Financial Audit
Bureau of the Public Debt's Fiscal Years 2009 and 2008 Schedules of Federal Debt Gao ID: GAO-10-88 November 10, 2009GAO is required to audit the consolidated financial statements of the U.S. government. Because of the significance of the federal debt held by the public to the governmentwide financial statements, GAO audits 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 over financial reporting relevant to the Schedule of Federal Debt. Further, GAO tests compliance with a significant provision of law related to the Schedule of Federal Debt (statutory debt limit). 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 primarily 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 2009 and 2008 were fairly presented in all material respects, and BPD maintained effective internal control over financial reporting relevant to the Schedule of Federal Debt as of September 30, 2009. GAO found no instances of noncompliance in fiscal year 2009 with the statutory debt limit. As of September 30, 2009 and 2008, federal debt managed by BPD totaled about $11,898 billion and $10,011 billion, respectively. 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 $3,980 billion, or 50 percent, from $7,918 billion as of September 30, 2005, to $11,898 billion as of September 30, 2009. The increase to the federal debt has become particularly acute since the onset of the recession in December 2007. Federal government actions in response to both the financial market crisis and the economic downturn have added significantly to Treasury's borrowing needs. The fiscal year 2008 increase in total federal debt of $1,018 billion was the largest annual dollar increase in history; only to be surpassed by the fiscal year 2009 increase of $1,887 billion. During fiscal years 2008 and 2009, legislation was enacted to raise the statutory debt limit on three different occasions. During this period, the statutory debt limit went from $9,815 billion to its current level of $12,104 billion, an increase of 23 percent.
GAO-10-88, Financial Audit: Bureau of the Public Debt's Fiscal Years 2009 and 2008 Schedules of Federal Debt
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United States Government Accountability Office:
GAO:
Report to the Secretary of the Treasury:
November 2009:
Financial Audit:
Bureau of the Public Debt‘s Fiscal Years 2009 and 2008 Schedules of
Federal Debt:
GAO-10-88:
GAO Highlights:
Highlights of GAO-10-88, 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. Because of the significance of the federal debt held
by the public to the governmentwide financial statements, GAO audits
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 over financial
reporting relevant to the Schedule of Federal Debt. Further, GAO tests
compliance with a significant provision of law related to the Schedule
of Federal Debt (statutory debt limit).
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
primarily 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 2009
and 2008 were fairly presented in all material respects, and BPD
maintained effective internal control over financial reporting relevant
to the Schedule of Federal Debt as of September 30, 2009. GAO found no
instances of noncompliance in fiscal year 2009 with the statutory debt
limit.
As of September 30, 2009 and 2008, federal debt managed by BPD totaled
about $11,898 billion and $10,011 billion, respectively. As shown in
figure 1 below, total federal debt increased over each of the last 4
fiscal years.
Figure 1: Total Gross Federal DEbt Outstanding (Fiscal Years Ended
September 39, 2005-2009) (Dollars in billions)
[Refer to PDF for image: Combined stacked vertical bar and line graph]
As of September 30, 2005:
Intragovernmental holdings: $3,317;
Held by the public: $4,601;
Total: $7,918.
As of September 30, 2006:
Intragovernmental holdings: $3,650;
Held by the public: $4,843;
Total: $8,493.
As of September 30, 2007:
Intragovernmental holdings: $3,944;
Held by the public: $5,049;
Total: $8,993.
As of September 30, 2008:
Intragovernmental holdings: $4,202;
Held by the public: $5,809;
Total: $10,011.
As of September 30, 2009:
Intragovernmental holdings: $4,346;
Held by the public: $7,552;
Total: $11,898.
Source: BPD.
[End of figure]
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
$3,980 billion, or 50 percent, from $7,918 billion as of September 30,
2005, to $11,898 billion as of September 30, 2009. The increase to the
federal debt has become particularly acute since the onset of the
recession in December 2007. Federal government actions in response to
both the financial market crisis and the economic downturn have added
significantly to Treasury‘s borrowing needs. The fiscal year 2008
increase in total federal debt of $1,018 billion was the largest annual
dollar increase in history; only to be surpassed by the fiscal year
2009 increase of $1,887 billion. During fiscal years 2008 and 2009,
legislation was enacted to raise the statutory debt limit on three
different occasions. During this period, the statutory debt limit went
from $9,815 billion to its current level of $12,104 billion, an
increase of 23 percent.
For a fuller understanding of GAO's opinion on BPD's fiscal years 2009
and 2008 Schedules of Federal Debt, readers should refer to the
complete audit report, available by clicking on [hyperlink,
http://www.gao.gov/products/GAO-10-88], 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:
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: Management‘s Report on Internal Control over Financial
Reporting Related to the Schedule of Federal Debt:
Appendix II: Comments from the Bureau of the Public Debt:
Appendix III: GAO Contact and Staff Acknowledgments:
Abbreviations:
BPD: Bureau of the Public Debt:
GDP: Gross Domestic Product:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
November 10, 2009:
The Honorable Timothy F. Geithner:
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, 2009 and 2008. 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 of the Public Debt (BPD).[Footnote 1]
The auditor‘s report contains our (1) opinion on the Schedules of
Federal Debt for the fiscal years ended September 30, 2009 and 2008,
(2) opinion on the effectiveness of relevant internal control over
financial reporting as of September 30, 2009, (3) conclusion on BPD‘s
compliance in fiscal year 2009 with a selected provision of a 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, 2009 and 2008, federal debt managed by the bureau
totaled about $11,898 billion and $10,011 billion, respectively,
primarily for moneys borrowed to fund the federal government‘s
operations. As shown on the Schedules of Federal Debt, these balances
consisted of approximately (1) $7,552 billion as of September 30, 2009,
and $5,809 billion as of September 30, 2008, of debt held by the public
and about (2) $4,346 billion as of September 30, 2009, and $4,202
billion as of September 30, 2008, of intragovernmental debt holdings.
