Financial Audit
Bureau of the Public Debt's Fiscal Years 2007 and 2006 Schedules of Federal Debt Gao ID: GAO-08-168 November 7, 2007GAO 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, GAO tests compliance with a significant selected provision of law 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 2007 and 2006 were fairly presented in all material respects and BPD maintained effective internal control relevant to the Schedule of Federal Debt as of September 30, 2007. GAO also found no instances of noncompliance in fiscal year 2007 with the statutory debt limit. As of September 30, 2007 and 2006, federal debt managed by BPD totaled about $8,993 billion and $8,493 billion, respectively. Total federal debt increased over each of the last 4 fiscal years. Total federal spending has exceeded total federal revenues which have resulted in increases in debt held by the public. Further, certain trust funds (e.g., Social Security) continue to run cash surpluses, resulting in increased intragovernmental debt holdings since the federal government spends these surpluses on other operating costs and replaces them with federal debt instruments. 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 about 33 percent between the end of fiscal years 2003 and 2007. On September 29, 2007, legislation was enacted to raise the statutory debt limit by $850 billion to $9,815 billion. This was the third occurrence since the end of fiscal year 2003 that the statutory debt limit had to be raised to avoid breaching the statutory debt limit. During that time, the debt limit has increased by over $2.4 trillion, or about 33 percent, from $7,384 billion on September 30, 2003, to the current limit of $9,815 billion.
GAO-08-168, Financial Audit: Bureau of the Public Debt's Fiscal Years 2007 and 2006 Schedules of Federal Debt
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Report to the Secretary of the Treasury:
November 2007:
Financial Audit:
Bureau of the Public Debt's Fiscal Years 2007 and 2006 Schedules of
Federal Debt:
GAO-08-168:
GAO Highlights:
Highlights of GAO-08-168, 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 a significant selected provision of law 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 2007
and 2006 were fairly presented in all material respects and BPD
maintained effective internal control relevant to the Schedule of
Federal Debt as of September 30, 2007. GAO also found no instances of
noncompliance in fiscal year 2007 with the statutory debt limit.
As of September 30, 2007 and 2006, federal debt managed by BPD totaled
about $8,993 billion and $8,493 billion, respectively. As shown in
figure 1 below, total federal debt increased over each of the last 4
fiscal years.
Figure: Total Gross Federal Debt Outstanding:
This figure is a bar chart showing total gross federal debt
outstanding. The X axis is the year, and the Y axis is the dollars in
billions.
As of September 30:
Held by the public: 2003: $3,924; Held by the public: 2004: $4307; Held
by the public: 2005: $4601; Held by the public: 2006: $4843; Held by
the public: 2007: $5,049.
Intragovernmental holdings: 2003: $2,859; Intragovernmental holdings:
2004: $3,072; Intragovernmental holdings: 2005: $3.317;
Intragovernmental holdings: 2006: $3,650; Intragovernmental holdings:
2007: $3, 944.
Total: 2003: $6,783;
Total: 2004: $7,379;
Total: 2005: $7,918;
Total: 2006: $8,493;
Total: 2007: $8,993.
[See PDF for image]
Source: BPD.
[End of figure]
Total federal spending has exceeded total federal revenues which have
resulted in increases in debt held by the public. Further, certain
trust funds (e.g., Social Security) continue to run cash surpluses,
resulting in increased intragovernmental debt holdings since the
federal government spends these surpluses on other operating costs and
replaces them with federal debt instruments. 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 about 33 percent between the end
of fiscal years 2003 and 2007. On September 29, 2007, legislation was
enacted to raise the statutory debt limit by $850 billion to $9,815
billion. This was the third occurrence since the end of fiscal year
2003 that the statutory debt limit had to be raised to avoid breaching
the statutory debt limit. During that time, the debt limit has
increased by over $2.4 trillion, or about 33 percent, from $7,384
billion on September 30, 2003, to the current limit of $9,815 billion.
For a fuller understanding of GAO‘s opinion on BPD's fiscal years 2007
and 2006 Schedules of Federal Debt, readers should refer to the
complete audit report, available by clicking on [hyperlink,
http://www.GAO-08-168], 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 a Selected Provision of Law:
Consistency of Other Information:
Objectives, Scope, and Methodology:
Agency Comments:
Overview, Schedules, and Notes:
11:
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 Abbreviations:
BPD: Bureau of the Public Debt:
OMB: Office of Management and Budget:
Letter November 7, 2007:
The Honorable Henry M. Paulson, Jr.:
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
(BPD) for the fiscal years ended September 30, 2007 and 2006. 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 1]
The auditor's report contains our (1) opinion on the Schedules of
Federal Debt for the fiscal years ended September 30, 2007 and 2006,
(2) opinion on the effectiveness of relevant internal control as of
September 30, 2007, (3) conclusion on compliance in fiscal year 2007
with a selected provision of law 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, 2007 and 2006, federal debt managed by the bureau
totaled about $8,993 billion and $8,493 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) $5,049 billion as of September 30, 2007, and $4,843
billion as of September 30, 2006, of debt held by the public and about
(2) $3,944 billion as of September 30, 2007, and $3,650 billion as of
September 30, 2006, 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 total
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.
