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entitled 'Financial Audit: Bureau of the Fiscal Service's Fiscal Years 
2013 and 2012 Schedules of Federal Debt' which was released on 
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United States Government Accountability Office: 
GAO: 

Report to the Secretary of the Treasury: 

December 2013: 

Financial Audit: 

Bureau of the Fiscal Service's Fiscal Years 2013 and 2012 Schedules of 
Federal Debt: 

GAO-14-173: 

GAO Highlights: 

Highlights of GAO-14-173, 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 government-wide financial statements, GAO audits 
Fiscal Service’s Schedules of Federal Debt annually to determine 
whether, in all material respects, (1) the schedules are reliable and 
(2) Fiscal Service management maintained effective internal control 
over financial reporting relevant to the Schedule of Federal Debt. 
Further, GAO tests compliance with selected provisions of applicable 
laws, regulations, contracts, and grant agreements related to the 
Schedule of Federal Debt. 

Federal debt managed by Fiscal Service 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 essentially 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 such as Social 
Security and Medicare—that typically have an obligation to invest 
their excess annual receipts (including interest earnings) over 
disbursements in federal securities. 

In commenting on a draft of this report, Fiscal Service’s Commissioner 
concurred with GAO’s conclusions. 

What GAO Found: 

In GAO’s opinion, the Bureau of the Fiscal Service’s (Fiscal Service) 
Schedules of Federal Debt for fiscal years 2013 and 2012 were fairly 
presented in all material respects, and although information systems 
controls could be improved, Fiscal Service maintained, in all material 
respects, effective internal control over financial reporting relevant 
to the Schedule of Federal Debt as of September 30, 2013. GAO’s tests 
disclosed no instances of reportable noncompliance for fiscal year 
2013 with selected provisions of applicable laws, regulations, 
contracts, and grant agreements related to the Schedule of Federal 
Debt. 

Total federal debt managed by Fiscal Service has increased by 210 
percent and the debt limit has been raised 14 times, from $5,950 
billion to $16,699 billion, from fiscal year 1997, the first year of 
audit, through September 30, 2013. 

Figure: Total Federal Debt Outstanding, September 30, 1997, through 
September 30, 2013: 

[Refer to PDF for image: stacked vertical bar graph] 

Years as of September 30: 

1997: 
Debt held by the public: $3.815 trillion; 
Intragovernmental debt holdings: $1.583 trillion; 
Total: $5.398 trillion. 

1998: 
Debt held by the public: $3.761 trillion; 
Intragovernmental debt holdings: $1.750 trillion; 
Total: $5.511 trillion. 

1999: 
Debt held by the public: $3.668 trillion; 
Intragovernmental debt holdings: $1.973 trillion; 
Total: $5.641 trillion. 

2000: 
Debt held by the public: $3.439 trillion; 
Intragovernmental debt holdings: $2.220 trillion; 
Total: $5.659 trillion. 

2001: 
Debt held by the public: $3.339 trillion; 
Intragovernmental debt holdings: $2.453 trillion; 
Total: $5.792 trillion. 

2002: 
Debt held by the public: $3.553 trillion; 
Intragovernmental debt holdings: $2.660 trillion; 
Total: $6.213 trillion. 

2003: 
Debt held by the public: $3.924 trillion; 
Intragovernmental debt holdings: $2.859 trillion; 
Total: $6.783 trillion. 

2004: 
Debt held by the public: $4.307 trillion; 
Intragovernmental debt holdings: $3.072 trillion; 
Total: $7.379 trillion. 

2005: 
Debt held by the public: $4.601 trillion; 
Intragovernmental debt holdings: $3.317 trillion; 
Total: $7.918 trillion. 

2006: 
Debt held by the public: $4.843 trillion; 
Intragovernmental debt holdings: $3.650 trillion; 
Total: $8.493 trillion. 

2007: 
Debt held by the public: $5.049 trillion; 
Intragovernmental debt holdings: $3.944 trillion; 
Total: $8.993 trillion. 

2008: 
Debt held by the public: $5.809 trillion; 
Intragovernmental debt holdings: $4.202 trillion; 
Total: $10.011 trillion. 

2009: 
Debt held by the public: $7.552 trillion; 
Intragovernmental debt holdings: $4.346 trillion; 
Total: $11.898 trillion. 

2010: 
Debt held by the public: $9.023 trillion; 
Intragovernmental debt holdings: $4.528 trillion; 
Total: $13.551 trillion. 

2011: 
Debt held by the public: $10.127 trillion; 
Intragovernmental debt holdings: $4.654 trillion; 
Total: $14.781 trillion. 

2012: 
Debt held by the public: $11.270 trillion; 
Intragovernmental debt holdings: $4.789 trillion; 
Total: $16.059 trillion. 

2013: 
Debt held by the public: $11.976 trillion; 
Intragovernmental debt holdings: $4.756 trillion; 
Total: $16.732 trillion. 

Source: Fiscal Service. 

[End of figure] 

Due to delays in raising the debt limit, during fiscal year 2013, the 
Department of the Treasury (Treasury) twice, and for almost half of 
the fiscal year, deviated from its normal debt management operations 
and took a number of extraordinary actions—-consistent with relevant 
laws and regulations—-to avoid exceeding the debt limit. Many 
extraordinary actions taken by Treasury during fiscal year 2013 
resulted in federal debt securities not being issued to certain 
federal government accounts. Consequently, the resulting uninvested 
principal as of September 30, 2013, totaling $248 billion, and related 
interest totaling $801 million, are not reported on the fiscal year 
2013 Schedule of Federal Debt. Uninvested principal was subsequently 
restored to affected federal government accounts, increasing the 
federal debt. As GAO has previously reported, delays in raising the 
debt limit can create uncertainty in the Treasury market and lead to 
higher Treasury borrowing costs. To avoid such uncertainty and related 
borrowing costs, GAO noted, in its February 2011 and July 2012 reports 
related to the debt limit, that Congress should consider ways to 
better link decisions about the debt limit with decisions about 
spending and revenue to avoid potential disruptions to the Treasury 
market and to help inform the fiscal policy debate in a timely way. As 
decision makers determine funding for the federal government’s 
operations in the short term over the next few months and as they 
decide how to address the federal government’s long-term fiscal 
challenges, it will be important at the time such decisions are made 
that consideration be given as to the impact the decisions will have 
on the level of federal debt. 

View [hyperlink, http://www.gao.gov/products/GAO-14-173]. For more 
information, contact Gary T. Engel at (202) 512-3406 or engelg@gao.gov. 

[End of section] 

Contents: 

Letter: 

Independent Auditor's Report9: 

Report on the Schedules of Federal Debt and on Internal Control over 
Financial Reporting: 

Report on Compliance with Laws, Regulations, Contracts, and Grant 
Agreements: 

Agency Comments: 

Overview, Schedules, and Notes: 

Overview on Federal Debt Managed by the Bureau of the Fiscal Service: 

Schedules of Federal Debt Managed by the Bureau of the Fiscal Service: 

Notes to the Schedules of Federal Debt Managed by the Bureau of the 
Fiscal Service29: 

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 Fiscal Service: 

Abbreviations: 

BBEDCA: Balanced Budget and Emergency Deficit Control Act: 

FMFIA: Federal Managers' Financial Integrity Act: 

GDP: gross domestic product: 

[End of section] 

GAO:
United States Government Accountability Office: 
441 G St. N.W. 
Washington, DC 20548: 

December 12, 2013: 

The Honorable Jacob J. Lew: 
Secretary of the Treasury: 

Dear Mr. Secretary: 

The accompanying independent auditor's report presents the results of 
our audits of the Schedules of Federal Debt Managed by the Bureau of 
the Fiscal Service (Schedule of Federal Debt) for the fiscal years 
ended September 30, 2013, and 2012. 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 Fiscal Service 
(Fiscal Service), and include accompanying notes. 

The independent auditor's report contains (1) our unmodified opinions 
on the Schedules of Federal Debt for the fiscal years ended September 
30, 2013, and 2012; (2) our opinion that although internal controls 
could be improved, Fiscal Service maintained, in all material 
respects, effective internal control over financial reporting relevant 
to the Schedule of Federal Debt as of September 30, 2013; and (3) the 
results of our tests of Fiscal Service's compliance with selected 
provisions of applicable laws, regulations, contracts, and grant 
agreements related to the Schedule of Federal Debt, which identified 
no instances of reportable noncompliance. The report also discusses 
deficiencies that we identified in information system controls that 
collectively represent a significant deficiency in internal control 
over financial reporting relevant to the Schedule of Federal Debt. 
[Footnote 1] 

As of September 30, 2013, and 2012, federal debt managed by Fiscal 
Service totaled $16,732 billion and $16,059 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) $11,976 billion as of September 30, 2013, and 
$11,270 billion as of September 30, 2012, of debt held by the public 
and (2) $4,756 billion as of September 30, 2013, and $4,789 billion as 
of September 30, 2012, of intragovernmental debt holdings. 

Debt held by the public essentially represents the amount the federal 
government has borrowed from the public to finance cumulative cash 
deficits. When a cash surplus occurs, the annual excess funds can 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. Debt held 
by the public represents federal debt issued by Treasury and held by 
investors outside of the federal government, including individuals, 
corporations, state or local governments, the Federal Reserve, and 
foreign governments. The majority of debt held by the public consists 
of marketable Treasury securities, such as bills, notes, bonds, and 
Treasury Inflation-Protected Securities that are sold through auctions 
and can be resold by whoever owns them. Treasury also issues a smaller 
amount of nonmarketable securities, such as savings securities and 
State and Local Government Series securities. 

