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entitled 'Financial Audit: Bureau of the Fiscal Service's Fiscal Years 
2014 and 2013 Schedules of Federal Debt' which was released on 
November 10, 2014. 

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United States Government Accountability Office: 
GAO: 

Report to the Secretary of the Treasury: 

November 2014: 

Financial Audit: 

Bureau of the Fiscal Service's Fiscal Years 2014 and 2013 Schedules of 
Federal Debt: 

GAO-15-157: 

GAO Highlights: 

Highlights of GAO-15-157, 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 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 2014 and 2013 were fairly 
presented in all material respects, and Fiscal Service maintained, in 
all material respects, effective internal control over financial 
reporting relevant to the Schedule of Federal Debt as of September 30, 
2014. GAO's tests disclosed no instances of reportable noncompliance 
for fiscal year 2014 with selected provisions of applicable laws, 
regulations, contracts, and grant agreements related to the Schedule 
of Federal Debt. 

From fiscal year 1997, the first year of audit, through September 30, 
2014, total federal debt managed by Fiscal Service has increased by 
230 percent and the debt limit has been raised 15 times, from $5,950 
billion to $17,212 billion. During fiscal year 2014, delays in raising 
the debt limit occurred for a total of 16 business days. Also, the 
debt limit was suspended for the period October 17, 2013, through 
February 7, 2014, and again from February 15, 2014, through March 15, 
2015. 

Figure: Total Federal Debt Outstanding, September 30, 1997, through 
September 30, 2014: 

[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. 

2014: 
Debt held by the public: $12.785 trillion; 
Intragovernmental debt holdings: $5.025 trillion; 
Total: $17.810 trillion. 

Note: A small amount of total federal debt is not subject to the debt 
limit. 

Source: GAO analysis of Fiscal Service information. GAO-15-157. 

[End of figure] 

During the delays, Treasury 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. As 
GAO has previously reported, the debt limit does not restrict the 
Congress's ability to enact spending and revenue legislation that 
affects the level of federal debt or otherwise constrains fiscal 
policy; it restricts Treasury's authority to borrow to finance the
decisions already enacted by the Congress and the President. 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 GAO has also 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 the Congress should consider ways to 
better link decisions about the debt limit with decisions about 
spending and revenue at the time those decisions are made to avoid 
potential disruptions to the Treasury market and to help inform the 
fiscal policy debate in a timely way. 

View GAO-15-157. For more information, contact Gary T. Engel at (202) 
512-3406 or engelg@gao.gov. 

[End of section] 

Contents: 

Letter: 

Independent Auditor's Report8: 

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 Service15: 

Schedules of Federal Debt Managed by the Bureau of the Fiscal 
Service26: 

Notes to the Schedules of Federal Debt Managed by the Bureau of the 
Fiscal Service27: 

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: 

Fiscal Service: Bureau of the Fiscal Service: 

FMFIA: Federal Managers' Financial Integrity Act: 

GDP: gross domestic product: 

Treasury: Department of the Treasury: 

[End of section] 

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

November 10, 2014: 

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, 2014, and 2013. 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 opinion that the 
Schedules of Federal Debt for the fiscal years ended September 30, 
2014, and 2013, are presented fairly, in all material respects, in 
accordance with U.S. generally accepted accounting principles; (2) our 
opinion that Fiscal Service maintained, in all material respects, 
effective internal control over financial reporting relevant to the 
Schedule of Federal Debt as of September 30, 2014; 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. 

As of September 30, 2014, and 2013, federal debt managed by Fiscal 
Service totaled $17,810 billion and $16,732 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) $12,785 billion as of September 30, 2014, and 
$11,976 billion as of September 30, 2013, of debt held by the public 
and (2) $5,025 billion as of September 30, 2014, and $4,756 billion as 
of September 30, 2013, 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, 
floating rate notes, 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 1] As of June 30, 2014, 
the reported amount of Treasury securities held by foreign and 
international investors represented an estimated 48 percent of debt 
held by the public. This percentage is slightly higher than the 47 
percent as of June 30, 2013, and 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 $6,013 billion as of June 30, 2014--an increase 
of $5,030 billion.[Footnote 2] 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. 
[Footnote 3] These estimates are not reported on the Schedules of 
Federal Debt, and as such, we do not audit these amounts. 

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 230 percent. 
Also during this period, the statutory debt limit was raised 15 times, 
from $5,950 billion to $17,212 billion.[Footnote 5] As discussed in 
the accompanying Overview on Federal Debt Managed by the Bureau of the 
Fiscal Service, during the last 4 fiscal years, total federal debt has 
increased by $4,259 billion, or 31 percent, from $13,551 billion as of 
September 30, 2010, to $17,810 billion as of September 30, 2014. Of 
the total increase, $3,762 billion was from the increase in debt held 
by the public and $497 billion was from the increase in 
intragovernmental debt holdings. The last economic recession and the 
federal government's actions to stabilize financial markets and 
promote economic recovery contributed to such increases in debt held 
by the public, especially during fiscal years 2011 and 2012. During 
fiscal years 2013 and 2014, debt held by the public increased by $706 
billion and $809 billion, respectively. 