Intragovernmental debt holdings represent balances of Treasury
securities held by federal government accounts, primarily federal trust
funds (e.g., Social Security), 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. The federal government uses
the trust funds' invested cash surpluses to assist in funding other
federal government costs. The transactions relating to Treasury
securities held by the federal government accounts net out on the
federal government's consolidated financial statements because under
current U.S. generally accepted accounting principles they essentially
represent loans from one part of the federal government to another.
These securities are nonmarketable; however, they represent a priority
call on future budgetary resources.
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. 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. Specifically, when trust funds
redeem Treasury securities to obtain cash to fund expenditures,
Treasury usually borrows from the public to finance these redemptions.
Such borrowings result in competition with the private sector and thus
an effect on the economy.
We have audited the Schedule of Federal Debt since fiscal year 1997.
Over this period, total federal debt has increased by 73 percent.
During the last 4 fiscal years, managing the federal debt has continued
to be a challenge as evidenced by the growth of total federal debt by
$2,210 billion, or 33 percent, from $6,783 billion as of September 30,
2003, to $8,993 billion as of September 30, 2007. As a result of the
increasing debt, again this past year, Congress enacted a bill to
increase the debt limit to avoid breaching the statutory debt limit. On
September 29, 2007, the President approved the bill to increase the
statutory debt limit from $8,965 billion to $9,815 billion. This was
the third occurrence since the end of fiscal year 2003 that a law has
been enacted to raise the statutory debt limit, with the debt limit
increasing over $2.4 trillion, or about 33 percent, from $7,384 billion
on September 30, 2003, to $9,815 billion, over that period.
Over the last several years, we have noted a trend in the amount of
Treasury securities held by foreign and international investors.
According to amounts reported in the September 2007 Treasury Bulletin,
Treasury estimates that the amount of Treasury securities held by
foreign and international investors has increased $837 billion, from
$1,383 as of June 30, 2003, to $2,220 billion as of June 30, 2007. As
of June 30, 2007, this represents an estimated 45 percent of debt held
by the public, up from about 36 percent as of June 30, 2003. The United
States benefits from foreign purchases of Treasury securities because
foreign and international 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 and
international investors to finance the deficits of the U.S. government
presents potential risk to the U.S. economy, especially since the U.S.
gross national saving rate is low by U.S. historical standards.
Another trend we have observed is the decline in annual budget
deficits. As widely reported last month, the fiscal year 2007 budget
deficit of $163 billion represents the third consecutive decline in
budget deficits, down from last year's deficit of $248 billion.
Certainly lower short-term deficits are better than higher short-term
deficits. However, our nation's real challenge is not short-term
deficits, rather it's the U.S. government's impending longer-term
structural deficits and related debt burdens. Indeed, what we call the
longer-term fiscal challenge is not in the distant future. The first of
the baby boomers become eligible for early retirement under Social
Security on January 1, 2008--only two months from now--and for Medicare
benefits just 3 years later. The budget and economic implications of
the baby boom generation's retirement have already become a factor in
Congressional Budget Office's 10-year baseline projections and will
only intensify as the baby boomers age. 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 2]
Simply put, our nation is on an imprudent and unsustainable long-term
fiscal path that is getting worse with the passage of time. 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.
As discussed earlier, federal debt managed by the bureau totaled about
$9 trillion at the end of fiscal year 2007. However, that number
excludes many items, including the gap between scheduled 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
total burden in present value dollars is estimated to be about $53
trillion.[Footnote 3] Stated differently, the estimated current total
burden for every American is nearly $175,000; and every day that burden
becomes larger. Given the size of the projected imbalance, the U.S.
government will not be able to grow its way out of this problem; tough
choices will be required. Our report, 21ST Century Challenges:
Reexamining the Base of the Federal Government, is intended to support
Congress in identifying issues and options that could help address
these fiscal pressures.[Footnote 4]
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 Financial Services and
General Government, Senate Committee on Appropriations; the
Subcommittee on Federal Financial Management, Government Information,
Federal Services, and International Security, Senate Committee on
Homeland Security and Governmental Affairs; the House Committee on
Appropriations; the House Committee on Oversight and Government Reform;
the House Committee on the Budget; the Subcommittee on Financial
Services and General Government, House Committee on Appropriations; and
the Subcommittee on Government Management, Organization, and
Procurement, House Committee on Oversight and Government Reform. We are
also sending copies of this report to the Commissioner of the Bureau of
the Public Debt, the Acting 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 engelg@gao.gov. Staff acknowledgements
are provided in appendix II.
Sincerely yours,
Signed by:
David M. Walker:
Comptroller General of the United States:
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 5] we have 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, 2007 and 2006. 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
6]
In our audits of the Schedules of Federal Debt Managed by BPD for the
fiscal years ended September 30, 2007 and 2006, we found:
* 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 relevant to the Schedule of
Federal Debt as of September 30, 2007; and:
* no reportable noncompliance in fiscal year 2007 with a selected
provision of law we tested.
The following sections discuss, in more detail, (1) these conclusions;
(2) our conclusion on the Overview on Federal Debt Managed by the
Bureau of the Public Debt; (3) our audit objectives, scope, and
methodology; and (4) agency comments.
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, 2007,
2006, and 2005 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, 2007 and 2006.
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,
2007, 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), the Federal
Managers' Financial Integrity Act, and the Office of Management and
Budget (OMB) Circular A-123, Management's Responsibility for Internal
Control.