As we have noted in previous years, Treasury reporting shows that 
foreign ownership of Treasury securities represents a significant 
portion of debt held by the public.[Footnote 2] As of June 30, 2013, 
the reported amount of Treasury securities held by foreign and 
international investors represented an estimated 47 percent of debt 
held by the public. This percentage is slightly lower than the 48 
percent as of June 30, 2012, but remains considerably higher than the 
estimated 30 percent of debt held by the public as of June 30, 2001. 
Treasury estimates that the amount of Treasury securities held by 
foreign and international investors has increased from $983 billion as 
of June 30, 2001, to $5,594 billion as of June 30, 2013--an increase 
of $4,611 billion. Estimates of foreign ownership of Treasury 
securities are derived from information reported under the Treasury 
International Capital reporting system, not from the financial system 
used to prepare the Schedule of Federal Debt. These estimates are not 
reported on the Schedules of Federal Debt and, as such, we do not 
audit these amounts.[Footnote 3] 

Intragovernmental debt holdings represent federal debt owed by 
Treasury to federal government accounts--primarily federal trust funds 
such as Social Security and Medicare--that typically have an 
obligation to invest in federal securities their excess annual 
receipts (including interest earnings) over disbursements. Most 
federal government accounts invest in special nonmarketable Treasury 
securities that represent legal obligations of the Treasury and are 
guaranteed for principal and interest by the full faith and credit of 
the U.S. government. The federal government uses the federal 
government accounts' invested cash surpluses to assist in funding 
other federal government operations. Unlike debt held by the public, 
intragovernmental debt holdings are not shown as balances on the 
federal government's consolidated financial statements because they 
represent loans from one part of the federal government to another. 
Under U.S. generally accepted accounting principles, when the federal 
government's financial statements are consolidated, those offsetting 
balances are eliminated. 

Debt held by the public and intragovernmental debt holdings are very 
different. Debt held by the public represents a claim on today's 
taxpayers and absorbs resources from today's economy. In addition, the 
interest paid on this debt may reduce budget flexibility because, 
unlike most of the budget, it cannot be controlled directly. In 
contrast, intragovernmental debt holdings reflect a claim on taxpayers 
and the economy in the future. Specifically, when federal government 
accounts redeem Treasury securities to obtain cash to fund 
expenditures, Treasury usually borrows from the public to finance 
these redemptions.[Footnote 4] 

We have audited the Schedule of Federal Debt since fiscal year 1997. 
Over this period, total federal debt has increased by 210 percent. 
Also during this period, the statutory debt limit was raised 14 times, 
from $5,950 billion to $16,699 billion.[Footnote 5] During the last 4 
fiscal years, total federal debt has increased by $4,834 billion, or 
41 percent, from $11,898 billion as of September 30, 2009, to $16,732 
billion as of September 30, 2013. Of the total increase, $4,424 
billion was from the increase in debt held by the public and $410 
billion was from the increase in intragovernmental debt holdings. The 
economic downturn along with the federal government's response to it 
contributed to the rapid buildup in debt held by the public. During 
fiscal year 2013, total federal debt increased by a net $673 billion, 
consisting of a (1) $706 billion increase in debt held by the public 
and (2) $33 billion decrease in intragovernmental debt holdings. This 
decrease in intragovernmental debt holdings resulted from certain 
extraordinary actions taken by Treasury consistent with relevant laws 
and regulations to manage federal debt to avoid exceeding the debt 
limit.[Footnote 6] Although federal debt continued to increase in 
fiscal year 2013, the increase in debt held by the public was 
significantly lower than the fiscal year 2012 increase of $1,143 
billion. Notably, while the statutory debt limit was raised on six 
different occasions during the last 4 fiscal years, increasing by 
about 38 percent, from $12,104 billion to $16,699 billion, delays in 
raising the debt limit occurred in each of the last 3 fiscal years. 
Delays result in Treasury deviating from its normal debt management 
operations and taking a number of extraordinary actions within its 
legal authorities to avoid exceeding the debt limit. 

During fiscal year 2013, Treasury twice, and for almost half of the 
fiscal year, faced the challenge of managing federal debt close to the 
statutory debt limit. The first delay in raising the debt limit 
occurred from December 31, 2012, through February 3, 2013, with 
Treasury taking a number of extraordinary actions consistent with 
relevant laws and regulations to avoid exceeding the debt limit. These 
actions included suspending investments to certain federal government 
accounts. On February 4, 2013, the No Budget, No Pay Act of 2013 was 
enacted, which suspended the statutory debt limit through May 18, 
2013.[Footnote 7] Subsequent to the start of the suspension period, 
Treasury restored principal and interest to the affected federal 
government accounts in accordance with relevant laws. An increase in 
the debt limit was not enacted before the suspension period ended and 
therefore, consistent with the No Budget, No Pay Act of 2013, the debt 
limit was raised on May 19, 2013, to the amount of qualifying federal 
debt securities outstanding at that date, or $16,699 billion. As such, 
a second delay in raising the debt limit occurred with Treasury again 
taking certain extraordinary actions consistent with relevant laws and 
regulations to avoid exceeding the limit from May 20, 2013, through 
October 16, 2013. On October 17, 2013, the Continuing Appropriations 
Act, 2014 was enacted, which suspended the statutory debt limit 
through February 7, 2014.[Footnote 8] If an increase in the debt limit 
is not enacted before the end of this suspension period, consistent 
with the Continuing Appropriations Act, 2014, the debt limit will be 
increased by the change in qualifying federal debt securities 
outstanding on October 17, 2013, compared to those outstanding on 
February 8, 2014. This was the first time since the Schedule of 
Federal Debt was audited for fiscal year 1997 that extraordinary 
actions were being used and uninvested principal related to such 
actions existed at fiscal year-end. Many extraordinary actions taken 
by Treasury during the period of May 20, 2013, through September 30, 
2013, resulted in federal debt securities not being issued to certain 
federal government accounts. Consequently, the resulting uninvested 
principal as of September 30, 2013, totaling $248 billion and related 
interest totaling $801 million are not reported on the fiscal year 
2013 Schedule of Federal Debt. The Overview on Federal Debt Managed by 
the Bureau of the Fiscal Service and note 6 to the Schedules of 
Federal Debt provide details on (1) the extraordinary actions taken by 
Treasury during these periods; (2) the uninvested principal as of 
September 30, 2013, and related interest; and (3) the subsequent 
restorations of principal and interest to the affected federal 
government accounts by Treasury in accordance with relevant laws. 

As we have previously reported, the debt limit neither restricts 
Congress's ability to pass spending and revenue legislation that 
affects the level of federal debt nor otherwise constrains fiscal 
policy; it restricts Treasury's authority to borrow to finance the 
decisions already enacted by Congress and the President.[Footnote 9] 
The United States benefits from the confidence investors have that 
debt backed by the full faith and credit of the United States will be 
honored. As we have also previously reported, delays in raising the 
debt limit can create uncertainty in the Treasury market and lead to 
higher Treasury borrowing costs. We estimated, as reported in July 
2012, that delays in raising the debt limit in 2011 led to an increase 
in Treasury's borrowing costs of about $1.3 billion in fiscal year 
2011. However, this does not account for the multiyear effects on 
increased costs for Treasury securities that remain outstanding after 
fiscal year 2011. To avoid such uncertainty and related borrowing 
costs, in both our February 2011 and July 2012 reports related to the 
debt limit, we noted that Congress should consider ways to better link 
decisions about the debt limit with decisions about spending and 
revenue to avoid potential disruptions to the Treasury market and to 
help inform the fiscal policy debate in a timely way. As decision 
makers determine funding for the federal government's operations in 
the short term over the next few months and as they decide how to 
address the federal government's long-term fiscal challenges,[Footnote 
10] it will be important at the time such decisions are made that 
consideration be given as to the impact the decisions will have on the 
level of federal debt. 

Federal financing needs increased in recent years, in part because of 
the persistent effects of the economic downturn and its impact on the 
federal deficit. This trend was at least in part reversed in the most 
recent fiscal year; the reported federal deficit for fiscal year 2013 
was $680 billion, down from the fiscal year 2012 reported federal 
deficit of $1,089 billion. Debt held by the public increased slightly 
as a percentage of gross domestic product (GDP), from roughly 70 
percent of GDP at the end of fiscal year 2012 to roughly 72 percent at 
the end of fiscal year 2013. Whether federal debt held by the public 
increases over the next several years depends in part on whether 
Congress and the President further amend the Balanced Budget and 
Emergency Deficit Control Act (BBEDCA), which provides discretionary 
spending limits through fiscal year 2021.[Footnote 11] Over the longer 
term, debt held by the public as a share of GDP is expected to grow as 
a result of the structural imbalance between revenue and spending 
driven on the spending side by rising health care costs and 
demographics. Increasing numbers of baby-boom generation members are 
becoming eligible for Social Security retirement benefits and for 
Medicare. In addition, although health care spending growth recently 
slowed, it has been growing faster than the overall economy over the 
past several decades and is expected to continue to grow at an 
increased rate as more members of the baby-boom generation retire and 
become eligible for federal health programs. The aging of the 
population and rising health care costs will continue to put upward 
pressure on spending and, absent action to address the growing 
imbalance between spending and revenue, the federal government faces 
an unsustainable growth in debt. 

We are sending copies of this report to interested congressional 
committees, the Fiscal Assistant Secretary of the Treasury, the 
Commissioner of the Bureau of the Fiscal Service, 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 website at 
[hyperlink, http://www.gao.gov]. 