The level of debt held by the public primarily 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 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 operations. The Treasury securities held by the
federal government accounts are not shown as balances on the federal
government‘s consolidated financial statements because, under current
U.S. generally accepted accounting principles, they represent loans
from one part of the federal government to another. When the federal
government‘s financial statements are consolidated, those offsetting
balances are eliminated. These securities are nonmarketable; however,
they represent a priority call on future federal 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 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 Treasury are entirely offset
by the income received by such accounts. This intragovernmental debt
and related interest represent 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 for funds 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 more than doubled, increasing
by 120 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 $3,980 billion, or 50 percent, from $7,918
billion as of September 30, 2005, to $11,898 billion as of September
30, 2009. The increase to the federal debt has become particularly
acute since the onset of the recession in December 2007. Federal
government actions in response to both the financial market crisis and
the economic downturn have added significantly to Treasury‘s borrowing
needs. The fiscal year 2008 increase in total federal debt of $1,018
billion was the largest annual dollar increase in history; only to be
surpassed by the fiscal year 2009 increase of $1,887 billion. Of the
fiscal year 2009 increase, about $1,743 billion was from the increase
in debt held by the public and about $144 billion was from the increase
in intragovernmental debt holdings. Two primary factors contributed to
the increase in debt held by the public. First, there was the largest
reported deficit in history of $1.4 trillion in fiscal year 2009,
compared to $455 billion in fiscal year 2008. Second, a significant
amount of assets were purchased primarily relating to the Government
Sponsored Enterprise Mortgage-Backed Securities Purchase Program and
the Troubled Asset Relief Program in which debt was borrowed to fund
the purchases. Treasury met its borrowing needs in part by
reintroducing the 3-year and 7-year notes, both issued monthly, and
increasing the amounts offered at public debt auctions. Further,
Treasury added offerings of both the 30-year bond and the 10-year note
resulting in 12 additional auctions a year. During fiscal years 2008
and 2009, legislation was enacted to raise the statutory debt limit on
three different occasions. During this period, the statutory debt limit
went from $9,815 billion to its current level of $12,104 billion, an
increase of 23 percent. Legislation to increase the statutory debt
limit to $13,029 billion was passed by the House of Representatives and
referred to the Senate. In addition, the Secretary of the Treasury has
requested an increase in the statutory debt limit. As of November 2,
2009, an increase had not been enacted.
Weaknesses in the economy and financial markets”and the federal
government‘s response to them”are expected to impact both the annual
federal deficit and related debt in the near term. Official estimates
for fiscal year 2010 show the annual federal deficit will exceed $1
trillion. Correspondingly, debt held by the public is expected to grow
from an estimated 53.1 percent of gross domestic product (GDP) at the
end of fiscal year 2009 to over 60 percent of GDP at the end of fiscal
year 2010. However, while addressing these near-term pressures is
important, the real challenge is not this year‘s deficit or even next
year‘s; it is how best to address the nation‘s long-term fiscal path
over the coming decades.
While a lot of attention has been understandably given to the recent
fiscal deterioration, the federal government faces even larger fiscal
challenges that will persist long after the return to financial
stability and economic growth. The budget and economic implications of
the baby boom generation‘s retirement have already become a factor in
near-term budget projections and will only intensify as the baby
boomers age. The Medicare Hospital Insurance program currently pays
more in benefits than it receives in cash from payroll taxes. The
Social Security program, which has historically run large cash
surpluses that helped reduce the need to borrow to finance other
federal government activities, is expected to pay more in benefits than
it receives in tax income for a sustained period beginning in 2016. GAO
and the Congressional Budget Office‘s long-range fiscal policy
simulations continue to show that, absent significant changes in
policy, the federal government‘s fiscal condition over the coming
decades is on an unsustainable path.[Footnote 2] The sooner action is
taken to address the long-term fiscal challenge, the less disruptive
and destabilizing the changes will be. As a result, once current
economic and financial issues are addressed, the nation‘s leaders will
need to turn their attention to the long-term challenges that lie
ahead.
A continuing trend that we also have noted is the increase in reported
foreign ownership of Treasury securities. Treasury securities held by
foreign and international investors have increased significantly since
2001. According to amounts reported in the September 2009 Treasury
Bulletin, Treasury estimates that the amount of Treasury securities
held by foreign and international investors has increased by $2,383
billion”from $1,001 billion as of June 30, 2001, to $3,384 billion as
of June 30, 2009. As of June 30, 2009, this represents an estimated 45
percent of debt held by the public, down from an estimated 50 percent
as of June 30, 2008, but up from about 31 percent as of June 30, 2001.
We are sending copies of this report to interested congressional
committees, 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, this report is available at no charge on the GAO Web site at
[hyperlink, http://www.gao.gov].
If you have any questions concerning this report, please contact me at
(202) 512-3406 or engelg@gao.gov. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last
page of this report. GAO staff who made key contributions to this
report are listed in appendix III.
Sincerely yours,
Signed by:
Gary T. Engel:
Director:
Financial Management and Assurance:
[End of section]
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, 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.[Footnote 3]
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, 2009 and 2008. 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
4]
In our audits of the Schedules of Federal Debt Managed by BPD for the
fiscal years ended September 30, 2009 and 2008, we found:
* the Schedules of Federal Debt are presented fairly, in all material
respects, in conformity with U.S. generally accepted accounting
principles;
* BPD maintained, in all material respects, effective internal control
over financial reporting relevant to the Schedule of Federal Debt as of
September 30, 2009; and:
* no reportable noncompliance in fiscal year 2009 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, 2009,
2008, and 2007 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, 2009 and 2008.
Opinion on Internal Control:
BPD maintained, in all material respects, effective internal control
over financial reporting relevant to the Schedule of Federal Debt as of
September 30, 2009, that provided reasonable assurance that
misstatements, losses, or noncompliance material in relation to the
Schedule of Federal Debt would be prevented or detected and corrected
on a timely basis. Our opinion is based on criteria established under
31 U.S.C. 3512 (c), (d), commonly known as the Federal Managers'
Financial Integrity Act (FMFIA).
We identified deficiencies in BPD's system of internal control that we
consider not to be material weaknesses or significant deficiencies.
[Footnote 5] We have communicated these matters to management and,
where appropriate, will report on them separately.
Compliance with a Selected Provision of Law:
Our tests of BPD's compliance with the statutory debt limit for fiscal
year 2009 disclosed no instances of noncompliance that would be
reportable under U.S. generally accepted government auditing standards.
The objective of our audit of the Schedule of Federal Debt for the
fiscal year ended September 30, 2009, 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 did not audit and 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. On the basis of this limited work,
we found no material inconsistencies with the schedules or U.S.
generally accepted accounting principles.
Objectives, Scope, and Methodology:
BPD management is responsible for (1) preparing the Schedules of
Federal Debt in conformity with U.S. generally accepted accounting
principles; (2) establishing and maintaining internal control over
financial reporting, and evaluating its effectiveness; and (3)
complying with applicable laws and regulations. BPD management
evaluated the effectiveness of BPD's internal control over financial
reporting relevant to the Schedule of Federal Debt as of September 30,
2009, based on the criteria established under FMFIA. BPD management's
assertion is included in appendix I.