We found matters involving information security controls that we do not
consider to be significant deficiencies.[Footnote 7] 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 a Selected Provision of Law:
Our tests for compliance in fiscal year 2007 with the statutory debt
limit disclosed no instances of noncompliance that would be reportable
under U.S. generally accepted government auditing standards or
applicable OMB audit guidance. However, the objective of our audit of
the Schedule of Federal Debt for the fiscal year ended September 30,
2007, 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 or U.S. generally accepted
accounting principles.
Objectives, Scope, and Methodology:
Management is responsible for (1) preparing the Schedules of Federal
Debt in conformity with U.S. generally accepted accounting principles;
(2) 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 (3) 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 relevant internal
control as of September 30, 2007, 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, 2007, 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, 2007,
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 (1) testing compliance with selected
provisions of laws and regulations that have a direct and material
effect on the Schedule of Federal Debt and (2) 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 the entity and its operations, including
its internal control relevant to the Schedule of Federal Debt as of
September 30, 2007, 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 relevant to the Schedule of Federal Debt as of
September 30, 2007;
* 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 2007 with the statutory debt limit
(31 U.S.C. § 3101(b) (Supp IV 2005), as amended by Pub. L. No. 109-182,
120 Stat. 289 (2006), and Pub L. No. 110-91, 121 Stat. 988 (2007)).
We did not evaluate all internal controls relevant to operating
objectives as broadly defined 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 a selected provision of law
that has a direct and material effect on the Schedule of Federal Debt
for the fiscal year ended September 30, 2007. 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 31, 2007:
Overview, Schedules, and Notes:
Overview on Federal Debt Managed by the Bureau of the Public Debt:
Gross Federal Debt Outstanding[Footnote 8]:
Federal debt managed by the Bureau of the Public Debt (BPD) 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, 2007 and 2006, outstanding gross federal
debt managed by the bureau totaled $8,993 and $8,493 billion,
respectively. The increase in gross federal debt of $500 billion during
fiscal year 2007 was due to an increase in gross intragovernmental debt
holdings of $294 billion and an increase in gross debt held by the
public of $206 billion. As Figure 1 illustrates, both intragovernmental
debt holdings and debt held by the public have steadily increased since
fiscal year 2003. 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, 2007,
gross debt held by the public totaled $5,049 billion and gross
intragovernmental debt holdings totaled $3,944 billion.
Figure 1: Total Gross Federal Debt Outstanding (in billions):
This figure is a bar chart showing total gross federal debt
outstanding.
As of September 30:
Held by the public: 2003: $3,924; Held by the public: 2004: $4307; Held
by the public: 2005: $4601; Held by the public: 2006: $4843; Held by
the public: 2007: $5,049.
Intragovernmental holdings: 2003: $2,859; Intragovernmental holdings:
2004: $3,072; Intragovernmental holdings: 2005: $3.317;
Intragovernmental holdings: 2006: $3,650; Intragovernmental holdings:
2007: $3, 944.
Total: 2003: $6,783;
Total: 2004: $7,379;
Total: 2005: $7,918;
Total: 2006: $8,493;
Total: 2007: $8,993.
[See PDF for image]
[End of figure]
Interest Expense:
Interest expense incurred during fiscal year 2007 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 2007, interest
expense incurred totaled $433 billion, interest expense on debt held by
the public was $239 billion, and $194 billion was interest incurred for
intragovernmental debt holdings. As Figure 2 illustrates, total
interest expense has increased in fiscal years 2003 through 2007.
Average interest rates on principal balances outstanding as of
September 30, 2007 and 2006, are disclosed in the Notes to the
Schedules of Federal Debt.
Figure 2: Total Interest Expense:
This figure is a bar chart showing total interest expense.
Fiscal year Ended September 30:
Held by the public: 2003: $157; Held by the public: 2004: $158; Held by
the public: 2005: $181; Held by the public: 2006: $221.
Intragovernmental holdings: 2003: $158; Intragovernmental holdings:
2004: $164; Intragovernmental holdings: 2005: $174; Intragovernmental
holdings: 2006: $183; Intragovernmental holdings: 2007: $194.
Total: 2003: $315;
Total: 2004: $322;
Total: 2005: $355;
Total: 2006: $404;
Total: 2007: $433.
[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, 2007
and 2006, gross debt held by the public totaled $5,049 billion and
$4,843 billion, respectively (see Figure 1), an increase of $206
billion. The borrowings and repayments of debt held by the public
increased from fiscal year 2006 to 2007. After Treasury took into
account the increased issuances of State and Local Government Series
securities, Treasury decided to finance the remaining current
operations using more short-term securities.
As of September 30, 2007, $4,428 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, 2007, $2,838 billion or 64 percent will mature
within the next 4 years (see Figure 3). As of September 30, 2007 and
2006, notes and TIPS held by the public maturing within the next 10
years totaled $2,767 billion and $2,709 billion, respectively, an
increase of $58 billion.
Figure 3: Maturity Dates[Footnote 9] of Marketable Debt Held by the
Public as of September 30, 2007:
This figure is a line graph showing maturity dates as of marketable
debt held by the public as of September 30, 2007. The X axis is the
Fiscal Year of Maturity, and the Y axis represents dollars in billions.