If you or your staff 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. 

Signed by: 

Gary T. Engel: 
Director: 
Financial Management and Assurance: 

[End of section] 

GAO:
United States Government Accountability Office: 
441 G St. N.W. 
Washington, DC 20548: 

Independent Auditor's Report: 

To the Commissioner of the Bureau of the Fiscal Service: 

In our audits of the Schedules of Federal Debt Managed by the Bureau 
of the Fiscal Service (Schedule of Federal Debt)[Footnote 12] for the 
fiscal years ended September 30, 2013, and 2012, we found: 

* the Schedules of Federal Debt for the fiscal years ended September 
30, 2013, and 2012, are presented fairly, in all material respects, in 
accordance with U.S. generally accepted accounting principles; 

* although internal controls could be improved, the Bureau of the 
Fiscal Service (Fiscal Service) maintained, in all material respects, 
effective internal control over financial reporting relevant to the 
Schedule of Federal Debt as of September 30, 2013; and: 

* no reportable noncompliance for fiscal year 2013 with provisions of 
applicable laws, regulations, contracts, and grant agreements we 
tested related to the Schedule of Federal Debt. 

The following sections discuss in more detail (1) our report on the 
Schedules of Federal Debt and on internal control over financial 
reporting, which includes other information included with the 
Schedules of Federal Debt; (2) our report on compliance with laws, 
regulations, contracts, and grant agreements; and (3) agency comments. 

Report on the Schedules of Federal Debt and on Internal Control over 
Financial Reporting: 

In connection with fulfilling our requirement to audit the 
consolidated financial statements of the U.S. government, we have 
audited the Schedules of Federal Debt because of the significance of 
the federal debt to the federal government's consolidated financial 
statements.[Footnote 13] 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) Fiscal Service, and include 
accompanying notes.[Footnote 14] We also have audited Fiscal Service's 
internal control over financial reporting relevant to the Schedule of 
Federal Debt as of September 30, 2013, based on criteria established 
under 31 U.S.C. § 3512(c), (d), commonly known as the Federal 
Managers' Financial Integrity Act (FMFIA). 

We conducted our audits in accordance with U.S. generally accepted 
government auditing standards. We believe that the audit evidence we 
obtained is sufficient and appropriate to provide a basis for our 
audit opinions. 

Management's Responsibility: 

Fiscal Service management is responsible for (1) the preparation and 
fair presentation of the Schedules of Federal Debt in accordance with 
U.S. generally accepted accounting principles; (2) preparing and 
presenting other information included in documents containing the 
audited Schedules of Federal Debt and auditor's report, and ensuring 
the consistency of that information with the audited Schedules of 
Federal Debt; (3) maintaining effective internal control over 
financial reporting, including the design, implementation, and 
maintenance of internal control relevant to the preparation and fair 
presentation of Schedules of Federal Debt that are free from material 
misstatement, whether due to fraud or error; (4) evaluating the 
effectiveness of internal control over financial reporting based on 
the criteria established under FMFIA; and (5) providing its assertion 
about the effectiveness of internal control over financial reporting 
as of September 30, 2013, based on its evaluation, included in the 
accompanying Management's Report on Internal Control over Financial 
Reporting in appendix I. 

Auditor's Responsibility: 

Our responsibility is to express an opinion on the Schedules of 
Federal Debt and an opinion on Fiscal Service's internal control over 
financial reporting relevant to the Schedule of Federal Debt based on 
our audits. U.S. generally accepted government auditing standards 
require that we plan and perform the audits to obtain reasonable 
assurance about whether the Schedules of Federal Debt are free from 
material misstatement, and whether effective internal control over 
financial reporting was maintained in all material respects. We are 
also responsible for applying certain limited procedures to the other 
information included with the Schedules of Federal Debt. 

An audit of the Schedules of Federal Debt involves performing 
procedures to obtain audit evidence about the amounts and disclosures 
in the Schedules of Federal Debt. The procedures selected depend on 
the auditor's judgment, including the auditor's assessment of the 
risks of material misstatement of the Schedules of Federal Debt, 
whether due to fraud or error. In making those risk assessments, the 
auditor considers internal control relevant to the entity's 
preparation and fair presentation of the Schedules of Federal Debt in 
order to design audit procedures that are appropriate in the 
circumstances. An audit of the Schedules of Federal Debt also involves 
evaluating the appropriateness of the accounting policies used and the 
reasonableness of significant accounting estimates made by management, 
as well as evaluating the overall presentation of the Schedules of 
Federal Debt. An audit of internal control over financial reporting 
includes obtaining an understanding of internal control over financial 
reporting, assessing the risk that a material weakness exists, 
evaluating the design and operating effectiveness of internal control 
over financial reporting based on the assessed risk, and testing 
relevant internal control over financial reporting. Our audit of 
internal control also considered Fiscal Service's process for 
evaluating and reporting on internal control over financial reporting 
relevant to the Schedule of Federal Debt based on criteria established 
under FMFIA. Our audits also included performing such other procedures 
as we considered necessary in the circumstances. 

We did not evaluate all internal controls relevant to operating 
objectives as broadly established under FMFIA, such as those controls 
relevant to preparing performance information 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 whether effective internal 
control over financial reporting relevant to the Schedule of Federal 
Debt was maintained, in all material respects. Consequently, our audit 
may not identify all deficiencies in internal control over financial 
reporting relevant to the Schedule of Federal Debt that are less 
severe than a material weakness.[Footnote 15] 

Definitions and Inherent Limitations of Internal Control over 
Financial Reporting: 

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 with other applicable laws, regulations, 
contracts, and grant agreements that could have a direct and material 
effect on the Schedule of Federal Debt. 

Because of its inherent limitations, internal control over financial 
reporting may not prevent, or detect and correct, misstatements due to 
fraud or error. 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. 

Opinion on the Schedules of Federal Debt: 

In our opinion, the Schedules of Federal Debt present fairly, in all 
material respects, Federal Debt Managed by Fiscal Service and the 
related Accrued Interest Payables and Net Unamortized Premiums and 
Discounts as of September 30, 2013, and 2012, and the related 
increases and decreases for the fiscal years then ended in accordance 
with U.S. generally accepted accounting principles. 

Opinion on Internal Control over Financial Reporting: 

In our opinion, although internal controls could be improved, Fiscal 
Service maintained, in all material respects, effective internal 
control over financial reporting relevant to the Schedule of Federal 
Debt as of September 30, 2013, based on criteria established under 
FMFIA. 

We identified a significant deficiency in Fiscal Service's internal 
control over financial reporting, which although not a material 
weakness, is important enough to merit the attention of those charged 
with governance of Fiscal Service.[Footnote 16] This deficiency, 
described in more detail below, concerns Fiscal Service's information 
systems controls. 

We will be reporting additional details concerning this significant 
deficiency separately to Fiscal Service management, along with 
recommendations for corrective actions. We also identified other 
deficiencies in Fiscal Service's internal control over financial 
reporting relevant to the Schedule of Federal Debt that we do not 
consider to be material weaknesses or significant deficiencies. 
Nonetheless, these deficiencies warrant Fiscal Service management's 
attention. We have communicated these matters to Fiscal Service 
management and, where appropriate, will report on them separately. 

Significant Deficiency in Internal Control Related to Information 
Systems: 

During fiscal year 2013, we identified new deficiencies in information 
systems controls that along with unresolved control deficiencies from 
prior audits, collectively represent a significant deficiency in 
Fiscal Service's internal control over financial reporting. 
Specifically, the deficiencies related to general information systems 
controls in the areas of security management, access controls, and 
configuration management.[Footnote 17] For most of these deficiencies, 
Fiscal Service either had not developed and implemented adequate 
policies and procedures or was not consistently following its policies 
and procedures. Further, several of these information systems control 
deficiencies had not been detected by Fiscal Service, and certain 
previously reported control deficiencies that Fiscal Service informed 
us it had addressed continued to be present. The potential effect of 
these deficiencies on the Schedule of Federal Debt financial reporting 
was mitigated primarily by Fiscal Service's physical security measures 
and compensating management and reconciliation controls designed to 
detect potential misstatements on the Schedule of Federal Debt. 
Nevertheless, these deficiencies, collectively, significantly increase 
the risk of unauthorized access, loss, modification, or disclosure of 
sensitive data and programs and disruption of critical operations, and 
therefore merit the attention of those charged with governance of 
Fiscal Service. 

Fiscal Service relies on a number of information systems to manage the 
federal debt. In late fiscal year 2011, Treasury began consolidating 
the data centers and related operations of Treasury's Bureau of the 
Public Debt and Financial Management Service. In addition, in fiscal 
year 2013, Fiscal Service began testing a new general ledger system 
and is implementing the new system in fiscal year 2014. Further, 
certain systems that process federal debt are moving to a more 
distributed computing environment, which presents different risks. 
[Footnote 18] These continuing changes can introduce risks that 
require corresponding changes to controls, can hinder the effective 
operation of controls, and may have contributed to some of the control 
deficiencies comprising the significant deficiency. Also, such changes 
could hamper Fiscal Service's ability to effectively and timely 
resolve the identified control deficiencies and could result in 
additional control deficiencies. Consequently, addressing the 
significant deficiency in this environment will require increased 
focus on assessing risks associated with these changes, monitoring the 
effectiveness of the operation of controls, and designing and 
implementing effective internal controls. 