We are responsible for planning and performing the audit to obtain
reasonable assurance and provide our opinion 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) BPD management maintained, in all material respects,
effective internal control over financial reporting relevant to the
Schedule of Federal Debt as of September 30, 2009. 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 accompanying 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 over financial reporting relevant to the Schedule
of Federal Debt as of September 30, 2009;
* considered BPD's process for evaluating and reporting on internal
control over financial reporting relevant to the Schedule of Federal
Debt based on the criteria established under FMFIA;
* assessed the risk that a material misstatement exists in the Schedule
of Federal Debt and the risk that a material weakness exists in
internal control over financial reporting relevant to the Schedule of
Federal Debt;
* evaluated the design and operating effectiveness of internal control
over financial reporting relevant to the Schedule of Federal Debt as of
September 30, 2009, based on the assessed risk;
* tested relevant internal control over financial reporting;
* tested compliance in fiscal year 2009 with the statutory debt limit
(31 U.S.C. § 3101(b) (2006), as amended by Pub. L. No. 110-91, 121
Stat. 988 (2007); Pub. L. No. 110-289, Div. C, Title III, § 3083, 122
Stat. 2908 (2008); Pub. L. No. 110-343, Div. A, Title I, § 122, 122
Stat 3790 (2008); and Pub. L. No. 111-5, Div. B, Title I, § 1604, 123
Stat. 366 (2009)); and:
* performed such other procedures as we considered necessary in the
circumstances.
Internal control over financial reporting relevant to the Schedule of
Federal Debt is a process effected by those charged with governance,
management, and other personnel, the objectives of which are to provide
reasonable assurance that (1) transactions are properly recorded,
processed, and summarized to permit the preparation of the Schedule of
Federal Debt in accordance with U.S. generally accepted accounting
principles; and (2) transactions related to the Schedule of Federal
Debt are executed in accordance with laws governing the use of budget
authority and other laws and regulations that could have a direct and
material effect on the Schedule of Federal Debt.
We did not evaluate all internal controls relevant to operating
objectives as broadly established under FMFIA, such as those controls
relevant to preparing statistical reports and ensuring efficient
operations. We limited our internal control testing to controls over
financial reporting. Because of inherent limitations, internal control
may not prevent or detect and correct misstatements due to error or
fraud, losses, or noncompliance. We also caution that projecting any
evaluation of effectiveness 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 the policies or procedures 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, 2009. 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 audit in accordance with U.S. generally accepted
government auditing standards. We believe our audit provides a
reasonable basis for our opinions and other conclusions.
Agency Comments:
In commenting on a draft of this report, BPD concurred with the
conclusions in our report. The comments are reprinted in appendix II.
Signed by:
Gary T. Engel:
Director:
Financial Management and Assurance:
November 2, 2009:
[End of section]
Overview, Schedules, and Notes:
Overview on Federal Debt Managed by the Bureau of the Public Debt:
Gross Federal Debt Outstanding[Footnote 6]:
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 (under Title 31 U.S.C. § 3101), the latter of which is
referred to as intragovernmental debt holdings. As of September 30,
2009 and 2008, outstanding gross federal debt managed by the bureau
totaled $11,898 and $10,011 billion, respectively. The increase in
gross federal debt of $1,887 billion during fiscal year 2009 was due to
an increase in gross intragovernmental debt holdings of $144 billion
and an increase in gross debt held by the public of $1,743 billion. As
Figure 1 illustrates, both intragovernmental debt holdings and debt
held by the public have increased since fiscal year 2005. The primary
reason for the increases in intragovernmental debt holdings is the
Department of the Treasury's use of the surpluses in the Federal
Old-Age and Survivors Insurance Trust Fund, Civil Service Retirement
and Disability Fund, Federal Supplementary Medical Insurance Trust
Fund, Military Retirement Fund, and DOD Medicare-Eligible Retiree
Health Care Fund. The increases in debt held by the public are due
primarily to total federal spending exceeding total federal revenues.
As of September 30, 2009, gross debt held by the public totaled $7,552
billion and gross intragovernmental debt holdings totaled $4,346
billion.
Figure 1: Total Gross Federal DEbt Outstanding (Fiscal Years Ended
September 39, 2005-2009) (Dollars in billions)
[Refer to PDF for image: Combined stacked vertical bar and line graph]
As of September 30, 2005:
Intragovernmental holdings: $3,317;
Held by the public: $4,601;
Total: $7,918.
As of September 30, 2006:
Intragovernmental holdings: $3,650;
Held by the public: $4,843;
Total: $8,493.
As of September 30, 2007:
Intragovernmental holdings: $3,944;
Held by the public: $5,049;
Total: $8,993.
As of September 30, 2008:
Intragovernmental holdings: $4,202;
Held by the public: $5,809;
Total: $10,011.
As of September 30, 2009:
Intragovernmental holdings: $4,346;
Held by the public: $7,552;
Total: $11,898.
[End of figure]
Interest Expense:
Interest expense incurred during fiscal year 2009 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 2009, interest
expense incurred totaled $381 billion, interest expense on debt held by
the public was $189 billion, and $192 billion was interest incurred for
intragovernmental debt holdings. As Figure 2 illustrates, total
interest expense has increased from fiscal years 2005 through 2008,
but decreased from fiscal year 2008 to fiscal year 2009. Due to the
current economic conditions, there has been a significant increase
in the demand for government backed securities, which resulted in lower
average interest rates and interest expense. For example, the average
interest rates on Treasury bills outstanding as of September 30, 2009
and 2008, were 0.3 percent and 1.6 percent, respectively. Average
interest rates on principal balances outstanding as of September 30,
2009 and 2008, are disclosed in the Notes to the Schedules of Federal
Debt.
Figure 2: Total Interest Expenses (in billions):
[Refer to PDF for image: stacked vertical bar graph]
Fiscal year ended September 30, 2005:
Intragovernmental debt holdings: $174;
Held by the public: $181;
Total: $355.
Fiscal year ended September 30, 2006:
Intragovernmental debt holdings: $183;
Held by the public: $221;
Total: $404.
Fiscal year ended September 30, 2007:
Intragovernmental debt holdings: $184;
Held by the public: $239;
Total: $433.
Fiscal year ended September 30, 2008:
Intragovernmental debt holdings: $212;
Held by the public: $242;
Total: $454.
Fiscal year ended September 30, 2009:
Intragovernmental debt holdings: $192;
Held by the public: $189;
Total: $381.
[End of figure]
Debt Held by the Public:
Debt held by the public primarily 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. During the fiscal
year, changes in economic conditions resulted in the need for an
increase in borrowings from the public to finance federal spending.