The statutory debt limit was raised on five different occasions during 
the last 4 fiscal years, increasing by about 20 percent, from $14,294 
billion to $17,212 billion. Notably, delays in raising the debt limit 
occurred in all 4 of these years. For fiscal year 2014, delays in 
raising the debt limit occurred for a total of 16 business days. 
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.[Footnote 6] 

A delay in raising the debt limit that began in fiscal year 2013 
continued through October 16, 2013. During this period, Treasury took 
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 October 17, 
2013, the Continuing Appropriations Act, 2014 was enacted, which 
suspended the statutory debt limit through February 7, 2014.[Footnote 
7] Subsequent to the start of the temporary debt limit suspension 
period, Treasury restored principal and interest to the affected 
federal government accounts in accordance with relevant laws. The 
amounts restored included uninvested principal and interest that 
existed as of the end of fiscal year 2013, which were appropriately 
not reported on the fiscal year 2013 Schedule of Federal Debt since 
securities had not been issued at that time to the affected federal 
government accounts. The fiscal year 2014 increase in debt held by the 
public of $809 billion was greater than the reported fiscal year 2014 
federal deficit of $483 billion primarily due to the above-noted 
restoration of principal and interest, as well as increases in the 
government's cash balance and federal direct student loans. 

An increase in the debt limit was not enacted before the suspension 
period ended and therefore, consistent with the Continuing 
Appropriations Act, 2014, the debt limit was raised on February 8, 
2014, to the amount of qualifying federal debt securities outstanding 
at that date, or $17,212 billion. As such, on Monday, February 10, 
2014, Treasury began taking certain extraordinary actions consistent 
with relevant laws and regulations to avoid exceeding the limit. These 
actions continued through February 14, 2014. On February 15, 2014, the 
Temporary Debt Limit Extension Act was enacted, which suspended the 
statutory debt limit through March 15, 2015.[Footnote 8] Subsequent to 
the start of this temporary debt limit suspension period, Treasury 
restored principal and interest to the affected federal government 
accounts in accordance with relevant laws. If an increase in the debt 
limit is not enacted before the end of this suspension period, 
consistent with the Temporary Debt Limit Extension Act, the debt limit 
will be increased by the change in qualifying federal debt securities 
outstanding on February 15, 2014, compared to those outstanding on 
March 16, 2015. 

As we have previously reported, the debt limit does not restrict the 
Congress's ability to enact spending and revenue legislation that 
affects the level of federal debt or otherwise constrains fiscal 
policy; however, it restricts Treasury's authority to borrow to 
finance the decisions already enacted by the 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. To avoid 
such uncertainty and related borrowing costs, we noted, in our 
February 2011 and July 2012 reports related to the debt limit, that 
the Congress should consider ways to better link decisions about the 
debt limit with decisions about spending and revenue at the time those 
decisions are made to avoid potential disruptions to the Treasury 
market and to help inform the fiscal policy debate in a timely way. 

In fiscal year 2014, the federal deficit shrank for the second year in 
a row, but this deficit and the need to refinance maturing debt meant 
that federal financing needs continued to grow. The reported federal 
deficit for fiscal year 2014 of $483 billion was down from the fiscal 
year 2013 reported federal deficit of $680 billion. Debt held by the 
public increased slightly as a percentage of gross domestic product 
(GDP), from roughly 72 percent of GDP at the end of fiscal year 2013 
to roughly 74 percent at the end of fiscal year 2014. Federal deficits 
contributed less to the growth in debt held by the public in fiscal 
year 2014 than in prior fiscal years. While today's relatively lower 
interest rates have kept interest costs lower than they otherwise 
could have been, despite the recent increases in debt held by the 
public, interest rates are expected to increase as the economy 
continues to recover, resulting in increasing pressure on the budget. 
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, health care spending 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. 

Sincerely yours, 

Signed by: 

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

[End of section] 

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) for the fiscal years 
ended September 30, 2014, and 2013, we found: 

* the Schedules of Federal Debt for the fiscal years ended September 
30, 2014, and 2013, are presented fairly, in all material respects, in 
accordance with U.S. generally accepted accounting principles; 

* 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, 2014; and: 

* no reportable noncompliance for fiscal year 2014 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[Footnote 10] 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 11] 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 12] We also have audited Fiscal Service's 
internal control over financial reporting relevant to the Schedule of 
Federal Debt as of September 30, 2014, 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, 2014, based on its evaluation, included in the 
accompanying Management's Report on Internal Control over Financial 
Reporting Relevant to the Schedule of Federal Debt 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 13] 

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, 2014, and 2013, 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, Fiscal Service maintained, in all material respects, 
effective internal control over financial reporting relevant to the 
Schedule of Federal Debt as of September 30, 2014, based on criteria 
established under FMFIA. 