[See PDF for image]
[End of figure]
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, 2007, nonmarketable securities
totaled $621 billion, or 12 percent of debt held by the public. As of
that date, nonmarketable securities primarily consisted of savings
securities totaling $197 billion and special securities for state and
local governments totaling $297 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.[Footnote 10] As of September 30,
2007, such funds accounted for $3,419 billion, or 87 percent, of the
$3,944 billion intragovernmental debt holdings balances (see Figure 4).
As of September 30, 2007 and 2006, gross intragovernmental debt
holdings totaled $3,944 billion and $3,650 billion, respectively (see
Figure 1), an increase of $294 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, 2007:
This figure is a pie chart showing components of intragovernmental debt
holdings as of September 30, 2007.
Social Security trust funds: 55%;
Civil Service Retirement and Disability trust fund: 18%;
Other programs and trust funds: 13%;
Medicare trust funds: 9%;
Military Retirement fund: 5%.
[See PDF for image]
[End of figure]
Significant Events in FY 2007:
Statutory Debt Ceiling Raised:
On May 17, 2007, a house bill was introduced and approved to increase
the debt limit from $8,965 billion to $9,815 billion. The bill was then
referred to the Senate Committee on Finance on May 21, 2007, where it
gained approval on September 12, 2007. Projections determined that the
United States would hit the statutory debt limit on October 1, 2007,
and consequently, the full senate passed this measure to raise the debt
limit by $850 billion on September 27, 2007. On September 29, 2007,
Public Law 110-91 was enacted, which raised the statutory debt ceiling
to $9,815 billion.
Thirty-Year Bond Issuance/Discontinuation of 3-Year Note
The thirty-year bond was re-introduced in February 2006 with semi-
annual issuance planned. In August 2006, Treasury announced that the 30-
year bond would be issued on a quarterly basis beginning in February
2007. The February issue was reopened in May 2007, followed by an
original issue in August 2007 that will be reopened in November 2007.
This quarterly issuance pattern has benefited the Separate Trading of
Registered Interest and Principal of Securities (STRIPS) market by
creating interest payments for February, May, August and November.
Beginning in February 2006, the auction and issuance of the monthly 5-
year note was shifted to month end to accommodate the re-introduction
of the 30-year bond.
Additionally, Treasury‘s ongoing monitoring of the fiscal year‘s
economic outlook has resulted in the discontinuance of the 3- year
note. Discontinuance of the 3-year note will allow Treasury to ensure
large liquid benchmark issuances, better balance its portfolio, and
manage the fiscal outlook. The final scheduled auction of the 3-year
note was held on May 7, 2007.
Discontinuance of Long-Term Securities in Legacy Treasury Direct
On January 18, 2007, a final amendment to the Uniform Offering Circular
(UOC) was published in the Federal Register clarifying that the
Treasury Department may announce certain marketable Treasury securities
as not eligible for purchase or holding in Legacy Treasury Direct.
Legacy Treasury Direct, which was implemented in 1986, will be phased
out and replaced by the newer, online TreasuryDirect system. To assist
with this phasing out, the offering of longer-term securities in Legacy
Treasury Direct was discontinued. Since January 2007, 30-year bonds and
20-year TIPS are no longer available in Legacy Treasury Direct. This
amendment also clarified that the announcement for each auction, in
conjunction with the UOC, provides the terms and conditions for the
sale and issuance of marketable Treasury bills, notes, bonds, and TIPS.
TreasuryDirect Security Changes
TreasuryDirect is an Internet-accessed system that enables investors to
purchase the full range of Treasury securities and manage their
holdings in a single account. Sensitive online transactions such as
bank account changes and securities sales and transfers could become
vulnerable to fraud. In July 2007, BPD initiated certified paper
requests to process these sensitive transactions. This third-party
investor identification helps mitigate risk and assure individual
investors of the security of their Treasury Direct investments by
providing additional verification and a written record of transaction
requests.
Postal Retiree Health Benefits Fund:
On December 20, 2006, the President signed H.R. 6407, which enacted
Public Law 109-435, the ’Postal Accountability and Enhancement Act.“
This Act created a new Government Account Series Trust Fund, the Postal
Retiree Health Benefits Fund. This fund is administered by the Office
of Personnel Management and receives transfers from the United States
Postal Service (USPS). The initial transfer in the amount of $3 billion
was received and invested in par value securities on April 6, 2007.
Additional amounts of $17.1 billion and $5.4 billion were transferred
and invested on June 30, 2007 and September 28, 2007, respectively. The
fund is not expected to make payouts until 2017.
Daily Financial Statements:
Beginning with the accounting date of June 1, 2007, BPD is publishing
key daily debt-related financial data on our website, [hyperlink,
http://www.treasurydirect.gov/govt/reports/pd/feddebt/feddebt_daily.htm.
Similar financial information is currently published monthly. During
the past fiscal year, BPD strengthened internet communications with
customers by redesigning the government section of the [hyperlink,
http://www.Treasurydirect.gov] website. Additional on-line resources
are now available and the overall functionality and accessibility
features are greatly improved. The Schedules of Federal Debt daily
reporting was implemented to support the Treasury strategic objective
to ’make accurate, timely financial information on U.S. Government
programs readily available.“ The enhanced financial reporting is geared
toward providing our customers more timely information and is one of
BPD‘s strategic goals for FY 2007.