Treasury responded to the increase in marketable borrowing requirements
by raising issuance sizes of regular weekly and monthly bills,
increasing the frequency and issuance sizes of cash management bills,
increasing the issuance sizes of nominal coupon security offerings, and
adjusting the securities offering calendar to include the
reintroduction of certain Treasury notes. As a result of this change in
debt management strategy, Treasury bill and Treasury note issuances
increased by $2,288 billion and $1,008 billion, respectively, in fiscal
year 2009. Due to the increase in short-term debt issuances, repayments
increased by $2,317 billion during the fiscal year. As of September 30,
2009 and 2008, gross debt held by the public totaled $7,552 billion and
$5,809 billion, respectively (see Figure 1), an increase of $1,743
billion.
As of September 30, 2009, $6,988 billion, or 93 percent, of the
securities that constitute debt held by the public were marketable,
meaning that once the Federal 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, 2009, $4,509 billion, or 65 percent, will mature
within the next 4 years (see Figure 3). As of September 30, 2009 and
2008, notes and TIPS held by the public maturing within the next 10
years totaled $4,169 billion and $3,004 billion, respectively, an
increase of $1,165 billion.
Figure 3: Maturity Dates[Footnote 7] of Marketable Debt eld by the
Public as of September 30, 2009:
[Refer to PDF for image: multiple line graph]
Plots Fiscal year of maturity versus debt in billions for:
TIPS:
Bonds:
Notes:
Bills:
[To obtain specific data represented in this graph, please contact the
Bureau of Public Debt]
[End of figure]
The Federal Government also issues to the public nonmarketable
securities, which cannot be resold, and have maturity dates from on
demand out to 40 years. As of September 30, 2009, nonmarketable
securities totaled $564 billion, or 7 percent of debt held by the
public. As of that date, nonmarketable securities primarily consisted
of savings securities totaling $192 billion, special securities for
state and local governments totaling $216 billion, and Government
Account Series securities totaling $119 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 Health Care, and
Civil Service Retirement and Disability trust funds.[Footnote 7] As of
September 30, 2009, such funds accounted for $3,986 billion, or 92
percent, of the $4,346 billion intragovernmental debt holdings balances
(see Figure 4). As of September 30, 2009 and 2008, gross
intragovernmental debt holdings totaled $4,346 billion and $4,202
billion, respectively (see Figure 1), an increase of $144 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, 2009:
[Refer to PDF for image: pie-chart]
Social Security trust funds: 58%;
Civil Service Retirement and Disability trust fund: 17%;
Medicate trust funds: 9%;
Military Retirement and Health Care funds: 9%;
Other programs and trust funds: 8%.
[End of figure]
Significant Events in Fiscal Year 2009:
Changes to the Statutory Debt Ceiling:
On October 3, 2008, the Emergency Economic Stabilization Act of 2008
was signed into law becoming Public Law No. 110-343. This legislation,
as amended by the Helping Families Save Their Homes Act of 2009, Pub.
L. No. 111-22, Div. A, provides authority for the Department of the
Treasury to purchase or insure almost $700 billion in troubled assets
held by financial institutions for the purposes of, among other things,
restoring liquidity and stability to the financial system. Section
122 of this law increased the statutory debt limit by $700 billion from
$10,615 billion to $11,315 billion.
On February 17, 2009, the American Recovery and Reinvestment Act of
2009 was signed into law becoming Public Law No. 111-5. This
legislation supports job preservation and creation, infrastructure
investment, energy efficiency and science, assistance to the
unemployed, and State and Local fiscal stabilization. Section 1604 of
this law increased the statutory debt limit by $789 billion from
$11,315 billion to $12,104 billion.
The House of Representatives approved a $925 billion increase in the
statutory debt limit on April 29, 2009. H.J. Res. 45 passed the House
pursuant to the provisions of S. Con. Res. 13. In an August 7, 2009,
letter to Senate Majority Leader Harry Reid, the Secretary of the
Treasury requested that the statutory debt limit be raised. An increase
in the limitation is now awaiting Senate approval. As of September 30,
2009, the total public debt outstanding subject to the statutory debt
limit was $11,853 billion.
Increase in System Open Market Account Holdings:
The amount of the Federal Reserve Bank's System Open Market Account
(SOMA) holdings has increased significantly from fiscal year 2008 to
fiscal year 2009. Specifically, total SOMA holdings were $769 billion
as of September 30, 2009 compared to $477 billion as of September 30,
2008. This increase is due to the Treasury portion of the large scale
asset purchase program announced by the Federal Open Market Committee
on March 18, 2009. This portion of the program authorized the Federal
Reserve to purchase up to $300 billion of U.S. Treasury securities to
help improve conditions in private credit markets.
Decrease in the Supplementary Financing Program:
The Supplementary Financing Program (SFP) is a temporary program
announced on September 17, 2008, by Treasury and the Federal Reserve to
provide emergency cash for Federal Reserve initiatives aimed at
addressing the ongoing crisis in financial markets. At the height of
this program's activity, during the week of November 6, 2008, there
were a total of 15 cash management bills outstanding that totaled $560
billion. As of September 30, 2009, there were a total of 5 cash
management bills outstanding that totaled $165 billion. The decrease is
a result of outstanding SFP bills that have matured and have not been
reinvested in the program. On September 16, 2009, Treasury announced
its intention to reduce the balance to $15 billion in the short run to
preserve flexibility in the conduct of debt management policy.
Equity Decline in Unemployment Trust Fund Investments:
Amounts invested in Government Account Series securities by the
Unemployment Trust Fund have significantly declined during fiscal year
2009. This reduction is primarily attributable to elevated nationwide
unemployment rates and the corresponding withdrawal of trust fund
monies for payment of unemployment insurance benefits to eligible
claimants. Additionally, the fund's investment holdings have been
further reduced as a result of statutory changes enacted during the
year. In response to recent economic conditions, Congress passed
legislation authorizing the creation of new and modification of
existing unemployment programs, including Unemployment Compensation
Modernization Incentive Payments, Administrative Grants to States, and
extension of Emergency Unemployment Compensation benefits. In
accordance with statutory language, much of the funding for the
aforementioned programs was derived from amounts held within the
Unemployment Trust Fund.
Reopening of the 10-year Note and 30-year Bond and the Reintroduction
of the 3-Year and 7-Year Note:
In response to the large increase in projected financing needs, to
better manage the overall debt portfolio, and to create additional
flexibility in meeting uncertainty in borrowing requirements, Treasury
implemented changes to the auction calendar. The changes included
adding monthly 3-year notes and 7-year notes; adding a reopening of 10-
year notes; and issuing 30-year bonds on a monthly basis. During the
fiscal year, Treasury conducted over 290 auctions, resulting in the
issuance of over $8 trillion dollars in marketable securities.
