Financial Audit
Bureau of the Public Debt's Fiscal Years 2010 and 2009 Schedules of Federal Debt Gao ID: GAO-11-52 November 8, 2010GAO 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 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. Debt held by the public primarily represents the amount the federal government has borrowed to finance cumulative cash deficits. Intragovernmental debt holdings represent balances of Treasury securities held by federal government accounts, primarily federal trust funds, that typically have an obligation to invest their excess annual receipts (including interest earnings) over disbursements in federal securities.
In GAO's opinion, BPD's Schedules of Federal Debt for fiscal years 2010 and 2009 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, 2010. GAO's tests of BPD's compliance with the statutory debt limit for fiscal year 2010 disclosed no instances of reportable noncompliance. As of September 30, 2010 and 2009, federal debt managed by BPD totaled about $13,551 billion and $11,898 billion, respectively. Total gross federal debt outstanding increased over each of the last four fiscal years. During the last four fiscal years, managing the federal debt has been a challenge, as evidenced by the growth of total federal debt by $5,058 billion, or 60 percent, from $8,493 billion as of September 30, 2006, to $13,551 billion as of September 30, 2010. The increase to the federal debt became particularly acute with the onset of the recession in December 2007. Reduced federal revenues and federal government actions in response to both the financial market crisis and the economic downturn added significantly to the federal government's borrowing needs. And, due to the persistent effects of the recession, which ended in June 2009, federal financing needs remain high. As a result, the increases to total federal debt over the past three fiscal years represent the largest dollar increases over a three year period in history. During fiscal years 2008, 2009, and 2010, legislation was enacted to raise the statutory debt limit on five different occasions. During this period, the statutory debt limit went from $9,815 billion to its current level of $14,294 billion, an increase of 46 percent.
GAO-11-52, Financial Audit: Bureau of the Public Debt's Fiscal Years 2010 and 2009 Schedules of Federal Debt
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United States Government Accountability Office:
GAO:
November 2010:
Report to the Secretary of the Treasury:
Financial Audit:
Bureau of the Public Debt's Fiscal Years 2010 and 2009 Schedules of
Federal Debt:
GAO-11-52:
GAO Highlights:
Highlights of GAO-11-52, 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 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. Debt held by the public primarily
represents the amount the federal government has borrowed to finance
cumulative cash deficits. Intragovernmental debt holdings represent
balances of Treasury securities held by federal government accounts,
primarily federal trust funds, that typically have an obligation to
invest their excess annual receipts (including interest earnings) over
disbursements in federal securities.
What GAO Found:
In GAO‘s opinion, BPD‘s Schedules of Federal Debt for fiscal years
2010 and 2009 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, 2010. GAO‘
s tests of BPD‘s compliance with the statutory debt limit for fiscal
year 2010 disclosed no instances of noncompliance.
As of September 30, 2010 and 2009, federal debt managed by BPD totaled
about $13,551 billion and $11,898 billion, respectively. Total gross
federal debt outstanding increased over each of the last 4 fiscal
years.
Figure 1: Total Gross Federal Debt Outstanding (Fiscal Years Ended
September 30, 2006-2010):
[Refer to PDF for image: stacked vertical bar graph]
Dollars in billions:
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.
As of September 30, 2010:
Intragovernmental holdings: $4,528;
Held by the public: $9,023;
Total: $13,551.
Source: BPD.
[End of figure]
During the last 4 fiscal years, managing the federal debt has been a
challenge, as evidenced by the growth of total federal debt by $5,058
billion, or 60 percent, from $8,493 billion as of September 30, 2006,
to $13,551 billion as of September 30, 2010. The increase to the
federal debt became particularly acute with the onset of the recession
in December 2007. Reduced federal revenues and federal government
actions in response to both the financial market crisis and the
economic downturn added significantly to the federal government‘s
borrowing needs. And, due to the persistent effects of the recession,
which ended in June 2009, federal financing needs remain high. As a
result, the increases to total federal debt over the past three fiscal
years represent the largest dollar increases over a three year period
in history. During fiscal years 2008, 2009, and 2010, legislation was
enacted to raise the statutory debt limit on five different occasions.
During this period, the statutory debt limit went from $9,815 billion
to its current level of $14,294 billion, an increase of 46 percent.
For a fuller understanding of GAO's opinion on BPD's fiscal years 2010
and 2009 Schedules of Federal Debt, readers should refer to the
complete audit report, available by clicking on [hyperlink,
http://www.gao.gov/products/GAO-11-52], 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 the 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 Relevant 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]
November 8, 2010:
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, 2010 and 2009. 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 Department of the Treasury's (Treasury)
Bureau of the Public Debt (BPD).[Footnote 1]
The auditor's report contains our (1) unqualified opinions on the
Schedules of Federal Debt for the fiscal years ended September 30,
2010 and 2009, (2) opinion that BPD maintained, in all material
respects, effective internal control over financial reporting relevant
to the Schedule of Federal Debt as of September 30, 2010, and (3)
conclusion that our tests of BPD's compliance with the statutory debt
limit for fiscal year 2010 disclosed no instances of reportable
noncompliance.