During fiscal year 2014, Fiscal Service made significant efforts and 
sufficiently addressed most of the internal control issues related to 
a significant deficiency in internal control[Footnote 14] that we 
reported for fiscal year 2013 concerning information systems controls. 
[Footnote 15] While we identified some continuing and new control 
deficiencies relating to information systems and in other areas, we do 
not consider them individually or collectively to be material 
weaknesses or significant deficiencies. We have communicated these 
matters to management and, where appropriate, will report on them 
separately to Fiscal Service management, along with recommendations 
for corrective actions. 

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 into what is now Fiscal 
Service. In addition, in fiscal year 2013, Fiscal Service began 
testing a new general ledger system and implemented the new system in 
fiscal year 2014. These changes may have contributed to some of the 
above noted control deficiencies that we identified. Fiscal Service's 
continuing consolidation efforts can introduce risks that require 
corresponding changes to controls and can hinder the effective 
operation of controls. As such, it will be important that management 
sustain focus on assessing associated risks, monitoring the 
effectiveness of the operation of controls, and designing and 
implementing effective internal controls. 

Other Matter: 

Other Information: 

Fiscal Service's other information 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 2014 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 concurred with 
our conclusions. The complete text of Fiscal Service's response is 
reprinted in appendix II. 

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

November 3, 2014: 

[End of section] 

Footnotes: 

[1] GAO, Financial Audit: Bureau of the Fiscal Service's Fiscal Years 
2013 and 2012 Schedules of Federal Debt, [hyperlink, 
http://www.gao.gov/products/GAO-14-173; (Washington, D.C.: Dec. 12, 
2013). 

[2] Department of the Treasury, Major Foreign Holders of Treasury 
Securities, accessed November 3, 2014, [hyperlink, 
http://www.treasury.gov/resource-center/data-chart-
center/tic/Documents/mfh.txt]. 

[3] The data reported under the Treasury International Capital 
reporting system are collected primarily from U.S.-based custodians. 
According to Treasury, since U.S. securities held in overseas custody 
accounts may not be attributed to the actual owners, the data may not 
provide a precise accounting of individual country ownership of 
Treasury securities. 

[4] For more information regarding the federal debt, see GAO, Fiscal 
Outlook: Understanding The Federal Debt, accessed November 3, 2014, 
[hyperlink, 
http://www.gao.gov/fiscal_outlook/understanding_federal_debt/overview#t=
0]. 

[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. 113-46, § 1002, 127 Stat. 558, 566-67 (Oct. 17, 2013). 

[8] Pub. L. No. 113-83, § 2, 128 Stat. 1011 (Feb. 15, 2014). 

[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] Other information consists of the Overview on the Schedule of 
Federal Debt Managed by the Bureau of the Fiscal Service. 

[11] 31 U.S.C. § 331(e)(2). Because Fiscal Service is a bureau within 
the Department of 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)). 

[12] 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. 

[13] 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. 

[14] 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. 

[15] [hyperlink, http://www.gao.gov/products/GAO-14-173. 

[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 (issued under 31 U.S.C. §§ 3101-3113), the 
latter of which is referred to as intragovernmental debt holdings. As 
of September 30, 2014 and September 30, 2013, outstanding gross 
federal debt managed by Fiscal Service totaled $17,810 billion and 
$16,732 billion, respectively.[Footnote 1] The increase in gross 
federal debt of $1,078 billion during fiscal year 2014 was due to an 
increase in gross intragovernmental debt holdings of $269 billion and 
an increase in gross debt held by the public of $809 billion. As 
Figure 1 illustrates, overall intragovernmental debt holdings and debt 
held by the public increased by $497 billion and $3,762 billion, 
respectively, from September 30, 2010 to September 30, 2014. 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. 
The increases in debt held by the public are due primarily to total 
federal spending exceeding total federal revenues. 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 in fiscal year 
2013, the Department of the 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. 

On October 17, 2013, the Continuing Appropriations Act, 2014 (Public 
Law No 113-46) was enacted suspending the debt limit through February 
7, 2014. On October 17, 2013, the suspended investments were 
reinvested in the CSRDF and the Postal Benefits Fund. On February 8, 
2014 the statutory debt limit was increased to $17,212 billion as a 
result of Section 1002 “Default Prevention Act of 2013,” of the 
Continuing Appropriations Act, 2014. The debt limit increase was based 
on the change in qualifying federal debt securities outstanding on 
October 17, 2013, compared to those outstanding on February 8, 2014. 
As such, on Monday, February 10, 2014, Treasury departed from its 
normal debt management procedures and began taking extraordinary 
actions to avoid exceeding the statutory debt limit. On February 15, 
2014, the Temporary Debt Limit Extension Act (Public Law No. 113-83) 
was enacted suspending the statutory debt limit through March 15, 
2015. As of September 30, 2014, outstanding debt obligations subject 
to the statutory debt limit had increased to $17,781 billion. As of 
September 30, 2014, gross debt held by the public totaled $12,785 
billion and gross intragovernmental debt holdings totaled $5,025 
billion. 

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

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

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. 

As of September 30, 2014: 
Held by the Public: $12,785; 
Intragovernmental Debt Holdings: $5,025; 
Total: $17,810. 

