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2009 and 2008 Schedules of Federal Debt' which was released on November 
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United States Government Accountability Office: 
GAO: 

Report to the Secretary of the Treasury: 

November 2009: 

Financial Audit: 

Bureau of the Public Debt’s Fiscal Years 2009 and 2008 Schedules of 
Federal Debt: 

GAO-10-88: 

GAO Highlights: 

Highlights of GAO-10-88, a report to the Secretary of the Treasury. 

Why GAO Did This Study: 

GAO is required to audit the consolidated financial statements of the 
U.S. government. Because of the significance of the federal debt held 
by the public to the governmentwide financial statements, GAO audits 
the Bureau of the Public Debt’s (BPD) Schedules of Federal Debt 
annually. 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 over financial 
reporting relevant to the Schedule of Federal Debt. Further, GAO tests 
compliance with a significant provision of law related to the Schedule 
of Federal Debt (statutory debt limit). 

Federal debt managed by BPD consists of Treasury securities held by the 
public and by certain federal government accounts, referred to as 
intragovernmental debt holdings. 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 2009 
and 2008 were fairly presented in all material respects, and BPD 
maintained effective internal control over financial reporting relevant 
to the Schedule of Federal Debt as of September 30, 2009. GAO found no 
instances of noncompliance in fiscal year 2009 with the statutory debt 
limit. 

As of September 30, 2009 and 2008, federal debt managed by BPD totaled 
about $11,898 billion and $10,011 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 39, 2005-2009) (Dollars in billions) 

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

As of September 30, 2005: 
Intragovernmental holdings: $3,317; 
Held by the public: $4,601; 
Total: $7,918. 

As of September 30, 2006: 
Intragovernmental holdings: $3,650; 
Held by the public: $4,843; 
Total: $8,493. 

As of September 30, 2007: 
Intragovernmental holdings: $3,944; 
Held by the public: $5,049; 
Total: $8,993. 

As of September 30, 2008: 
Intragovernmental holdings: $4,202; 
Held by the public: $5,809; 
Total: $10,011. 

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

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 
$3,980 billion, or 50 percent, from $7,918 billion as of September 30, 
2005, to $11,898 billion as of September 30, 2009. The increase to the 
federal debt has become particularly acute since the onset of the 
recession in December 2007. Federal government actions in response to 
both the financial market crisis and the economic downturn have added 
significantly to Treasury’s borrowing needs. The fiscal year 2008 
increase in total federal debt of $1,018 billion was the largest annual 
dollar increase in history; only to be surpassed by the fiscal year 
2009 increase of $1,887 billion. During fiscal years 2008 and 2009, 
legislation was enacted to raise the statutory debt limit on three 
different occasions. During this period, the statutory debt limit went 
from $9,815 billion to its current level of $12,104 billion, an 
increase of 23 percent. 

For a fuller understanding of GAO's opinion on BPD's fiscal years 2009 
and 2008 Schedules of Federal Debt, readers should refer to the 
complete audit report, available by clicking on [hyperlink, 
http://www.gao.gov/products/GAO-10-88], 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: Management’s Report on Internal Control over Financial 
Reporting Related to the Schedule of Federal Debt: 

Appendix II: Comments from the Bureau of the Public Debt: 

Appendix III: GAO Contact and Staff Acknowledgments: 

Abbreviations: 

BPD: Bureau of the Public Debt: 

GDP: Gross Domestic Product: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

November 10, 2009: 

The Honorable Timothy F. Geithner: 
The Secretary of the Treasury: 

Dear Mr. Secretary: 

The accompanying auditor’s report presents the results of our audits of 
the Schedules of Federal Debt Managed by the Bureau of the Public Debt 
for the fiscal years ended September 30, 2009 and 2008. 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, 2009 and 2008, 
(2) opinion on the effectiveness of relevant internal control over 
financial reporting as of September 30, 2009, (3) conclusion on BPD’s 
compliance in fiscal year 2009 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, 2009 and 2008, federal debt managed by the bureau 
totaled about $11,898 billion and $10,011 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) $7,552 billion as of September 30, 2009, 
and $5,809 billion as of September 30, 2008, of debt held by the public 
and about (2) $4,346 billion as of September 30, 2009, and $4,202 
billion as of September 30, 2008, 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 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 Treasury securities held by the 
federal government accounts are not shown as balances on the federal 
government’s consolidated financial statements because, under current 
U.S. generally accepted accounting principles, they represent loans 
from one part of the federal government to another. When the federal 
government’s financial statements are consolidated, those offsetting 
balances are eliminated. These securities are nonmarketable; however, 
they represent a priority call on future federal budgetary resources. 