On November 5, 2008, Treasury announced the reintroduction of the 3-
year note as a result of the ongoing assessment of its debt management
strategy. The last issue date for a 3-year note was in May 2007. The
first auction of the reintroduced 3-year notes occurred on November 10,
2008, with a settlement date on November 17, 2008.
On November 5, 2008, Treasury announced it was moving to new-issue
quarterly 30-year bond auctions beginning with the February 2009
quarterly refunding. The first auction of the reopening of 30-year
bonds occurred on March 12, 2009, with a settlement on March 16, 2009.
On April 29, 2009, Treasury announced a second reopening of the 30-year
bond. The second reopening results in a monthly issuance of the 30-year
bond. The auction of the second reopening of the 30-year bond occurred
on July 9, 2009, with a settlement on July 15, 2009.
On November 5, 2008, Treasury announced the addition of a regular
second reopening of the 10-year note in the month following the first
reopening. Specifically, Treasury auctioned a new-issue 10-year note on
November 12, 2008 during the refunding, reopened the security in
December 2008, and then reopened the security again in January 2009.
The first auction of the second reopening of the 10-year note occurred
on January 8, 2009, for settlement on January 15, 2009. The issuance
pattern of the 10-year note changed from twice a quarter to monthly.
On February 4, 2009, Treasury announced the reintroduction of the 7-
year note as a result of the ongoing assessment of its debt management
strategy. The last issue date for a 7-year note was in April 1993. The
first auction of the reintroduced 7-year note occurred on February 26,
2009, with a settlement on March 2, 2009.
Improved Retail Securities Services:
TreasuryDirect, BPD's internet-accessed retail system that is integral
to Treasury's goal of promoting paperless systems, continues to grow.
Account establishments rose by 88 thousand this past year, from 696
thousand in FY 2008 to 784 thousand in FY 2009--an increase of 13
percent. TreasuryDirect became fully functional as it was expanded to
enable entities such as trusts, corporations, fiduciaries, and estates
to open accounts and conduct transactions. BPD modified TreasuryDirect
to support changes in Treasury's auction schedule to offer 7-year notes
and to more frequently re-open notes and bonds.
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
$1,572 billion as of September 30, 1984, to $11,898 billion as of
September 30, 2009 (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 three fold
between 1984 and 1997.
Figure 5: Total Gross Federal Debt Outstanding (in billions):
[Refer to PDF for image: vertical bar graph]
Graph plots September 30 of each year from 1984 through 2009 against
debt in billions.
Source: Statement of Public Debt.
Figures shown prior to 1996 are unaudited and include securities issued
by the Federal Financing Bank.
[To obtain specific data represented in this graph, please contact the
Bureau of Public Debt]
[End of figure]
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, federal debt held by the public began to increase in fiscal
year 2002 as a result of higher federal outlays and tax policy
decisions. Federal debt held by the public increased by 51.2 percent
from fiscal year 2002 to fiscal year 2007. From fiscal year 2008 to
fiscal year 2009, federal debt held by the public increased an
additional 49.6 percent rising by $2,503 billion. This increase is
primarily a result of the federal government's response to the
financial market crisis and the economic downturn. As a result, debt
held by the public has increased from $3,339 billion in 2001 to $7,552
billion in 2009.
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 $1,029 billion, from $3,317 billion as of September 30,
2005, to $4,346 billion as of September 30, 2009. 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 Rate of Federal Debt Outstanding:
[Refer to PDF for image: line graph]
Graph plots September 30 of each year from 1984 through 2009 against
average interest rates from 0% to 12%.
Source: Prior to fiscal year 2001: Monthly Statement of the Public
Debt. Fiscal year 2001 and after: Public Debt Online Average Interest
Rates.
[To obtain specific data represented in this graph, please contact the
Bureau of Public Debt]
[End of figure]
[End of section]
Schedules of Federal Debt:
Schedules of Federal Debt:
Managed by the Bureau of the Public Debt:
For the Fiscal Years Ended September 30, 2009 and 2008 (Dollars in
Millions):
Federal Debt:
Balance as of September 30, 2007:
Held by the Public, Principal (Note 2): $5,409,305;
Held by the Public, Accrued Interest Payable: $44,386;
Held by the Public, Net Unamortized Premiums/(Discounts): ($39,411);
Intragovernmental Debt Holdings, Principal (Note 3): $3,944,348;
Intragovernmental Debt Holdings, Accrued Interest Payable: $48,611;
Intragovernmental Debt Holdings, Net Unamortized Premiums/(Discounts):
$3,730.
Increases: Borrowings from the Public:
Held by the Public, Principal (Note 2): $5,645,014;
Held by the Public, Accrued Interest Payable: [Empty];
Held by the Public, Net Unamortized Premiums/(Discounts): ($29,192)
Intragovernmental Debt Holdings, Principal (Note 3): [Empty];
Intragovernmental Debt Holdings, Accrued Interest Payable: [Empty];
Intragovernmental Debt Holdings, Net Unamortized Premiums/(Discounts):
[Empty];
Increases: Net Increase in Intragovernmental Debt Holdings:
Held by the Public, Principal (Note 2): [Empty];
Held by the Public, Accrued Interest Payable: [Empty];
Held by the Public, Net Unamortized Premiums/(Discounts): [Empty];
Intragovernmental Debt Holdings, Principal (Note 3): $257,656;
Intragovernmental Debt Holdings, Accrued Interest Payable: [Empty];
Intragovernmental Debt Holdings, Net Unamortized Premiums/(Discounts):
$30,342.
Increases: Accrued Interest (Note 4):
Held by the Public, Principal (Note 2): [Empty];
Held by the Public, Accrued Interest Payable: $209,068;
Held by the Public, Net Unamortized Premiums/(Discounts): [Empty];
Intragovernmental Debt Holdings, Principal (Note 3): [Empty];
Intragovernmental Debt Holdings, Accrued Interest Payable: $213,943;
Intragovernmental Debt Holdings, Net Unamortized Premiums/(Discounts):
[Empty].
Total Increases:
Held by the Public, Principal (Note 2): $5,645,014;
Held by the Public, Accrued Interest Payable; $209,068;
Held by the Public, Net Unamortized Premiums/(Discounts): ($29,192);
Intragovernmental Debt Holdings, Principal (Note 3): $257,656;
Intragovernmental Debt Holdings, Accrued Interest Payable; $213,943;
Intragovernmental Debt Holdings, Net Unamortized Premiums/(Discounts):
$30,342.