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
$1,142 billion as of September 30, 1982, to $8,993 billion as of
September 30, 2007 (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 almost five fold
between 1982 and 1997.
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.
However, higher Federal outlays and tax policy decisions have resulted
in an increase in debt held by the public from $3,339 billion in 2001
to $5,049 billion in 2007.
Figure 5: Total Gross Federal Debt Outstanding:
This figure is a bar chart showing total gross federal debt
outstanding, as of September 30. The X axis is the year, 1982 through
2007. The Y axis represents dollars in billions.
[See PDF for image]
Source: Monthly Statement of Public Debt.
[End of figure]
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 $1,085 billion, from $2,859 billion as of September 30,
2003, to $3,944 billion as of September 30, 2007. 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:
This figure is a line chart showing average interest rates of federal
debt outstanding, as of September 30. The X axis is the year, and the Y
axis represents the average interest rates.
[See PDF for image]
Source: Prior to fiscal year 2001: Monthly Statement of the Public
Debt; Fiscal year 2001 and after: Public Debt Online Average Interest
Rates.
[End of figure]
Table: Schedules of Federal Debt: Managed by the Bureau of the Public
Debt For the Fiscal Years Ended September 30, 2007 and 2006 (Dollars in
Millions):
Balance as of September 30, 2005;
Federal Debt: Held by the Public: Principal (Note 2): $4,601,239;
Federal Debt: Held by the Public: Accrued Interest Payable: $34,961;
Federal Debt: Held by the Public: Net Unamortized: ($35,531);
Federal Debt: Intragovernmental Debt Holdings: Principal (Note 3):
$3,317,471;
Federal Debt: Intragovernmental Debt Holdings: Accrued Interest
Payable: $43,250;
Federal Debt: Intragovernmental Debt Holdings: Net Unamortized:
$14,740.
Increases: Borrowings from the Public;
Federal Debt: Held by the Public: Principal (Note 2): 4,534,335;
Federal Debt: Held by the Public: Accrued Interest Payable: [Empty];
Federal Debt: Held by the Public: Net Unamortized: (48,568);
Federal Debt: Intragovernmental Debt Holdings: Principal (Note 3):
[Empty];
Federal Debt: Intragovernmental Debt Holdings: Accrued Interest
Payable: [Empty];
Federal Debt: Intragovernmental Debt Holdings: Net Unamortized:
[Empty].
Increases: Net Increase in Intragovernmental Debt Holdings;
Federal Debt: Held by the Public: Principal (Note 2): [Empty];
Federal Debt: Held by the Public: Accrued Interest Payable: [Empty];
Federal Debt: Held by the Public: Net Unamortized: [Empty];
Federal Debt: Intragovernmental Debt Holdings: Principal (Note 3):
332,382;
Federal Debt: Intragovernmental Debt Holdings: Accrued Interest
Payable: [Empty];
Federal Debt: Intragovernmental Debt Holdings: Net Unamortized:
(12,630).
Increases: Accrued Interest (Note 4);
Federal Debt: Held by the Public: Principal (Note 2): [Empty];
Federal Debt: Held by the Public: Accrued Interest Payable: 177,593;
Federal Debt: Held by the Public: Net Unamortized: [Empty];
Federal Debt: Intragovernmental Debt Holdings: Principal (Note 3):
[Empty];
Federal Debt: Intragovernmental Debt Holdings: Accrued Interest
Payable: 186,108;
Federal Debt: Intragovernmental Debt Holdings: Net Unamortized:
[Empty].
Total Increases;
Federal Debt: Held by the Public: Principal (Note 2): 4,534,335;
Federal Debt: Held by the Public: Accrued Interest Payable: 177,593;
Federal Debt: Held by the Public: Net Unamortized: (48,568);
Federal Debt: Intragovernmental Debt Holdings: Principal (Note 3):
332,382;
Federal Debt: Intragovernmental Debt Holdings: Accrued Interest
Payable: 186,108;
Federal Debt: Intragovernmental Debt Holdings: Net Unamortized:
(12,630).
Balance as of September 30, 2006;
Federal Debt: Held by the Public: Principal (Note 2): 4,843,121;
Federal Debt: Held by the Public: Accrued Interest Payable: 41,119;
Federal Debt: Held by the Public: Net Unamortized: (40,165);
Federal Debt: Intragovernmental Debt Holdings: Principal (Note 3):
3,649,853;
Federal Debt: Intragovernmental Debt Holdings: Accrued Interest
Payable: 45,726;
Federal Debt: Intragovernmental Debt Holdings: Net Unamoritized:
(1,159).
Increases: Borrowings from the Public;
Federal Debt: Held by the Public: Principal (Note 2): 4,596,053;
Federal Debt: Held by the Public: Accrued Interest Payable: [Empty];
Federal Debt: Held by the Public: Net Unamortized: (48,776);
Federal Debt: Held by the Public: Net Unamortized: [Empty];
Federal Debt: Intragovernmental Debt Holdings: Principal (Note 3):
[Empty];
Federal Debt: Intragovernmental Debt Holdings: Accrued Interest
Payable: [Empty];
Federal Debt: Intragovernmental Debt Holdings: Net Unamortized:
[Empty].