Other Matter: 

Other Information: 

Fiscal Service's other information, which consists of the Overview on 
the Schedule of Federal Debt Managed by the Bureau of the Fiscal 
Service, contains a wide range of information, some of which is not 
directly related to the Schedules of Federal Debt. This information is 
presented for purposes of additional analysis and is not a required 
part of the Schedules of Federal Debt. We read the other information 
included with the Schedules of Federal Debt in order to identify 
material inconsistencies, if any, with the audited Schedules of 
Federal Debt. Our audit was conducted for the purpose of forming an 
opinion on the Schedules of Federal Debt. We did not audit and do not 
express an opinion or provide any assurance on the other information. 

Report on Compliance with Laws, Regulations, Contracts, and Grant 
Agreements: 

In connection with our audits of the Schedules of Federal Debt, we 
tested compliance with selected provisions of applicable laws, 
regulations, contracts, and grant agreements consistent with our 
auditor's responsibility discussed below. We caution that 
noncompliance may occur and not be detected by these tests. We 
performed our tests of compliance in accordance with U.S. generally 
accepted government auditing standards. 

Management's Responsibility: 

Fiscal Service management is responsible for complying with laws, 
regulations, contracts, and grant agreements applicable to Fiscal 
Service. 

Auditor's Responsibility: 

Our responsibility is to test compliance with selected provisions of 
laws, regulations, contracts, and grant agreements applicable to 
Fiscal Service that have a direct effect on the determination of 
material amounts and disclosures in the Schedules of Federal Debt, and 
perform certain other limited procedures. Accordingly, we did not test 
compliance with all laws, regulations, contracts, and grant agreements 
applicable to Fiscal Service. 

Results of Our Tests for Compliance with Laws, Regulations, Contracts, 
and Grant Agreements: 

Our tests for compliance with selected provisions of applicable laws, 
regulations, contracts, and grant agreements disclosed no instances of 
noncompliance for fiscal year 2013 that would be reportable under U.S. 
generally accepted government auditing standards. However, the 
objective of our tests was not to provide an opinion on compliance 
with laws, regulations, contracts, and grant agreements applicable to 
Fiscal Service. Accordingly, we do not express such an opinion. 

Intended Purpose of Report on Compliance with Laws, Regulations, 
Contracts, and Grant Agreements: 

The purpose of this report is solely to describe the scope of our 
testing of compliance with selected provisions of applicable laws, 
regulations, contracts, and grant agreements, and the results of that 
testing, and not to provide an opinion on compliance. This report is 
an integral part of an audit performed in accordance with U.S. 
generally accepted government auditing standards in considering 
compliance. Accordingly, this report on compliance with laws, 
regulations, contracts, and grant agreements is not suitable for any 
other purpose. 

Agency Comments: 

In commenting on a draft of this report, Fiscal Service's Commissioner 
concurred with our conclusions. Fiscal Service's comments are 
reprinted in their entirety in appendix II. 

Signed by: 

Gary T. Engel: 
Director: 
Financial Management and Assurance: 

December 4, 2013: 

Footnotes: 

[1] A significant deficiency is a deficiency, or a 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 combination 
of deficiencies, in internal control over financial reporting, 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. 

[2] GAO, Financial Audit: Bureau of the Public Debt's Fiscal Years 
2012 and 2011 Schedules of Federal Debt, [hyperlink, 
http://www.gao.gov/products/GAO_13-114] (Washington, D.C.: Nov. 8, 
2012). 

[3] Department of the Treasury, Major Foreign Holders of Treasury 
Securities, accessed December 4, 2013, [hyperlink, 
http://www.treasury.gov/resource-center/data-chart-
center/tic/Documents/mfh.txt]. 

[4] For more information regarding the federal debt, see GAO, Federal 
Debt: Answers to Frequently Asked Questions, accessed December 4, 
2013, [hyperlink, http://www.gao.gov/special.pubs/longterm/debt]. 

[5] A small amount of total federal debt reported on the Schedule of 
Federal Debt is not subject to the debt limit. This amount is 
primarily composed of unamortized discounts on Treasury bills and Zero 
Coupon Treasury bonds. 

[6] Actions that are not part of Treasury's normal cash and debt 
management operations are considered "extraordinary actions" by 
Treasury. 

[7] Pub. L. No. 113-3, § 2, 127 Stat. 51 (Feb. 4, 2013). 

[8] Pub. L. No. 113-46, § 1002, 127 Stat. 558, 566-67 (Oct. 17, 2013). 

[9] GAO, Debt Limit: Analysis of 2011-2012 Actions Taken and Effect of 
Delayed Increase on Borrowing Costs, [hyperlink, 
http://www.gao.gov/products/GAO_12-701] (Washington, D.C.: July 23, 
2012), and Debt Limit: Delays Create Debt Management Challenges and 
Increase Uncertainty in the Treasury Market, [hyperlink, 
http://www.gao.gov/products/GAO_11-203] (Washington, D.C.: Feb. 22, 
2011). 

[10] For more information, see GAO, The Federal Government's Long-Term 
Fiscal Outlook: Spring 2013 Update, [hyperlink, 
http://www.gao.gov/products/GAO_13-481SP] (Washington, D.C.: April 
2013). 

[11] The Budget Control Act of 2011 (Pub. L. No. 112-25), amending 
BBEDCA, imposed discretionary spending limits for fiscal years 2012 to 
2021 to reduce projected spending by about $1 trillion. The Budget 
Control Act also established the Joint Select Committee on Deficit 
Reduction, which was tasked with proposing legislation to reduce the 
deficit by an additional $1.2 trillion through fiscal year 2021. The 
Joint Committee failed to report a proposal, and Congress and the 
President did not enact legislation. This failure triggered the 
sequestration process in BBEDCA's section 251A, which is classified, 
as amended, at 2 U.S.C. § 901a. Section 251A required the Office of 
Management and Budget to calculate, and the President to order, a 
sequestration of discretionary and direct spending on March 1, 2013. 
Section 251A also provides for an annual reduction of the 
discretionary spending limits and a sequestration of direct spending 
from fiscal years 2014 to 2021. 

[12] For previous years, the title was the Schedule of Federal Debt 
Managed by the Bureau of the Public Debt (BPD). On October 7, 2012, 
the Secretary of the Treasury (1) established the Bureau of the Fiscal 
Service as a bureau within the Department of the Treasury (Treasury), 
(2) consolidated and redesignated BPD and the Financial Management 
Service as the Bureau of the Fiscal Service, and (3) transferred the 
duties of the BPD and Financial Management Service commissioners to 
the Commissioner of the Bureau of the Fiscal Service. As such, the 
title has changed to the Schedule of Federal Debt Managed by the 
Bureau of the Fiscal Service. 

[13] 31 U.S.C. § 331(e)(2). Because Fiscal Service is a bureau within 
the Treasury, federal debt and related activity and balances managed 
by it are also significant to the consolidated financial statements of 
the Department of the Treasury (see 31 U.S.C. § 3515(b)). 

[14] Debt held by the public represents federal debt issued by 
Treasury and held by investors outside of the federal government, 
including individuals, corporations, state or local governments, the 
Federal Reserve, and foreign governments. Intragovernmental debt 
holdings represent federal debt owed by Treasury to federal government 
accounts, primarily federal trust funds such as Social Security and 
Medicare. 

[15] A material weakness is a deficiency, or combination of 
deficiencies, in internal control over financial reporting, 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. 

[16] A significant deficiency is a deficiency, or a 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. 

[17] Security management provides a framework and continuing cycle of 
activity for managing risk, developing security policies, assigning 
responsibilities, and monitoring the adequacy of the entity's computer-
related controls. Access controls limit or detect access to computer 
resources such as data, programs, equipment, and facilities, thereby 
protecting them against unauthorized modification, loss, and 
disclosure. Configuration management prevents unauthorized changes to 
information system resources, such as software programs and hardware 
configurations, and provides reasonable assurance that systems are 
configured and operating securely and as intended. 

[18] Distributed environments enable multiple computer processing 
units to communicate with each other. 

[End of section] 

Overview, Schedules, and Notes: 

Overview on Federal Debt Managed by the Bureau of the Fiscal Service: 

Gross Federal Debt Outstanding: 

Federal debt managed by the Bureau of the Fiscal Service (Fiscal 
Service) 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, 2013 and September 30, 2012, outstanding gross federal 
debt managed by Fiscal Service totaled $16,732 billion and $16,059 
billion, respectively.[Footnote 1] As Figure 1 illustrates, 
intragovernmental debt holdings and debt held by the public increased 
by $443 billion and $3,718 billion, respectively, from September 30, 
2009 to September 30, 2012. 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 (CSRDF), Military Retirement Fund, and DOD Medicare-
Eligible Retiree Health Care Fund. From September 30, 2012 to 
September 30, 2013, intragovernmental debt holdings decreased by $33 
billion while debt held by the public increased by $706 billion. 
Because of a delay in raising the debt limit, the Department of 
Treasury (Treasury) had to take extraordinary actions to meet the 
government’s obligations as they came due without exceeding the debt 
limit, which included suspension of investments to the CSRDF and 
Postal Service Retiree Health Benefits Fund (Postal Benefits Fund). As 
of September 30, 2013, the delay still existed and suspension of 
investments for these funds continued, which contributed to the 
decrease in the intragovernmental debt holdings. The increases in debt 
held by the public are due primarily to total federal spending 
exceeding total federal revenues. As of September 30, 2013, gross debt 
held by the public totaled $11,976 billion and gross intragovernmental 
debt holdings totaled $4,756 billion. Gross federal debt (with some 
adjustments) is subject to a statutory debt limit. As of September 30, 
2013 and September 30, 2012, the statutory debt limit was $16,699 
billion and $16,394 billion, respectively, and debt subject to the 
statutory debt limit was $16,699 billion and $16,027 billion, 
respectively. 