[End of figure] 

Interest Expense: 

Interest expense incurred during fiscal year 2014 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 
2014, interest expense incurred totaled $433 billion; this consisted 
of interest expense on debt held by the public of $260 billion, and 
$173 billion in interest incurred for intragovernmental debt holdings. 

As Figure 2 illustrates, interest expense increased from fiscal year 
2010 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 2014, total interest expense increased from $432 
billion to $433 billion. This increase results from an increase of $15 
billion in interest expense on debt held by the public offset by a $14 
billion decrease in interest expense on intragovernmental debt 
holdings. The $15 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. The $14 
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, 2014 and 2013, 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, 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. 

Fiscal Year Ended September 30, 2014; 
Held by the Public: $260; 
Intragovernmental Debt Holdings: $173; 
Total: $433. 

[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 2014, 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. These actions contributed to a decrease in 
Treasury bills; whereas, Treasury notes, bonds and TIPS increased by 
$410 billion, $171 billion and $109 billion respectively, in fiscal 
year 2014. In addition to the existing suite of securities, Treasury 
began issuing Floating Rate Notes (FRNs), with a term of 2 years, in 
fiscal year 2014, which increased the offerings of longer term 
securities. As of September 30, 2014 and 2013, gross debt held by the 
public totaled $12,785 billion and $11,976 billion, respectively (see 
Figure 1), an increase of $809 billion. Due primarily to a decrease 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 decreased for fiscal year 2014. 

As of September 30, 2014, $12,272 billion, or 96 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, TIPS and FRNs 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, 2014, 
$7,063 billion, or 58 percent, will mature within the next 4 years 
(see Figure 3). As of September 30, 2014 and 2013, total marketable 
debt held by the public maturing within the next 10 years totaled 
$10,744 billion and $10,250 billion, respectively, an increase of $494 
billion. 

Figure 3: Maturity Dates of Marketable Debt Held by the Public as of
September 30, 2014: 

[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, 2014, 
nonmarketable securities totaled $513 billion, or 4 percent of debt 
held by the public. As of that date, nonmarketable securities 
primarily consisted of Government Account Series totaling $197 
billion, savings securities totaling $177 billion, and State and Local 
Government Series (SLGS) securities totaling $106 billion. From fiscal 
year end 2013 to 2014, total nonmarketable securities increased from 
$399 billion to $513 billion. This increase is primarily the result of 
the suspension of investments to the Government Securities Investment 
Fund (G-Fund) as of September 30, 2013 related to the extraordinary 
actions taken due to the delay in raising the debt limit that 
continued to exist as of September 30, 2013. On October 17, 2013, the 
Continuing Appropriations Act, 2014 (Public Law No 113-46) was enacted 
suspending the debt limit through February 7, 2014. On October 17, 
2013, $174 billion was reinvested into the G-Fund, which included 
amounts uninvested 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 240 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, 2014, such funds accounted for $4,581 billion, or 91 
percent, of the $5,025 billion intragovernmental debt holdings 
balances (see Figure 4). As of September 30, 2014 and 2013, gross 
intragovernmental debt holdings totaled $5,025 billion and $4,756 
billion, respectively (see Figure 1), an increase of $269 billion. 
This increase is primarily the result of the suspension of investments 
to the CSRDF and Postal Benefits Fund as of September 30, 2013 related 
to the extraordinary actions taken due to the delay in raising the 
debt limit that continued to exist as of September 30, 2013. On 
October 17, 2013, the Continuing Appropriations Act, 2014 (Public Law 
No 113-46) was enacted suspending the debt limit through February 7, 
2014. On October 17, 2013, $118 billion and $5 billion were reinvested 
into the CSRDF and Postal Benefits Fund, respectively, which included 
amounts uninvested as of September 30, 2013. 

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, 2014: 

[Refer to PDF for image: pie-chart] 

Social Security trust funds: 55%; 
Civil Service Retirement and Disability trust fund: 17%; 
Medicare trust funds: 5%; 
Military Retirement and Health Care funds: 14%; 
Other programs and trust funds: 9%. 

[End of figure] 

Significant Events in Fiscal Year 2014: 

Delays in Raising the Statutory Debt Limit: 

A delay in raising the statutory debt limit, which began on May 20, 
2013, continued into fiscal year 2014. From October 1 through October 
16, 2013, Treasury departed from its normal debt management procedures 
and invoked legal authorities to avoid exceeding the debt limit. 
Extraordinary actions taken by Treasury during this period to ensure 
the debt limit was not exceeded included (1) suspending investments in 
the G-Fund and CSRDF, (2) suspending new issuances of SLGS securities, 
(3) exchanging $9,305 million of Treasury securities held by the CSRDF 
for securities issued by the Federal Financing Bank and (4) suspending 
investments to the Exchange Stabilization Fund. 

