
U.S. generally accepted accounting principles.
* Compliance with laws and regulations: Transactions related to the
Schedule of Federal Debt for the fiscal year ended September 30, 2005,
are executed in accordance with laws governing the use of budget
authority and with other laws and regulations that could have a direct
and material effect on the Schedule of Federal Debt.
We are also responsible for testing compliance with selected provisions
of laws and regulations that have a direct and material effect on the
Schedule of Federal Debt. Further, we are responsible for performing
limited procedures with respect to certain other information appearing
with the Schedules of Federal Debt.
In order to fulfill these responsibilities, we:
* examined, on a test basis, evidence supporting the amounts and
disclosures in the Schedules of Federal Debt;
* assessed the accounting principles used and any significant estimates
made by management;
* evaluated the overall presentation of the Schedules of Federal Debt;
* obtained an understanding of internal control relevant to the
Schedule of Federal Debt as of September 30, 2005, related to financial
reporting and compliance with laws and regulations (including execution
of transactions in accordance with budget authority);
* tested relevant internal controls over financial reporting and
compliance, and evaluated the design and operating effectiveness of
internal control related to the Schedule of Federal Debt as of
September 30, 2005;
* considered the process for evaluating and reporting on internal
control and financial management systems under the Federal Managers'
Financial Integrity Act; and:
* tested compliance in fiscal year 2005 with the (1) statutory debt
limit (31 U.S.C. § 3101(b), as amended by Pub. L. No. 107-199, § 1, 116
Stat. 734 (2002), Pub. L. No. 108-24, 117 Stat. 710 (2003), and Pub. L.
No. 108-415, § 1, 118 Stat. 2337 (2004)), (2) suspension and early
redemption of investments from the Civil Service Retirement and
Disability Trust Fund (5 U.S.C. § 8348(j)(k)), and (3) suspension of
investments from the G-Fund (5 U.S.C. § 8438(g)).
We did not evaluate all internal controls relevant to operating
objectives as broadly described by the Federal Managers' Financial
Integrity Act, such as those controls relevant to preparing statistical
reports and ensuring efficient operations. We limited our internal
control testing to controls over financial reporting and compliance.
Because of inherent limitations in internal control, misstatements due
to error or fraud, losses, or noncompliance may nevertheless occur and
not be detected. We also caution that projecting our evaluation to
future periods is subject to the risk that controls may become
inadequate because of changes in conditions or that the degree of
compliance with controls may deteriorate.
We did not test compliance with all laws and regulations applicable to
BPD. We limited our tests of compliance to selected provisions of laws
that have a direct and material effect on the Schedule of Federal Debt
for the fiscal year ended September 30, 2005. We caution that
noncompliance may occur and not be detected by these tests and that
such testing may not be sufficient for other purposes.
We performed our work in accordance with U.S. generally accepted
government auditing standards and applicable OMB audit guidance.
Agency Comments:
In commenting on a draft of this report, BPD concurred with the
conclusions in our report. The comments are reprinted in appendix I.
Signed by:
David M. Walker:
Comptroller General of the United States:
October 25, 2005:
[End of section]
Overview, Schedules, and Notes:
Overview on Federal Debt Managed by the Bureau of the Public Debt:
Overview on Federal Debt Managed by the Bureau of the Public Debt Gross
Federal Debt Outstanding[NOTE 1]:
Federal debt managed by the Bureau of the Public Debt comprises debt
held by the public and debt held by certain federal government
accounts, the latter of which is referred to as intragovernmental debt
holdings. As of September 30, 2005 and 2004, outstanding gross federal
debt managed by the bureau totaled $7,918 and $7,379 billion,
respectively. The increase in gross federal debt of $539 billion during
fiscal year 2005 was due to an increase in gross intragovernmental debt
holdings of $245 billion and an increase in gross debt held by the
public of $294 billion. As Figure 1 illustrates, both intragovernmental
debt holdings and debt held by the public have steadily increased since
fiscal year 2001. The primary reason for the increases in
intragovernmental debt holdings is the annual surpluses in the Federal
Old-Age and Survivors Insurance Trust Fund, Civil Service Retirement
and Disability Fund, Federal Hospital Insurance Trust Fund, Federal
Disability Insurance Trust Fund, and Military Retirement Fund. The
increases in debt held by the public are due primarily to total federal
spending exceeding total federal revenues. As of September 30, 2005,
gross debt held by the public totaled $4,601 billion and gross
intragovernmental debt holdings totaled $3,317 billion.