Figure 1: Total Gross Federal Debt Outstanding: 
(in billions) 

[Refer to PDF for image: stacked vertical bar graph] 

As of September 30, 2009: 
Held by the Public: $7,552
Intragovernmental Debt Holdings: $4,346; 
Total: $11,898. 

As of September 30, 2010: 
Held by the Public: $9,023
Intragovernmental Debt Holdings: $4,528; 
Total: $13,551. 

As of September 30, 2011: 
Held by the Public: $10,127
Intragovernmental Debt Holdings: $4,654; 
Total: $14,781. 

As of September 30, 2012: 
Held by the Public: $11,270
Intragovernmental Debt Holdings: $4,789; 
Total: $16,059. 

As of September 30, 2013: 
Held by the Public: $11,976
Intragovernmental Debt Holdings: $4,756; 
Total: $16,732. 

Interest Expense: 

Interest expense incurred during fiscal year 2013 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 of 
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 
2013, interest expense incurred totaled $425 billion; this consisted 
of interest expense on debt held by the public of $247 billion, and 
$178 billion in interest incurred for intragovernmental debt holdings. 

As Figure 2 illustrates, interest expense increased from fiscal year 
2009 through 2011 due primarily to an increase in Treasury notes and 
bonds outstanding, which had higher average interest rates than 
Treasury bills. Interest expense decreased for fiscal year 2012 due 
primarily to a decrease in the average interest rates for Treasury 
notes, bonds and Treasury Inflation-Protected Securities (TIPS). From 
fiscal year 2012 to 2013, total interest expense decreased from $432 
billion to $425 billion. This decrease results from an increase of $2 
billion in interest expense on debt held by the public offset by a $9 
billion decrease in interest expense on intragovernmental debt 
holdings. The $2 billion increase in interest expense on debt held by 
the public results from the overall increase in the outstanding debt 
held by the public being almost fully offset by a decrease in the 
average interest rates for Treasury notes, bonds, and TIPS. Average 
interest rates on federal debt held by the public, marketable have 
continued to decrease while the average interest rate on federal debt 
held by the public, nonmarketable increased this fiscal year. The 
suspension of investments to the Government Securities Investment Fund 
of the Federal Employees’ Retirement System (G-Fund) and the 
suspension of new issuances of State and Local Government Series 
(SLGS) securities related to the extraordinary actions taken due to 
the aforementioned delay in raising the debt limit resulted in a 
decrease in nonmarketable debt of $141 billion from that of fiscal 
year 2012. Since these suspended investments had lower interest rates 
than the average, the result is an overall increase in the 
nonmarketable average interest rate. The $9 billion decrease in 
interest expense on intragovernmental debt holdings results primarily 
from the decrease in the average interest rates on intragovernmental 
debt holdings. Average interest rates on principal balances 
outstanding as of September 30, 2013 and 2012, 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, 2009; 
Held by the Public: $189; 
Intragovernmental Debt Holdings: $192; 
Total: $381. 

Fiscal Year Ended September 30, 2010; 
Held by the Public: $215; 
Intragovernmental Debt Holdings: $198; 
Total: $413. 

Fiscal Year Ended September 30, 2011; 
Held by the Public: $251; 
Intragovernmental Debt Holdings: $203; 
Total: $454. 

Fiscal Year Ended September 30, 2012; 
Held by the Public: $245; 
Intragovernmental Debt Holdings: $187; 
Total: $432. 

Fiscal Year Ended September 30, 2013; 
Held by the Public: $247; 
Intragovernmental Debt Holdings: $178; 
Total: $425. 

[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 2013, Treasury primarily used the existing suite of 
securities to meet the borrowing needs of the Federal Government while 
increasing its offerings of longer term securities to extend the 
average length of maturity. As a result, Treasury bills decreased by 
$85 billion; whereas, Treasury notes, bonds, and TIPS increased by 
$635 billion, $168 billion, and $129 billion, respectively, in fiscal 
year 2013. As of September 30, 2013 and 2012, gross debt held by the 
public totaled $11,976 billion and $11,270 billion, respectively (see 
Figure 1), an increase of $706 billion. This increase was primarily 
the result of borrowings needed to finance the government's fiscal 
year 2013 deficit. Due to an increase in short term debt issuances, as 
compared to the prior year, the total dollar amount of activity for 
both borrowings and repayments of debt held by the public increased 
for fiscal year 2013. 

As of September 30, 2013, $11,577 billion, or 97 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 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, 2013, 
$6,729 billion, or 58 percent, will mature within the next 4 years 
(see Figure 3). As of September 30, 2013 and 2012, notes and TIPS held 
by the public maturing within the next 10 years totaled $8,436 billion 
and $7,646 billion, respectively, an increase of $790 billion. 

Figure 3: Maturity Dates of Marketable Debt Held by the Public as of
September 30, 2013: 
In Billions: 

[Refer to PDF for image: stacked line graph] 

Graph depicts Fiscal Year of Maturity, 2013 through 2043 for the 
following: 
TIPS: 
Bonds: 
Notes: 
Bills: 

[End of figure] 

The Federal Government also issues to the public nonmarketable 
securities, which cannot be resold, and have maturity dates ranging 
from on demand out to 40 years. As of September 30, 2013, 
nonmarketable securities totaled $399 billion, or 3 percent of debt 
held by the public. As of that date, nonmarketable securities 
primarily consisted of savings securities totaling $180 billion, SLGS 
securities totaling $124 billion, and Government Account Series 
securities totaling $60 billion. From fiscal year end 2012 to 2013, 
total nonmarketable securities decreased from $539 billion to $399 
billion. This decrease results from the suspension of investments to 
the G-Fund and the suspension of new issuances of SLGS securities 
related to the extraordinary actions taken due to the delay in raising 
the debt limit that continued to exist as of September 30, 2013. 

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 print and deliver savings bonds purchased with 
federal income tax refunds; and redeem savings bonds, including 
handling 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 2] As of 
September 30, 2013, such funds accounted for $4,354 billion, or 92 
percent, of the $4,756 billion intragovernmental debt holdings 
balances (see Figure 4). As of September 30, 2013 and 2012, gross 
intragovernmental debt holdings totaled $4,756 billion and $4,789 
billion, respectively (see Figure 1), a decrease of $33 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, 2013: 

[Refer to PDF for image: pie-chart] 

Social Security trust funds: 58%; 
Civil Service Retirement and Disability trust fund: 15%; 
Military Retirement and Health Care funds: 13%; 
Medicare trust funds: 6%; 
Other programs and trust funds: 8%. 

[End of figure] 

Significant Events in Fiscal Year 2013: 

FY 2013 Establishment of the Bureau of the Fiscal Service: 

On October 7, 2012, the Secretary of the Treasury (1) established the 
Bureau of the Fiscal Service as a bureau within the Department of the 
Treasury, (2) consolidated and redesignated the Bureau of the Public 
Debt and the Financial Management Service as the Bureau of the Fiscal 
Service, and (3) transferred the duties of the Bureau of the Public 
Debt and Financial Management Service commissioners to the 
Commissioner of the Bureau of the Fiscal Service. Beyond the financial 
and operational benefits, this consolidation will enable the 
Department of the Treasury to better address the financial management 
needs of the federal government and realize administrative 
efficiencies while retaining existing core federal financial 
management responsibilities. 

Statutory Debt Limit Raised: 

Prior to the enactment of the “No Budget, No Pay Act of 2013” (Public 
Law No 113-3), which was signed into law on February 4, 2013, delays 
in raising the statutory debt limit occurred that required Treasury to 
depart from its normal debt management procedures and invoke legal 
authorities to avoid exceeding the statutory debt limit. On December 
31, 2012, the Secretary of the Treasury declared a debt issuance 
suspension period beginning on that date. During the period of 
December 31, 2012 through February 3, 2013, extraordinary actions 
taken by Treasury included (1) suspending investments to the G-Fund, 
CSRDF, Postal Benefits Fund, and Exchange Stabilization Fund (ESF) and 
(2) redeeming certain investments held by CSRDF earlier than normal. 
Treasury also suspended new issuances of SLGS securities. 

On February 4, 2013, a temporary suspension of the statutory debt 
limit through May 18, 2013 was enacted. In accordance with relevant 
laws, on February 4, 2013, Fiscal Service restored uninvested 
principal to the G-Fund and CSRDF totaling $31 billion. Also, in 
accordance with relevant laws, Fiscal Service restored the interest 
related to the suspended investments and early redemptions to the G-
Fund, CSRDF, and Postal Benefits Fund totaling $20 million by June 28, 
2013. Postal Benefits Fund and ESF were fully invested prior to 
February 4, 2013, and ESF is not entitled to foregone interest. At the 
end of the temporary suspension of the statutory debt limit, 
consistent with Public Law No. 113-3, the debt limit was raised on May 
19, 2013, to $16,699 billion, which was the amount of qualifying 
federal debt securities outstanding on that date. 

Additional Debt Issuance Suspension Period: 

Beginning May 20, 2013, Treasury faced an additional debt issuance 
suspension period. During the remainder of fiscal year 2013, Treasury 
departed from its normal debt management procedures and invoked legal 
authorities to avoid exceeding the debt limit. During this period, 
extraordinary actions taken by Treasury included (1) suspending 
investments to the G-Fund, CSRDF, and Postal Benefits Fund and (2) 
redeeming certain investments held by CSRDF earlier than normal. 
Additionally, Treasury suspended new issuances of SLGS securities and 
issued cash management bills to manage short-term financing needs. 