On October 17, 2013, the Continuing Appropriations Act, 2014 (Public 
Law No 113-46) was enacted, which suspended the statutory debt limit 
through February 7, 2014. Treasury discontinued its use of 
extraordinary actions and resumed normal debt management operations. 
On October 17, 2013, and in accordance with relevant laws, Fiscal 
Service restored uninvested principal amounts to the G-Fund, CSRDF and 
the Postal Benefits Fund in the amounts of $173,948 million, $117,693 
million and $4,601 million, respectively. The Exchange Stabilization 
Fund was fully reinvested on October 17, 2013 and does not have 
interest restoration legislation. In accordance with relevant laws, 
Fiscal Service restored the interest related to the uninvested 
principal during the period May 20, 2013 through October 16, 2013, to 
the G-Fund on October 18, 2013, the next interest payment date, 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 was restored on December 31, 2013, the next 
interest payment date, in the amounts of $539 million and $24 million, 
respectively. 

The statutory debt limit was increased on February 8, 2014 to 
$17,211,558 million based on the change in qualifying federal debt 
securities outstanding as of October 17, 2013, compared to those 
outstanding as of February 8, 2014. As such, on Monday, February 10, 
2014, Treasury departed from its normal debt management procedures and 
invoked legal authorities to avoid exceeding the debt limit. 
Extraordinary actions taken by Treasury to meet the government's 
obligations as they came due without exceeding the debt limit included 
(1) suspending investments in the G-Fund and CSRDF, (2) redeeming 
certain investments held by CSRDF earlier than normal and (3) 
suspending new issuances of SLGS securities. On February 15, 2014, the 
Temporary Debt Limit Extension Act, (Public Law 113-83) was enacted 
which suspended the statutory debt limit through March 15, 2015. On 
February 18, 2014, and in accordance with relevant laws, Fiscal 
Service restored uninvested principal amounts to the G-Fund and the 
CSRDF in the amounts of $67,972 million and $532 million, 
respectively. In accordance with relevant laws, Fiscal Service 
restored the interest related to the uninvested principal during the 
period February 10, 2014 through February 14, 2014 to the G-Fund on 
February 18, 2014, the next interest payment date, in the amount of 
$28 million. Interest related to the uninvested principal during the 
period of February 10, 2014 through February 14, 2014, for CSRDF was 
restored on June 30, 2014, the next interest payment date, and was 
less than $1 million. 

Floating Rate Notes: 

In August 2012, Treasury announced its plan to develop a FRN 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. On January 23, 2014, Treasury announced the first FRN, a 
two year note. This was then followed by the auction and settlement on 
January 29 and 31, 2014, respectively. The first issuance of this note 
yielded $15 billion in outstanding securities due to mature on January 
31, 2016. The FRN is the first new security that Treasury has offered 
since TIPS were first auctioned in 1997 and may be issued with 
maturities of at least one year, but not more than ten years. It is 
also anticipated that Treasury will, for the first time, issue FRNs to 
Government Account Series customers in fiscal year 2015. 

The FRN is a security that pays interest quarterly and has an interest 
rate that can change over time. Treasury FRNs are indexed to the 
highest accepted discount rate (high rate) of the most recent 13-week 
Treasury bill auction. The interest rate will be the spread plus the 
index rate, which resets daily based on the most recent auction of 13-
week bills and will be subject to a minimum daily interest accrual 
rate of zero percent. The minimum and maximum purchase and award 
amounts and the award methodology are the same as for other marketable 
securities. Treasury announces specific terms and conditions of each 
issue, such as the auction date, issue date, and the public offering 
amount, prior to each auction. 

End of Paper EE and I Savings Bond Reissues: 

On February 18, 2014, Fiscal Service implemented electronic-only 
reissues of Series EE and I Savings bonds. The move is a continuation 
of the Paperless Treasury initiative announced in 2010. Paper Series 
EE and I Savings bonds reissues are requested by customers to change 
registrations or to replace lost, stolen, or damaged bonds. Under the 
new program, there will be no reissues of paper Series EE or I Savings 
bonds. Customers will instead receive electronic reissues of Series EE 
and I Savings bonds through TreasuryDirect. This change reduces the 
number of paper bonds printed by 62 percent based on the total number 
of paper bonds printed in fiscal year 2012 and represents a 
significant step toward ending all paper savings bond issues. With 
this phase complete, Fiscal Service will now focus on ending the 
remaining 38 percent of paper savings bond issues such as tax-time 
paper savings bonds issued through income tax refunds using IRS Form 
8888. 

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 $2,857 billion as of September 30, 1989, to $17,810 billion as of 
September 30, 2014 (see Figure 5). Large budget deficits continued 
during the 1990'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 
steady pace. 

Figure 5: 

[Refer to PDF for image: vertical bar graph] 

Graph depicts Total Gross Federal Debt Outstanding, As of September 30 
for the following fiscal years: 1989 through 2014. 

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 2014, federal debt held by the public more than doubled, 
rising by $7,736 billion. This increase was primarily a result of the 
last economic recession and the federal government's actions to 
stabilize financial markets and promote economic recovery. Since 
fiscal year 2002, debt held by the public has increased from $3,339 
billion as of September 30, 2001 to $12,785 billion as of September 
30, 2014. 