Figure 1: Total Gross Federal Debt Outstanding (in billions):
[See PDF for image]
[End of figure]
NOTE:
[1] Federal debt outstanding reported here differs from the amount
reported in the Financial Report of the United States Government
because of the securities not maintained or reported by the bureau and
which are issued by the Federal Financing Bank and other federal
government agencies.
Interest Expense:
Interest expense incurred during fiscal year 2005 consists of (1)
interest accrued and paid on debt held by the public or credited to
accounts holding intragovernmental debt during the fiscal year, (2)
interest accrued during the fiscal year, but not yet paid on debt held
by the public or credited to accounts holding intragovernmental debt,
and (3) net amortization of premiums and discounts. The primary
components of interest expense are interest paid on the debt held by
the public and interest credited to federal government trust funds and
other federal government accounts that hold Treasury securities. The
interest paid on the debt held by the public affects the current
spending of the federal government and represents the burden in
servicing its debt (i.e., payments to outside creditors). Interest
credited to federal government trust funds and other federal government
accounts, on the other hand, does not result in an immediate outlay of
the federal government because one part of the government pays the
interest and another part receives it. However, this interest
represents a claim on future budgetary resources and hence an
obligation on future taxpayers. This interest, when reinvested by the
trust funds and other federal government accounts, is included in the
programs' excess funds not currently needed in operations, which are
invested in federal securities. During fiscal year 2005, interest
expense incurred totaled $355 billion, interest expense on debt held by
the public was $181 billion, and $174 billion was interest incurred for
intragovernmental debt holdings. As Figure 2 illustrates, total
interest expense decreased each year from fiscal year 2001 through
2003, but increased in fiscal years 2004 and 2005. Average interest
rates on principal balances outstanding as of fiscal year end are
disclosed in the Notes to the Schedules of Federal Debt.
Figure 2: Total Interest Expense (in billions):
[See PDF for image]
[End of figure]
Debt Held by the Public:
Debt held by the public reflects how much of the nation's wealth has
been absorbed by the federal government to finance prior federal
spending in excess of total federal revenues. As of September 30, 2005
and 2004, gross debt held by the public totaled $4,601 billion and
$4,307 billion, respectively (see Figure 1), an increase of $294
billion. The borrowings and repayments of debt held by the public
decreased from fiscal year 2004 to 2005 primarily due to Treasury's
decision to finance current operations using more long-term securities.
As of September 30, 2005, $4,066 billion, or 88 percent, of the
securities that constitute debt held by the public were marketable,
meaning that once the government issues them, they can be resold by
whoever owns them. Marketable debt is made up of Treasury bills,
Treasury notes, Treasury bonds, and Treasury Inflation-Protected
Securities (TIPS) with maturity dates ranging from less than 1 year out
to 30 years. Of the marketable securities currently held by the public
as of September 30, 2005, $2,728 billion or 67 percent will mature
within the next 4 years (see Figure 3). As of September 30, 2005 and
2004, notes and TIPS held by the public maturing within the next 10
years totaled $2,558 billion and $2,274 billion, respectively, an
increase of $284 billion.
Figure 3: Maturity Dates [NOTE 2] of Marketable Debt Held by the Public
as of September 30, 2005:
[See PDF for image]
[End of figure]
NOTE:
[2] Callable securities mature between fiscal years 2011 and 2015, but
are reported by their call date.
The government also issues to the public, state and local governments,
and foreign governments and central banks nonmarketable securities,
which cannot be resold, and have maturity dates from on demand to more
than 10 years. As of September 30, 2005, nonmarketable securities
totaled $535 billion, or 12 percent of debt held by the public. As of
that date, nonmarketable securities primarily consisted of savings
securities totaling $204 billion and special securities for state and
local governments totaling $225 billion.
The Federal Reserve Banks (FRBs) act as fiscal agents for Treasury, as
permitted by the Federal Reserve Act. As fiscal agents for Treasury,
the FRBs play a significant role in the processing of marketable book-
entry securities and paper U.S. savings bonds. For marketable book-
entry securities, selected FRBs receive bids, issue book-entry
securities to awarded bidders and collect payment on behalf of
Treasury, and make interest and redemption payments from Treasury's
account to the accounts of security holders. For paper U.S. savings
bonds, selected FRBs sell, print, and deliver savings bonds; redeem
savings bonds; and handle the related transfers of cash.
