GAO

United States General Accounting Office

Report to the Secretary of the Treasury

March 2001 FINANCIAL AUDIT

Bureau of the Public 

Debt’s Fiscal Years 

2000 and 1999 

Schedules of Federal 

Debt

GAO-01-389

Page 1 GAO-01-389 Schedules of Federal Debt

Contents

Letter 3

Auditor’s Report 7

Overview, Schedules, 

and Notes

12

Overview on Federal Debt Managed by the Bureau of the Public Debt 12

Schedules of Federal Debt 18

Notes to the Schedules of Federal Debt 19

Appendixes Appendix I: Comments From the Bureau of the Public Debt 26

Appendix II: GAO Contact and Staff Acknowledgments 27

Abbreviations

BPD Bureau of the Public Debt

OMB Office of Management and Budget
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Page 3 GAO-01-389 Schedules of Federal Debt

United States General Accounting Office

Washington, D.C. 20548

Comptroller General

of the United States

Letr

March 1, 2001

The Honorable Paul H. O’Neill 

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, 2000 and 1999. 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 Holdings, (2) the related Accrued Interest Payables, and 

(3) the related Net Unamortized Discounts and Premiums managed by the 

bureau.1

The auditor’s report contains our (1) opinion on the Schedules of Federal 

Debt for the fiscal years ended September 30, 2000 and 1999, (2) opinion on 

the effectiveness of related internal control as of September 30, 2000, 

(3) conclusion on the bureau’s compliance in fiscal year 2000 with a 

selected provision of a significant law we tested, and (4) conclusion on the 

consistency between information in the Schedules of Federal Debt and the 

Overview on Federal Debt Managed by the Bureau of the Public Debt.

As of September 30, 2000 and 1999, federal debt managed by the bureau 

totaled about $5,659 billion and $5,641 billion, respectively, for moneys 

borrowed to fund the government’s operations. These balances consisted 

of approximately (1) $3,439 billion as of September 30, 2000, and $3,668 

billion as of September 30, 1999, of debt held by the public and about 

(2) $2,220 billion as of September 30, 2000, and $1,973 billion as of 

September 30, 1999, of intragovernmental holdings.

The level of debt held by the public reflects how much of the nation’s 

wealth has been absorbed by the federal government to finance prior 

federal spending in excess of revenues. It best represents the cumulative 

effect of past federal borrowing on today’s economy and the federal 

1

Intragovernmental Holdings represent federal debt issued by Treasury and held by certain 

federal government accounts, such as the Social Security and Medicare trust funds. 
Page 4 GAO-01-389 Schedules of Federal Debt

budget. When an actual budget surplus occurs, the annual excess funds are 

then used to reduce debt held by the public. In other words, actual deficits 

or surpluses generally approximate the annual net change in the amount of 

government borrowing from the public. 

As we recently reported in our Performance and Accountability Series,2

budget surpluses over the past 3 years have resulted in Treasury reducing 

debt held by the public. Treasury has reduced this debt by redeeming 

maturing debt, reducing the number of auctions and size of new debt 

issues, eliminating the 3-year note, conducting “buybacks” of debt before 

its maturity date, and redeeming callable securities when the opportunities 

arose.3

 As a result of Treasury’s actions, debt held by the public and 

managed by the Bureau of the Public Debt, has been reduced by 

approximately $376 billion since September 30, 1997, with about 

$229 billion of this decrease occurring in fiscal year 2000. 

Intragovernmental holdings represent balances of Treasury securities held 

by individual funds, primarily trust funds, 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. These securities are nonmarketable, 

however, they represent a priority call on future budgetary resources. 

Certain of these trust funds such as the Social Security and federal civilian 

employee and military retirement trust funds, have been running annual 

surpluses, which are loaned to the Treasury and reduce the current need 

for the government to borrow from the public. Primarily as a result of such 

trust fund surpluses, intragovernmental holdings have increased by 

approximately $637 billion since September 30, 1997, with about 

$247 billion of this increase occurring in fiscal year 2000. 

The transactions relating to the use of the funds’ surpluses net out on the 

government’s consolidated financial statements because, in effect, they 

represent loans from one part of the government to another. Importantly, 

these intragovernmental holdings also constitute future obligations of the 

Treasury since the Treasury must provide cash to redeem these securities 

2

Major Management Challenges and Program Risks: Department of the Treasury (GAO-01-

254, January 2001).

3

On January 31, 2001, Treasury announced that it is eliminating the 52-week bill.
Page 5 GAO-01-389 Schedules of Federal Debt

in order for the funds to pay their benefits or other obligations as they 

come due. When this occurs, the government must fund these redemptions 

through some combination of reduced future surpluses, if available; lower 

relative spending for federal programs; higher relative taxes; and/or greater 

relative borrowing from the public. 

Debt held by the public and intragovernmental holdings are very different. 