Increases: Net Increase in Intragovernmental Debt Holdings;
Federal Debt: Held by the Public: Principal (Note 2): [Empty];
Federal Debt: Held by the Public: Accrued Interest Payable: [Empty];
Federal Debt: Held by the Public: Net Unamortized: [Empty];
Federal Debt: Intragovernmental Debt Holdings: Principal (Note 3):
294,495;
Federal Debt: Intragovernmental Debt Holdings: Accrued Interest
Payable: [Empty];
Federal Debt: Intragovernmental Debt Holdings: Net Unamortized: 6,005.
Increases: Accrued Interest (Note 4);
Federal Debt: Held by the Public: Principal (Note 2): [Empty];
Federal Debt: Held by the Public: Accrued Interest Payable: 189,396;
Federal Debt: Held by the Public: Net Unamortized: [Empty];
Federal Debt: Intragovernmental Debt Holdings: Principal (Note 3):
[Empty];
Federal Debt: Intragovernmental Debt Holdings: Accrued Interest
Payable: 195,445;
Federal Debt: Intragovernmental Debt Holdings: Net Unamortized:
[Empty].
Total Increase;
Federal Debt: Held by the Public: Principal (Note 2): 4,596,053;
Federal Debt: Held by the Public: Accrued Interest Payable: 189,396;
Federal Debt: Held by the Public: Net Unamortized: (48,776);
Federal Debt: Intragovernmental Debt Holdings: Principal (Note 3):
294,495;
Federal Debt: Intragovernmental Debt Holdings: Accrued Interest
Payable: 195,445;
Federal Debt: Intragovernmental Debt Holdings: Net Unamortized: 6,005.
Decreases: Repayments of Debt Held by the Public;
Federal Debt: Held by the Public: Principal (Note 2): 4,389,869;
Federal Debt: Held by the Public: Accrued Interest Payable: [Empty];
Federal Debt: Held by the Public: Net Unamortized: [Empty];
Federal Debt: Intragovernmental Debt Holdings: Principal (Note 3):
[Empty];
Federal Debt: Intragovernmental Debt Holdings: Accrued Interest
Payable: [Empty];
Federal Debt: Intragovernmental Debt Holdings: Net Unamortized:
[Empty].
Deacreases: Interest Paid;
Federal Debt: Held by the Public: Principal (Note 2): [Empty];
Federal Debt: Held by the Public: Accrued Interest Payable: 186,129;
Federal Debt: Held by the Public: Net Unamortized: [Empty];
Federal Debt: Intragovernmental Debt Holdings: Principal (Note 3):
[Empty];
Federal Debt: Intragovernmental Debt Holdings: Accrued Interest
Payable: 192,560;
Federal Debt: Intragovernmental Debt Holdings: Net Unamortized:
[Empty].
Decreases: Net Authorization (Note 4);
Federal Debt: Held by the Public: Principal (Note 2): [Empty];
Federal Debt: Held by the Public: Accrued Interest Payable: [Empty];
Federal Debt: Held by the Public: Net Unamortized: (49,500);
Federal Debt: Intragovernmental Debt Holdings: Principal (Note 3):
[Empty];
Federal Debt: Intragovernmental Debt Holdings: Accrued Interest
Payable: [Empty];
Federal Debt: Intragovernmental Debt Holdings: Net Unamortized: 1,116.
Total Decreases;
Federal Debt: Held by the Public: Principal (Note 2): 4,389,869;
Federal Debt: Held by the Public: Accrued Interest Payable: 186,129;
Federal Debt: Held by the Public: Net Unamortized: (49,500);
Federal Debt: Intragovernmental Debt Holdings: Principal (Note 3): 0;
Federal Debt: Intragovernmental Debt Holdings: Accrued Interest
Payable: 192,560;
Federal Debt: Intragovernmental Debt Holdings: Net Unamortized: 1,116.
Balance as of September 30, 2007;
Federal Debt: Held by the Public: Principal (Note 2): $5,049,305;
Federal Debt: Held by the Public: Accrued Interest Payable: $44,386;
Federal Debt: Held by the Public: Net Unamortized: ($39,441);
Federal Debt: Intragovernmental Debt Holdings: Principal (Note 3):
$3,944,348;
Federal Debt: Intragovernmental Debt Holdings: Accrued Interest
Payable: $48,611;
Federal Debt: Intragovernmental Debt Holdings: Net Unamortized: $3,730.
The accompanying notes are an integral part of these schedules.
Source: BDP.
[End of table]
Notes to the Schedules of Federal Debt Managed by the Bureau of the
Public Debt For the Fiscal Years Ended September 30, 2007 and 2006
(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 2007 and 2006 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 daily over the life of the security
based on the Consumer Price Index for all Urban Consumers.
Notes to the Schedules of Federal Debt Managed by the Bureau of the
Public Debt For the Fiscal Years Ended September 30, 2007 and 2006
(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 2007 and 2006 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 daily over the life of the security
based on the Consumer Price Index for all Urban Consumers.
For the Fiscal Years Ended September 30, 2007 and 2006:
(Dollars in Millions):
Note 2. Federal Debt Held by the Public:
Table: As of September 30, 2007 and 2006, Federal Debt Held by the
Public consisted of the following:
Marketable: Treasury Bills;
2007: Amount: $954,607;
2007: Average Interest Rates: 4.6%;
2006: Amount: $908,474;
2006: Average Interest Rates: 5.0%.