Intragovernmental Debt Holdings:
Intragovernmental debt holdings represent balances of Treasury
securities held by over 230 individual federal government accounts with
either the authority or the requirement to invest excess receipts in
special U.S. Treasury securities that are guaranteed for principal and
interest by the full faith and credit of the U.S. Government.
Intragovernmental debt holdings primarily consist of balances in the
Social Security, Medicare, Military Retirement, and Civil Service
Retirement and Disability trust funds. [NOTE 3] As of September 30,
2005, such funds accounted for $2,928 billion, or 88 percent, of the
$3,317 billion intragovernmental debt holdings balances (see Figure 4).
As of September 30, 2005 and 2004, gross intragovernmental debt
holdings totaled $3,317 billion and $3,072 billion, respectively (see
Figure 1), an increase of $245 billion.
The majority of intragovernmental debt holdings are Government Account
Series (GAS) securities. GAS securities consist of par value securities
and market-based securities, with terms ranging from on demand out to
30 years. Par value securities are issued and redeemed at par (100
percent of the face value), regardless of current market conditions.
Market-based securities, however, can be issued at a premium or
discount and are redeemed at par value on the maturity date or at
market value if redeemed before the maturity date.
Figure 4: Components of Intragovernmental Debt Holdings as of September
30, 2005:
[See PDF for image]
[End of figure]
NOTE:
[3] The Social Security trust funds consist of the Federal Old-Age and
Survivors Insurance Trust Fund and the Federal Disability Insurance
Trust Fund. In addition, the Medicare trust funds are made up of the
Federal Hospital Insurance Trust Fund and the Federal Supplementary
Medical Insurance Trust Fund.
Significant Events in FY 2005 Statutory Debt Ceiling Raised:
From October 14 to November 19, 2004, Treasury faced a debt issuance
suspension period that required it to depart from its normal debt
management procedures and to invoke legal authorities to avoid
breaching the statutory debt limit. During this period, actions taken
by Treasury included suspending investment of receipts of the
Government Securities Investment Fund (G-Fund) of the federal employees
Thrift Savings Plan, the Exchange Stabilization Fund (ESF), and the
Civil Service Retirement and Disability Fund (Civil Service Fund);
redeeming Civil Service Fund securities early; suspending the sales of
State and Local Government Series securities; exchanging Government
Account Series nonmarketable Treasury securities for Federal Financing
Bank securities not reported on these schedules; and postponing an
auction of Treasury bills. On November 19, 2004, Public Law 108-415 was
enacted, which raised the statutory debt ceiling by $800 billion to
$8,184 billion.
TreasuryDirect:
Marketable Securities Offered in TreasuryDirect:
Since 1986, individuals buying marketable securities directly from the
Treasury have been able to buy and hold these securities through Legacy
Treasury Direct. Because this system pre-dated the Internet, it does
not operate in a completely paper-free, online manner, although it does
permit certain online electronic transactions, such as purchases and
reinvestments, through Electronic Services for Treasury Bills, Notes,
and Bonds. Savings bonds are not available in Legacy Treasury Direct.
In 2002, Treasury launched a new TreasuryDirect program through the
Bureau of the Public Debt that allows investors to manage their
accounts electronically for savings bonds as well as marketable
securities. Since the introduction of this new program, account holders
have only been able to purchase Series I and EE U.S. Savings Bonds.
Beginning with the October 3, 2005 auction of 13 and 26 week Treasury
bills, individuals with TreasuryDirect online accounts were able to
submit noncompetitive bids to purchase marketable Treasury securities
(bills, notes, bonds, and TIPS). For the first time, TreasuryDirect
account holders were able to purchase and hold savings bonds and
marketable securities in a single, online account, providing 24/7
convenience for tracking and managing all Treasury consumer securities.
The regulations that allow the marketable securities to be offered in
TreasuryDirect were published on September 30, 2005.