Debt held by the public approximates the federal government’s competition 

with other sectors in the credit markets. This competition affects current 

interest rates and private capital accumulation. In addition, interest on debt 

held by the public is a current burden on taxpayers. In contrast, 

intragovernmental holdings perform an accounting function but typically 

do not constitute the government’s total future commitment to trust fund 

financed programs. They primarily represent the cumulative annual 

surpluses of those trust funds and also reflect future claims on the U.S. 

Treasury. They do not have the current economic effects of borrowing from 

the public and do not currently compete with the private sector for 

available funds in the credit markets. However, when trust funds redeem 

Treasury securities to obtain cash to fund expenditures, they compete with 

the private sector and thus have an effect on the economy. 

Even after 3 years of budgetary surpluses, debt held by the public stands at 

about $3.4 trillion, or 35 percent of the annual size of the U.S. economy, a 

level that the United States rarely exceeded before 1940. However, the 

projected surpluses, if they materialize and depending on how much is 

saved, could lead to a dramatic reduction in or potential elimination of debt 

held by the public. Over the longer term, the retirement of the baby boom 

generation will place significant pressures on the federal budget. These 

pressures—including, for example, increasing demand for health 

services—will require reform of existing entitlement programs and/or other 

policy actions to prevent debt held by the public from dramatically rising 

again in future decades. 

We are sending copies of this report to Senator Max Baucus, Senator 

Robert Byrd, Senator Ben Nighthorse Campbell, Senator Kent Conrad, 

Senator Pete Domenici, Senator Byron Dorgan, Senator Charles Grassley, 

Senator Joseph Lieberman, Senator Ted Stevens, Senator Fred Thompson, 

and to Representative Dan Burton, Representative Stephen Horn, 

Representative Steny Hoyer, Representative Ernest Istook, Representative 

Jim Nussle, Representative David Obey, Representative Charles Rangel, 

Representative Janice Schakowsky, Representative John Spratt, 

Representative William Thomas, Representative Henry Waxman, and 
Page 6 GAO-01-389 Schedules of Federal Debt

Representative C.W. Bill Young in their capacities as Chairmen, Ranking 

Members, or Ranking Minority Members of Senate or House Committees 

and Subcommittees. We are also sending copies of this report to Van Zeck, 

Commissioner, Bureau of the Public Debt; the Honorable Jeffrey Rush, Jr., 

Inspector General, Department of the Treasury; the Honorable Mitchell 

Daniels, Jr., Director, Office of Management and Budget; and other agency 

officials. Copies will be made available to others upon request.

If I can be of further assistance, please call me at (202) 512-5500. This 

report was prepared under the direction of Gary T. Engel, Director, 

Financial Management and Assurance. Should you or members of your 

staff have any questions concerning this report, please contact Mr. Engel at 

(202) 512-3406. Another key contact and staff acknowledgments are in 

appendix II.

Sincerely yours,

David M. Walker

Comptroller General

of the United States
Page 7 GAO-01-389 Schedules of Federal Debt

United States General Accounting Office

Washington, D.C. 20548

Comptroller General

of the United States

AudtRosir’eport

To the Commissioner of the Bureau of the Public Debt 

In connection with fulfilling our requirement to audit the financial 

statements of the U.S. government, we audited the Schedules of Federal 

Debt Managed by the Bureau of the Public Debt (BPD) because of the 

significance of the federal debt on the federal government’s financial 

statements.1

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, 

2000 and 1999. 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 Holdings, (2) the related 

Accrued Interest Payables, and (3) the related Net Unamortized Discounts 

and Premiums managed by BPD.2

In our audits of the Schedules of Federal Debt for the fiscal years ended 

September 30, 2000 and 1999, we found 

• the Schedules of Federal Debt are presented fairly, in all material 

respects, in conformity with generally accepted accounting principles; 

• BPD had effective internal control over financial reporting (including 

safeguarding assets) and compliance with laws and regulations related 

to the Schedule of Federal Debt for the fiscal year ended September 30, 

2000; and

• no reportable noncompliance in fiscal year 2000 with a selected 

provision of a law we tested. 

The following sections discuss, in more detail, (1) these conclusions and 

our conclusion on the Overview on Federal Debt Managed by the Bureau of 

the Public Debt and (2) the scope of our audits.

1

31 U.S.C. 331(e) (1994).

2

Intragovernmental Holdings represent federal debt issued by Treasury and held by certain 

federal government accounts, such as the Social Security and Medicare trust funds.
Page 8 GAO-01-389 Schedules of Federal Debt

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, 2000, 1999, and 

1998, for Federal Debt Managed by BPD; the related Accrued Interest 

Payables and Net Unamortized Discounts and Premiums; and the related 

increases and decreases for the fiscal years ended September 30, 2000 and 

1999. 

Opinion on Internal 

Control

BPD maintained, in all material respects, effective internal control relevant 

to the Schedule of Federal Debt related to financial reporting (including 

safeguarding assets) and compliance with applicable laws and regulations 

as of September 30, 2000. The internal control provided reasonable 

assurance that misstatements, losses, or noncompliance material in 

relation to the Schedule of Federal Debt for the fiscal year ended 

September 30, 2000, would be prevented or detected on a timely basis. 