Marketable: Treasury Notes;
2007: Amount: 2,456,100;
2007: Average Interest Rates: 4.4%;
2006: Amount: 2,445,307;
2006: Average Interest Rates: 4.2%.
Marketable: Treasury Bonds;
2007: Amount: 560,922;
2007: Average Interest Rates: 7.4%;
2006: Amount: 534,473;
2006: Average Interest Rates: 7.6%.
Marketable: TIPS;
2007: Amount: 456,776;
2007: Average Interest Rates: 2.3%;
2006: Amount: 395,550;
2006: Average Interest Rates: 2.3%.
Total Marketable;
2007: Amount: $4,428,405;
2007: Average Interest Rates: [Empty];
2006: Amount: $4,283,804;
2006: Average Interest Rates: [Empty].
Nonmarketable;
2007: Amount: $620,900;
2007: Average Interest Rates: 4.9%;
2006: Amount: $559,317;
2006: Average Interest Rates: 5.0%.
Total Federal Debt Held by the Public;
2007: Amount: $5,049,305;
2007: Average Interest Rates: [Empty];
2006: Amount: $4,843,121;
2006: Average Interest Rates: [Empty].
[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, 2007 and 2006, 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, 2007 and 2006. 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, a widely used measure of
inflation. TIPS are issued with a term of 5 years or more. 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. The TIPS
Federal Debt Held by the Public inflation-adjusted principal balance
includes inflation of $50,517 million and $43,927 million as of
September 30, 2007 and 2006, respectively.
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 $775 billion and $765 billion of Federal
Debt Held by the Public as of September 30, 2007 and 2006,respectively.
These securities are held in the FRB System Open Market Account (SOMA)
for the purpose of conducting monetary policy.
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, 2007 and
2006. Nonmarketable securities are issued with a term of on
demand to more than 10 years.
Table: As of September 30, 2007 and 2006, nonmarketable securities
consisted of the following:
Domestic Series;
2007: $29,995;
2006: $29,995.
Foreign Series;
2007: 2,986;
2006: 2,986.
R.E.A. Series;
2007: 1;
2006: 1.
State and Local Government Series;
2007: 296,513;
2006: 238,835.
United States Savings Securities;
2007: 197,171;
2006: 203,701.
Government Account Series;
2007: 88,153;
2006: 78,129.
Other;
2007: 6,081;
2006: 5,670.
Total Nonmarketable;
2007: $620,900;
2006: $559,317.
[End of table]
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.
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 2007 and 2006 are included in the respective Borrowings from the
Public amounts reported on the Schedules of Federal Debt.
Fiscal years-end September 30, 2007 and 2006, occurred on a Sunday and
Saturday, respectively. As a result, $26,591 million and $31,656
million of marketable Treasury notes matured but not repaid is included
in the balance of the total Federal Debt Held by the Public as of
September 30, 2007 and 2006, respectively. Settlement of these
debt repayments occurred on Monday, October 1, 2007, and Monday,
October 2, 2006.
Note 3. Intragovernmental Debt Holdings:
Table: As of September 30, 2007 and 2006, Intragovernmental Debt
Holdings are owed to the following:
SSA: Federal Old-Age and Survivors Insurance Trust Fund;
2007: $1,968,262;
2006: $1,793,129.
OPM: Civil Service Retirement and Disability Fund;
2007: 687,665;
2006: 675,936.
HHS: Federal Hospital Insurance Trust Fund;
2007: 319,377;
2006: 302,186.
SSA: Federal Disability Insurance Trust Fund;
2007: 213,830;
2006: 202,178.
DOD: Military Retirement Fund;
2007: 190,232;
2006: 181,810.
DOD: DOD Medicare-Eligible Retiree Health Care Fund;
2007: 92,191;
2006: 72,740.
DOL: Unemployment Trust Fund;
2007: 74,923;
2006: 66,213.
FDIC: The Deposit Insurance Fund;
2007: 47,515;
2007: 46,216.
DOE: Nuclear Waste Disposal Fund;
2007: 39,435;
2006: 36,482.
HHS: Federal Supplementary Medical Insurance Trust Fund;
2007: 39,248;
2006: 32,306.
DOL: Pension Benefit Guaranty Corporation;
2007: 35,775;
2006: 36,635.
OPM: Employees Life Insurance Fund;
2007: 32,965;
2006: 31,282.
OPM: Postal Service Retiree Health Benefits Fund;
2007: 25,491;
2006: 0.
HUD: FHA – Liquidating Account;
2007: 22,405;
2006: 22,030.
Treasury: Exchange Stabilization Fund;
2007: 16,436;
2006: 15,711.
OPM: Employees Health Benefits Fund;
2007: 15,890;
2006: 14,822.
DOS: Foreign Service Retirement and Disability Fund;
2007: 14,378;
2006: 13,876.
DOT: Highway Trust Fund;
2007: 12,205;
2006: 10,998.
VA: National Service Life Insurance Fund;
2007: 9,752;
2006: 10,189.
Other Programs and Funds;
2007: 86,373;
2006: 85,114.
Total Intragovernmental Debt Holdings;
2007: $3,944,348;
2006: $3,649,853.