Paper Savings Bond Conversions:
Electronic Series I savings bonds, the first securities offered in
TreasuryDirect, were introduced in October 2002, and electronic Series
EE savings bonds were added in May 2003. Since December 2004, owners of
paper Series EE, E and I bonds have been able to convert their paper
securities to electronic form and hold them in a TreasuryDirect
account. To manage the influx of transactions, the opportunity to
convert has initially been extended by invitation to TreasuryDirect
account holders. As of September 30, 2005, 190,250 paper bonds have
been converted to electronic form.
Legacy Treasury Direct:
Federal Reserve Bank Consolidation:
Recognizing that the growth of TreasuryDirect would reduce the number
of transactions processed by the Federal Reserve Banks, the Bureau of
the Public Debt announced in December 2003 that all savings bond and
Legacy Treasury Direct processing would be consolidated from seven FRBs
to FRB Minneapolis and FRB Pittsburgh. These two banks, designated as
Treasury Retail Securities processing sites, were tasked with planning
and executing the consolidation with assistance as needed from the
Bureau of the Public Debt. Based on these consolidations, the Bureau of
the Public Debt began updating the Public Debt Accounting and Reporting
System to refine the reporting entities' access. This process was
ongoing throughout fiscal year 2005.
Regulations Signed for Legacy Treasury Direct:
The regulations published on September 30, 2005, included changes in
the appearance of the name for the existing direct-access system for
book-entry marketable securities. The name was formerly presented as
legacy TreasuryDirect, but will now appear as Legacy Treasury Direct.
These regulations were needed to distinguish the legacy system which
was introduced in 1986 from the new system which was launched in 2002.
The new system is trademarked as TreasuryDirect. In addition, the
regulations state that competitive bidding will no longer be allowed
for securities held in Legacy Treasury Direct.
New Rate Structure for Series EE Bonds:
On April 4, 2005, Treasury announced that Series EE bonds with issue
dates of May 2005 and later would earn fixed rates of interest.
Previous EE bonds earned interest at a variable rate that was adjusted
every 6 months. The new fixed rate applies for the 30-year life of each
bond, including a 10-year extended maturity period, unless a different
rate or rate structure is announced for the extension period. Rates for
new issues are announced each May 1 and November 1. Treasury guarantees
that, at a minimum, the value of a Series EE bond issued May 2005 or
later will double after 20 years. If a bond does not double in value as
a result of applying the fixed rate for 20 years, Treasury will make a
one-time adjustment at original maturity to make up the difference. The
initial fixed rate, announced on May 2, 2005, and effective for bonds
issued May through October 2005, is 3.50%.
New SLGS Regulations Published:
On June 30, 2005, final regulations on the State and Local Government
Series (SLGS) securities were published in the Federal Register and
became effective on August 15, 2005. The regulations address certain
practices of SLGS market participants that Treasury considers to be an
inappropriate use of the SLGS securities program. A significant change
was to reduce the basis point differential to 1 basis point below the
current Treasury borrowing rates. Other significant changes include
prohibiting the cancellation of subscriptions, disallowing issue date
changes, restricting the change of principal subscribed for to 10
percent, and requiring the mandatory use of SLGSafe for all SLGS
transactions. SLGSafe is the Internet application available to
investors in SLGS securities.
Implementation of Daily GAS Accruals:
Beginning July 1, 2005, the Bureau of the Public Debt began posting
daily interest accruals and amortization of discounts and premiums for
the Government Account Series (GAS) securities. Previously, this
posting was monthly. This effort is in support of the strategic
objective to produce daily financial statements by fiscal year 2007.
Thirty-Year Nominal Issuance:
The reintroduction of the thirty-year bond diversifies funding and
increases the investor base. Reintroduction of the bond will halt the
decline in the average maturity of debt outstanding and modestly lower
Treasury's rollover need. Treasury plans to issue the first 30-year
bond in February 2006 on a February/August cycle with the first bond
maturing on February 15, 2036.
Early Release of CUSIPS:
Beginning on December 17, 2004, Treasury released the CUSIPS for all
securities scheduled for the following week. The early release of
CUSIPS will improve efficiency of Treasury market transactions at the
time of auction announcements. CUSIPS for scheduled auctions will be
announced every Friday at 10:30 a.m. and posted on the Bureau of the
Public Debt's website.