Management asserted that its internal control is effective based on criteria 

established under 31 U.S.C. 3512 (Federal Managers’ Financial Integrity 

Act) and the Office of Management and Budget (OMB) Circular A-123, 

Management Accountability and Control.

We found matters involving computer controls that we do not consider to 

be reportable conditions.3

 We will communicate these matters to BPD’s 

management, along with our recommendations for improvement, in a 

separate report to be issued at a later date. 

Compliance With Laws 

and Regulations 

Our tests for compliance in fiscal year 2000 with Statutory Debt Limits, 31 

U.S.C. 3101(b), as amended, disclosed no instances of noncompliance that 

would be reportable under U.S. generally accepted government auditing 

standards or OMB audit guidance. However, the objective of our audit of 

the Schedule of Federal Debt for the fiscal year ended September 30, 2000, 

was not to provide an opinion on overall compliance with laws and 

regulations. Accordingly, we do not express such an opinion. 

3

Reportable conditions are matters coming to our attention that, in our judgment, should be 

communicated because they represent significant deficiencies in the design or operation of 

internal control, which could adversely affect the organization’s ability to meet the internal 

control objectives described in the report.
Page 9 GAO-01-389 Schedules of Federal Debt

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. Based on this limited work, we found no material 

inconsistencies with the schedules. 

Objectives, Scope, and 

Methodology

Management is responsible for 

• preparing the Schedules of Federal Debt in conformity with U.S. 

generally accepted accounting principles;

• 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

• 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 generally accepted accounting principles and 

(2) management maintained effective related internal control as of 

September 30, 2000, the objectives of which are the following: 

• 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, 2000, in conformity with 

generally accepted accounting principles, and assets, as reflected in 

note 5 to the Schedules of Federal Debt, are safeguarded against loss 

from unauthorized acquisition, use, or disposition. 

• Compliance with laws and regulations: Transactions related to the 

Schedule of Federal Debt for the fiscal year ended September 30, 2000, 

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 Schedules of Federal Debt and any other laws, 

regulations, and governmentwide policies identified by OMB audit 

guidance. 

We are also responsible for testing compliance with selected provisions of 

laws and regulations that have a direct and material effect on the Schedule 

of Federal Debt. Further, we are responsible for performing limited 
Page 10 GAO-01-389 Schedules of Federal Debt

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 significant estimates made 

by management;

• evaluated the overall presentation of the Schedules of Federal Debt;

• obtained an understanding of internal control relevant to the Schedule 

of Federal Debt for the fiscal year ended September 30, 2000, related to 

financial reporting (including safeguarding assets as reflected in note 5 

to the schedules) and compliance with laws and regulations (including 

execution of transactions in accordance with budget authority);

• tested relevant internal controls over financial reporting (including 

safeguarding assets as reflected in note 5 to the schedules) and 

compliance, and evaluated the design and operating effectiveness of 

internal control related to the Schedule of Federal Debt for the fiscal 

year ended September 30, 2000;

• considered 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 2000 with Statutory Debt Limits, 31 

U.S.C. 3101(b), as amended.

We did not evaluate all internal controls relevant to operating objectives as 

broadly described 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 selected provisions of laws and 

regulations that have a direct and material effect on the Schedule of 

Federal Debt. We caution that noncompliance may occur and not be 
Page 11 GAO-01-389 Schedules of Federal Debt

detected by these tests and that such testing may not be sufficient for other 

purposes.

We performed our work 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 facts and 

conclusions in our report. The comments are reprinted in appendix I.

David M. Walker

Comptroller General

of the United States

January 31, 2001
Page 12 GAO-01-389 Schedules of Federal Debt

Overview, Schedules, and Notes

Overview on Federal Debt Managed by the Bureau of the Public Debt
Overview, Schedules, and Notes

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Overview, Schedules, and Notes

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Overview, Schedules, and Notes

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Overview, Schedules, and Notes

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Overview, Schedules, and Notes

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Overview, Schedules, and Notes

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Schedules of Federal Debt
Overview, Schedules, and Notes

Page 19 GAO-01-389 Schedules of Federal Debt

Notes to the Schedules of Federal Debt
Overview, Schedules, and Notes

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Overview, Schedules, and Notes

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Overview, Schedules, and Notes

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Overview, Schedules, and Notes

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Overview, Schedules, and Notes

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Appendix I

Comments From the Bureau of the Public Apendxies

Debt ApendxiI
Page 27 GAO-01-389 Schedules of Federal Debt

Appendix II

GAO Contact and Staff Acknowledgments ApendxiI

GAO Contact Louise DiBenedetto, (202) 512-6921

Acknowledgments In addition to the individual named above, Paul F. Foderaro, Dawn B. 

Simpson, Dean D. Carpenter, Chau L. Dinh, Carolyn A. Frye, and 

LaShawnda K. Wilson made key contributions to this report.

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