While both are important, debt held by the public and intragovernmental 
debt holdings are very different. Debt held by the public approximates 
the federal government’s competition with other sectors in the credit 
markets. Federal borrowing absorbs resources available for private 
investment and may put upward pressure on interest rates. In addition, 
interest on debt held by the public is paid in cash and represents a 
burden on current taxpayers. It reflects the amount the federal 
government pays to its outside creditors. In contrast, 
intragovernmental debt holdings typically do not require cash payments 
from the current budget or represent a burden on the current economy. 
In addition, from the perspective of the budget as a whole, interest 
payments to federal government accounts by Treasury are entirely offset 
by the income received by such accounts. This intragovernmental debt 
and related interest represent a claim on future resources and hence a 
burden on future taxpayers and the future economy. Specifically, when 
trust funds redeem Treasury securities to obtain cash to fund 
expenditures, Treasury usually borrows from the public to finance these 
redemptions. Such borrowings result in competition for funds with the 
private sector and thus an effect on the economy. 

We have audited the Schedule of Federal Debt since fiscal year 1997. 
Over this period, total federal debt has more than doubled, increasing 
by 120 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 $3,980 billion, or 50 percent, from $7,918 
billion as of September 30, 2005, to $11,898 billion as of September 
30, 2009. The increase to the federal debt has become particularly 
acute since the onset of the recession in December 2007. Federal 
government actions in response to both the financial market crisis and 
the economic downturn have added significantly to Treasury’s borrowing 
needs. The fiscal year 2008 increase in total federal debt of $1,018 
billion was the largest annual dollar increase in history; only to be 
surpassed by the fiscal year 2009 increase of $1,887 billion. Of the 
fiscal year 2009 increase, about $1,743 billion was from the increase 
in debt held by the public and about $144 billion was from the increase 
in intragovernmental debt holdings. Two primary factors contributed to 
the increase in debt held by the public. First, there was the largest 
reported deficit in history of $1.4 trillion in fiscal year 2009, 
compared to $455 billion in fiscal year 2008. Second, a significant 
amount of assets were purchased primarily relating to the Government 
Sponsored Enterprise Mortgage-Backed Securities Purchase Program and 
the Troubled Asset Relief Program in which debt was borrowed to fund 
the purchases. Treasury met its borrowing needs in part by 
reintroducing the 3-year and 7-year notes, both issued monthly, and 
increasing the amounts offered at public debt auctions. Further, 
Treasury added offerings of both the 30-year bond and the 10-year note 
resulting in 12 additional auctions a year. During fiscal years 2008 
and 2009, legislation was enacted to raise the statutory debt limit on 
three different occasions. During this period, the statutory debt limit 
went from $9,815 billion to its current level of $12,104 billion, an 
increase of 23 percent. Legislation to increase the statutory debt 
limit to $13,029 billion was passed by the House of Representatives and 
referred to the Senate. In addition, the Secretary of the Treasury has 
requested an increase in the statutory debt limit. As of November 2, 
2009, an increase had not been enacted. 

Weaknesses in the economy and financial markets—and the federal 
government’s response to them—are expected to impact both the annual 
federal deficit and related debt in the near term. Official estimates 
for fiscal year 2010 show the annual federal deficit will exceed $1 
trillion. Correspondingly, debt held by the public is expected to grow 
from an estimated 53.1 percent of gross domestic product (GDP) at the 
end of fiscal year 2009 to over 60 percent of GDP at the end of fiscal 
year 2010. However, while addressing these near-term pressures is 
important, the real challenge is not this year’s deficit or even next 
year’s; it is how best to address the nation’s long-term fiscal path 
over the coming decades. 