On September 30, 2013, a delay in raising the statutory debt limit 
still existed with Treasury continuing to use extraordinary actions to 
meet the government’s obligations as they come due without exceeding 
the debt limit. Many extraordinary actions taken by Treasury during 
the period of May 20, 2013 through September 30, 2013, resulted in 
federal debt securities not being issued to certain federal government 
accounts. Consequently, the resulting uninvested principal as of 
September 30, 2013, totaling $247,827 million and related interest 
totaling $801 million are not reported on the Schedule of Federal 
Debt. Such uninvested principal and related interest are disclosed in 
Note 6 to the Schedule of Federal Debt. 

Floating Rate Notes: 

In August 2012, Treasury announced that it plans to develop a floating 
rate note program to complement the existing suite of securities 
issued and to help achieve the objective of financing the government 
at the lowest cost over time. Treasury published amendments to its 
marketable securities auction rules to accommodate the auction and 
issuance of floating rate notes on July 31, 2013. Treasury’s 
introduction of the floating rate note will provide a number of 
benefits, including assisting Treasury in managing the maturity 
profile of the nation’s marketable debt outstanding, expanding 
Treasury’s investor base, and helping to finance the government at the 
lowest cost over time. 

The floating rate note is a security that has an interest payment that 
can change over time. Treasury floating rate notes will be indexed to 
the highest accepted discount rate (high rate) of the most recent 13-
week Treasury bill auction. The bidding process, the minimum and 
maximum purchase and award amounts, and the award methodology are the 
same as for other marketable securities. Treasury will announce 
specific terms and conditions of each issue, such as the auction date, 
issue date, and the public offering amount, prior to each auction. The 
first floating rate note auction is expected to occur in January 2014. 

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’ 
(primarily federal trust funds) excess receipts. Total gross federal 
debt outstanding has dramatically increased over the past 25 years 
from $2,602 billion as of September 30, 1988, to $16,732 billion as of 
September 30, 2013 (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 doubled between 1988 and 
1997. 

Figure 5: Total Gross Federal Debt Outstanding: 

[Refer to PDF for image: vertical bar graph] 

Graph depicts Total Gross Federal Debt Outstanding, As of September 30 
for the following fiscal years: 
1988 through 2013. 

Source: Monthly Statement of the Public Debt. 

Figures shown prior to 1996 are unaudited and include securities 
issued by 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, primarily as a result of higher federal outlays. 
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 2013, federal debt held by the public more than doubled, 
rising by $6,927 billion. This increase was primarily a result of the 
economic downturn and the federal government's response to it. Since 
fiscal year 2002, debt held by the public has increased from $3,339 
billion as of September 30, 2001 to $11,976 billion as of September 
20, 2013. 

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 $410 billion, from $4,346 billion as of 
September 30, 2009, to $4,756 billion as of September 30, 2013. The 
increase in intragovernmental debt holdings would have been greater 
had there not been a suspension of investments for certain federal 
government accounts related to extraordinary actions taken due to the 
delay in raising the debt limit in effect at September 30, 2013. By 
law, federal government accounts, including 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 debt held by the public and 
intragovernmental debt holdings outstanding at the end of the fiscal 
year. 

Figure 6: Average Interest Rates of Federal Debt Outstanding: 

[Refer to PDF for image: line graph] 

Graph depicts average interest rates of federal debt outstanding as of 
September 30 for the years 1988 through 2013. 

Source: Prior to fiscal year 2001: Monthly Statement of the Public 
Debt. Fiscal year 2001 and after: Public Debt Online Average Interest 
Rates. 

[End of figure] 

Overview on Federal Debt Managed by the Bureau of the Fiscal Service: 
Footnotes: 

[1] Federal debt outstanding reported here differs from the amount 
reported in the Financial Report of the United States Government 
because of the securities not maintained or reported by Fiscal Service 
which are issued by the Federal Financing Bank and other specific 
securities issued outside of the authority of Title 31, U.S. Code, 
section 3101. 

[2] 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] 

Significant Change After Fiscal Year 2013 Affecting Federal Debt: 

A delay in raising the statutory debt limit existed at the end of 
fiscal year 2013 and lasted until October 17, 2013, when the 
Continuing Appropriations Act, 2014, (Public Law No 113-46) was 
enacted. During the period of October 1 through October 16, 2013, 
Treasury continued to use extraordinary actions to meet the government’
s obligations as they came due without exceeding the debt limit. In 
addition to continuing with the actions used from May 20, 2013 through 
September 30, 2013, Treasury (1) exchanged $9 billion of Treasury 
securities held by the CSRDF for securities issued by the Federal 
Financing Bank and (2) began suspending investments to the ESF. On 
October 17, 2013, a temporary suspension of the statutory debt limit 
through February 7, 2014 was enacted. The amounts related to the 
restoration of uninvested principal as of October 16, 2013, and 
related interest for the period May 20, 2013 through October 16, 2013, 
are disclosed in Note 6 to the Schedules of Federal Debt. The 
Continuing Appropriations Act, 2014, established a process that may 
result in an increase of the statutory debt limit on February 8, 2014. 
This increase will be determined by the change in qualifying federal 
debt securities outstanding on October 17, 2013 compared to those 
outstanding on February 8, 2014. 

Schedules of Federal Debt Managed by the Bureau of the Fiscal Service: 

Schedules of Federal Debt: 
Managed by the Bureau of the For the Fiscal Years Ended September 30, 
2013 and 2012. 

Balance as of September 30, 2011: 

Federal Debt: Held by the Public: 
Principal (Note 2): $10,127,031; 
Accrued Interest Payable: $51,470; 
Net Unamortized Premiums/(Discounts): ($29,538). 

Federal Debt: Intragovernmental Debt Holdings: 
Principal (Note 3): $4,654,374; 
Accrued Interest Payable: $47,778; 
Net Unamortized Premiums/(Discounts): $47,624. 

Increases: Borrowings from the Public: 
Federal Debt: Held by the Public: 
Principal (Note 2): $7,761,885; 
Accrued Interest Payable: [Empty]; 
Net Unamortized Premiums/(Discounts): $4,995. 

Increases: Net Increase in Intragovernmental Debt Holdings; 
Federal Debt: Intragovernmental Debt Holdings: 
Principal (Note 3): $134,677; 
Accrued Interest Payable: [Empty]; 
Net Unamortized Premiums/(Discounts): $13,242. 

Increases: Accrued Interest (Note 4); 
Federal Debt: Held by the Public: 
Accrued Interest Payable: $240,097. 

Increases: Accrued Interest (Note 4); 
Federal Debt: Intragovernmental Debt Holdings: 
Accrued Interest Payable: $191,656. 

Total Increases: 

Federal Debt: Held by the Public: 
Principal (Note 2): $7,761,885; 
Accrued Interest Payable: $240,097; 
Net Unamortized Premiums/(Discounts): $4,995. 

Federal Debt: Intragovernmental Debt Holdings: 
Principal (Note 3): $134,677; 
Accrued Interest Payable: $191,656; 
Net Unamortized Premiums/(Discounts): $13,242. 

Decreases: 

Federal Debt: Held by the Public: 
Principal (Note 2): Repayments of Debt Held by the Public: $6,619,330 
Accrued Interest Payable: Interest Paid: $234,345; 
Net Unamortized Premiums/(Discounts): Net Amortization (Note 4): 
($5,318). 

Federal Debt: Intragovernmental Debt Holdings: 
Principal (Note 3): Repayments of Debt Held by the Public: [Empty]; 
Accrued Interest Payable: Interest Paid: $193,886; 
Net Unamortized Premiums/(Discounts): Net Amortization (Note 4): 
$4,616. 

Total Decreases: 

Federal Debt: Held by the Public: 
Principal (Note 2): $6,619,330; 
Accrued Interest Payable: $234,345; 
Net Unamortized Premiums/(Discounts): ($5,318). 

Federal Debt: Intragovernmental Debt Holdings: 
Principal (Note 3): 0; 
Accrued Interest Payable: $193,886; 
Net Unamortized Premiums/(Discounts): $4,616. 

 
Balance as of September 30, 2012: 

Federal Debt: Held by the Public: 
Principal (Note 2): $11,269,586; 
Accrued Interest Payable: $57,222; 
Net Unamortized Premiums/(Discounts): ($19,225). 

Federal Debt: Intragovernmental Debt Holdings: 
Principal (Note 3): $4,789,051; 
Accrued Interest Payable: $45,548; 
Net Unamortized Premiums/(Discounts): $56,250. 

Increases: Borrowings from the Public: 
Federal Debt: Held by the Public: 
Principal (Note 2): $8,155,584; 
Accrued Interest Payable: [Empty]; 
Net Unamortized Premiums/(Discounts): ($10,122). 

Increases: Net Increase in Intragovernmental Debt Holdings; 
Federal Debt: Intragovernmental Debt Holdings: 
Principal (Note 3): [Empty]; 
Accrued Interest Payable: [Empty]; 
Net Unamortized Premiums/(Discounts): $21,004. 

Increases: Accrued Interest (Note 4); 
Federal Debt: Held by the Public: 
Accrued Interest Payable: $242,689. 

Increases: Accrued Interest (Note 4); 
Federal Debt: Intragovernmental Debt Holdings: 
Accrued Interest Payable: $185,437. 

Total Increases: 

Federal Debt: Held by the Public: 
Principal (Note 2): $8,155,584; 
Accrued Interest Payable: $$242,689; 
Net Unamortized Premiums/(Discounts): ($10,122). 