As of September 30, 2010 and 2009, federal debt managed by BPD totaled
about $13,551 billion and $11,898 billion, respectively, primarily for
borrowings to fund the federal government's operations. As shown on
the Schedules of Federal Debt, these balances consisted of
approximately (1) $9,023 billion as of September 30, 2010, and $7,552
billion as of September 30, 2009, of debt held by the public and (2)
$4,528 billion as of September 30, 2010, and $4,346 billion as of
September 30, 2009, of intragovernmental debt holdings.
Debt held by the public primarily represents the amount the federal
government has borrowed to finance cumulative cash deficits. 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, that typically have an obligation to invest their excess
annual receipts (including interest earnings) 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 federal 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.[Footnote 2]
We have audited the Schedule of Federal Debt since fiscal year 1997.
Over this period, total federal debt has increased by 151 percent.
During the last 4 fiscal years, managing the federal debt has been a
challenge, as evidenced by the growth of total federal debt by $5,058
billion, or 60 percent, from $8,493 billion as of September 30, 2006,
to $13,551 billion as of September 30, 2010. The increase to the
federal debt became particularly acute with the onset of the recession
in December 2007. Reduced federal revenues and federal government
actions in response to both the financial market crisis and the
economic downturn added significantly to the federal government's
borrowing needs. And, due to the persistent effects of the recession,
which ended in June 2009, federal financing needs remain high. As a
result, the increases to total federal debt over the past three fiscal
years represent the largest dollar increases over a three year period
in history. The largest annual dollar increase occurred in fiscal year
2009 when total federal debt increased by $1,887 billion. During
fiscal year 2010, total federal debt increased by $1,653 billion. Of
the fiscal year 2010 increase, about $1,471 billion was from the
increase in debt held by the public and about $182 billion was from
the increase in intragovernmental debt holdings. Treasury primarily
utilized its existing suite of securities and increased or decreased
auction sizes by security type as needed to finance the operations of
the federal government and to lengthen the average maturity of
securities within its portfolio. During fiscal years 2008, 2009, and
2010, legislation was enacted to raise the statutory debt limit on
five different occasions. During this period, the statutory debt limit
went from $9,815 billion to its current level of $14,294 billion, an
increase of about 46 percent.
Recovery from the economic downturn is expected to be slow during the
next few years and as a result, deficits are expected to remain high.
The Congressional Budget Office (CBO) estimates the annual federal
deficit will be just over $1 trillion for fiscal year 2011, down from
$1.3 trillion for fiscal year 2010. Correspondingly, debt held by the
public is expected to grow from an estimated 62.5 percent of gross
domestic product (GDP) at the end of fiscal year 2010 to over 66
percent of GDP at the end of fiscal year 2011. The real challenge is
not this year's deficit or even next year's; it is how best to address
the nation's unsustainable long-term fiscal path over the coming
decades.
While considerable attention has been understandably given to the near-
term fiscal position, the federal government faces even larger fiscal
challenges that will persist long after the return to 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. Since
fiscal year 2008, the Medicare Hospital Insurance program has paid
more in benefits than it receives in cash from payroll taxes. For the
first time in over 25 years, the Social Security program, which has
historically run large cash surpluses that helped reduce the need to
borrow to finance other federal government activities, paid more in
benefits than it received in tax income in fiscal year 2010 thereby
contributing to borrowing needs. GAO and CBO'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. The sooner action is taken to
address this long-term fiscal challenge, the less disruptive and
destabilizing the changes will be. As a result, the nation's leaders
face the challenge of dealing with current economic and financial
issues in the context of the need to address the long-term fiscal
challenges.
A continuing trend that we 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 2010 Treasury
Bulletin, Treasury estimates that the amount of Treasury securities
held by foreign and international investors has increased by $3,022
billion--from $983 billion[Footnote 3] as of June 30, 2001, to $4,005
billion as of June 30, 2010. As of June 30, 2010, this represents an
estimated 46 percent of debt held by the public as compared to about
30 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 Acting
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]
United States Government Accountability Office:
Washington, DC 20548:
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
consolidated financial statements.[Footnote 4]
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, 2010 and 2009. 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
Department of the Treasury's BPD.[Footnote 5]
In our audits of the Schedules of Federal Debt Managed by BPD for the
fiscal years ended September 30, 2010 and 2009, 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, 2010; and:
* no reportable noncompliance in fiscal year 2010 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) BPD's comments on a draft of this report.
Opinion on the 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, 2010,
2009, and 2008 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, 2010 and 2009.