While a lot of attention has been understandably given to the recent 
fiscal deterioration, the federal government faces even larger fiscal 
challenges that will persist long after the return to financial 
stability and economic growth. The budget and economic implications of 
the baby boom generation’s retirement have already become a factor in 
near-term budget projections and will only intensify as the baby 
boomers age. The Medicare Hospital Insurance program currently pays 
more in benefits than it receives in cash from payroll taxes. The 
Social Security program, which has historically run large cash 
surpluses that helped reduce the need to borrow to finance other 
federal government activities, is expected to pay more in benefits than 
it receives in tax income for a sustained period beginning in 2016. GAO 
and the Congressional Budget Office’s long-range fiscal policy 
simulations continue to show that, absent significant changes in 
policy, the federal government’s fiscal condition over the coming 
decades is on an unsustainable path.[Footnote 2] The sooner action is 
taken to address the long-term fiscal challenge, the less disruptive 
and destabilizing the changes will be. As a result, once current 
economic and financial issues are addressed, the nation’s 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 increase in reported 
foreign ownership of Treasury securities. Treasury securities held by 
foreign and international investors have increased significantly since 
2001. According to amounts reported in the September 2009 Treasury 
Bulletin, Treasury estimates that the amount of Treasury securities 
held by foreign and international investors has increased by $2,383 
billion—from $1,001 billion as of June 30, 2001, to $3,384 billion as 
of June 30, 2009. As of June 30, 2009, this represents an estimated 45 
percent of debt held by the public, down from an estimated 50 percent 
as of June 30, 2008, but up from about 31 percent as of June 30, 2001. 

We are sending copies of this report to interested congressional 
committees, the Commissioner of the Bureau of the Public Debt, the 
Inspector General of the Department of the Treasury, the Director of 
the Office of Management and Budget, and other agency officials. In 
addition, this report is available at no charge on the GAO Web site at 
[hyperlink, http://www.gao.gov]. 

If you have any questions concerning this report, please contact me at 
(202) 512-3406 or engelg@gao.gov. Contact points for our Offices of 
Congressional Relations and Public Affairs may be found on the last 
page of this report. GAO staff who made key contributions to this 
report are listed in appendix III. 

Sincerely yours, 

Signed by: 

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

[End of section] 

To the Commissioner of the Bureau of the Public Debt: 

In connection with fulfilling our requirement to audit the financial 
statements of the U.S. government, we have audited the Schedules of 
Federal Debt Managed by the Bureau of the Public Debt (BPD) because of 
the significance of the federal debt to the federal government's 
financial statements.[Footnote 3] 

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, 2009 and 2008. 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 
4] 

In our audits of the Schedules of Federal Debt Managed by BPD for the 
fiscal years ended September 30, 2009 and 2008, we found: 

* the Schedules of Federal Debt are presented fairly, in all material 
respects, in conformity with U.S. generally accepted accounting 
principles; 

* BPD maintained, in all material respects, effective internal control 
over financial reporting relevant to the Schedule of Federal Debt as of 
September 30, 2009; and: 

* no reportable noncompliance in fiscal year 2009 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, 2009, 
2008, and 2007 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, 2009 and 2008. 

Opinion on Internal Control: 

BPD maintained, in all material respects, effective internal control 
over financial reporting relevant to the Schedule of Federal Debt as of 
September 30, 2009, that provided reasonable assurance that 
misstatements, losses, or noncompliance material in relation to the 
Schedule of Federal Debt would be prevented or detected and corrected 
on a timely basis. Our opinion is based on criteria established under 
31 U.S.C. 3512 (c), (d), commonly known as the Federal Managers' 
Financial Integrity Act (FMFIA). 

We identified deficiencies in BPD's system of internal control that we 
consider not to be material weaknesses or significant deficiencies. 
[Footnote 5] We have communicated these matters to management and, 
where appropriate, will report on them separately. 

Compliance with a Selected Provision of Law: 

Our tests of BPD's compliance with the statutory debt limit for fiscal 
year 2009 disclosed no instances of noncompliance that would be 
reportable under U.S. generally accepted government auditing standards. 
The objective of our audit of the Schedule of Federal Debt for the 
fiscal year ended September 30, 2009, was not to provide an opinion on 
overall compliance with laws and regulations. Accordingly, we do not 
express such an opinion. 