Historical Perspective:
Federal debt outstanding is one of the largest legally binding
obligations of the federal government. Nearly all the federal debt has
been issued by the Treasury with a small portion being issued by other
federal government agencies. Treasury issues debt securities for two
principal reasons, (1) to borrow needed funds to finance the current
operations of the federal government and (2) to provide an investment
and accounting mechanism for certain federal government accounts'
excess receipts, primarily trust funds. Total gross federal debt
outstanding has dramatically increased over the past 25 years from $908
billion as of September 30, 1980 to $7,918 billion as of September 30,
2005 (see Figure 5). Large budget deficits emerged during the 1980's
due to tax policy decisions and increased outlays for defense and
domestic programs. Through fiscal year 1997, annual federal deficits
continued to be large and debt continued to grow at a rapid pace. As a
result, total federal debt increased more than five fold between 1980
and 1997.
Figure 5: Total Gross Federal Debt Outstanding:
[See PDF for image]
[End of figure]
However, by fiscal year 1998, federal debt held by the public was
beginning to decline. In fiscal years 1998 through 2001, the amount of
debt held by the public fell by $476 billion, from $3,815 billion to
$3,339 billion. As a consequence of the changes in the federal
government's financing needs, resulting from increased federal outlays,
tax policy decisions, and the deterioration of overall economic
performance, from fiscal year 2001 to 2005 debt held by the public rose
by $1,262 billion, from $3,339 billion to $4,601 billion.
Even in those years where debt held by the public declined, total
federal debt increased because of increases in intragovernmental debt
holdings. Over the past 4 fiscal years, intragovernmental debt holdings
increased by $864 billion, from $2,453 billion as of September 30,
2001, to $3,317 billion as of September 30, 2005. By law, trust funds
have the authority or are required to invest surpluses in federal
securities. As a result, the intragovernmental debt holdings balances
primarily represent the cumulative surplus of funds due to the trust
funds' cumulative annual excess of tax receipts, interest credited, and
other collections compared to spending.
As shown in Figure 6, interest rates have fluctuated over the past 25
years. The average interest rates reflected here represent the original
issue weighted effective yield on securities outstanding at the end of
the fiscal year.
Figure 6 Average Interest Rates of Federal Debt Outstanding
(Unaudited):
[See PDF for image]
[End of figure]
As of September 30:
Schedules of Federal Debt:
Schedules of Federal Debt Managed by the Bureau of the Public Debt:
For the Fiscal Years Ended September 30, 2005 and 2004 (Dollars in
Millions):
Balance as of September 30, 2003:
[See PDF for image]
[End of table]
The accompanying notes are an integral part of these schedules.
Notes to the Schedules of Federal Debt Managed by the Bureau of the
Public Debt For the Fiscal Years Ended September 30, 2005 and 2004:
(Dollars in Millions):
Note 1. Significant Accounting Policies:
Basis of Presentation:
The Schedules of Federal Debt Managed by the Bureau of the Public Debt
(BPD) have been prepared to report fiscal year 2005 and 2004 balances
and activity relating to monies borrowed from the public and certain
federal government accounts to fund the U.S. government's operations.
Permanent, indefinite appropriations are available for the payment of
interest on the federal debt and the redemption of Treasury securities.
Reporting Entity:
The Constitution empowers the Congress to borrow money on the credit of
the United States. The Congress has authorized the Secretary of the
Treasury to borrow monies to operate the federal government within a
statutory debt limit. Title 31 U.S.C. authorizes Treasury to prescribe
the debt instruments and otherwise limit and restrict the amount and
composition of the debt. BPD, an organizational entity within the
Fiscal Service of the Department of the Treasury, is responsible for
issuing Treasury securities in accordance with such authority and to
account for the resulting debt. In addition, BPD has been given the
responsibility to issue Treasury securities to trust funds for trust
fund receipts not needed for current benefits and expenses. BPD issues
and redeems Treasury securities for the trust funds based on data
provided by program agencies and other Treasury entities.
Basis of Accounting:
The schedules were prepared in conformity with U.S. generally accepted
accounting principles and from BPD's automated accounting system,
Public Debt Accounting and Reporting System. Interest costs are
recorded as expenses when incurred, instead of when paid. Certain
Treasury securities are issued at a discount or premium. These
discounts and premiums are amortized over the term of the security
using an interest method for all long term securities and the straight
line method for short term securities. The Department of the Treasury
also issues Treasury Inflation-Protected Securities (TIPS). The
principal for TIPS is adjusted over the life of the security based on
the Consumer Price Index for all Urban Consumers.