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 $497 billion, from $4,528 billion as of 
September 30, 2010, to $5,025 billion as of September 30, 2014. 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 1989 through 2014. 

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, Schedules, and Notes 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 31 U.S.C. §§ 3101-3113. 

[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] 

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

The accompanying notes are an integral part of these schedules. 

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, 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. 

Increases: Borrowings from the Public: 
Federal Debt: Held by the Public: 
Principal (Note 2): $7,485,194; 
Accrued Interest Payable: [Empty]; 
Net Unamortized Premiums/(Discounts): ($9,368). 

Increases: Net Increase in Intragovernmental Debt Holdings; 
Federal Debt: Intragovernmental Debt Holdings: 
Principal (Note 3): $269,279; 
Accrued Interest Payable: [Empty]; 
Net Unamortized Premiums/(Discounts): $7,535. 

Increases: Accrued Interest (Note 4); 
Federal Debt: Held by the Public: 
Accrued Interest Payable: $255,517. 

Increases: Accrued Interest (Note 4); 
Federal Debt: Intragovernmental Debt Holdings: 
Accrued Interest Payable: $182,165. 

Total Increases: 

Federal Debt: Held by the Public: 
Principal (Note 2): $7,485,194; 
Accrued Interest Payable: $255,517; 
Net Unamortized Premiums/(Discounts): ($9,368). 

Federal Debt: Intragovernmental Debt Holdings: 
Principal (Note 3): $269,279; 
Accrued Interest Payable: $182,165; 
Net Unamortized Premiums/(Discounts): $7,535. 

Decreases: 

Federal Debt: Repayment of Debt Held by the Public: 
Principal (Note 2): Repayments of Debt Held by the Public: $6,676,502; 
Accrued Interest Payable: Interest Paid: $252,881; 
Net Unamortized Premiums/(Discounts): Net Amortization (Note 4): 
($4,433). 

Federal Debt: Intragovernmental Debt Holdings: 
Principal (Note 3): Repayments of Debt Held by the Public: [Empty]; 
Accrued Interest Payable: Interest Paid: $182,902; 
Net Unamortized Premiums/(Discounts): Net Amortization (Note 4): 
$9,160. 

Total Decreases: 

Federal Debt: Held by the Public: 
Principal (Note 2): $6,676,502; 
Accrued Interest Payable: $252,881; 
Net Unamortized Premiums/(Discounts): ($4,433). 

Federal Debt: Intragovernmental Debt Holdings: 
Principal (Note 3): 0; 
Accrued Interest Payable: $182,902; 
Net Unamortized Premiums/(Discounts): $9,160. 

Balance as of September 30, 2014: 

Federal Debt: Held by the Public: 
Principal (Note 2): $12,784,971; 
Accrued Interest Payable: $53,831; 
Net Unamortized Premiums/(Discounts): ($29,379). 

Federal Debt: Intragovernmental Debt Holdings: 
Principal (Note 3): $5,024,994; 
Accrued Interest Payable: $42,392; 
Net Unamortized Premiums/(Discounts): $67,822. 

[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, 2014 and 2013: 
(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 2014 
and fiscal year 2013 balances and activity relating to monies borrowed 
from the public and certain federal government accounts under 31 
U.S.C. §§ 3101-3113 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. §§ 3101-3113, 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. 

Note 2. Federal Debt Held by the Public: 

Marketable: 

Treasury Bills: 
2014 Amount: $1,409,627; 
2014 Average Interest Rates: 0.1%; 
2013 Amount: $1,527,909; 
2013 Average Interest Rates: 0.1%. 

Treasury Notes: 
2014 Amount: $8,160,196; 
2014 Average Interest Rates: 1.8%; 
2013 Amount: $7,750,336; 
2013 Average Interest Rates: 1.8%. 

Treasury Bonds: 
2014 Amount: $1,534,068; 
2014 Average Interest Rates: 4.9%; 
2013 Amount: $1,363,114; 
2013 Average Interest Rates: 5.1%. 

TIPS: 
2014 Amount: $1,044,676; 
2014 Average Interest Rates: 0.9%; 
2013 Amount: $936,041; 
2013 Average Interest Rates: 1.1%. 

Total Marketable: 
2014 Amount: $12,271,552; 
2013 Amount: $11,577,400. 

Nonmarketable: 

2014 Amount: $513,419; 
2013 Amount: $398,879; 
2013 Average Interest Rates: 2.4%. 

Total Federal Debt Held by the Public: 
2014 Amount: $12,784,971; 
2013 Amount: $11,976,279. 

[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, 
2014 and 2013. 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, 2014 and 2013. 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, 2014 and 2013. The TIPS Federal Debt Held by the Public 
inflation-adjusted principal balance includes inflation of $97,149 
million and $88,524 million as of September 30, 2014 and 2013, 
respectively. 

In January 2014, Treasury began issuing a new marketable security, the 
Floating Rate Note (FRN), which pays interest quarterly based on the 
interest rate at the time of payment. The interest rate of FRNs can 
change over time and is indexed to the highest accepted discount rate 
of the most recent 13-week marketable bill auction. These securities, 
like marketable notes and bonds, are issued at either par value or at 
an amount that reflects a discount or premium. The average interest 
rate on marketable FRNs represents the highest accepted discount rate 
of the most recent 13-week marketable auction as of September 30, 
2014, adjusted by any discount or premium on securities outstanding as 
of that date. These notes are currently issued with a term of 2 years. 

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, 2014, the FRB had total holdings of 
$1,919,365 million, which (1) excludes $534,667 million in Treasury 
securities used in overnight reverse repurchase transactions and (2) 
includes a net of $2,289 million in Treasury securities held by the 
FRB as collateral for securities lending activities. 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. 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, 
2014 and 2013. Nonmarketable securities are issued with a term of on 
demand out to 40 years. 

As of September 30, 2014 and 2013, nonmarketable securities consisted 
of the following: 

Domestic Series: 
2014: $29,995; 
2013: $29,995. 

Foreign Series: 
2014: $2,986; 
2013: $2,986. 

State and Local Government Series: 
2014: $105,668; 
2013: $124,079. 

United States Savings Securities: 
2014: $176,762; 
2013: $180,022. 

Government Account Series: 
2014: $196,520; 
2013: $60,445. 

Other: 
2014: $1,488; 
2013: $1,352. 

Total Nonmarketable: 
2014: $513,419; 
2013: $398,879. 

[End of table] 

Government Account Series (GAS) securities are nonmarketable 
securities issued to federal government accounts. Federal Debt Held by 
the Public includes GAS securities issued to certain federal 
government accounts. One example is the GAS securities held by the 
Government Securities Investment Fund (G-Fund) of the federal 
employees' Thrift Savings Plan. Federal employees and retirees who 
have individual accounts own the GAS securities held by the fund. For 
this reason, these securities are considered part of the Federal Debt 
Held by the Public rather than Intragovernmental Debt Holdings. The 
GAS securities held by the G-Fund consist of overnight investments 
redeemed one business day after their issue. The net increase in the 
fund's principal balance during fiscal year 2014 is included in the 
Borrowings from the Public amount reported on the Schedules of Federal 
Debt 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. 

Note 3. Intragovernmental Debt Holdings: 

As of September 30, 2014 and 2013, Intragovernmental Debt Holdings are 
owed to the following: 

SSA: Federal Old-Age and Survivors Insurance Trust Fund: 
2014: $2,712,805; 
2013: $2,655,599. 

OPM: Civil Service Retirement and Disability Fund: 
2014: $843,557; 
2013: $713,761. 

DOD: Military Retirement Fund: 
2014: $483,111; 
2013: $421,327. 

HHS: Federal Hospital Insurance Trust Fund: 
2014: $202,207; 
2013: $206,010. 

DOD: DOD Medicare-Eligible Retiree Health Care Fund: 
2014: $200,372; 
2013: $188,664. 

SSA: Federal Disability Insurance Trust Fund: 
2014: $70,113; 
2013: $100,791. 

HHS: Federal Supplementary Medical Insurance Trust Fund: 
2014: $68,391; 
2013: $67,385. 

DOE: Nuclear Waste Disposal Fund: 
2014: $51,527; 
2013: $50,598. 

FDIC: The Deposit Insurance Fund: 
2014: $48,750; 
2013: $36,864. 

OPM: Postal Service Retiree Health Benefits Fund: 
2014: $48,468; 
2013: $42,324. 

OPM: Employees Life Insurance Fund: 
2014: $43,213; 
2013: $41,951. 

DOL: Unemployment Trust Fund: 
2014: $35,919; 
2013: $29,478. 

OPM: Employees Health Benefits Fund: 
2014: $23,556; 
2013: $23,427. 

Treasury: Exchange Stabilization Fund: 
2014: $22,649; 
2013: $22,669. 

DOS: Foreign Service Retirement and Disability Fund: 
2014: $17,792; 
2013: $17,364. 

DOL: Pension Benefit Guaranty Corporation: 
2014: $17,444[A]; 
2013: $22,575[A]. 

DOT: Airport and Airway Trust Fund: 
2014: $12,759; 
2013: $11,808. 

NCUA: National Credit Union Share Insurance Fund: 
2014: $11,024; 
2013: $10,643. 

DOT: Highway Trust Fund: 
2014: $10,696; 
2013: $1,957. 

Other Programs and Funds: 
2014: $100,641; 
2013: $92,477. 

Total Intragovernmental Debt Holdings: 
2014: $5,024,994; 
2013: $4,755,715. 

[A] As of September 30, 2013, the Pension Benefit Guaranty Corporation 
(PBGC) amount consisted of $4,883 million of marketable Treasury 
securities as well as $17,692 million of GAS securities. As of 
September 30, 2014, the PBGC amount consisted only of GAS securities. 
On October 1, 2013, PBGC began reporting its investments in marketable 
Treasury securities through a newly established Deposit Fund. As such, 
PBGC's investments in marketable Treasury securities as of September 
30, 2014 are included in the Debt Held by the Public balances reported 
on the Schedules of Federal Debt. 

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, 
2014 and 2013, the inflation-adjusted principal balance included 
inflation of $121,483 million and $108,908 million, respectively. The 
average interest rates on Intragovernmental Debt Holdings, excluding 
TIPS, for fiscal years 2014 and 2013 were 3.3 and 3.6 percent, 
respectively. The average interest rate on TIPS for both fiscal years 
2014 and 2013 was 1.3 percent The average interest rate represents the 
original issue weighted effective yield on securities outstanding as 
of September 30, 2014 and 2013. 

Note 4. Interest Expense: 

Interest expense on federal debt for fiscal years 2014 and 2013 
consisted of the following: 

Federal Debt Held by the Public: Accrued Interest; 
2014: $255,517; 
2013: $242,689. 

Federal Debt Held by the Public: Net Amortization of Premiums and 
Discounts; 
2014: $4,433; 
2013: $4,893. 

Total Interest Expense on Federal Debt Held by the Public: 
2014: $259,950; 
2013: $247,582. 

Intragovernmental Debt Holdings: Accrued Interest; 
2014: $182,165; 
2013: $185,437. 

Intragovernmental Debt Holdings: Net Amortization of Premiums and 
Discounts; 
2014: ($9,160); 
2013: ($7,807). 

Total Interest Expense on Intragovernmental Debt Holdings: 
2014: $173,005; 
2013: $177,630. 

Total Interest Expense on Federal Debt Managed by BPD: 
2014: $432,955; 
2013: $425,212. 

[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 $19,682 million and $16,548 million for 
fiscal years 2014 and 2013, respectively. Accrued interest on 
Intragovernmental Debt Holdings includes inflation adjustments of 
$12,381 million and $10,754 million for fiscal years 2014 and 2013, 
respectively. 

Note 5. Fund Balance with Treasury: 

Dollars in millions: 

Appropriated Funds Obligated: 
As of September 30, 2014: $16. 
As of September 30, 2013: $56; 

[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. Suspension of Issuances and Subsequent Restorations of 
Uninvested Principal and Interest Amounts: 

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. On
October 17, 2013, the Continuing Appropriations Act, 2014 (Public Law 
No 113-46) was enacted suspending the statutory debt limit through 
February 7, 2014. On October 17, 2013, in accordance with relevant 
laws, Fiscal Service restored uninvested principal amounts to the G-
Fund, CSRDF, and Postal Benefits Fund in the amounts of $173,948 
million, $117,693 million, and $4,601 million, respectively. In 
accordance with relevant laws, Fiscal Service restored the related 
interest to the G-Fund on October 18, 2013, in the amount of $653 
million, and to CSRDF and Postal Benefits Fund on the next semi-annual 
interest payment date of December 31, 2013, in the amounts of $539 
million and $24 million, respectively. The amounts restored included 
uninvested principal and related interest that existed as of September 
30, 2013, which were appropriately excluded from the Schedule of 
Federal Debt as of September 30, 2013, since securities had not been 
issued at that time to the affected federal government accounts. 

[End of section] 

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

Department of The Treasury: 
Washington, DC 20239-0001: 

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 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. 

Fiscal Service management is responsible for maintaining effective 
internal control over financial reporting, including the design, 
implementation, and maintenance of internal control relevant to the
preparation and fair presentation of the Schedule of Federal Debt that 
is 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 30,2014, 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 30,2014, 
Fiscal Service's internal control over financial reporting relevant to 
the Schedule of Federal Debt was effective. 

Signed by the following: 

Sheryl R. Morrow: 
Commissioner: 
Bureau of the Fiscal Service: 

Matthew J. Miller: 
Assistant Commissioner: 
Fiscal Accounting Operations: 

Cyntha Z. Springer: 
Deputy Commissioner: 
Fiscal Accounting and Shared Services: 

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

Kimberly A. McCoy: 
Deputy Commissioner, Finance and Administration: 
Chief Information Officer, and Assistant Commissioner, Information and 
Security Services: 

November 3, 2014: 

[End of section] 

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

Department of The Treasury: 
Washington, DC 20239-0001: 

November 4, 2014: 

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, 2014 and 2013. We agree with the conclusions of
your audit report. 

This year was especially challenging as we were faced with the 
accounting for two Debt Issuance Suspension Periods (DISPs), the 
issuance of the new Floating Rate Note, and the implementation of the
Summary Debt Accounting System (SDAS). We appreciate the knowledge and 
experience displayed by your audit team as we continued to encounter 
unique reporting requirements, while striving to maintain strong 
internal controls in our new system environment. Your team's 
experience with our accounting operations allowed for continued 
accuracy and consistency in our reporting. We would like to thank you
and your staff for the thorough audit of these schedules as we 
finalize the eighteenth year of our professional relationship. We look 
forward to sustaining a productive and successful relationship with
your staff. 

Sincerely, 

Signed by: 

Sheryl R. Morrow: 
Commissioner: 
Bureau of the Fiscal Service: 

[End of section] 

[End of section] 

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