Federal Debt: Intragovernmental Debt Holdings: 
Principal (Note 3): 0; 
Accrued Interest Payable: $185,437; 
Net Unamortized Premiums/(Discounts): $21,004. 

Decreases: 

Federal Debt: Repayment of Debt Held by the Public: 
Principal (Note 2): Repayments of Debt Held by the Public: $7,448,891; 
Net Decrease in Intragovernmental Debt Holdings - Principal: [Empty]; 
Accrued Interest Payable: Interest Paid: $248,716; 
Net Unamortized Premiums/(Discounts): Net Amortization (Note 4): 
($4,893). 

Federal Debt: Intragovernmental Debt Holdings: 
Principal (Note 3): Repayments of Debt Held by the Public: [Empty]; 
Net Decrease in Intragovernmental Debt Holdings - Principal: $33,336; 
Accrued Interest Payable: Interest Paid: $1187,856; 
Net Unamortized Premiums/(Discounts): Net Amortization (Note 4): 
$7,807. 

Total Decreases: 

Federal Debt: Held by the Public: 
Principal (Note 2): $7,448,891; 
Accrued Interest Payable: $248,716; 
Net Unamortized Premiums/(Discounts): ($4,893). 

Federal Debt: Intragovernmental Debt Holdings: 
Principal (Note 3): $33,336; 
Accrued Interest Payable: $187,856; 
Net Unamortized Premiums/(Discounts): $7,807. 

 
Balance as of September 30, 2013: 

Federal Debt: Held by the Public: 
Principal (Note 2): $11,976,279; 
Accrued Interest Payable: $51,195; 
Net Unamortized Premiums/(Discounts): ($24,444). 

Federal Debt: Intragovernmental Debt Holdings: 
Principal (Note 3): $4,755,715; 
Accrued Interest Payable: $43,129; 
Net Unamortized Premiums/(Discounts): $69,447. 

The accompanying notes are an integral part of these schedules. 

[End of table] 

Notes to the Schedules of Federal Debt Managed by the Bureau of the 
Fiscal Service: 

For the Fiscal Years Ended September 30, 2013 and 2012: 
(Dollars in Millions): 

Note 1. Significant Accounting Policies: 

Basis of Presentation: 

The Schedules of Federal Debt Managed by the Bureau of the Fiscal 
Service (Fiscal Service) have been prepared to report fiscal year 2013 
and fiscal year 2012 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. Fiscal Service, an organizational 
entity within 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, Fiscal Service maintains 
an investment program for federal government accounts, including trust 
funds, that have legislative authority to invest temporary cash 
reserves not needed for current benefits and expenses. Fiscal Service 
issues and redeems Treasury securities for these federal government 
accounts based on data provided by the respective program agencies and 
other Treasury entities. Fiscal Service also issues other specific 
securities outside of the authority of 31 U.S.C. § 3101, such as HOPE 
Bonds, that are not reported on the Schedules of Federal Debt Managed 
by the Bureau of the Fiscal Service. 

Basis of Accounting: 

The schedules were prepared in accordance with U.S. generally accepted 
accounting principles and from Fiscal Service’s automated debt 
accounting system. Accounting principles generally accepted for 
Federal entities are the standards prescribed by the Federal 
Accounting Standards Advisory Board (FASAB), which is the official 
body for setting accounting standards of the Federal government. The 
FASAB issued the Statement of Federal Financial Accounting Standards 
(SFFAS) No. 34, The Hierarchy of Generally Accepted Accounting 
Principles, Including the Application of Standards Issued by the 
Financial Accounting Standards Board in July 2009. SFFAS No. 34 
identifies the sources of accounting principles and the framework for 
selecting the principles used in the preparation of general purpose 
financial reports of federal reporting entities that are presented in 
accordance with Federal generally accepted accounting principles. 

Interest costs are recorded as expenses when incurred, instead of when 
paid. Certain Treasury securities are issued at a discount or premium. 
These discounts and premiums are amortized over the term of the 
security using an interest method for all long term securities and the 
straight line method for short term securities. The Department of the 
Treasury also issues Treasury Inflation-Protected Securities (TIPS). 
The principal for TIPS is adjusted daily over the life of the security 
based on the Consumer Price Index for all Urban Consumers. 

Notes to the Schedules of Federal Debt Managed by the Bureau of the 
Fiscal Service: 

For the Fiscal Years Ended September 30, 2013 and 2012: 
(Dollars in Millions): 

Note 2. Federal Debt Held by the Public: 

As of September 30, 2013 and 2012, Federal Debt Held by the Public 
consisted of the following: 

Marketable: 

Treasury Bills: 
2013 Amount: $1,527,909; 
2013 Average Interest Rates: 0.1%; 
2012 Amount: $1,613,026; 
2012 Average Interest Rates: 0.1%. 

Treasury Notes: 
2013 Amount: $7,750,336; 
2013 Average Interest Rates: 1.8%; 
2012 Amount: $7,114,960; 
2012 Average Interest Rates: 2.0%. 

Treasury Bonds: 
2013 Amount: $1,363,114; 
2013 Average Interest Rates: 5,1%; 
2012 Amount: $1,194,715; 
2012 Average Interest Rates: 5.4%. 

TIPS: 
2013 Amount: $936,041; 
2013 Average Interest Rates: 1.1%; 
2012 Amount: $807,469; 
2012 Average Interest Rates: 1.4%. 

Total Marketable: 
2013 Amount: $11,577,400; 
2012 Amount: $10,730,170. 

Nonmarketable: 

2013 Amount: $398,879; 
2013 Average Interest Rates: 2.4%; 
2012 Amount: $539,416; 
2012 Average Interest Rates: 2.1%. 

Total Federal Debt Held by the Public: 
2013 Amount: $11,976,279; 
2012 Amount: $11,269,586. 

[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, 
2013 and 2012. 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, 2013 and 2012. 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 
that 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, 2013 and 2012. The TIPS Federal Debt Held by the Public 
inflation-adjusted principal balance includes inflation of $88,524 
million and $77,909 million as of September 30, 2013 and 2012, 
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, 2013, the FRB had total holdings of 
$1,930,247 million, which (1) excludes $145,184 million in Treasury 
securities used in overnight reverse repurchase transactions and (2) 
includes a net of $3,148 million in Treasury securities held by the 
FRB as collateral for securities lending activities. As of September 
30, 2012, the FRB had total holdings of $1,646,809 million, including 
a net of $1,523 million in Treasury securities held by the FRB as 
collateral for securities lending activities. Treasury securities are 
held by the FRB 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, 
2013 and 2012. Nonmarketable securities are issued with a term of on 
demand out to 40 years. 

As of September 30, 2013 and 2012, nonmarketable securities consisted 
of the following: 

Domestic Series: 
2013: $29,995; 
2012: $29,995. 

Foreign Series: 
2013: $2,986; 
2012: $2,986. 

State and Local Government Series: 
2013: $124,079; 
2012: $158,514. 

United States Savings Securities: 
2013: $180,022; 
2012: $183,661. 

Government Account Series: 
2013: $60,445; 
2012: $162,880. 

Other: 
2013: $1,352; 
2012: $1,380. 

Total Nonmarketable: 
2013: $398,879; 
2012: $539,416. 

[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 decrease in the 
fund’s principal balance during fiscal year 2013 is included in the 
Repayments of Debt Held by the Public amount reported on the Schedules 
of Federal Debt. The net increase in the fund’s principal balance 
during fiscal year 2012 is included in the Borrowings from the Public 
amount reported on the Schedules of Federal Debt. 

Fiscal year-end September 30, 2012, occurred on a Sunday. As a result, 
$53,003 million of marketable Treasury notes, $35 million of 
Government Account Series securities, and $1 million of State and 
Local Government Series securities matured but not repaid are included 
in the balance of the total debt held by the public as of September 
30, 2012. Settlement of this debt repayment occurred on Monday, 
October 1, 2012. 

As of September 30, 2013 and 2012, Intragovernmental Debt Holdings are 
owed to the following: 

SSA: Federal Old-Age and Survivors Insurance Trust Fund: 
2013: $2,655,599; 
2012: $2,586,697. 

OPM: Civil Service Retirement and Disability Fund: 
2013: $713,761; 
2012: $819,444. 

DOD: Military Retirement Fund: 
2013: $421,327; 
2012: $376,439. 

HHS: Federal Hospital Insurance Trust Fund: 
2013: $206,010; 
2012: $228,292. 

DOD: DOD Medicare-Eligible Retiree Health Care Fund: 
2013: $188,664; 
2012: $176,113. 

SSA: Federal Disability Insurance Trust Fund: 
2013: $100,791; 
2012: $132,345. 

HHS: Federal Supplementary Medical Insurance Trust Fund: 
2013: $67,385; 
2012: $69,324. 

DOE: Nuclear Waste Disposal Fund: 
2013: $50,598; 
2012: $49,552. 

OPM: Postal Service Retiree Health Benefits Fund: 
2013: $42,324; 
2012: $45,347. 

OPM: Employees Life Insurance Fund: 
2013: $41,951; 
2012: $41,250. 

FDIC: The Deposit Insurance Fund: 
2013: $36,864; 
2012: $36,498. 

DOL: Unemployment Trust Fund: 
2013: $29,478; 
2012: $20,673. 

OPM: Employees Health Benefits Fund: 
2013: $23,427; 
2012: $21,259. 

Treasury: Exchange Stabilization Fund: 
2013: $22,669; 
2012: $22,680. 

DOL: Pension Benefit Guaranty Corporation: 
2013: $22,575[A]; 
2012: $21,114[A]. 