Note 2. Federal Debt Held by the Public:
As of September 30, 2005 and 2004, Federal Debt Held by the Public
consisted of the following:
[See PDF for image]
[End of table]
Treasury issues marketable bills at a discount and pays the par amount
of the security upon maturity. The average interest rate on Treasury
bills represents the original issue effective yield on securities
outstanding as of September 30, 2005 and 2004, respectively. Treasury
bills are issued with a term of one year or less.
Treasury issues marketable notes and bonds as long-term securities that
pay semi-annual interest based on the securities' stated interest rate.
These securities are issued at either par value or at an amount that
reflects a discount or a premium. The average interest rate on
marketable notes and bonds represents the stated interest rate adjusted
by any discount or premium on securities outstanding as of September
30, 2005 and 2004. Treasury notes are issued with a term of 2 - 10
years and Treasury bonds are issued with a term of more than 10 years.
Treasury also issues TIPS that have interest and redemption payments,
which are tied to the Consumer Price Index, the leading measurement of
inflation. TIPS are issued with a term of more than 5 years. At
maturity, TIPS are redeemed at the inflation-adjusted principal amount,
or the original par value, whichever is greater. TIPS pay a semi-annual
fixed rate of interest applied to the inflation-adjusted principal.
Note 2. Federal Debt Held by the Public (continued):
As of September 30, 2005, nonmarketable securities primarily consisted
of $203,690 million in U.S. Savings Securities, $225,283 million in
securities issued to State and Local Governments, $3,086 million in
Foreign Series Securities, and $29,995 million in Domestic Series
Securities. As of September 30, 2004, nonmarketable securities
primarily consisted of $204,246 million in U.S. Savings Securities,
$158,214 million in securities issued to State and Local Governments,
$5,881 million in Foreign Series Securities, and $29,995 million in
Domestic Series Securities. Treasury issues nonmarketable securities at
either par value or at an amount that reflects a discount or a premium.
The average interest rate on the nonmarketable securities represents
the original issue weighted effective yield on securities outstanding
as of September 30, 2005 and 2004. Nonmarketable securities are issued
with a term of on demand to more than 10 years.
Government Account Series (GAS) securities are nonmarketable securities
issued to federal government accounts. Federal Debt Held by the Public
includes GAS securities issued to certain federal government accounts.
These accounts consist of GAS Held by the Public of $67,961 million and
$58,528 million as of September 30, 2005 and 2004, respectively. One
example is the GAS securities held by the Government Securities
Investment Fund (G-Fund) of the federal employees' Thrift Savings Plan.
Federal employees and retirees who have individual accounts own the GAS
securities held by the fund. For this reason, these securities are
considered part of the Federal Debt Held by the Public rather than
Intragovernmental Debt Holdings. The GAS securities held by the G-Fund
consist of overnight investments redeemed one business day after their
issue. The net increase in amounts borrowed from the fund during fiscal
years 2005 and 2004 are included in the respective Borrowings from the
Public amounts reported on the Schedules of Federal Debt.
Federal Debt Held by the Public includes federal debt held outside of
the U. S. government by individuals, corporations, Federal Reserve
Banks (FRB), state and local governments, and foreign governments and
central banks. The FRB owned $733 billion and $698 billion of Federal
Debt Held by the Public as of September 30, 2005 and 2004,
respectively. These securities are held in the FRB System Open Market
Account (SOMA) for the purpose of conducting monetary policy.
Note 3. Intragovernmental Debt Holdings:
As of September 30, 2005 and 2004, Intragovernmental Debt Holdings are
owed to the following:
[See PDF for image]
[End of table]
These amounts include marketable Treasury securities as well as GAS
securities as follows:
As of September 30,2004:
GAS Securities Marketable Total Treasury Securities:
Civil Service Retirement and Disability Fund Federal Disability
Insurance Trust Fund:
[See PDF for image]
[End of table]
The marketable securities held by the Civil Service Retirement and
Disability Fund and the Federal Disability Insurance Trust Fund were
called on February 15, 2005. The proceeds were rolled over as
investments in GAS securities.