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, 2010, 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 on internal control 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 6] 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 2010 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, 2010, 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 effective 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,
2010, based on the criteria established under FMFIA. BPD management's
assertion based on its evaluation 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, 2010. 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;
* 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
based on the assessed risk;
* tested internal control over financial reporting relevant to the
Schedule of Federal Debt;
* tested compliance in fiscal year 2010 with the statutory debt limit
(31 U.S.C. § 3101(b) (Supp. II 2008), as amended by Pub. L. No. 111-5,
Div. B, Title I, § 1604, 123 Stat. 366 (2009); Pub. L. No. 111-123, §
1, 123 Stat. 3483 (2009); and Pub. L. No. 111-139, 124 Stat. 8
(2010)); 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 testing
controls over financial reporting. Our internal control testing was
for the purpose of expressing an opinion on the effectiveness of
internal control over financial reporting and may not be sufficient
for other purposes. Consequently, our audit may not identify all
deficiencies in internal control over financial reporting that are
less severe than a material weakness. 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, 2010. 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 1, 2010:
[End of section]
Overview, Schedules, and Notes:
Overview on Federal Debt Managed by the Bureau of the Public Debt:
Gross Federal Debt Outstanding[Footnote 7]:
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 31 U.S.C. § 3101), the latter of which is referred to
as intragovernmental debt holdings. As of September 30, 2010 and 2009,
outstanding gross federal debt managed by the bureau totaled $13,551
and $11,898 billion, respectively. The increase in gross federal debt
of $1,653 billion during fiscal year 2010 was due to an increase in
gross intragovernmental debt holdings of $182 billion and an increase
in gross debt held by the public of $1,471 billion. As Figure 1
illustrates, both intragovernmental debt holdings and debt held by the
public have increased since fiscal year 2006. The primary reason for
the increases in intragovernmental debt holdings is the excess annual
receipts (including interest earnings) over disbursements 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, 2010, gross debt held by the public totaled $9,023
billion and gross intragovernmental debt holdings totaled $4,528
billion.
Figure 1: Total Gross Federal Debt Outstanding (in billions):
[Refer to PDF for image: stacked vertical bar graph]
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.
As of September 30, 2010:
Intragovernmental holdings: $4,528;
Held by the public: $9,023;
Total: $13,551.
[End of figure]
Interest Expense:
Interest expense incurred during fiscal year 2010 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. For fiscal year 2010, interest expense
incurred totaled $413 billion, interest expense on debt held by the
public was $215 billion, and $198 billion was interest incurred for
intragovernmental debt holdings. As Figure 2 illustrates, total
interest expense has increased from fiscal years 2006 through 2008.
However, due to the economic conditions, there was a significant
increase in the demand for government backed securities during fiscal
year 2009, which resulted in lower average interest rates and interest
expense for that year. 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. While the interest rates on
Treasury bills have remained relatively steady for fiscal years 2009
and 2010, interest expense has increased due primarily to an increase
in Treasury notes and bonds outstanding, which have higher average
interest rates than Treasury bills. Average interest rates on principal
balances outstanding as of September 30, 2010 and 2009, are disclosed
in the Notes to the Schedules of Federal Debt.
Figure 2: Total Interest Expense (in billions):
[Refer to PDF for image: stacked vertical bar graph]
Fiscal year ended September 30, 2006:
Intragovernmental holdings: $183;
Held by the public: $2212;
Total: $404.
Fiscal year ended September 30, 2007:
Intragovernmental holdings: $194;
Held by the public: $239;
Total: $433.
Fiscal year ended September 30, 2008:
Intragovernmental holdings: $212;
Held by the public: $242;
Total: $454.
Fiscal year ended September 30, 2009:
Intragovernmental holdings: $192;
Held by the public: $189;
Total: $381.
Fiscal year ended September 30, 2010:
Intragovernmental holdings: $198;
Held by the public: $215;
Total: $413.
[End of figure]
Debt Held by the Public:
Debt held by the public primarily represents the amount the Federal
Government has borrowed to finance cumulative cash deficits. During
fiscal year 2010, Treasury implemented several important components as
a debt management strategy, which affected the mix of outstanding
Treasury securities. Treasury bills decreased by $202 billion; whereas,
Treasury notes and bonds increased by $1,480 billion and $169 billion,
respectively, in fiscal year 2010. As of September 30, 2010 and 2009,
gross debt held by the public totaled $9,023 billion and $7,552
billion, respectively (see Figure 1), an increase of $1,471 billion.
This increase was primarily the result of borrowings needed to finance
the government's fiscal year 2010 deficit. However, as a result of most
of the increase in outstanding gross debt held by the public being in
the form of longer term securities, the total dollar amount of activity
for both borrowings and repayments of debt held by the public decreased
for fiscal year 2010.
As of September 30, 2010, $8,476 billion, or 94 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, 2010, $5,180 billion, or 61 percent, will mature
within the next 4 years (see Figure 3). As of September 30, 2010 and
2009, notes and TIPS held by the public maturing within the next 10
years totaled $5,673 billion and $4,169 billion, respectively, an
increase of $1,504 billion.
Figure 3: Maturity Dates of Marketable Debt Held by the Public as of
September 30, 2010:
[Refer to PDF for image: stacked line graph]
Graph plots fiscal year of maturity from 2010 through 2040 against
amounts from 0 to $3,000 billion. Plotted are amounts of TIPS; Bonds;
Notes; and Bills.