[End of table]
Social Security Administration (SSA); Office of Personnel Management
(OPM); Department of Health and Human Services (HHS); Department of
Defense (DOD); Department of Labor (DOL); Federal Deposit Insurance
Corporation (FDIC); Department of Energy (DOE); Department of Housing
and Urban Development (HUD); Department of the Treasury (Treasury);
Department of State (DOS); Department of Transportation (DOT);
Department of Veterans Affairs (VA).
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 2007 and 2006 were 5.1 and 5.2 percent, respectively. The average
interest rate represents the original issue weighted effective yield on
securities outstanding as of September 30, 2007 and 2006. GAS
securities are issued with a term of on demand to 30 years. GAS
securities include TIPS, which are reported at an inflation-adjusted
principal balance using the Consumer Price Index. As of September 30,
2007 and 2006, the inflation-adjusted principal balance included
inflation of $28,643 million and $19,576 million, respectively.
Fiscal years-ended September 30, 2007 and 2006, occurred on a Sunday
and Saturday, respectively. As a result, $53 million and $360 million
of GAS securities held by Federal Agencies matured but not repaid is
included in the balance of the Intragovernmental Debt Holdings as of
September 30, 2007 and 2006, respectively. Settlement of these debt
repayments occurred on Monday, October 1, 2007 and Monday, October 2,
2006.
Note 4. Interest Expense:
Table: Interest expense on Federal Debt Managed by BPD for fiscal years
2007 and 2006 consisted of the following:
Federal Debt Held by the Public: Accrued Interest;
2007: $189,396;
2006: $177,593.
Federal Debt Held by the Public: Net Amortization;
2007: 49,500;
2006: 43,934.
Total Interest Expense on Federal Debt Held by the Public;
2007: 238,896;
2006: 221,527.
Intragovernmental Debt Holdings: Accrued Interest;
2007: 195,445;
2006: 186,108.
Intragovernmental Debt Holdings: Net Amortization of Premiums and
Discounts;
2007: (1,116);
2006: (3,269).
Total Interest Expense on Intragovernmental Debt Holdings;
2007: 194,329;
2006: 182,839.
Total Interest Expense on Federal Debt Managed by BPD;
2007: $433,225;
2006: $404,366.
[End of table]
The valuation of TIPS is adjusted daily over the life of the security
based on the Consumer Price Index for all Urban Consumers. This daily
adjustment is an interest expense for the Bureau of the Public Debt.
Accrued interest on Federal Debt Held by the Public includes inflation
adjustments of $10,276 million and $14,512 million for fiscal years
2007 and 2006, respectively. Accrued interest on Intragovernmental Debt
Holdings includes inflation adjustments of $378 million and $607
million for fiscal years 2007 and 2006, respectively.
Note 5. Fund Balance With Treasury:
Appropriated Funds Obligated;
As of September 30, 2007: $156;
As of September 30, 2006: $152.
[End of table]
Appendix I: Comments from the Bureau of the Public Debt:
Department of the Treasury:
Bureau of the Public Debt:
Parkersburg, WV 26106-1328:
[hyperlink, http://www.treasurydirect.gov]:
November 2, 2007:
Mr. Gary T. Engel:
Director:
U.S. Government Accountability Office:
441 F. 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, 2007 and 2006. We agree with your audit report's
conclusions.
As we conclude the eleventh consecutive year of our professional
relationship, we appreciate the experience and professional attitude of
your audit team. As your audit team expands, their ability to grasp the
complexities surrounding the schedule greatly enhances the audit
process. We would like to thank you and your staff for conducting an
efficient and thorough audit of these schedules with increasingly
stringent audit requirements. The usability of these reports continues
to develop through combined efforts, and we look forward to continuing
this productive and successful relationship.
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; Dean D. Carpenter; Emily M. Clancy; Dennis L. Clarke; Chau L.
Dinh; Lisa M. Galvan-Treviņo; Vivian M. Gutierrez; Erik S. Huff; Bret
R. Kressin; Nicole M. McGuire; and Jay R. McTigue made key
contributions to this report.
[End of section]
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] See GAO, Our Nation's Fiscal Outlook: The Federal Government's Long-
Term Budget Imbalance, [hyperlink,
http://www.gao.gov/special.pubs/longterm].
[3] The total burden is estimated based on the federal government's
liabilities, commitments, and contingencies reported in the Financial
Report of the U.S. Government for Fiscal Year 2006 adjusted for growth
in debt held by the public during fiscal year 2007 and updated
estimates of future social insurance obligations as reported in the
2007 Trustees reports.
[4] GAO, 21ST Century Challenges: Reexamining the Base of the Federal
Government, GAO-05-325SP (Washington, D.C.: February 2005).
[5] 31 U.S.C. § 331(e).
[6] 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.
[7] A significant deficiency is a control deficiency, or combination of
control deficiencies, that adversely affects the entity's ability to
initiate, authorize, record, process, or report financial data reliably
in accordance with U.S. generally accepted accounting principles such
that there is more than a remote likelihood that a misstatement of the
entity's financial statements that is more than inconsequential will
not be prevented or detected. A control deficiency exists when the
design or operation of a control does not allow management or employees
in the normal course of performing their assigned functions to prevent
or detect misstatements on a timely basis.
[8] 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.
[9] Callable securities mature between fiscal years 2013 and 2015, but
are reported by their call date.
[10] 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.
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