Decreases: Repayments of Debt Held by the Public:
Held by the Public, Principal (Note 2): $4,885,627;
Held by the Public, Accrued Interest Payable: [Empty];
Held by the Public, Net Unamortized Premiums/(Discounts): [Empty];
Intragovernmental Debt Holdings, Principal (Note 3): [Empty];
Intragovernmental Debt Holdings, Accrued Interest Payable: [Empty];
Intragovernmental Debt Holdings, Net Unamortized Premiums/(Discounts):
[Empty];
Decreases: Interest Paid:
Held by the Public, Principal (Note 2): [Empty];
Held by the Public, Accrued Interest Payable: $213,327;
Held by the Public, Net Unamortized Premiums/(Discounts): [Empty];
Intragovernmental Debt Holdings, Principal (Note 3): [Empty];
Intragovernmental Debt Holdings, Accrued Interest Payable: $212,161;
Intragovernmental Debt Holdings, Net Unamortized Premiums/(Discounts):
[Empty].
Decreases: Net Amortization (Note 4):
Held by the Public, Principal (Note 2):
Held by the Public, Accrued Interest Payable:
Held by the Public, Net Unamortized Premiums/(Discounts): ($32,509)
Intragovernmental Debt Holdings, Principal (Note 3):
Intragovernmental Debt Holdings, Accrued Interest Payable:
Intragovernmental Debt Holdings, Net Unamortized Premiums/(Discounts):
$1,505.
Total Decreases:
Held by the Public, Principal (Note 2): $4,885,627;
Held by the Public, Accrued Interest Payable: $213,327;
Held by the Public, Net Unamortized Premiums/(Discounts): ($32,509);
Intragovernmental Debt Holdings, Principal (Note 3): 0;
Intragovernmental Debt Holdings, Accrued Interest Payable: $212,161;
Intragovernmental Debt Holdings, Net Unamortized Premiums/(Discounts):
$1,505.
Balance as of September 30, 2008:
Held by the Public, Principal (Note 2): $5,808,692;
Held by the Public, Accrued Interest Payable: $40,127;
Held by the Public, Net Unamortized Premiums/(Discounts): ($36,124);
Intragovernmental Debt Holdings, Principal (Note 3): $4,202,004;
Intragovernmental Debt Holdings, Accrued Interest Payable: $50,393;
Intragovernmental Debt Holdings, Net Unamortized Premiums/(Discounts):
$32,567.
Increases: Borrowings from the Public:
Held by the Public, Principal (Note 2): $8,946,010;
Held by the Public, Accrued Interest Payable: [Empty];
Held by the Public, Net Unamortized Premiums/(Discounts): ($15,054)
Intragovernmental Debt Holdings, Principal (Note 3): [Empty];
Intragovernmental Debt Holdings, Accrued Interest Payable: [Empty];
Intragovernmental Debt Holdings, Net Unamortized Premiums/(Discounts):
[Empty];
Increases: Net Increase in Intragovernmental Debt Holdings:
Held by the Public, Principal (Note 2): [Empty];
Held by the Public, Accrued Interest Payable: [Empty];
Held by the Public, Net Unamortized Premiums/(Discounts): [Empty];
Intragovernmental Debt Holdings, Principal (Note 3): $143,550;
Intragovernmental Debt Holdings, Accrued Interest Payable: [Empty];
Intragovernmental Debt Holdings, Net Unamortized Premiums/(Discounts):
$1,718.
Increases: Accrued Interest (Note 4):
Held by the Public, Principal (Note 2): [Empty];
Held by the Public, Accrued Interest Payable: $171,875;
Held by the Public, Net Unamortized Premiums/(Discounts): [Empty];
Intragovernmental Debt Holdings, Principal (Note 3): [Empty];
Intragovernmental Debt Holdings, Accrued Interest Payable: $191,955;
Intragovernmental Debt Holdings, Net Unamortized Premiums/(Discounts):
[Empty].
Total Increases:
Held by the Public, Principal (Note 2): $8,946,010;
Held by the Public, Accrued Interest Payable; $171,875;
Held by the Public, Net Unamortized Premiums/(Discounts): ($15,0542);
Intragovernmental Debt Holdings, Principal (Note 3): $143,550;
Intragovernmental Debt Holdings, Accrued Interest Payable; $191,955;
Intragovernmental Debt Holdings, Net Unamortized Premiums/(Discounts):
$1,718.
Decreases: Repayments of Debt Held by the Public:
Held by the Public, Principal (Note 2): $7,202,840;
Held by the Public, Accrued Interest Payable: [Empty];
Held by the Public, Net Unamortized Premiums/(Discounts): [Empty];
Intragovernmental Debt Holdings, Principal (Note 3): [Empty];
Intragovernmental Debt Holdings, Accrued Interest Payable: [Empty];
Intragovernmental Debt Holdings, Net Unamortized Premiums/(Discounts):
[Empty];
Decreases: Interest Paid:
Held by the Public, Principal (Note 2): [Empty];
Held by the Public, Accrued Interest Payable: $170,654;
Held by the Public, Net Unamortized Premiums/(Discounts): [Empty];
Intragovernmental Debt Holdings, Principal (Note 3): [Empty];
Intragovernmental Debt Holdings, Accrued Interest Payable: $192,905;
Intragovernmental Debt Holdings, Net Unamortized Premiums/(Discounts):
[Empty].
Decreases: Net Amortization (Note 4):
Held by the Public, Principal (Note 2):
Held by the Public, Accrued Interest Payable:
Held by the Public, Net Unamortized Premiums/(Discounts): ($17,273)
Intragovernmental Debt Holdings, Principal (Note 3):
Intragovernmental Debt Holdings, Accrued Interest Payable:
Intragovernmental Debt Holdings, Net Unamortized Premiums/(Discounts):
$399.
Total Decreases:
Held by the Public, Principal (Note 2): $7,202,840;
Held by the Public, Accrued Interest Payable: $170,654;
Held by the Public, Net Unamortized Premiums/(Discounts): ($17,273);
Intragovernmental Debt Holdings, Principal (Note 3): 0; 192,905212,161;
Intragovernmental Debt Holdings, Net Unamortized Premiums/(Discounts):
$399.
Balance as of September 30, 2008:
Held by the Public, Principal (Note 2): $7,551,862;
Held by the Public, Accrued Interest Payable: $41,348;
Held by the Public, Net Unamortized Premiums/(Discounts): ($33,9054);
Intragovernmental Debt Holdings, Principal (Note 3): $4,345,554;
Intragovernmental Debt Holdings, Accrued Interest Payable: $49,443;
Intragovernmental Debt Holdings, Net Unamortized Premiums/(Discounts):
$33,886.