[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, 2010, nonmarketable
securities totaled $547 billion, or 6 percent of debt held by the
public. As of that date, nonmarketable securities primarily consisted
of savings securities totaling $189 billion, State and Local Government
Series securities totaling $193 billion, and Government Account Series
securities totaling $129 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 payments 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 8] As of
September 30, 2010, such funds accounted for $4,131 billion, or 91
percent, of the $4,528 billion intragovernmental debt holdings
balances (see Figure 4). As of September 30, 2010 and 2009, gross
intragovernmental debt holdings totaled $4,528 billion and $4,346
billion, respectively (see Figure 1), an increase of $182 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, 2010:
[Refer to PDF for image: pie-chart]
Social Security trust funds: 57%;
Civil Service Retirement and Disability trust fund: 17%;
Medicare trust funds: 8%;
Military Retirement and Health Care funds: 9%;
Other programs and trust funds: 9%.
[End of figure]
Significant Events in Fiscal Year 2010:
Changes to the Statutory Debt Ceiling:
On December 28, 2009, an Act to permit continued financing of Federal
Government operations was signed into law becoming Public Law No. 111-
123. Section 1 of this law increased the statutory debt limit by $290
billion from $12,104 billion to $12,394 billion.
On February 12, 2010, the Statutory Pay-As-You-Go Act of 2010 was
signed into law becoming Public Law No. 111-139. The purpose of this
legislation was to reestablish a statutory procedure to enforce a rule
of budgetary neutrality on new revenue and direct spending legislation.
This law increased the statutory debt limit by $1,900 billion from
$12,394 billion to $14,294 billion.
Treasury Inflation-Protected Securities (TIPS):
Treasury Inflation-Protected Securities (TIPS) are an important
component of Treasury's debt management strategy. As part of an ongoing
effort to improve liquidity in the TIPS program, Treasury announced in
the May 2010 Quarterly Refunding Statement the decision to increase the
frequency of TIPS auctions by adding a second reopening to 10-year TIPS
offerings. This will result in a total of six 10-year TIPS auctions per
year. The change began with the July 2010 new-issue 10-year TIPS
offering. The security was first reopened in September 2010 and, will
subsequently, be reopened in the month of November 2010. Similarly, the
January 2011 new-issue 10-year TIPS offering will be reopened in March
and May 2011.
In addition, to support Treasury's debt management strategy in the TIPS
program, extend the average maturity of the portfolio, and better
capture the premium associated with inflation protection, Treasury
replaced its 20-year TIPS offering with 30-year TIPS.
The 30-year TIPS are issued on a semi-annual basis. The initial
offering was in February 2010, followed by a reopening of the original
issue in August 2010. Similar to the 5-year TIPS offering, the security
will mature mid-month, but will settle at the end of the month.
Rescheduling of Regular Bill Auctions:
As a result of Treasury frequently rescheduling the timing of regular
bill auctions from 1:00 p.m. to 11:30 a.m. to accommodate additional
auctions of coupon securities, Treasury decided to move all regularly
scheduled Treasury bill auctions of 4-week, 13-week, 26-week, and 52-
week bills to 11:30 a.m. beginning with the auctions on November 9,
2009.
Treasury expects the change to increase the transparency and make the
bill auctions more regular and predictable.
Treasury Announced Call of Last Outstanding Callable Security:
On July 15, 2009, the Bureau of the Public Debt announced the call of
CUSIP 912810DN5 on November 15, 2009. This is the last of the 11-3/4
percent Treasury Bonds of 2004-2019. These bonds were originally issued
November 15, 1984, and would have matured on November 15, 2014. There
were $5.02 billion of these bonds outstanding, of which $3.82 billion
were held by private investors. Treasury estimated gross savings from
the call to be about $2 billion. This was the last outstanding callable
security issued by Treasury.
Fluctuation 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. As of September 30,
2009, there were a total of 5 cash management bills outstanding that
totaled $165 billion. In fiscal year 2010, the balance in the Treasury
Supplemental Financing Program decreased to a low of $5 billion in late
December, 2009. The action was taken to preserve flexibility in the
conduct of debt management. The balance increased to $200 billion by
the end of April 2010 through the issuance of 56-day cash management
bills. This restored the SFP back to the level maintained between
February and September 2009.
As of September 30, 2010, there were 8 cash management bills
outstanding that totaled $200 billion. Treasury retains the flexibility
to change the level of the SFP in the future. Such a decision will be
made in coordination with the Federal Reserve.
Stability in System Open Market Account (SOMA) Holdings:
On August 10, 2010, the Federal Open Market Committee directed the Open
Market Trading Desk (the Desk) at the Federal Reserve Bank of New York
to keep constant the Federal Reserve's holdings of securities at their
current level by reinvesting principal payments from agency debt and
agency mortgage-backed securities in longer-term Treasury securities.
The Desk will seek to maintain the face value of outright holdings of
domestic securities in the SOMA at approximately this level. Due to
differences in settlement dates for purchases and principal payments,
it is anticipated that the actual level of domestic securities held
will vary around this level to some degree.
In the middle of each month, the Desk will publish a tentative schedule
of purchase operations expected to take place through the middle of the
following month, as well as the anticipated total amount of purchase to
be conducted over that period. The Desk will concentrate its purchase
in the 2 to 10 year sector of the nominal Treasury curve, although
purchases will occur across the nominal Treasury coupon and TIPS yield
curves. Additionally, the Desk will refrain from purchasing securities
for which there is heightened demand or of which the SOMA already holds
large concentrations.
Overall Plan to Promote TreasuryDirect and TreasuryDirect Payroll
Savings:
On April 19, 2010, Treasury announced a broad initiative focused on
increasing the number of electronic transactions. As part of the
initiative, Treasury eliminated the option to purchase paper savings
bonds through payroll plans beginning September 30, 2010, for federal
employees and January 1, 2011, for all other (non-federal) employees.
Payroll savers are being encouraged to use TreasuryDirect as an
alternative. Transitioning employees to electronic payroll purchases
saves employers administrative costs and allows employees to manage
their own accounts. This is estimated to save Treasury nearly $50
million in the first five years.
Tax Refund Savings Bond:
Beginning in January 2010, taxpayers entitled to tax refunds were
provided a new option to direct a portion of their refunds towards the
purchase of Series I United States Savings Bonds. The purchase is
requested using standard IRS forms. This initiative is a component of
President Obama's larger initiative (announced September 5, 2009) to
make it easier for American families to save for retirement. The
project involved the combined efforts of the Internal Revenue Service,
Federal Reserve Banks, Financial Management Service, and the Bureau of
the Public Debt.
As of September 30, 2010, more than 22,368 requests for savings bonds
had been processed resulting in 98,230 Series I paper bonds being
issued worth $11,040,300. Work is underway to add enhancements to the
program. Beginning in 2011, more registration options will be available
and it will be possible to request gifts in the name of others.
Highway Trust Fund Appropriation:
On March 18, 2010, the Jobs for Main Street Act was signed into law
becoming Public Law No. 111-147. This law contained a provision to
repeal the previous statutory provision that prohibited the crediting
of interest to the Highway Trust Fund (HTF). Additionally, the Act
provided an appropriation of $19.5 billion for foregone interest. The
Department of Transportation (DOT) worked with the Office of Management
and Budget and the Financial Management Service (FMS) to establish
receipt accounts for the issuance of the appropriation and subsequent
transfer of funds into the trust fund.
FMS processed the warrant to transfer the $19.5 billion from the
general fund to a DOT transfer account on April 16, 2010. The Bureau of
the Public Debt received the funds transfer from DOT on April 22, 2010,
and invested $14.7 billion for the Highway Account and $4.8 billion for
the Mass Transit Account, as outlined within the legislation.
Deposit Insurance Fund Prepaid Assessments:
The Federal Deposit Insurance Corporation (FDIC) issued a final rule on
November 17, 2009 to address the Deposit Insurance Fund's (DIF)
liquidity needs and, require insured depository institutions to prepay
their quarterly risk-based assessments for the fourth quarter of 2009,
and for all of 2010, 2011, and 2012, on December 30, 2009. As a result,
on December 30, 2009, the FDIC collected approximately $45.7 billion in
prepaid assessments from a majority of financial institutions in the
United States. The additional assessments were primarily invested in
Treasury securities and contributed to an increase in DIF's outstanding
balance from September 30, 2009 to September 30, 2010.
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
$1,823 billion as of September 30, 1985, to $13,551 billion as of
September 30, 2010 (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 nearly three fold
between 1985 and 1997.
Figure 5: Total Gross Federal Debt Outstanding:
[Refer to PDF for image: vertical bar graph]
Graph plots Total Gross Federal Debt Outstanding from 1985 through
2010 as of September 30 of each year against amounts from 0 to $14,000
billion.
Source: Monthly Statement of the Public Debt.
Figures shown prior to 1996 are unaudited and include securities
issued at the Federal Financing Bank.
[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 through fiscal year 2007. From fiscal year 2008
through fiscal year 2010, federal debt held by the public increased an
additional 78.7 percent rising by $3,974 billion. This increase is
primarily a result of reduced federal revenues and 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 $9,023 billion in 2010.
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 $878 billion, from $3,650 billion as of September 30,
2006, to $4,528 billion as of September 30, 2010. By law, trust funds
have the authority or are required to invest their excess annual
receipts (including interest earnings) over disbursements 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:
[Refer to PDF for image: line graph]
Graph plots the Average Interest Rates of Federal Debt on September 30
of each year from 1985 through 2010 against average interest rates fro
0 to 12%.
Source: Prior to fiscal year 2001: Monthly Statement of Public Debt.
Fiscal year 2001 and after: Public Debt Online Average Interest Rates.
[End of figure]
Schedules of Federal Debt:
Schedules of Federal Debt:
Managed by the Bureau of the Public Debt:
For the Fiscal Years Ended September 30, 2010 and 2009 (Dollars in
Millions):
Balance as of September 30, 2008:
Federal Debt: Held by the Public:
Principal (Note 2): $5,808,692;
Accrued Interest Payable: $40,127;
Net Unamortized Premiums/(Discounts): ($36,124).
Federal Debt: Intragovernmental Debt Holdings:
Principal (Note 3): $4,202,004;
Accrued Interest Payable: $50,393;
Net Unamortized Premiums/(Discounts): $32,567.
Increases: Borrowings from the Public:
Federal Debt: Held by the Public:
Principal (Note 2): $8,946,010;
Accrued Interest Payable: [Empty];
Net Unamortized Premiums/(Discounts): ($15,054).
Increases: Net Increase in Intragovernmental Debt Holdings;
Federal Debt: Intragovernmental Debt Holdings:
Principal (Note 3): $143,550;
Accrued Interest Payable: [Empty];
Net Unamortized Premiums/(Discounts): $1,718.
Increases: Accrued Interest (Note 4);
Federal Debt: Held by the Public:
Accrued Interest Payable: $171,875.
Increases: Accrued Interest (Note 4);
Federal Debt: Intragovernmental Debt Holdings:
Accrued Interest Payable: $191,955.
Total Increases:
Federal Debt: Held by the Public:
Principal (Note 2): $8,946,010;
Accrued Interest Payable: $171,875;
Net Unamortized Premiums/(Discounts): ($15,054).
Federal Debt: Intragovernmental Debt Holdings:
Principal (Note 3): $143,550;
Accrued Interest Payable: $191,955;
Net Unamortized Premiums/(Discounts): $1,718.
Decreases:
Federal Debt: Held by the Public:
Principal (Note 2): Repayments of Debt Held by the Public: $7,202,840;
Accrued Interest Payable: Interest Paid: $170,654;
Net Unamortized Premiums/(Discounts): Net Amortization (Note 4):
($17,273).
Federal Debt: Intragovernmental Debt Holdings:
Principal (Note 3): Repayments of Debt Held by the Public: [Empty];
Accrued Interest Payable: Interest Paid: $192,905;
Net Unamortized Premiums/(Discounts): Net Amortization (Note 4):
($399).
Total Decreases:
Federal Debt: Held by the Public:
Principal (Note 2): $7,202,840;
Accrued Interest Payable: $170,654;
Net Unamortized Premiums/(Discounts): ($17,273).
Federal Debt: Intragovernmental Debt Holdings:
Principal (Note 3): 0;
Accrued Interest Payable: $192,905;
Net Unamortized Premiums/(Discounts): $399.
Balance as of September 30, 2009:
Federal Debt: Held by the Public:
Principal (Note 2): $7,551,862;
Accrued Interest Payable: $41,348;
Net Unamortized Premiums/(Discounts): ($33,905).
Federal Debt: Intragovernmental Debt Holdings:
Principal (Note 3): $4,345,554;
Accrued Interest Payable: $49,443;
Net Unamortized Premiums/(Discounts): $33,886.
Increases: Borrowings from the Public:
Federal Debt: Held by the Public:
Principal (Note 2): $8,533,376;
Accrued Interest Payable: [Empty];
Net Unamortized Premiums/(Discounts): ($7,912).
Increases: Net Increase in Intragovernmental Debt Holdings;
Federal Debt: Intragovernmental Debt Holdings:
Principal (Note 3): $182,529;
Accrued Interest Payable: [Empty];
Net Unamortized Premiums/(Discounts): $6,067.
Increases: Accrued Interest (Note 4);
Federal Debt: Held by the Public:
Accrued Interest Payable: $206,843.
Increases: Accrued Interest (Note 4);
Federal Debt: Intragovernmental Debt Holdings:
Accrued Interest Payable: $199,789.
Total Increases:
Federal Debt: Held by the Public:
Principal (Note 2): $8,533,376;
Accrued Interest Payable: $206,843;
Net Unamortized Premiums/(Discounts): ($7,912).
Federal Debt: Intragovernmental Debt Holdings:
Principal (Note 3): $182,529;
Accrued Interest Payable: $199,789;
Net Unamortized Premiums/(Discounts): $6,067.
Decreases:
Federal Debt: Held by the Public:
Principal (Note 2): Repayments of Debt Held by the Public: $7,062,430;
Accrued Interest Payable: Interest Paid: $201,200;
Net Unamortized Premiums/(Discounts): Net Amortization (Note 4):
($7,947).
Federal Debt: Intragovernmental Debt Holdings:
Principal (Note 3): Repayments of Debt Held by the Public: [Empty];
Accrued Interest Payable: Interest Paid: $200,650;
Net Unamortized Premiums/(Discounts): Net Amortization (Note 4):
$1,549.
Total Decreases:
Federal Debt: Held by the Public:
Principal (Note 2): $7,062,430;
Accrued Interest Payable: $201,200;
Net Unamortized Premiums/(Discounts): ($7,947).
Federal Debt: Intragovernmental Debt Holdings:
Principal (Note 3): 0;
Accrued Interest Payable: $200,650;
Net Unamortized Premiums/(Discounts): $1,549.
Balance as of September 30, 2010:
Federal Debt: Held by the Public:
Principal (Note 2): $9,022,808;
Accrued Interest Payable: $46,991;
Net Unamortized Premiums/(Discounts): ($33,870).
Federal Debt: Intragovernmental Debt Holdings:
Principal (Note 3): $$4,528,083;
Accrued Interest Payable: $48,582;
Net Unamortized Premiums/(Discounts): $38,404.
The accompanying notes are an integral part of these schedules.
Notes to the Schedules of Federal Debt:
Notes to the Schedules of Federal Debt Managed by the Bureau of the
Public Debt:
For the Fiscal Years Ended September 30, 2010 and 2009:
(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 2010 and fiscal year
2009 balances and activity relating to monies borrowed from the public
and certain federal government accounts under 31 U.S.C. § 3101 to fund
the operations of the U.S. government. 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. Code 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 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, 2010 and 2009, Federal Debt Held by the Public
consisted of the following:
Marketable:
Treasury Bills:
2010 Amount: $1,783,675;
2010 Average Interest Rates: 0.2%;
2009 Amount: $1,986,174;
2009 Average Interest Rates: 0.3%.
Treasury Notes:
2010 Amount: $5,252,585;
2010 Average Interest Rates: 2.6%;
2009 Amount: $3,772,964;
2009 Average Interest Rates: 3.0%.
Treasury Bonds:
2010 Amount: $846,054;
2010 Average Interest Rates: 6.1%;
2009 Amount: $677,491;
2009 Average Interest Rates: 6.5%.
TIPS:
2010 Amount: $593,614;
2010 Average Interest Rates: 2.2%;
2009 Amount: $551,308;
2009 Average Interest Rates: 2.1%.
Total Marketable:
2010 Amount: $8,475,928;
2009 Amount: $6,987,937.
Nonmarketable:
2010 Amount: $546,880;
2010 Average Interest Rates: 2.8%;
2009 Amount: $563,925;
2009 Average Interest Rates: 3.7%.
Total Federal Debt Held by the Public:
2010 Amount: $9,022,808;
2009 Amount: $7,551,862.
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,
2010 and 2009. 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, 2010 and 2009. 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, 2010 and 2009. The TIPS Federal Debt Held by the Public
inflation-adjusted principal balance includes inflation of $57,481
million and $57,552 million as of September 30, 2010 and 2009,
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, 2010, the FRB had total holdings of
$813,550 million, including a net of $1,880 million in Treasury
securities held by the FRB as collateral for securities lending
activities. As of September 30, 2009, the FRB had total holdings of
$769,144 million, excluding a very small net amount in Treasury
securities lent by the FRB to dealers. 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,
2010 and 2009. Nonmarketable securities are issued with a term of on
demand out to 40 years.
As of September 30, 2010 and 2009, nonmarketable securities consisted
of the following:
Domestic Series:
2010: $29,995;
2009: $29,995.
Foreign Series:
2010: $4,186;
2009: $4,886.
R.E.A. Series:
2010: 0[A];
2009: $1.
State and Local Government Series:
2010: $193,208;
2009: $216,488.
United States Savings Securities:
2010: $188,796;
2009: $192,452.
Government Account Series:
2010: $129,355;
2009: $118,636.
Other:
2010: $1,340;
2009: $1,467.
Total Nonmarketable:
2010: $546,880;
2009: $563,925.
[A] Rural Electrification Authority (REA) Series Certificates of
Indebtedness were issued to electric and telephone cooperatives as an
investment option for unexpended loan proceeds from the REA. On
September 30, 2010, the last outstanding REA Series Certificate of
Indebtedness was redeemed.
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 2010 and 2009 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, 2010 and 2009, Intragovernmental Debt Holdings are
owed to the following:
SSA: Federal Old-Age and Survivors Insurance Trust Fund:
2010: $2,399,111;
2009: $2,296,316.
OPM: Civil Service Retirement and Disability Fund
2010: $770,126;
2009: $742,322.
DOD: Military Retirement Fund
2010: $282,006;
2009: $240,807.
HHS: Federal Hospital Insurance Trust Fund
2010: $279,475;
2009: $309,702.
SSA: Federal Disability Insurance Trust Fund
2010: $187,222;
2009: $207,932.
DOD: DOD Medicare-Eligible Retiree Health Care Fund
2010: $142,289;
2009: $126,821.
HHS: Federal Supplementary Medical Insurance Trust Fund
2010: $70,982;
2009: $61,764.
DOE: Nuclear Waste Disposal Fund
2010: $47,578;
2009: $44,643.
OPM: Postal Service Retiree Health Benefits Fund
2010: $42,115v
2009: $35,115.
OPM: Employees Life Insurance Fund
2010: $37,605;
2009: $36,146.
FDIC: The Deposit Insurance Fund
2010: $37,441;
2009: $16,076.
DOT: Highway Trust Fund
2010: $24,455;
2009: $11,484
Treasury: Exchange Stabilization Fund
2010: $20,436;
2009: $18,615.
DOL: Pension Benefit Guaranty Corporation
2010: $19,888[A];
2009: $17,459[A].
DOL: Unemployment Trust Fund
2010: $18,703;
2009: $19,628.
OPM: Employees Health Benefits Fund
2010: $16,242;
2009: $15,367.
DOS: Foreign Service Retirement and Disability Fund
2010: $15,862;
2009: $15,334.
HUD: Federal Housing Authority - Liquidating Account
2010: $4,194;
2009: $10,664.
Other Programs and Funds:
2010: $112,353;
2009: $119,359.
Total Intragovernmental Debt Holdings:
2010: $4,528,083;
2009: $4,345,554.
[A] These amounts include $4,999 million and $2,676 million of
marketable Treasury securities as well as $14,889 million and $14,783
million of GAS securities as of September 30, 2010 and 2009,
respectively.
Social Security Administration (SSA); Office of Personnel Management
(OPM); Department of Defense (DOD); Department of Health and Human
Services (HHS); Department of Energy (DOE); Federal Deposit Insurance
Corporation (FDIC); Department of Transportation (DOT); Department of
the Treasury (Treasury); Department of Labor (DOL); Department of
State (DOS); Department of Housing and Urban Development (HUD).
Intragovemmental 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. GAS securities are issued with
a term of on demand out 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,
2010 and 2009, the inflation-adjusted principal balance included
inflation of $65,693 million and $54,775 million, respectively. The
average interest rates on Intragovernmental Debt Holdings, excluding
TIPS, for fiscal years 2010 and 2009 were 4.3 and 4.6 percent,
respectively. The average interest rates on TIPS for fiscal years 2010
and 2009 were 1.9 and 2.0 percent, respectively. The average interest
rate represents the original issue weighted effective yield on
securities outstanding as of September 30, 2010 and 2009.
Note 4. Interest Expense:
Interest expense on Federal Debt Managed by BPD for fiscal years 2010
and 2009 consisted of the following:
Federal Debt Held by the Public: Accrued Interest;
2010: $206,843;
2009: $171,875.
Federal Debt Held by the Public: Net Amortization of Premiums and
Discounts;
2010: $7,947;
2009: $17,273.
Total Interest Expense on Federal Debt Held by the Public:
2010: $214,790;
2009: $189,148.
Intragovernmental Debt Holdings: Accrued Interest;
2010: $199,789;
2009: $191,955.
Intragovernmental Debt Holdings: Net Amortization of Premiums and
Discounts;
2010: ($1,549);
2009: ($399).
Total Interest Expense on Intragovernmental Debt Holdings:
2010: $198,240;
2009: $191,556.
Total Interest Expense on Federal Debt Managed by BPD:
2010: $413,030;
2009: $380,704.
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 $6,904 million and deflation adjustments of $10,607
million for fiscal years 2010 and 2009, respectively. Accrued interest
on Intragovernmental Debt Holdings includes inflation adjustments of
$4,452 million and deflation adjustments of $6,571 million for fiscal
years 2010 and 2009, respectively.
Note 5. Fund Balance With Treasury:
Appropriated Funds Obligated:
As of September 30, 2010: $102;
As of September 30, 2009: $115.
Fiduciary Funds Obligated:
As of September 30, 2010: $2;
As of September 30, 2009: $3.
Total FBWT:
As of September 30, 2010: $104;
As of September 30, 2009: $118.
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.
[End of section]
Appendix I: Management‘s Report on Internal Control over Financial
Reporting Relevant to the Schedule of Federal Debt:
Management's Report on Internal Control over Financial Reporting
Relevant to the Schedule of Federal Debt :
The Bureau of the Public Debt's (BPD) 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.
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 relevant to the Schedule of Federal Debt as of September 30.
2010, 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, 2010,
BPD's internal control over financial reporting relevant to the
Schedule of Federal Debt was effective.
Bureau of the Public Debt:
November 1, 2010
Signed by:
Van Zeck:
Commissioner:
Signed by:
Fred Pyatt:
Chief Financial Officer:
Signed by:
Debra L. Hines:
Assistant Commissioner, OPD:
Signed by:
Kimberly McCoy
Chief Information 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:
November 2, 2010:
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 in 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. 2010 and 2009. We agree with the conclusions of
your audit report.
We appreciate the knowledge and experience displayed by your audit
team as we finalize the fourteenth year of our professional
relationship. We would like to thank you and your staff for the
thorough audit performed on these schedules. The usability of these
reports continues to develop through combined efforts such as the
implementation of routine status meetings and an all-inclusive
provided by client list during fiscal year 2010. As we move forward
with Summary Debt Accounting modernization, we will keep you abreast
of our efforts. 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; Edmund F. Fernandez; Vivian M. Gutierrez; James M. Healy;
Alan S. MacMullin; Nicole M. McGuire; Werner F. Miranda-Hernandez;
Matthew C. O'Connor; Priscilla M. Pinckney; Chris J. Rodriguez;
Carolyn M. Voltz; Melissa A. Wolf; Yiming I. Wu; and Tory E. Wudtke.
[End of section]
Footnotes:
[1] Intragovernmental Debt Holdings represent federal debt issued by
BPD and held by certain federal government accounts, such as the
Social Security and Medicare trust funds.
[2] For more information, see GAO, Federal Debt: Answers to Frequently
Asked Questions: An Update, [hyperlink,
http://www.gao.gov/products/GAO-04-485SP] (Washington, D.C.: August
12, 2004).
[3] The June 30, 2001, estimated amount was previously reported in the
Treasury Bulletin as $1,001 billion and was subsequently revised to
match the amount reported by the Treasury International Capital system.
[4] 31 U.S.C. § 331(e). As a bureau within the Department of the
Treasury, 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).
[5] Intragovernmental Debt Holdings represent federal debt issued by
BPD and held by certain federal government accounts, such as the
Social Security and Medicare trust funds.
[6] 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.
[7] 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.
[8] 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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