DOS: Foreign Service Retirement and Disability Fund: 
2013: $17,364; 
2012: $16,893. 

DOT: Airport and Airway Trust Fund: 
2013: $11,808; 
2012: $10,425. 

NCUA: National Credit Union Share Insurance Fund: 
2013: $10,643; 
2012: $10,297. 

Other Programs and Funds: 
2013: $92,477; 
2012: $104,409. 

Total Intragovernmental Debt Holdings: 
2013: $4,755,715; 
2012: $4,789,051. 

[A] These amounts consist of $4,883 million and $5,038 million of 
marketable Treasury securities as well as $17,692 million and $16,076 
million of GAS securities as of September 30, 2013 and 2012, 
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 Labor (DOL); Department of the 
Treasury (Treasury); Department of State (DOS); Department of 
Transportation (DOT); National Credit Union Administration (NCUA). 

[End of table] 

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. 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, 
2013 and 2012, the inflation-adjusted principal balance included 
inflation of $108,908 million and $96,075 million, respectively. The 
average interest rates on Intragovernmental Debt Holdings, excluding 
TIPS, for fiscal years 2013 and 2012 were 3.6 and 3.7 percent, 
respectively. The average interest rates on TIPS for fiscal years 2013 
and 2012 were 1.3 and 1.5 percent, respectively. The average interest 
rate represents the original issue weighted effective yield on 
securities outstanding as of September 30, 2013 and 2012. 

Fiscal year-end September 30, 2012, occurred on a Sunday. As a result, 
$2,145 million of GAS securities held by federal government accounts 
matured but not repaid is included in the balance of the 
Intragovernmental Debt Holdings as of September 30, 2012. Settlement 
of this debt repayment occurred on Monday, October 1, 2012. 

Note 4. Interest Expense: 

Interest expense on federal debt for fiscal years 2013 and 2012 
consisted of the following: 
Dollars in millions: 

Federal Debt Held by the Public: Accrued Interest; 
2013: $242,689; 
2012: $240,097. 

Federal Debt Held by the Public: Net Amortization of Premiums and 
Discounts; 
2013: $4,893; 
2012: $5,318. 

Total Interest Expense on Federal Debt Held by the Public: 
2013: $247,582; 
2012: $245,415. 

Intragovernmental Debt Holdings: Accrued Interest; 
2013: $185,437; 
2012: $191,656. 

Intragovernmental Debt Holdings: Net Amortization of Premiums and 
Discounts; 
2013: ($7,807); 
2012: ($4,616). 

Total Interest Expense on Intragovernmental Debt Holdings: 
2013: $177,630; 
2012: $187,040. 

Total Interest Expense on Federal Debt Managed by BPD: 
2013: $425,212; 
2012: $432,455. 

[End of table] 

The valuation of TIPS is adjusted daily over the life of the security 
based on the Consumer Price Index for all Urban Consumers. This daily 
adjustment is an interest expense for federal debt managed by Fiscal 
Service. Accrued interest on Federal Debt Held by the Public includes 
inflation adjustments of $16,548 million and $10,652 million for 
fiscal years 2013 and 2012, respectively. Accrued interest on 
Intragovernmental Debt Holdings includes inflation adjustments of 
$10,754 million and $7,160 million for fiscal years 2013 and 2012, 
respectively. 

Note 5. Fund Balance with Treasury: 

Dollars in millions: 

Appropriated Funds Obligated: 
As of September 30, 2013: $56; 
As of September 30, 2012: $98. 

[End of table] 

The Fund Balance with Treasury, a non-entity, intragovernmental 
account, is not included on the Schedules of Federal Debt and is 
presented for informational purposes. 

Note 6. Subsequent Events: 

A delay in raising the statutory debt limit existed as of September 
30, 2013. When delays in raising the statutory debt limit occur, 
Treasury often must deviate from its normal debt management operations 
and take a number of extraordinary actions to meet the government’s 
obligations as they come due without exceeding the debt limit. Many 
extraordinary actions taken by Treasury during the period of May 20, 
2013 through September 30, 2013, resulted in federal debt securities 
not being issued to certain federal government accounts. Consequently, 
the resulting uninvested principal as of September 30, 2013, totaling 
$247,827 million and related interest totaling $801 million are not 
reported on the Schedule of Federal Debt. Uninvested principal amounts 
for the Government Securities Investment Fund (G-Fund), Civil Service 
Retirement and Disability Fund (CSRDF), and Postal Service Retirees 
Health Benefits Fund (Postal Benefits Fund) were $119,880 million, 
$123,346 million, and $4,601 million, respectively, as of September 
30, 2013. Additionally, the related interest for the G-Fund, CSRDF, 
and Postal Benefits Fund that would have been accrued and/or paid 
during the period of May 20, 2013 through September 30, 2013, would 
have been $476 million, $304 million, and $21 million, respectively, 
on September 30, 2013. 

On October 1, 2013, the Secretary of the Treasury notified Congress 
that Treasury had begun using the final extraordinary actions and that 
these actions would be exhausted no later than October 17, 2013. Under 
the authority of the Continuing Appropriations Act, 2014 (Public Law 
No 113-46), the statutory debt limit identified in 31 U.S.C. § 3101(b) 
will not apply for the period of October 17, 2013 through February 7, 
2014. In accordance with this Act, on October 17, 2013, the President 
submitted a written certification to Congress that, absent a 
suspension of the limit under 31 U.S.C. § 3101(b), the Secretary of 
the Treasury would be unable to issue debt to meet existing 
commitments. On October 17, 2013, Treasury discontinued its use of the 
extraordinary actions and resumed normal debt management operations. 
On this date, in accordance with relevant laws, Fiscal Service 
restored uninvested principal amounts to the G-Fund, CSRDF, and Postal 
Benefits Fund of $173,948 million, $117,693 million, and $4,601 
million, respectively. In accordance with relevant laws, Fiscal 
Service restored the interest related to the uninvested principal 
during the period of May 20, 2013 through October 16, 2013, to the G-
Fund on October 18, 2013 in the amount of $653 million. Interest 
related to the uninvested principal during the period of May 20, 2013 
through October 16, 2013, for CSRDF and Postal Benefits Fund will be 
restored on the next semi-annual interest payment date of December 31, 
2013. As of October 17, 2013, these amounts were $562 million and $24 
million respectively. 

The Continuing Appropriations Act, 2014, established a process that 
may result in an increase of the statutory debt limit on February 8, 
2014. This increase will be determined by the change in qualifying 
federal debt securities outstanding on October 17, 2013 compared to 
those outstanding on February 8, 2014. 

[End of section] 

Appendix I: Management's Report on Internal Control over Financial 
Reporting Relevant to the Schedule of Federal Debt: 

The Bureau of the Fiscal Service's (Fiscal Service) internal control 
over financial reporting relevant to the Schedule of Federal Debt is a 
process affected by those charged with governance, management, and 
other personnel, the objectives of which are to provide reasonable 
assurance that (J) transactions are properly recorded, processed, and 
snmmarized 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 with 
other applicable laws, regulations, contracts, and grant agreements 
that could have a direct and material effect on the Schedule of 
Federal Debt. 

Fiscal Service management is responsible for maintaining effective 
internal control over fmancial reporting, including the design, 
implementation, and maintenance of internal control relevant to the 
preparation and fair presentation of the Schedule of Federal Debt that
are free from material misstatement, whether due to fraud or error. 
Fiscal Service management evaluated the effectiveness of Fiscal 
Service's internal control over financial reporting relevant to the 
Schedule of Federal Debt as of September 30,2013, based on the
criteria established under 31 U.S.C. 3512(c), (d) (commonly known as 
the Federal Managers' Financial Integrity Act). 

Based on that evaluation, we conclude that, as of September 30, 2013, 
Fiscal Service's internal control over fmancial reporting relevant to 
the Schedule of Federal Debt was effective. 

Signed by the following: 

David A. Lebryk: 
Commissioner: 
Bureau of the Fiscal Service: 

Matthew J. MIller: 
Assistant Commissioner, Fiscal Accounting Operations: 

Kimberly A. McCoy: 
Chief Information Officer: 
Assistant Commissioner, Office of Information and Security Services: 

Cynthia Z. Springer: 
Deputy Commissioner, Fiscal Accounting and Shared Services: 

Patricia M. Greiner: 
Chief Financial Officer: 
Assistant Commissioner, Office of Management: 

December 4, 2013: 

[End of section] 

Appendix II: Comments from the Bureau of the Fiscal Service: 

Department of the Treasury: 
Bureau of the Fiscal Service: 
200 Third Street: 
Parkersburg, WV 26106-5312: 

December 4, 2013: 

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 Fiscal Service for the fiscal years 
ended September 30, 2013 and 2012. We agree with the conclusions of 
your audit report. 

This year was especially challenging as we were faced with two Debt 
Issuance Suspension Periods (OISPs), the second of which crossed 
fiscal years. We appreciate the knowledge and experience displayed by 
your audit team as we encountered unique reporting requirements during 
these OISPs. Your team's experience with our accounting operations 
allowed for continued accuracy and consistency as we worked through 
new accounting scenarios and disclosures. We would like to thank
you and your staff for the thorough audit of these schedules as we 
finalize the seventeenth year of our professional relationship. We 
look forward to sustaining a productive and successful relationship with
your staff. 

Sincerely, 

Signed by: 

David A. Lebryk: 
Commissioner: 
Bureau of the Fiscal Service: 

[End of section] 

GAO’s Mission: 

The Government Accountability Office, the audit, evaluation, and 
investigative arm of Congress, exists to support Congress in meeting 
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