[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, 2009 and 2008 (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 2009 and fiscal year
2008 balances and activity relating to monies borrowed from the public
and certain federal government accounts under Title 31 U.S.C. § 3101 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. BPD also
issues other specific securities outside of the authority of Title 31
U.S.C. § 3101, such as HOPE Bonds. These securities are not reported
on the Schedules of Federal Debt Managed by the Bureau of the Public
Debt.
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.
Note 2. Federal Debt Held by the Public:
As of September 30, 2009 and 2008, Federal Debt Held by the Public
consisted of the following:
Marketable: Treasury Bills;
2009: Amount: $1,986,174;
2009: Average Interest Rates: 0.3%;
2008: Amount: $1,484,332;
2008: Average Interest Rates: 1.6%.
Marketable: Treasury Notes;
2009: Amount: $3,772,964;
2009: Average Interest Rates: 3.0%;
2008: Amount: $2,623,364;
2008: Average Interest Rates: 4.1%.
Marketable: Treasury Bonds;
2009: Amount: $677,491;
2009: Average Interest Rates: 6.5%;
2008: Amount: $578,504;
2008: Average Interest Rates: 4.1%.
Marketable: TIPS;
2009: Amount: $551,308;
2009: Average Interest Rates: 2.1%;
2008: Amount: $523,951;
2008: Average Interest Rates: 2.0%.
Total Marketable:
2009: Amount: $6,987,937;
2008: Amount: $5,210,151.
Nonmarketable:
2009: Amount: $563,925;
2009: Average Interest Rates: 3.7%;
2008: Amount: $598,541;
2008: Average Interest Rates: 4.1%.
Total Federal Debt Held by the Public:
2009: Amount: $7,551,862;
2008: Amount: $5,808,692.
[End of table]
Treasury issues marketable bills usually at a discount, but may also
issue at par, 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,
2009 and 2008, 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, 2009 and 2008. 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 for all Urban Consumers, 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 average interest rate on TIPS represents the
stated interest rate on principal plus inflation, adjusted by any
discount or premium on securities outstanding as of September 30, 2009
and 2008. The TIPS Federal Debt Held by the Public inflation-adjusted
principal balance includes inflation of $57,552 million and $72,930
million as of September 30, 2009 and 2008, 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. As of September 30, 2009, the FRB had total holdings of
$769 billion, with a very small amount lent to dealers and not
collateralized by other Treasury securities. As of September 30, 2008,
the FRB owned $221 billion, net of $256 billion in securities lent to
dealers and not collateralized by other Treasury securities, for total
holdings of $477 billion. 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, 2009 and
2008. Nonmarketable securities are issued with a term of on demand out
to 40 years.
As of September 30, 2009 and 2008, nonmarketable securities consisted
of the following:
Domestic Series:
2009: $29,995;
2008: $29,995.
Foreign Series:
2009: $4,886;
2008: $2,986.
R.E.A. Series:
2009: $1;
2008: $1.
State and Local Government Series:
2009: $216,488;
2008: $260,238.
United States Savings Securities:
2009: $192,452;
2008: $194,253.
Government Account Series:
2009: $118,636;
2008: $107,498.
Other:
2009: $1,467;
2008: $3,570.
Total Nonmarketable:
2009: $563,925;
2008: $598,541.
[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 2009 and 2008 are included in the respective Borrowings from the
Public amounts reported on the Schedules of Federal Debt.
Note 3. Intragovernmental Debt Holdings:
As of September 30, 2009 and 2008, Intragovernmental Debt Holdings are
owed to the following:
SSA: Federal Old-Age and Survivors Insurance Trust Fund:
2009: $2,296,316;
2008: $2,150,651.
OPM: Civil Service Retirement and Disability Fund:
2009: $742,322;
2008: $714,850.
HHS: Federal Hospital Insurance Trust Fund:
2009: $309,702;
2008: $318,741.
DOD: Military Retirement Fund:
2009: $240,807;
2008: $215,949.
SSA: Federal Disability Insurance Trust Fund:
2009: $207,932;
2008: $216,487.
DOD: DOD Medicare-Eligible Retiree Health Care Fund:
2009: $126,821;
2008: $112,726.
HHS: Federal Supplementary Medical Insurance Trust Fund:
2009: $61,764;
2008: $59,090.
DOE: Nuclear Waste Disposal Fund:
2009: $44,643;
2008: $42,570.
OPM: Employees Life Insurance Fund:
2009: $36,146;
2008: $34,397.
OPM: Postal Service Retiree Health Benefits Fund:
2009: $35,115;
2008: $32,294.
DOL: Unemployment Trust Fund:
2009: $19,628;
2008: $72,432.
Treasury: Exchange Stabilization Fund:
2009: $18,615;
2008: $16,847.
DOL: Pension Benefit Guaranty Corporation:
2009: $17,459*;
2008: $22,367*.
FDIC: The Deposit Insurance Fund:
2009: $16,076;
2008: $29,937.
OPM: Employees Health Benefits Fund:
2009: $15,367;
2008: $15,563.
DOS: Foreign Service Retirement and Disability Fund:
2009: $15,334;
2008: $14,855.
DOT: Highway Trust Fund:
2009: $11,484;
2008: $12,811.
HUD: FHA – Liquidating Account:
2009: $10,664;
2008: $19,085.
Other Programs and Funds:
2009: $119,359;
2008: $100,352.
Total Intragovernmental Debt Holdings:
2009: $4,345,554;
2008: $4,202,004.
* These amounts include $2,676 million and $5,580 million of marketable
Treasury securities as well as $14,783 million and $16,787 million of
GAS securities as of September 30, 2009 and 2008, respectively.
Social Security Administration (SSA); Office of Personnel Management
(OPM); Department of Health and Human Services (HHS); Department of
Defense (DOD); Department of Energy (DOE); Department of Labor (DOL);
Department of the Treasury (Treasury); Federal Deposit Insurance
Corporation (FDIC); Department of State (DOS); Department of
Transportation (DOT); Department of Housing and Urban Development
(HUD).
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 on
Intragovernmental Debt Holdings for fiscal years 2009 and 2008 were 4.3
and 4.8 percent, respectively. The average interest rate represents the
original issue weighted effective yield on securities outstanding as of
September 30, 2009 and 2008. 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 for all Urban Consumers. As of September 30, 2009 and 2008, the
inflation-adjusted principal balance included inflation of $54,775
million and $54,776 million, respectively.
Note 4. Interest Expense:
Interest expense on Federal Debt Managed by BPD for fiscal years 2009
and 2008 consisted of the following:
Federal Debt Held by the Public: Accrued Interest:
2009: $171,875;
2008: $209,068.
Federal Debt Held by the Public: Net Amortization of Premiums and
Discounts:
2009: $17,273;
2008: $32,509.
Total Interest Expense on Federal Debt Held by the Public:
2009: $189,148;
2008: $241,577.
Intragovernmental Debt Holdings: Accrued Interest:
2009: $191,955;
2008: $213,943.
Intragovernmental Debt Holdings: Net Amortization of Premiums and
Discounts:
2009: ($399);
2008: ($1,505).
Total Interest Expense on Intragovernmental Debt Holdings:
2009: $191,556;
2008: $212,438.
Total Interest Expense on Federal Debt Managed by BPD:
2009: $380,704;
2008: $454,015.
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 deflation
adjustments of $10,607 million and inflation adjustments of $26,982
million for fiscal years 2009 and 2008, respectively. Accrued interest
on Intragovernmental Debt Holdings includes deflation adjustments of
$6,571 million and inflation adjustments of $14,479 million for fiscal
years 2009 and 2008, respectively.
Note 5. Fund Balance With Treasury:
Appropriated Funds Obligated:
As of September 30, 2009: $115;
As of September 30, 2008: $168.
Fiduciary Funds Obligated:
As of September 30, 2009: $3;
As of September 30, 2008: $0.
Total FBWT:
As of September 30, 2009: $118;
As of September 30, 2008: $168.
The Fund Balance with Treasury (FBWT), a non-entity, intragovernmental
account, is not included on the Schedules of Federal Debt and is
presented for informational purposes. Prior to October 1, 2008, all
FBWT balances were recognized on Treasury's Balance Sheet as
Appropriated Funds Obligated. Beginning with fiscal year 2009, and in
conjunction with SFFAS No. 31: Accounting for Fiduciary Activities,
FBWT related to Fiduciary Funds Obligated are no longer shown on the
face of Treasury's financial statements but are presented as a note
disclosure. The $3 million of Fiduciary Funds Obligated relates to
agency securities backed by the full faith and credit of the federal
government.
[End of section]
Appendix I: Management‘s Report on Internal Control over Financial
Reporting Related to the Schedule of Federal Debt:
Management's Report on Internal Control over Financial Reporting
Related to the Schedule of Federal Debt:
The Bureau of the Public Debt's (BPD) internal control over financial
reporting related to the Schedule of Federal Debt is a process effected
by those charged with governance, management, and other personnel, the
objectives of which are to provide reasonable assurance that (1)
transactions are properly recorded, processed, and summarized to permit
the preparation of the Schedule of Federal Debt in accordance with U.S.
generally accepted accounting principles; and (2) transactions related
to the Schedule of Federal Debt are executed in accordance with laws
governing the use of budget authority and other laws and regulations
that could have a direct and material effect on the Schedule of Federal
Debt.
BPD management is responsible for establishing and maintaining
effective internal control over financial reporting. BPD management
evaluated the effectiveness of BPD's internal control over financial
reporting related to the Schedule of Federal Debt as of September 30,
2009, based on the criteria established under 31 U.S.C. 3512 (c), (d)
(commonly known as the Federal Manager's Financial Integrity Act).
Based on that evaluation, we conclude that, as of September 30, 2009,
BPD's internal control over financial reporting related to the Schedule
of Federal Debt was effective.
Bureau of the Public Debt:
November 2, 2009:
Signed by:
Debra L. Hines
Assistant Commissioner, OPDA:
Signed by:
Kimberly McCoy:
Chief Information Officer:
Signed by:
Van Zeck:
Commissioner:
Signed by:
Fred Pyatt:
Chief Financial Officer:
[End of section]
Appendix II: Comments from the Bureau of the Public Debt:
Department Of The Treasury:
Bureau Of The Public Debt:
Washington, DC 20239-0001:
[hyperlink, http://www.treasurydirect.gov]
November 6, 2009:
Mr. Gary T. Engel:
Director, Financial Management and Assurance:
Government Accountability Office:
441 G Street, N.W.
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, 2009 and 2008. We agree with your audit report's
conclusions.
This year was an especially challenging year as we were faced with the
compliance of the auditing standard, AT Section 501, and the
implementation of the Management's Report on Internal Control over
Financial Reporting Related to the Schedule of Federal Debt letter. We
appreciate the knowledge and experience displayed by your audit team as
we finalize the thirteenth consecutive year of our professional
relationship. We would like to thank you and your staff for your
efficiency and timeliness as we face more stringent audit requirements.
Through combined efforts, the usability of these reports continues to
grow and we look forward to continuing this productive and successful
relationship.
Sincerely,
Signed by:
Van Zeck:
Commissioner:
[End of section]
Appendix III: GAO Contact and Staff Acknowledgments:
GAO Contact:
Gary T. Engel, (202) 512-3406 or engelg@gao.gov.
Acknowledgments:
The following individuals made key contributions to this report: Dawn
B. Simpson, Assistant Director; Dean D. Carpenter; Lauren J. Catchpole;
Dennis L. Clarke; Francisco Diaz, Jr.; Michael T. Grimes; Vivian M.
Gutierrez; Nicole M. McGuire; Yvonne D. Moss; Seong Bin Park; Gabrielle
N. Perret; Eric H. Stalcup; Carolyn M. Voltz; Melissa A. Wolf; and Tory
E. Wudtke.
[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, The Federal Government‘s Long-Term Fiscal Outlook: Fall
2009 Update, [hyperlink, http://www.gao.gov/products/GAO-10-137SP]
(Washington, D.C.: October 2009) and the Congressional Budget Office,
The Long-Term Budget Outlook (Washington, D.C.: June 2009).
[3] 31 U.S.C. § 331(e). Federal debt and related activity and balances
are also significant to the consolidated financial statements of the
Department of the Treasury (see 31 U.S.C. § 3515).
[4] 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.
[5] A significant deficiency is a deficiency, or combination of
deficiencies, in internal control that is less severe than a material
weakness, yet important enough to merit attention by those charged with
governance. A material weakness is a deficiency, or a combination of
deficiencies, in internal control such that there is a reasonable
possibility that a material misstatement of the entity's financial
statements will not be prevented, or detected and corrected on a timely
basis. A deficiency in internal control 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 and correct misstatements on a timely basis.
[6] 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 specific
securities issued outside of the authority of Title 31 U.S.C. § 3101.
[7] The Social Security trust funds consist of the Federal Old-Age and
Survivors Insurance Trust Fund and the Federal Disability Insurance
Trust Fund. The Medicare trust funds are made up of the Federal
Hospital Insurance Trust Fund and the Federal Supplementary Medical
Insurance Trust Fund. The Military Retirement and Health Care Funds
consist of the Military Retirement Fund and the DOD Medicare-Eligible
Retiree Health Care Fund.
[End of section]
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