Social Security Administration (SSA); Office of Personnel Management
(OPM); Department of Health and Human Services (HHS); Department of
Defense (DOD); Department of Labor (DOL); Department of Energy (DOE);
Federal Deposit Insurance Corporation (FDIC); Department of Housing and
Urban Development (HUD); Department of the Treasury (Treasury);
Department of State (DOS); Department of Veterans Affairs (VA);
Department of Transportation (DOT).
Note 3. Intragovernmental Debt Holdings (continued):
Intragovernmental Debt Holdings primarily consist of GAS securities.
Treasury issues GAS securities at either par value or at an amount that
reflects a discount or a premium. The average interest rates for fiscal
years 2005 and 2004 were 5.2 percent and 5.4 percent, respectively. The
average interest rate represents the original issue weighted effective
yield on securities outstanding as of September 30, 2005 and 2004. GAS
securities are issued with a term of on demand to 30 years.
Note 4. Interest Expense:
Interest expense on Federal Debt Managed by BPD for fiscal years 2005
and 2004 consisted of the following:
[See PDF for image]
[End of table]
The Fund Balance with Treasury, a non-entity, intragovernmental
account, is not included on the Schedules of Federal Debt and is
presented for informational purposes.
[End of section]
Appendixes:
Appendix I: Comments from the Bureau of the Public Debt:
DEPARTMENT OF THE TREASURY:
BUREAU OF THE PUBLIC DEBT:
WASHINGTON, DC 20239-0001:
NOV 02 2005:
Mr. Gary T. Engel:
Director:
U.S. General Accounting Office:
441 G Street, NW:
Washington, DC 20548:
Dear Mr. Engel:
This letter is our response to your audit of the Schedules of Federal
Debt Managed by the Bureau of the Public Debt for the fiscal years
ended September 30, 2005, and 2004. We agree with your audit report's
conclusions.
As we conclude the ninth consecutive year of our professional
relationship, thank you for conducting a thorough audit of these
schedules. Through our combined efforts, the usability of these
financial reports continues to develop. The experience and courteous
attitude of your audit team is greatly appreciated and we look forward
to continuing this productive and successful collaboration.
Sincerely,
Signed by:
Van Zeck:
Commissioner:
[End of section]
Appendix II: GAO Contact and Staff Acknowledgments:
GAO Contact:
Gary Engel, (202) 512-3406:
Acknowledgments:
In addition to the individual named above, Dawn B. Simpson, Assistant
Director; Erik A. Braun; Dean D. Carpenter; Dennis L. Clarke; Thomas F.
Dawson; Chau L. Dinh; Mickie E. Gray; James S. Maziasz; Jay McTigue;
Timothy J. Murray; Lori B. Ryza; Zakia Simpson; and Jason O. Strange
made key contributions to this report.
(198318):
FOOTNOTES
[1] Intragovernmental Debt Holdings represent federal debt issued by
Treasury and held by certain federal government accounts, such as the
Social Security and Medicare trust funds.
[2] During this period, Treasury eliminated the 3-year note and the 52-
week bill.
[3] 5 U.S.C. §§ 8348(j)(5)(B), 8438(g)(6)(B).
[4] Pub. L. No. 108-415, §1, 118 Stat. 2337 (Nov. 19, 2004).
[5] See GAO, Our Nation's Fiscal Outlook: The Federal Government's Long-
Term Budget Imbalance, http://www.gao.gov/special.pubs/longterm.
[6] GAO, 21st Century Challenges: Reexamining the Base of the Federal
Government, GAO-05-325SP (Washington, D.C.: February 2005).
[7] 31 U.S.C. § 331(e).
[8] Intragovernmental Debt Holdings represent federal debt issued by
Treasury and held by certain federal government accounts, such as the
Social Security and Medicare trust funds.
[9] Reportable conditions are matters coming to our attention that, in
our judgment, should be communicated because they represent significant
deficiencies in the design or operation of internal control, which
could adversely affect the organization's ability to meet the internal
control objectives described in the Objectives, Scope, and Methodology
section of this report.
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Automated answering system: (800) 424-5454 or (202) 512-7470:
Public Affairs:
Jeff Nelligan, managing director,
NelliganJ@gao.gov
(202) 512-4800
U.S. Government Accountability Office,
441 G Street NW, Room 7149
Washington, D.C. 20548:
