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entitled 'Financial Audit: Bureau of the Public Debt’s Fiscal Years
2008 and 2007 Schedules of Federal Debt' which was released on November
7, 2008.
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Report to the Secretary of the Treasury:
November 2008:
Financial audit:
Bureau of the Public Debt's Fiscal Years 2008 and 2007 Schedules of
Federal Debt:
GAO-09-44:
GAO Highlights:
Highlights of GAO-09-44, a report to Secretary of the Treasury.
Why GAO Did This Study:
GAO is required to audit the consolidated financial statements of the
U.S. government. Due to the significance of the federal debt held by
the public to the governmentwide financial statements, GAO audits the
Bureau of the Public Debt’s (BPD) Schedules of Federal Debt annually.
The audit of these schedules is done to determine whether, in all
material respects, (1) the schedules are reliable and (2) BPD
management maintained effective internal control relevant to the
Schedule of Federal Debt. Further, GAO tests compliance with a
significant provision of law related to the Schedule of Federal Debt
(statutory debt limit). Federal debt managed by BPD consists of
Treasury securities held by the public and by certain federal
government accounts, referred to as intragovernmental debt holdings.
The level of debt held by the public primarily reflects how much of the
nation’s wealth has been absorbed by the federal government to finance
prior federal spending in excess of federal revenues. Intragovernmental
debt holdings represent balances of Treasury securities held by federal
government accounts, primarily federal trust funds such as Social
Security, that typically have an obligation to invest their excess
annual receipts over disbursements in federal securities.
What GAO Found:
In GAO’s opinion, BPD’s Schedules of Federal Debt for fiscal years 2008
and 2007 were fairly presented in all material respects, and BPD
maintained effective internal control relevant to the Schedule of
Federal Debt as of September 30, 2008. GAO found no instances of
noncompliance in fiscal year 2008 with the statutory debt limit.
As of September 30, 2008 and 2007, federal debt managed by BPD totaled
about $10,011 billion and $8,993 billion, respectively. As shown in
figure 1 below, total federal debt increased over each of the last 4
fiscal years.
Figure 1- Total Gross Federal Debt Outstanding (Fiscal Years Ended
September 30, 2004-2008)
This figure is a combination bar and line graph showing the total gross
federal debt outstanding (fiscal years ended September 30, 2004-2008.
The X axis represents the years, and the Y axis represents dollars in
billions. One bar represents intragovernmental holdings, and the other
represents held by the public.
Year: 2004;
Total: 7379;
Held by the public: 4307;
Intragovernmental holdings: 3072.
Year: 2005;
Total: 7918;
Held by the public: 4601;
Intragovernmental holdings: 3317.
Year: 2006;
Total: 8493;
Held by the public: 4843;
Intragovernmental holdings: 3650.
Year: 2007;
Total: 8993;
Held by the public: 5049;
Intragovernmental holdings: 3944.
Year: 2008;
Total: 10011;
Held by the public: 5809;
Intragovernmental holdings: 4202.
[See PDF for image]
Source: BPD.
[End of figure]
During the last 4 fiscal years, managing the federal debt has continued
to be a challenge as evidenced by the growth of total federal debt by
$2,632 billion, or 36 percent, from $7,379 billion as of September 30,
2004, to $10,011 billion as of September 30, 2008. In fiscal year 2008
alone, total federal debt increased by $1,018 billion, the single
largest annual increase in history. Of this amount, about $760 billion
was from the increase in debt held by the public, which included $300
billion in cash management bills issued in September 2008 under the
Supplementary Financing Program initiated by Treasury. The remaining
increase in federal debt of about $258 billion was from
intragovernmental debt holdings. On July 30, 2008, legislation was
enacted to raise the statutory debt limit from $9,815 billion to
$10,615 billion. In addition, in response to the nation’s growing
financial crisis, on October 3, 2008, the President signed into law
legislation authorizing the Secretary of the Treasury to purchase up to
$700 billion in troubled assets from financial institutions. This
legislation increased the statutory debt limit by $700 billion to
$11,315 billion. These increases in the statutory debt limit were the
fourth and fifth such occurrences since fiscal year 2004.
For a fuller understanding of GAO’s opinion on BPD’s fiscal years 2008
and 2007 Schedules of Federal Debt, readers should refer to the
complete audit report, available by clicking on [hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-09-44], Which includes
information on audit objectives, scope and methodology. For more
information, contact Gary T. Engel at (202) 512-3406 or engelg@gao.gov.
[End of section]
Contents:
Letter:
Auditor's Report:
Opinion on Schedules of Federal Debt:
Opinion on Internal Control:
Compliance with a Selected Provision of Law:
Consistency of Other Information:
Objectives, Scope, and Methodology:
Agency Comments:
Overview, Schedules, and Notes:
Overview on Federal Debt Managed by the Bureau of the Public Debt:
Schedules of Federal Debt:
Notes to the Schedules of Federal Debt:
Appendixes:
Appendix I: Comments from the Bureau of the Public Debt:
Appendix II: GAO Contact and Staff Acknowledgments:
Abbreviations:
BPD: Bureau of the Public Debt:
CBO: Congressional Budget Office:
GDP: Gross Domestic Product::
OMB: Office of Management and Budget:
Letter November 7, 2008:
The Honorable Henry M. Paulson, Jr.:
The Secretary of the Treasury:
Dear Mr. Secretary:
The accompanying auditor's report presents the results of our audits of
the Schedules of Federal Debt Managed by the Bureau of the Public Debt
for the fiscal years ended September 30, 2008 and 2007. The Schedules
of Federal Debt present the beginning balances, increases and
decreases, and ending balances for (1) Federal Debt Held by the Public
and Intragovernmental Debt Holdings, (2) the related Accrued Interest
Payables, and (3) the related Net Unamortized Premiums and Discounts
managed by the Bureau of the Public Debt (BPD).[Footnote 1]
The auditor's report contains our (1) opinion on the Schedules of
Federal Debt for the fiscal years ended September 30, 2008 and 2007,
(2) opinion on the effectiveness of relevant internal control as of
September 30, 2008, (3) conclusion on BPD's compliance in fiscal year
2008 with a selected provision of a law we tested, and (4) conclusion
on the consistency between information in the Schedules of Federal Debt
and the accompanying Overview on Federal Debt Managed by the Bureau of
the Public Debt.
As of September 30, 2008 and 2007, federal debt managed by the bureau
totaled about $10,011 billion and $8,993 billion, respectively,
primarily for moneys borrowed to fund the federal government's
operations. As shown on the Schedules of Federal Debt, these balances
consisted of approximately (1) $5,809 billion as of September 30, 2008,
and $5,049 billion as of September 30, 2007, of debt held by the public
and about (2) $4,202 billion as of September 30, 2008, and $3,944
billion as of September 30, 2007, of intragovernmental debt holdings.
The level of debt held by the public primarily reflects how much of the
nation's wealth has been absorbed by the federal government to finance
prior federal spending in excess of federal revenues. It best
represents the cumulative effect of past federal borrowing on today's
economy and the federal budget. To finance a cash deficit, the federal
government borrows from the public. When a cash surplus occurs, the
annual excess funds can then be used to reduce debt held by the public.
In other words, annual cash deficits or surpluses generally approximate
the annual net change in the amount of federal government borrowing
from the public.
Intragovernmental debt holdings represent balances of Treasury
securities held by federal government accounts, primarily federal trust
funds (e.g., Social Security), that typically have an obligation to
invest their excess annual receipts over disbursements in federal
securities. Most federal trust funds invest in special U.S. Treasury
securities that are guaranteed for principal and interest by the full
faith and credit of the U.S. government. The federal government uses
the trust funds' invested cash surpluses to assist in funding other
federal government operations. The transactions relating to Treasury
securities held by the federal government accounts net out on the
federal government's consolidated financial statements because, under
current U.S. generally accepted accounting principles, they essentially
represent loans from one part of the federal government to another.
These securities are nonmarketable; however, they represent a priority
call on future federal budgetary resources.
While both are important, debt held by the public and intragovernmental
debt holdings are very different. Debt held by the public approximates
the federal government's competition with other sectors in the credit
markets. Federal borrowing absorbs resources available for private
investment and may put upward pressure on interest rates. In addition,
interest on debt held by the public is paid in cash and represents a
burden on current taxpayers. It reflects the amount the federal
government pays to its outside creditors. In contrast,
intragovernmental debt holdings perform an accounting function but
typically do not require cash payments from the current budget or
represent a burden on the current economy. In addition, from the
perspective of the budget as a whole, interest payments to federal
government accounts by Treasury are entirely offset by the income
received by such accounts. This intragovernmental debt and related
interest represent a claim on future resources and hence a burden on
future taxpayers and the future economy. Specifically, when trust funds
redeem Treasury securities to obtain cash to fund expenditures,
Treasury usually borrows from the public to finance these redemptions.
Such borrowings result in competition for funds with the private sector
and thus an effect on the economy.
We have audited the Schedule of Federal Debt since fiscal year 1997.
Over this period, total federal debt has increased by 92 percent.
During the last 4 fiscal years, managing the federal debt has continued
to be a challenge as evidenced by the growth of total federal debt by
$2,632 billion, or 36 percent, from $7,379 billion as of September 30,
2004, to $10,011 billion as of September 30, 2008. In fiscal year 2008,
total federal debt increased by $1,018 billion, the single largest
annual increase in history. Of this amount, about $760 billion was from
the increase in debt held by the public and about $258 billion was from
intragovernmental debt holdings. Two primary factors contributed to the
increase in debt held by the public. First, there was a return to large
reported deficits, which totaled $455 billion in fiscal year 2008
compared to $162 billion in fiscal year 2007. Second, at the request of
the Federal Reserve, Treasury initiated the Supplementary Financing
Program. As part of this program, Treasury issued cash management bills
to provide cash for Federal Reserve initiatives. As of September 30,
2008, there were $300 billion of these cash management bills
outstanding.[Footnote 2] In addition, during fiscal year 2008, Treasury
experienced a reduction in the holdings of Treasury securities by state
and local governments, the Federal Deposit Insurance Corporation, and
the Federal Reserve. Much of this reduction can be attributed to the
nation's growing financial crisis. As a result, Treasury had to rely
more on domestic and foreign investors for purchasing Treasury
securities. Treasury met its borrowing objectives in part by
reintroducing the 52-week bill, which will be offered each month, and
increasing the amounts offered at public debt auctions.
Further increases in debt held by the public are expected. On July 30,
2008, legislation was enacted to raise the statutory debt limit from
$9,815 billion to $10,615 billion. In addition, in response to the
nation's growing financial crisis, on October 3, 2008, the President
signed into law legislation authorizing the Secretary of the Treasury
to purchase up to $700 billion in troubled assets from financial
institutions. This legislation increased the statutory debt limit by
$700 billion to $11,315 billion. These increases in the statutory debt
limit were the fourth and fifth such occurrences since fiscal year
2004.
The slowdown in the economy and efforts to revive it reversed the
recent trend of declining annual budget deficits. The reported fiscal
year 2008 budget deficit was $455 billion compared to the fiscal year
2007 deficit of $162 billion. Official estimates for fiscal year 2009
show the annual deficit approaching $500 billion. Correspondingly, debt
held by the public grew to 40.8 percent of GDP at the end of fiscal
year 2008, after hitting a 4-year low of 36.8 percent in fiscal year
2007. However, the real challenge is not this year's deficit or even
next year's; it is how to change the nation's long-term fiscal path
over the coming decades.
The beginning stages of the longer-term fiscal challenge are not in the
distant future. The first of the baby boomers began collecting Social
Security retirement benefits this year and will become eligible for
Medicare in about 2 years. The budget and economic implications of the
baby boom generation's retirement have already become a factor in the
Congressional Budget Office's (CBO) 10-year budget projections and will
only intensify as the baby boomers age. GAO and CBO's long-range fiscal
policy simulations show that the federal government's current fiscal
condition over the coming decades is on an unsustainable long-term
fiscal path absent significant changes in policy.[Footnote 3]
Currently, policymakers are understandably focused on dealing with
stabilizing financial markets and stimulating the economy. Once these
issues are addressed, the nation's new and returning leaders will need
to turn their attention to the long-term challenges that lie ahead.
A continuing trend that we also have noted is the significant increase
in reported foreign ownership of Treasury securities. Treasury
securities held by foreign and international investors increased in
fiscal year 2008, continuing a trend dating back to 2001. According to
amounts reported in the September 2008 Treasury Bulletin, Treasury
estimates that the amount of Treasury securities held by foreign and
international investors has increased by $1,647 billion--from $1,001
billion as of June 30, 2001, to $2,648 billion as of June 30, 2008. As
of June 30, 2008, this represents an estimated 50 percent of debt held
by the public, up from about 31 percent as of June 30, 2001. The United
States benefits from foreign purchases of Treasury securities because
foreign and international investors fill part of the U.S. government's
borrowing needs. However, to service this foreign-held debt, the U.S.
government must send interest payments abroad.
We are sending copies of this report to the Chairman and Ranking
Minority Members of the Senate Committee on Appropriations; the Senate
Committee on Homeland Security and Governmental Affairs; the
Subcommittee on Federal Financial Management, Government Information,
Federal Services, and International Security, Senate Committee on
Homeland Security and Governmental Affairs; the Subcommittee on
Financial Services and General Government, Senate Committee on
Appropriations; the House Committee on Oversight and Government Reform;
the House Committee on Appropriations; the Subcommittee on Government
Management, Organization, and Procurement, House Committee on Oversight
and Government Reform; and the Subcommittee on Financial Services and
General Government, House Committee on Appropriations. We are also
sending copies of this report to the Commissioner of the Bureau of the
Public Debt, the Inspector General of the Department of the Treasury,
the Director of the Office of Management and Budget, and other agency
officials. In addition, the report will be available at no charge on
the GAO Web site at [hyperlink, http://www.gao.gov].
If I can be of further assistance, please contact me at (202) 512-3406
or engelg@gao.gov. Staff acknowledgments are provided in appendix II.
Sincerely yours,
Signed by:
Gary T. Engel:
Director:
Financial Management and Assurance:
Auditor's Report:
To the Commissioner of the Bureau of the Public Debt:
In connection with fulfilling our requirement to audit the financial
statements of the U.S. government,[Footnote 4] we have audited the
Schedules of Federal Debt Managed by the Bureau of the Public Debt
(BPD) because of the significance of the federal debt to the federal
government's financial statements.
This auditor's report presents the results of our audits of the
Schedules of Federal Debt Managed by BPD for the fiscal years ended
September 30, 2008 and 2007. The Schedules of Federal Debt present the
beginning balances, increases and decreases, and ending balances for
(1) Federal Debt Held by the Public and Intragovernmental Debt
Holdings, (2) the related Accrued Interest Payables, and (3) the
related Net Unamortized Premiums and Discounts managed by BPD.[Footnote
5]
In our audits of the Schedules of Federal Debt Managed by BPD for the
fiscal years ended September 30, 2008 and 2007, we found:
* the Schedules of Federal Debt are presented fairly, in all material
respects, in conformity with U.S. generally accepted accounting
principles;
* BPD had effective internal control over financial reporting and
compliance with laws and regulations relevant to the Schedule of
Federal Debt as of September 30, 2008; and:
* no reportable noncompliance in fiscal year 2008 with a selected
provision of law we tested.
The following sections discuss, in more detail, (1) these conclusions;
(2) our conclusion on the Overview on Federal Debt Managed by the
Bureau of the Public Debt; (3) our audit objectives, scope, and
methodology; and (4) agency comments.
Opinion on Schedules of Federal Debt:
The Schedules of Federal Debt including the accompanying notes present
fairly, in all material respects, in conformity with U.S. generally
accepted accounting principles, the balances as of September 30, 2008,
2007, and 2006 for Federal Debt Managed by BPD; the related Accrued
Interest Payables and Net Unamortized Premiums and Discounts; and the
related increases and decreases for the fiscal years ended September
30, 2008 and 2007.
Opinion on Internal Control:
BPD maintained, in all material respects, effective internal control
relevant to the Schedule of Federal Debt related to financial reporting
and compliance with applicable laws and regulations as of September 30,
2008, that provided reasonable assurance that misstatements, losses, or
noncompliance material in relation to the Schedule of Federal Debt
would be prevented or detected on a timely basis. Our opinion is based
on criteria established under 31 U.S.C. § 3512 (c), (d), the Federal
Managers' Financial Integrity Act, and the Office of Management and
Budget (OMB) Circular A-123, Management's Responsibility for Internal
Control.
We found matters involving information security controls that we do not
consider to be significant deficiencies.[Footnote 6] We will
communicate these matters to BPD's management, along with our
recommendations for improvement, in a separate letter to be issued at a
later date.
Compliance with a Selected Provision of Law:
Our tests of BPD's compliance with the statutory debt limit for fiscal
year 2008 disclosed no instances of noncompliance that would be
reportable under U.S. generally accepted government auditing standards
or applicable OMB audit guidance. However, the objective of our audit
of the Schedule of Federal Debt for the fiscal year ended September 30,
2008, was not to provide an opinion on overall compliance with laws and
regulations. Accordingly, we do not express such an opinion.
Consistency of Other Information:
BPD's Overview on Federal Debt Managed by the Bureau of the Public Debt
contains information, some of which is not directly related to the
Schedules of Federal Debt. We do not express an opinion on this
information. However, we compared this information for consistency with
the schedules and discussed the methods of measurement and presentation
with BPD officials. On the basis of this limited work, we found no
material inconsistencies with the schedules or U.S. generally accepted
accounting principles.
Objectives, Scope, and Methodology:
BPD management is responsible for (1) preparing the Schedules of
Federal Debt in conformity with U.S. generally accepted accounting
principles; (2) establishing, maintaining, and assessing internal
control to provide reasonable assurance that the broad control
objectives of the Federal Managers' Financial Integrity Act are met;
and (3) complying with applicable laws and regulations.
We are responsible for obtaining reasonable assurance about whether (1)
the Schedules of Federal Debt are presented fairly, in all material
respects, in conformity with U.S. generally accepted accounting
principles and (2) BPD management maintained effective relevant
internal control as of September 30, 2008, the objectives of which are
as follows:
* Financial reporting: Transactions are properly recorded, processed,
and summarized to permit the preparation of the Schedule of Federal
Debt for the fiscal year ended September 30, 2008, in conformity with
U.S. generally accepted accounting principles.
* Compliance with laws and regulations: Transactions related to the
Schedule of Federal Debt for the fiscal year ended September 30, 2008,
are executed in accordance with laws governing the use of budget
authority and with other laws and regulations that could have a direct
and material effect on the Schedule of Federal Debt.
We are also responsible for (1) testing compliance with selected
provisions of laws and regulations that have a direct and material
effect on the Schedule of Federal Debt and (2) performing limited
procedures with respect to certain other information appearing with the
Schedules of Federal Debt.
In order to fulfill these responsibilities, we:
* examined, on a test basis, evidence supporting the amounts and
disclosures in the Schedules of Federal Debt;
* assessed the accounting principles used and any significant estimates
made by management;
* evaluated the overall presentation of the Schedules of Federal Debt;
* obtained an understanding of the entity and its operations, including
its internal control relevant to the Schedule of Federal Debt as of
September 30, 2008, related to financial reporting and compliance with
laws and regulations (including execution of transactions in accordance
with budget authority);
* tested relevant internal controls over financial reporting and
compliance, and evaluated the design and operating effectiveness of
internal control relevant to the Schedule of Federal Debt as of
September 30, 2008;
* considered the design of the process for evaluating and reporting on
internal control and financial management systems under the Federal
Managers' Financial Integrity Act; and:
* tested compliance in fiscal year 2008 with the statutory debt limit
(31 U.S.C. § 3101(b) (Supp IV 2005), as amended by Pub. L. No. 109-182,
120 Stat. 289 (2006), Pub. L. No. 110-91, 121 Stat. 988 (2007), and
Pub. L. No. 110-289, Div. C, Title III, § 3083, 122 Stat. 2908 (2008)).
We did not evaluate all internal controls relevant to operating
objectives as broadly defined by the Federal Managers' Financial
Integrity Act, such as those controls relevant to preparing statistical
reports and ensuring efficient operations. We limited our internal
control testing to controls over financial reporting and compliance.
Because of inherent limitations in internal control, misstatements due
to error or fraud, losses, or noncompliance may nevertheless occur and
not be detected. We also caution that projecting our evaluation to
future periods is subject to the risk that controls may become
inadequate because of changes in conditions or that the degree of
compliance with controls may deteriorate.
We did not test compliance with all laws and regulations applicable to
BPD. We limited our tests of compliance to a selected provision of law
that has a direct and material effect on the Schedule of Federal Debt
for the fiscal year ended September 30, 2008. We caution that
noncompliance may occur and not be detected by these tests and that
such testing may not be sufficient for other purposes.
We performed our audit in accordance with U.S. generally accepted
government auditing standards and applicable OMB audit guidance.
Agency Comments:
In commenting on a draft of this report, BPD concurred with the
conclusions in our report. The comments are reprinted in appendix 1.
Signed by:
Gary T. Engel:
Director Financial Management and Assurance:
November 3, 2008:
[End of section]
Overview, Schedules, and Notes:
Overview on Federal Debt Managed by the Bureau of the Public Debt:
Gross Federal Debt Outstanding[Footnote 7]:
Federal debt managed by the Bureau of the Public Debt (BPD) comprises
debt held by the public and debt held by certain federal
government accounts (under Title 31 U.S.C. § 3101), the latter of which
is referred to as intragovernmental debt holdings. As of
September 30, 2008 and 2007, outstanding gross federal debt managed by
the bureau totaled $10,011 and $8,993 billion, respectively.
The increase in gross federal debt of $1,018 billion during fiscal year
2008 was due to an increase in gross intragovernmental debt
holdings of $258 billion and an increase in gross debt held by the
public of $760 billion. As Figure 1 illustrates, both
intragovernmental debt holdings and debt held by the public have
steadily increased since fiscal year 2004. The primary reason for
the increases in intragovernmental debt holdings is the surpluses in
the Federal Old-Age and Survivors Insurance Trust Fund, Civil
Service Retirement and Disability Fund, Federal Supplementary Medical
Insurance Trust Fund, Military Retirement Fund, and DOD
Medicare-Eligible Retiree Health Care Fund. The increases in debt held
by the public are due primarily to total federal spending
exceeding total federal revenues. As of September 30, 2008, gross debt
held by the public totaled $5,809 billion and gross
intragovernmental debt holdings totaled $4,202 billion.
Figure 1: Total Gross Federal Debt Outstanding (in billions):
This figure is a graph showing total gross federal debt outstanding (in
billions).
Year: 2004;
Total: 7379;
Held by the public: 4307;
Intragovernmental holdings: 3072.
Year: 2005;
Total: 7918;
Held by the public: 4601;
Intragovernmental holdings: 3317.
Year: 2006;
Total: 8493;
Held by the public: 4843;
Intragovernmental holdings: 3650.
Year: 2007;
Total: 8993;
Held by the public: 5049;
Intragovernmental holdings: 3944.
Year: 2008;
Total: 10011;
Held by the public: 5809;
Intragovernmental holdings: 4202.
[See PDF for image]
Source: BPD.
[End of figure]
Interest Expense:
Interest expense incurred during fiscal year 2008 consists of (1)
interest accrued and paid on debt held by the public or credited to
accounts holding intragovernmental debt during the fiscal year, (2)
interest accrued during the fiscal year, but not yet paid on debt
held by the public or credited to accounts holding intragovernmental
debt, and (3) net amortization of premiums and discounts. The
primary components of interest expense are interest paid on the debt
held by the public and interest credited to federal government
trust funds and other federal government accounts that hold Treasury
securities. The interest paid on the debt held by the public
affects the current spending of the federal government and represents
the burden in servicing its debt (i.e., payments to outside
creditors). Interest credited to federal government trust funds and
other federal government accounts, on the other hand, does not
result in an immediate outlay of the Federal Government because one
part of the government pays the interest and another part
receives it. However, this interest represents a claim on future
budgetary resources and hence an obligation on future taxpayers. This
interest, when reinvested by the trust funds and other federal
government accounts, is included in the programs’ excess funds not
currently needed in operations, which are invested in federal
securities. During fiscal year 2008, interest expense incurred totaled
$454 billion, interest expense on debt held by the public was $242
billion, and $212 billion was interest incurred for
intragovernmental debt holdings. As Figure 2 illustrates, total
interest expense has increased from fiscal years 2004 through 2008.
Average interest rates on principal balances outstanding as of
September 30, 2008 and 2007, are disclosed in the Notes to the
Schedules of Federal Debt.
Figure 2: Total Interest Expense (in billions):
This figure is a graph showing total interest expense (in billions).
Year: 2004;
Total: 322;
Held by the public: 158;
Intragovernmental holdings: 164.
Year: 2005;
Total: 355;
Held by the public: 181;
Intragovernmental holdings: 174.
Year: 2006;
Total: 404;
Held by the public: 221;
Intragovernmental holdings: 183.
Year: 2007;
Total: 433;
Held by the public: 239;
Intragovernmental holdings: 194.
Year: 2008;
Total: 454;
Held by the public: 242;
Intragovernmental holdings: 212.
[See PDF for image]
Source: BPD.
[End of figure]
Debt Held by the Public:
Debt held by the public primarily reflects how much of the nation’s
wealth has been absorbed by the Federal Government to finance prior
federal spending in excess of total federal revenues. As of September
30, 2008 and 2007, gross debt held by the public totaled $5,809 billion
and $5,049 billion, respectively (see Figure 1), an increase of $760
billion. The borrowings and repayments of debt held by the public
increased from fiscal year 2007 to 2008 due to an increase in short term
debt issuances by Treasury.
As of September 30, 2008, $5,210 billion, or 90 percent, of the
securities that constitute debt held by the public were
marketable, meaning that once the Federal Government issues them, they
can be resold by whoever owns them. Marketable
debt is made up of Treasury bills, Treasury notes, Treasury bonds, and
Treasury Inflation-Protected Securities (TIPS) with
maturity dates ranging from less than 1 year out to 30 years. Of the
marketable securities currently held by the public as of
September 30, 2008, $3,429 billion, or 66 percent, will mature within
the next 4 years (see Figure 3). As of September 30,
2008 and 2007, notes and TIPS held by the public maturing within the
next 10 years totaled $3,004 billion and $2,767 billion,
respectively, an increase of $237 billion.
Figure 3: Maturity Dates[Footnote 8] of Marketable Debt Held by the
Public as of September 30, 2008:
This figure is a shaded line graph showing maturity dates of marketable
debt held by the public as of September 30, 2008. The X axis represents
fiscal year of maturity, and the Y axis represents dollars in billions.
[End of figure]
The Federal Government also issues to the public nonmarketable
securities, which cannot be resold, and have maturity dates from on
demand to more than 10 years. As of September 30, 2008, nonmarketable
securities totaled $599 billion, or 10 percent of debt held by the
public. As of that date, nonmarketable securities primarily consisted
of savings securities totaling $194 billion, special securities for
state and local governments totaling $260 billion, and Government
Account Series securities totaling $107 billion.
The Federal Reserve Banks (FRBs) act as fiscal agents for Treasury, as
permitted by the Federal Reserve Act. As fiscal agents for Treasury,
the FRBs play a significant role in the processing of marketable book-
entry securities and paper U.S. savings bonds. For marketable book-
entry securities, selected FRBs receive bids; issue book-entry
securities to awarded bidders and collect payment on behalf of
Treasury; and make interest and redemption payments from Treasury’s
account to the accounts of security holders. For paper U.S. savings
bonds, selected FRBs sell, print, and deliver savings bonds; redeem
savings bonds; and handle the related transfers of cash.
Intragovernmental Debt Holdings:
Intragovernmental debt holdings represent balances of Treasury
securities held by over 230 individual federal government accounts with
either the authority or the requirement to invest excess receipts in
special U.S. Treasury securities that are guaranteed for principal and
interest by the full faith and credit of the U.S. Government.
Intragovernmental debt holdings primarily consist of balances in the
Social Security, Medicare, Military Retirement and Health Care, and
Civil Service Retirement and Disability trust funds.[Footnote 9] As of
September 30, 2008, such funds accounted for $3,788 billion, or 90
percent, of the $4,202 billion intragovernmental debt holdings balances
(see Figure 4). As of September 30, 2008 and 2007, gross
intragovernmental debt holdings totaled $4,202 billion and $3,944
billion, respectively (see Figure 1), an increase of $258 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, 2008:
This figure is a pie graph showing components of intragovernmental debt
holdings as of September 30, 2008.
Social Security trust funds: 56%;
Civil Service Retirement and Disability trust fund: 17%;
Medicare trust funds: 9%;
Military Retirement and Health Care funds: 5%;
Other programs and trust funds: 10%.
[See PDF for image]
[End of figure]
Significant Events in Fiscal Year 2008:
Statutory Debt Ceiling Raised:
On July 30, 2008, the Housing and Economic Recovery Act of 2008 was
signed into law becoming Public Law No: 110-289. This legislation
strengthens and modernizes the regulation of the housing government-
sponsored enterprises – Fannie Mae and Freddie Mac, and the Federal
Home Loan Banks. Section 3083 of this law increased the statutory debt
limit from $9,815 billion to $10,615 billion.
Significant Actions Related to the Issuance of Marketable Securities:
Over the course of the fiscal year, changes in economic conditions,
financial markets, and fiscal policy as well as a reduction in
nonmarketable debt issuances have caused an increase in Treasury’s
marketable borrowing needs. Financial market strains have impacted the
real economy, and the nation has experienced lower economic growth,
lower receipts, and increased outlays. Treasury has responded to the
increase in marketable borrowing requirements by increasing (1)
issuance sizes of regular bills, (2) the frequency, terms, and issuance
sizes of cash management bills, and (3) the issuance sizes of nominal
coupon security offerings.
The amount of the Federal Reserve’s System Open Market Account (SOMA)
holdings has decreased significantly, which has led to more issuances
to domestic and foreign investors. Specifically, total SOMA holdings
were $780 billion on September 30, 2007 compared to $477 billion as of
September 30, 2008.
On September 18, 2008, the Bureau of the Public Debt began issuing
specific cash management bills to fund the Supplementary Financing
Program (SFP). The SFP is a temporary program announced by Treasury and
the Federal Reserve on September 17, 2008, to provide emergency cash
for Federal Reserve initiatives aimed at addressing the ongoing crisis
in financial markets. As of September 30, 2008, there were a total of
eight of these cash management bills outstanding that totaled $300
billion.
New Treasury Automated Auction Processing System:
In April 2008, the Office of Financing successfully implemented the New
Treasury Automated Auction Processing System (NTAAPS). The new system
brings a significant number of improvements in auction processes,
security features, and consolidated back-end processing. On April 3,
2008 the 13- and 26-week bills were the first securities announced in
the new system. The auctions followed on April 7, 2008, with the
results released to the public within the expected window of two
minutes plus or minus 30 seconds after the auction close time.
Minimum Auction Purchase Denomination:
In connection with the implementation of NTAAPS, the minimum purchase
amount and increment value for Treasury marketable securities was
lowered from $1,000 to $100. The change was expected to broaden
distribution, improve individual investor access to Treasury marketable
securities, and lower issuance costs to Treasury. An amendment to the
Uniform Offering Circular was also published in the Federal Register to
lower the minimum and multiple par amounts of Treasury marketable
bills, notes, bonds and TIPS that may be stripped from $1,000 to $100.
The new minimum and multiples for stripping also applies to outstanding
Treasury marketable securities.
Reintroduction of 52-week bills:
Treasury’s ongoing assessment of its debt management strategies
resulted in the reintroduction of the 52-week bill. The last
issue date for 52-week bills was March 1, 2001. The 52-week bills were
reintroduced with the initial announcement on Thursday, May 29, 2008
and initial auction of June 3, 2008. Treasury will auction this
security once every four weeks, concurrently with the 4-week bill.
Savings Bond Purchase Limit:
On December 3, 2007, the Federal Register published regulations for the
change in the annual savings bonds purchase limit from $30,000 to
$5,000 per Social Security Number. The limit applies separately to
Series EE and Series I savings bonds, and separately to bonds issued in
paper or electronic form. Notice of the change was sent to financial
institutions the week of December 10, 2007.
Historical Perspective:
Federal debt outstanding is one of the largest legally binding
obligations of the Federal Government. Nearly all the federal debt
has been issued by the Treasury with a small portion being issued by
other federal government agencies. Treasury issues debt
securities for two principal reasons, (1) to borrow needed funds to
finance the current operations of the Federal Government
and (2) to provide an investment and accounting mechanism for certain
federal government accounts’ excess receipts, primarily
trust funds. Total gross federal debt outstanding has dramatically
increased over the past 25 years from $1,377 billion as of
September 30, 1983, to $10,011 billion as of September 30, 2008 (see
Figure 5). Large budget deficits emerged during the
1980’s due to tax policy decisions and increased outlays for defense
and domestic programs. Through fiscal year 1997, annual
federal deficits continued to be large and debt continued to grow at a
rapid pace. As a result, total federal debt increased nearly
four fold between 1983 and 1997.
By fiscal year 1998, federal debt held by the public was beginning to
decline. In fiscal years 1998 through 2001, the amount of
debt held by the public fell by $476 billion, from $3,815 billion to
$3,339 billion. However, higher federal outlays, tax policy
decisions, and recent actions to stabilize the financial markets have
resulted in an increase in debt held by the public from
$3,339 billion in 2001 to $5,809 billion in 2008.
Figure 5: Total Gross Federal Debt Outstanding:
This figure is a bar graph showing total gross federal debt
outstanding. The X axis represents year, and the Y axis represents
dollars in billions. Figures shows prior to 1995 are unaudited and
include securities issued by the Federal Financing Bank.
Source: Monthly Statement of Public Debt.
[End of figure]
Even in those years where debt held by the public declined, total
federal debt increased because of increases in intragovernmental debt
holdings. Over the past 4 fiscal years, intragovernmental debt holdings
increased by $1,130 billion, from $3,072 billion as of September 30,
2004, to $4,202 billion as of September 30, 2008. By law, trust funds
have the authority or are required to invest surpluses in federal
securities. As a result, the intragovernmental debt holdings balances
primarily represent the cumulative surplus of funds due to the trust
funds’ cumulative annual excess of tax receipts, interest
credited, and other collections compared to spending.
As shown in Figure 6, interest rates have fluctuated over the past 25
years. The average interest rates reflected here represent
the original issue weighted effective yield on securities outstanding
at the end of the fiscal year.
Figure 6: Average Interest Rates of Federal Debt Outstanding:
This figure is a line graph showing average interest rates of federal
debt outstanding.
Source: Prior to fiscal year 2001: Monthly Statement of Public Debt.
Fiscal year 2001 and after: Public Debt Online Average Interest Rates.
The X axis represents the ear and the Y axis represents average
interest rates.
[See PDF for image]
[End of figure]
Significant Change After Fiscal Year 2008 Affecting Federal Debt:
The Emergency Economic Stabilization Act of 2008 was enacted into law
on October 3, 2008. Section 122 of the Act increased the statutory debt
limit by $700 billion to $11,315 billion. In order to address the
increased funding needs posed by the Emergency Economic Stabilization
Act, Treasury announced in a Press Release on October 6, 2008, that it
would be making adjustments to the auction calendar. Treasury will
continue to increase auction sizes of bills and coupon securities and
continue to issue cash management bills with varying maturity dates.
Additionally, Treasury is considering its options regarding the
frequency and issuance of additional nominal coupons.
Table: Schedules of Federal Debt: Managed by the Bureau of the Public
Debt For the Fiscal Years Ended September 30, 2008 and 2007 (Dollars in
millions).
Balance as of September 30, 2007;
Held by the Public: Principal (Note 2): $4,843,121;
Held by the Public: Accrued Interest Payable: $41,119;
Held by the Public: Net Unamortized: ($40,165);
Intragovernmental Debt Holdings: Principal (Note 3): $3,649,853;
Intragovernmental Debt Holdings: Accrued Interest Payable: $45,726;
Intragovernmental Debt Holdings: Net Unauthorized Premiums:
(Discounts): ($1,159).
Increases: Borrowings from the Public;
Held by the Public: Principal (Note 2): $4,596,053;
Held by the Public: Accrued Interest Payable: [Empty];
Held by the Public: Net Unamortized: ($48,776);
Intragovernmental Debt Holdings: Principal (Note 3): [Empty];
Intragovernmental Debt Holdings: Accrued Interest Payable: [Empty];
Intragovernmental Debt Holdings: Net Unauthorized Premiums:
(Discounts): [Empty].
Increases: Net Increase in Intragovernmental Debt Holdings;
Held by the Public: Principal (Note 2): [Empty];
Held by the Public: Accrued Interest Payable: [Empty];
Held by the Public: Net Unamortized: [Empty];
Intragovernmental Debt Holdings: Principal (Note 3): $294,495;
Intragovernmental Debt Holdings: Accrued Interest Payable: [Empty];
Intragovernmental Debt Holdings: Net Unauthorized Premiums:
(Discounts): $6,005.
Increases: Accrued Interest (Note 4);
Held by the Public: Principal (Note 2): [Empty];
Held by the Public: Accrued Interest Payable: $189,396;
Held by the Public: Net Unamortized: [Empty];
Intragovernmental Debt Holdings: Principal (Note 3): [Empty];
Intragovernmental Debt Holdings: Accrued Interest Payable: $192,560;
Intragovernmental Debt Holdings: Net Unauthorized Premiums:
(Discounts): [Empty].
Total Increases;
Held by the Public: Principal (Note 2): $4,596,053;
Held by the Public: Accrued Interest Payable: $189,396;
Held by the Public: Net Unamortized: ($48,776);
Intragovernmental Debt Holdings: Principal (Note 3): $294,495;
Intragovernmental Debt Holdings: Accrued Interest Payable: $195,445;
Intragovernmental Debt Holdings: Net Unauthorized Premiums:
(Discounts): $6,005.
Decreases: Repayments of Debt Held by the Public;
Held by the Public: Principal (Note 2): $4,389,869;
Held by the Public: Accrued Interest Payable: $[Empty];
Held by the Public: Net Unamortized: $[Empty];
Intragovernmental Debt Holdings: Principal (Note 3): $[Empty];
Intragovernmental Debt Holdings: Accrued Interest Payable: $[Empty];
Intragovernmental Debt Holdings: Net Unauthorized Premiums:
(Discounts): [Empty].
Decreases: Interest Paid;
Held by the Public: Principal (Note 2): [Empty];
Held by the Public: Accrued Interest Payable: $186,129;
Held by the Public: Net Unamortized: [Empty];
Intragovernmental Debt Holdings: Principal (Note 3): [Empty];
Intragovernmental Debt Holdings: Accrued Interest Payable: $192,560;
Intragovernmental Debt Holdings: Net Unauthorized Premiums:
(Discounts): [Empty].
Decreases: Net Amortization;
Held by the Public: Principal (Note 2): [Empty];
Held by the Public: Accrued Interest Payable: [Empty];
Held by the Public: Net Unamortized: [Empty];
Intragovernmental Debt Holdings: Principal (Note 3): ($49,500);
Intragovernmental Debt Holdings: Accrued Interest Payable: [Empty];
Intragovernmental Debt Holdings: Net Unauthorized Premiums:
(Discounts): $1,116.
Total Decreases;
Held by the Public: Principal (Note 2): $4,389,869;
Held by the Public: Accrued Interest Payable: $186,129;
Held by the Public: Net Unamortized: ($49,500);
Intragovernmental Debt Holdings: Principal (Note 3): $0;
Intragovernmental Debt Holdings: Accrued Interest Payable: $192,560;
Intragovernmental Debt Holdings: Net Unauthorized Premiums:
(Discounts): $1,116.
Balance as of September 30, 2007;
Held by the Public: Principal (Note 2): $5,049,305;
Held by the Public: Accrued Interest Payable: $44,386;
Held by the Public: Net Unamortized: ($39,441);
Intragovernmental Debt Holdings: Principal (Note 3): $3,944,348;
Intragovernmental Debt Holdings: Accrued Interest Payable: $48,611;
Intragovernmental Debt Holdings: Net Unauthorized Premiums:
(Discounts): $3,730.
Increases: Borrowings from the Public;
Held by the Public: Principal (Note 2): $5,645,014;
Held by the Public: Accrued Interest Payable: [Empty];
Held by the Public: Net Unamortized: [Empty];
Intragovernmental Debt Holdings: Principal (Note 3): (29,192);
Intragovernmental Debt Holdings: Accrued Interest Payable: [Empty];
Intragovernmental Debt Holdings: Net Unauthorized Premiums:
(Discounts): [Empty].
Increases: Net Increase in Intragovernmental Debt Holdings;
Held by the Public: Principal (Note 2): [Empty];
Held by the Public: Accrued Interest Payable: [Empty];
Held by the Public: Net Unamortized: [Empty];
Intragovernmental Debt Holdings: Principal (Note 3): $257,656;
Intragovernmental Debt Holdings: Accrued Interest Payable: [Empty];
Intragovernmental Debt Holdings: Net Unauthorized Premiums:
(Discounts): $30,342.
Increases: Accrued Interest (Note 4);
Held by the Public: Principal (Note 2): [Empty];
Held by the Public: Accrued Interest Payable: $209,068;
Held by the Public: Net Unamortized: [Empty];
Intragovernmental Debt Holdings: Principal (Note 3): [Empty];
Intragovernmental Debt Holdings: Accrued Interest Payable: $213,943;
Intragovernmental Debt Holdings: Net Unauthorized Premiums:
(Discounts): [Empty].
Total Increases;
Held by the Public: Principal (Note 2): $5,645,014;
Held by the Public: Accrued Interest Payable: $209,068;
Held by the Public: Net Unamortized: ($29,192);
Intragovernmental Debt Holdings: Principal (Note 3): $257,656;
Intragovernmental Debt Holdings: Accrued Interest Payable: $213,943;
Intragovernmental Debt Holdings: Net Unauthorized Premiums:
(Discounts): $30,342.
Decreases: Repayments of Debt Held by the Public;
Held by the Public: Principal (Note 2): $4,884,627;
Held by the Public: Accrued Interest Payable: [Empty];
Held by the Public: Net Unamortized: [Empty];
Intragovernmental Debt Holdings: Principal (Note 3): [Empty];
Intragovernmental Debt Holdings: Accrued Interest Payable: [Empty];
Intragovernmental Debt Holdings: Net Unauthorized Premiums:
(Discounts): [Empty].
Decreases: Interest Paid;
Held by the Public: Principal (Note 2): [Empty];
Held by the Public: Accrued Interest Payable: $213,327;
Held by the Public: Net Unamortized: [Empty];
Intragovernmental Debt Holdings: Principal (Note 3): [Empty];
Intragovernmental Debt Holdings: Accrued Interest Payable: $212,161;
Intragovernmental Debt Holdings: Net Unauthorized Premiums:
(Discounts): [Empty].
Decreases: Net Amortization (Note 4);
Held by the Public: Principal (Note 2): [Empty];
Held by the Public: Accrued Interest Payable: [Empty];
Held by the Public: Net Unamortized: (32,509)$;
Intragovernmental Debt Holdings: Principal (Note 3): [Empty];
Intragovernmental Debt Holdings: Accrued Interest Payable: [Empty];
Intragovernmental Debt Holdings: Net Unauthorized Premiums:
(Discounts): $1,505.
Total Decreases;
Held by the Public: Principal (Note 2): $4,885,627;
Held by the Public: Accrued Interest Payable: $213,327;
Held by the Public: Net Unamortized: ($32,509);
Intragovernmental Debt Holdings: Principal (Note 3): $0;
Intragovernmental Debt Holdings: Accrued Interest Payable: $212,161;
Intragovernmental Debt Holdings: Net Unauthorized Premiums:
(Discounts): $1,505.
Balance as of September 30, 2008;
Held by the Public: Principal (Note 2): $5,808,692;
Held by the Public: Accrued Interest Payable: $40,127;
Held by the Public: Net Unamortized: ($36,124);
Intragovernmental Debt Holdings: Principal (Note 3): $4,202,004;
Intragovernmental Debt Holdings: Accrued Interest Payable: $50,393;
Intragovernmental Debt Holdings: Net Unauthorized Premiums:
(Discounts): $32,567.
[End of table]
[End of section]
Notes to the Schedules of Federal Debt:
Managed by the Bureau of the Public Debt:
For the Fiscal Years Ended September 30, 2008 and 2007:
(Dollars in Millions):
Note 1. Significant Accounting Policies:
Basis of Presentation:
The Schedules of Federal Debt Managed by the Bureau of the Public Debt
(BPD) have been prepared to report fiscal year 2008 and fiscal year
2007 balances and activity relating to monies borrowed from the public
and certain federal government accounts under Title 31 U.S.C. § 3101 to
fund the U.S. government's operations. Permanent, indefinite
appropriations are available for the payment of interest on the federal
debt and the redemption of Treasury securities.
Reporting Entity:
The Constitution empowers the Congress to borrow money on the credit of
the United States. The Congress has authorized the Secretary of the
Treasury to borrow monies to operate the federal government within a
statutory debt limit. Title 31 U.S.C. authorizes Treasury to prescribe
the debt instruments and otherwise limit and restrict the amount and
composition of the debt. BPD, an organizational entity within the
Fiscal Service of the Department of the Treasury, is responsible for
issuing Treasury securities in accordance with such authority and to
account for the resulting debt. In addition, BPD has been given the
responsibility to issue Treasury securities to trust funds for trust
fund receipts not needed for current benefits and expenses. BPD issues
and redeems Treasury securities for the trust funds based on data
provided by program agencies and other Treasury entities. BPD also
issues other specific securities outside of the authority of Title 31
U.S.C. §3101, such as HOPE Bonds. These securities are not reported
on the Schedules of Federal Debt Managed by the Bureau of the Public
Debt.
Basis of Accounting:
The schedules were prepared in conformity with U.S. generally accepted
accounting principles and from BPD's automated accounting system,
Public Debt Accounting and Reporting System. Interest costs are
recorded as expenses when incurred, instead of when paid. Certain
Treasury securities are issued at a discount or premium. These
discounts and premiums are amortized over the term of the security
using an interest method for all long term securities and the straight
line method for short term securities. The Department of the Treasury
also issues Treasury Inflation-Protected Securities (TIPS). The
principal for TIPS is adjusted daily over the life of the security
based on the Consumer Price Index for all Urban Consumers.
Note 2. Federal Debt Held by the Public:
Table: As of September 30, 2008 and 2007, Federal Debt Held by the
Public consisted of the following:
Marketable: Treasury Bills;
2008: Amount: $1,484,332;
2008: Average Interest Rates: 1.6%;
2007: Amount: $954,607;
2008: Average Interest Rates: 4.6%.
Marketable: Treasury Notes;
2008: Amount: $2,623,364;
2008: Average Interest Rates: 4.1%;
2007: Amount: $2,456,100;
2008: Average Interest Rates: 4.4%.
Marketable: Treasury Bonds;
2008: Amount: $578,504;
2008: Average Interest Rates: 7.1%;
2007: Amount: $560,922;
2008: Average Interest Rates: 7.4%.
Marketable: TIPS;
2008: Amount: $523,951;
2008: Average Interest Rates: 2.0%;
2007: Amount: $456,776;
2008: Average Interest Rates: 2.3%.
Total Marketable;
2008: Amount: $5,210,151;
2008: Average Interest Rates: [Empty];
2007: Amount: $4,428,405;
2008: Average Interest Rates: [Empty].
Nonmarketable;
Marketable: Treasury Bills;
2008: Amount: $598,541;
2008: Average Interest Rates: 4.1%;
2007: Amount: $620,900;
2008: Average Interest Rates: 4.9%.
Total Federal Debt Held by the Public;
Marketable: Treasury Bills;
2008: Amount: $5,808,692;
2008: Average Interest Rates: [Empty];
2007: Amount: $5,049,305;
2008: Average Interest Rates: [Empty].
{End of table]
Treasury issues marketable bills at a discount and pays the par amount
of the security upon maturity. The average interest rate on Treasury
bills represents the original issue effective yield on securities
outstanding as of September 30, 2008 and 2007, respectively. Treasury
bills are issued with a term of one year or less.
Treasury issues marketable notes and bonds as long-term securities that
pay semi-annual interest based on the securities' stated interest rate.
These securities are issued at either par value or at an amount that
reflects a discount or a premium. The average interest rate on
marketable notes and bonds represents the stated interest rate adjusted
by any discount or premium on securities outstanding as of September
30, 2008 and 2007. Treasury notes are issued with a term of 2 – 10
years and Treasury bonds are issued with a term of more than 10 years.
Treasury also issues TIPS that have interest and redemption payments,
which are tied to the Consumer Price Index, a widely used measure of
inflation. TIPS are issued with a term of 5 years or more. At maturity,
TIPS are redeemed at the inflation-adjusted principal amount, or the
original par value, whichever is greater. TIPS pay a semi-annual fixed
rate of interest applied to the inflation-adjusted principal. The TIPS
Federal Debt Held by the Public inflation-adjusted principal balance
includes inflation of $72,930 million and $50,517 million as of
September 30, 2008 and 2007, 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, 2008, the FRB owned $221 billion,
net of $256 billion in securities lent to dealers, for total holdings
of $477 billion. As of September 30, 2007, the FRB owned $775 billion,
net of $5 billion in securities lent to dealers, for total holdings of
$780 billion. These securities are held in the FRB System Open
Market Account (SOMA) for the purpose of conducting monetary policy.
Treasury issues nonmarketable securities at either par value or at an
amount that reflects a discount or a premium. The average interest rate
on the nonmarketable securities represents the original issue weighted
effective yield on securities outstanding as of September 30, 2008 and
2007. Nonmarketable securities are issued with a term of on
demand to more than 10 years.
Table: As of September 30, 2008 and 2007, nonmarketable securities
consisted of the following:
Domestic Series;
2008: $29,995;
2007: $29,995.
Foreign Series;
2008: $2,986;
2007: $2,986.
R.E.A. Series;
2008: 1;
2007: 1.
State and Local Government Series;
2008: $260,238;
2007: $296,513.
United States Savings Securities;
2008: $194,253;
2007: $197,171.
Government Account Series;
2008: $107,498;
2007: $88,153.
Other;
2008: $3,570;
2007: $6,081.
Total Nonmarketable;
2008: $598,541;
2007: $620,900.
[End of table]
Government Account Series (GAS) securities are nonmarketable securities
issued to federal government accounts. Federal Debt Held by the Public
includes GAS securities issued to certain federal government accounts.
One example is the GAS securities held by the Government Securities
Investment Fund (G-Fund) of the federal employees’ Thrift Savings Plan.
Federal employees and retirees who have individual accounts own the GAS
securities held by the fund. For this reason, these securities are
considered part of the Federal Debt Held by the Public rather than
Intragovernmental Debt Holdings. The GAS securities held by the G-Fund
consist of overnight investments redeemed one business day after their
issue. The net increase in amounts borrowed from the fund during fiscal
years 2008 and 2007 are included in the respective Borrowings from the
Public amounts reported on the Schedules of Federal Debt.
Fiscal year-end September 30, 2007 occurred on a Sunday. As a result,
$26,591 million of marketable Treasury notes matured but not repaid
were included in the balance of the total Federal Debt Held by the
Public as of September 30, 2007. Settlement of these debt repayments
occurred on Monday, October 1, 2007.
As of September 30, 2008 and 2007, Intragovernmental Debt Holdings are
owed to the following:
Table:
SSA: Federal Old-Age and Survivors Insurance Trust Fund;
2008: $2,150,651;
2007: $1,968,262.
OPM: Civil Service Retirement and Disability Fund;
2008: $714,850;
2007: $687,665.
HHS: Federal Hospital Insurance Trust Fund;
2008: $318,741;
2007: $319,377.
SSA: Federal Disability Insurance Trust Fund;
2008: $216,487;
2007: $213,830.
DOD: Military Retirement Fund;
2008: $215,949;
2007: $190,232.
DOD: DOD Medicare-Eligible Retiree Health Care Fund;
2008: $112,726;
2007: $92,191.
DOL: Unemployment Trust Fund;
2008: $72,432;
2007: $74,923.
HHS: Federal Supplementary Medical Insurance Trust Fund;
2008: $59,090;
2007: $39,248.
DOE: Nuclear Waste Disposal Fund;
2008: $42,570;
2007: $39,435.
OPM: Employees Life Insurance Fund;
2008: $34,397;
2007: $32,965.
OPM: Postal Service Retiree Health Benefits Fund;
2008: $32,294;
2007: $25,491.
FDIC: The Deposit Insurance Fund;
2008: $29,937;
2007: $47,515.
DOL: Pension Benefit Guaranty Corporation;
2008: $22,367*;
35,775.
HUD: FHA – Liquidating Account;
2008: $19,085;
2007: $22,405.
Treasury: Exchange Stabilization Fund;
2008: $16,847;
2007: $16,436.
OPM: Employees Health Benefits Fund;
2008: $15,563;
2007: $15,890.
DOS: Foreign Service Retirement and Disability Fund;
2008: $14,855;
2007: $14,378.
DOT: Highway Trust Fund;
2008: $12,811;
2007: $12,205.
Other Programs and Funds;
2008: $100,352;
2007: $96,125.
Total Intragovernmental Debt Holdings;
2008: $4,202,004;
2007: $3,944,348.
* This amount includes $5,580 million of marketable Treasury securities
as well as $16,787 million of GAS securities.
[End of table]
Social Security Administration (SSA); Office of Personnel Management
(OPM); Department of Health and Human Services (HHS); Department of
Defense (DOD); Department of Labor (DOL); Department of Energy (DOE);
Federal Deposit Insurance Corporation (FDIC); Department of Housing and
Urban Development (HUD); Department of the Treasury (Treasury);
Department of State (DOS); Department of Transportation (DOT).
Intragovernmental Debt Holdings primarily consist of GAS securities.
Treasury issues GAS securities at either par value or at an amount that
reflects a discount or a premium. The average interest rates for fiscal
years 2008 and 2007 were 4.8 and 5.1 percent, respectively. The average
interest rate represents the original issue weighted effective yield on
securities outstanding as of September 30, 2008 and 2007. GAS
securities are issued with a term of on demand to 30 years. GAS
securities include TIPS, which are reported at an inflation-adjusted
principal balance using the Consumer Price Index. As of September 30,
2008 and 2007, the inflation-adjusted principal balance included
inflation of $54,776 million and $28,643 million, respectively.
Fiscal year-ended September 30, 2007 occurred on a Sunday. As a result,
$53 million of GAS securities held by Federal Agencies matured but not
repaid were included in the balance of the Intragovernmental Debt
Holdings as of September 30, 2007. Settlement of these debt repayments
occurred on Monday, October 1, 2007.
Note 4. Interest Expense:
Table: Interest expense on Federal Debt Managed by BPD for fiscal years
2008 and 2007 consisted of the following:
Federal Debt Held by the Public: Accrued Interest;
2008: $209,068;
2007: $189,396.
Federal Debt Held by the Public: Net Amortization of Premiums and
Discounts;
2008: $32,509;
2008: $49,500.
Total Interest Expense on Federal Debt Held by the Public;
2008: $241,577;
2008: $238,896.
Intragovernmental Debt Holdings: Accrued Interest;
2008: $213,943;
2008: $195,445.
Intragovernmental Debt Holdings: Net Amortization of Premiums and
Discounts;
2008: ($1,505);
2008: ($1,116).
Total Interest Expense on Intragovernmental Debt Holdings;
2008: $212,438;
2008: $194,329.
Total Interest Expense on Federal Debt Managed by BPD;
2008: $454,015;
2008: $433,225.
[End of table]
The valuation of TIPS is adjusted daily over the life of the security
based on the Consumer Price Index for all Urban Consumers. This daily
adjustment is an interest expense for the Bureau of the Public Debt.
Accrued interest on Federal Debt Held by the Public includes inflation
adjustments of $26,982 million and $10,276 million for fiscal
years 2008 and 2007, respectively. Accrued interest on
Intragovernmental Debt Holdings includes inflation adjustments of
$14,479 million and $378 million for fiscal years 2008 and 2007,
respectively.
Table: Note 5. Fund Balance With Treasury:
Appropriated Funds Obligated;
As of September 30, 2008: $168;
As of September 30, 2007: $156.
[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 Event
In order to address funding needs posed by the Emergency Economic
Stabilization Act of 2008 enacted into law on
October 3, 2008, issuances of marketable securities will continue to
increase. This act increased the statutory debt
limit by $700 billion to $11,315 billion.
[End of section]
Appendix I: Comments from the Bureau of the Public Debt:
Department Of The Treasury:
Bureau Of The Public Debt:
Washington, Dc 20239-000:
[hyperlink, http://www.treasurydirect.gov]:
November 6, 2008:
Mr. Gary T. Engel:
Director, Financial Management and Assurance:
Government Accountability Office:
441 G Street, N.W.:
Washington, DC 20548:
Dear Mr. Engel:
This letter is our response to your audit of the Schedules of Federal
Debt Managed by the Bureau of the Public Debt for the fiscal years
ended September 30, 2008 and 2007. We agree with your audit report's
conclusions.
We appreciate the knowledge and experience displayed by your audit team
as we finalize the twelfth consecutive year of our professional
relationship. This year has been unusually challenging with the shift
in economic and policy changes, but we were able to work in
collaboration with your audit team to achieve positive results. We
would like to thank you and your staff for your efficiency and
timeliness as we face more stringent audit requirements. Through
combined efforts, the usability of these reports continues to grow and
we look forward to continuing this productive and successful
relationship.
Sincerely,
Signed by:
Van Zeck:
Commissioner:
[End of section]
Appendix II: GAO Contact and Staff Acknowledgments:
Gary T. Engel, (202) 512-3406, engelg@gao.gov:
In addition to the individual named above, Dawn B. Simpson, Assistant
Director; Dean D. Carpenter; Dennis L. Clarke; Chau L. Dinh; Michael T.
Grimes; Natasha F. Guerra; J. Andrew Long; Megan J. Maisel; Nicole M.
McGuire; Richard P. McLean; Jay R. McTigue; Stephanie A. Miller; and
David L. Yoder made key contributions to this report.
[End of section]
Footnotes:
[1] Intragovernmental Debt Holdings represent federal debt issued by
Treasury and held by certain federal government accounts, such as the
Social Security and Medicare trust funds.
[2] Cash management bills are short-term securities that are issued on
variable terms, often maturing within a few days of issuance. These
securities do not have a regular issuance schedule, but instead are
issued to meet any short-term cash needs as determined by Treasury.
[3] See GAO, Our Nation's Fiscal Outlook: The Federal Government's Long-
Term Budget Imbalance, [hyperlink,
http://www.gao.gov/special.pubs/longterm].
[4] 31 U.S.C. § 331(e).
[5] Intragovernmental debt holdings represent federal debt issued by
Treasury and held by certain federal government accounts, such as the
Social Security and Medicare trust funds.
[6] A significant deficiency is a control deficiency, or combination of
control deficiencies, that adversely affects the entity's ability to
initiate, authorize, record, process, or report financial data reliably
in accordance with U.S. generally accepted accounting principles such
that there is more than a remote likelihood that a misstatement of the
entity's financial statements that is more than inconsequential will
not be prevented or detected. A control deficiency exists when the
design or operation of a control does not allow management or employees
in the normal course of performing their assigned functions to prevent
or detect misstatements on a timely basis.
[7] Federal debt outstanding reported here differs from the amount
reported in the Financial Report of the United States Government
because of the securities not maintained or reported by the bureau and
which are issued by the Federal Financing Bank and other specific
securities issued outside of the authority of Title 31 U.S.C. § 3101.
[8] Callable securities mature between fiscal years 2014 and 2015, and
are reported by their call date.
[9] 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.
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