Consistency of Other Information: 

BPD's Overview on Federal Debt Managed by the Bureau of the Public Debt 
contains information, some of which is not directly related to the 
Schedules of Federal Debt. We did not audit and we do not express an 
opinion on this information. However, we compared this information for 
consistency with the schedules and discussed the methods of measurement 
and presentation with BPD officials. On the basis of this limited work, 
we found no material inconsistencies with the schedules or U.S. 
generally accepted accounting principles. 

Objectives, Scope, and Methodology: 

BPD management is responsible for (1) preparing the Schedules of 
Federal Debt in conformity with U.S. generally accepted accounting 
principles; (2) establishing and maintaining internal control over 
financial reporting, and evaluating its effectiveness; and (3) 
complying with applicable laws and regulations. BPD management 
evaluated the effectiveness of BPD's internal control over financial 
reporting relevant to the Schedule of Federal Debt as of September 30, 
2009, based on the criteria established under FMFIA. BPD management's 
assertion is included in appendix I. 

We are responsible for planning and performing the audit to obtain 
reasonable assurance and provide our opinion about whether (1) the 
Schedules of Federal Debt are presented fairly, in all material 
respects, in conformity with U.S. generally accepted accounting 
principles and (2) BPD management maintained, in all material respects, 
effective internal control over financial reporting relevant to the 
Schedule of Federal Debt as of September 30, 2009. We are also 
responsible for (1) testing compliance with selected provisions of laws 
and regulations that have a direct and material effect on the Schedule 
of Federal Debt and (2) performing limited procedures with respect to 
certain other information accompanying the Schedules of Federal Debt. 

In order to fulfill these responsibilities, we: 

* examined, on a test basis, evidence supporting the amounts and 
disclosures in the Schedules of Federal Debt; 

* assessed the accounting principles used and any significant estimates 
made by management; 

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

* obtained an understanding of the entity and its operations, including 
its internal control over financial reporting relevant to the Schedule 
of Federal Debt as of September 30, 2009; 

* considered BPD's process for evaluating and reporting on internal 
control over financial reporting relevant to the Schedule of Federal 
Debt based on the criteria established under FMFIA; 

* assessed the risk that a material misstatement exists in the Schedule 
of Federal Debt and the risk that a material weakness exists in 
internal control over financial reporting relevant to the Schedule of 
Federal Debt; 

* evaluated the design and operating effectiveness of internal control 
over financial reporting relevant to the Schedule of Federal Debt as of 
September 30, 2009, based on the assessed risk; 

* tested relevant internal control over financial reporting; 

* tested compliance in fiscal year 2009 with the statutory debt limit 
(31 U.S.C. § 3101(b) (2006), as amended by Pub. L. No. 110-91, 121 
Stat. 988 (2007); Pub. L. No. 110-289, Div. C, Title III, § 3083, 122 
Stat. 2908 (2008); Pub. L. No. 110-343, Div. A, Title I, § 122, 122 
Stat 3790 (2008); and Pub. L. No. 111-5, Div. B, Title I, § 1604, 123 
Stat. 366 (2009)); and: 

* performed such other procedures as we considered necessary in the 
circumstances. 

Internal control over financial reporting relevant to the Schedule of 
Federal Debt is a process effected by those charged with governance, 
management, and other personnel, the objectives of which are to provide 
reasonable assurance that (1) transactions are properly recorded, 
processed, and summarized to permit the preparation of the Schedule of 
Federal Debt in accordance with U.S. generally accepted accounting 
principles; and (2) transactions related to the Schedule of Federal 
Debt are executed in accordance with laws governing the use of budget 
authority and other laws and regulations that could have a direct and 
material effect on the Schedule of Federal Debt. 

We did not evaluate all internal controls relevant to operating 
objectives as broadly established under FMFIA, such as those controls 
relevant to preparing statistical reports and ensuring efficient 
operations. We limited our internal control testing to controls over 
financial reporting. Because of inherent limitations, internal control 
may not prevent or detect and correct misstatements due to error or 
fraud, losses, or noncompliance. We also caution that projecting any 
evaluation of effectiveness to future periods is subject to the risk 
that controls may become inadequate because of changes in conditions, 
or that the degree of compliance with the policies or procedures may 
deteriorate. 

We did not test compliance with all laws and regulations applicable to 
BPD. We limited our tests of compliance to a selected provision of law 
that has a direct and material effect on the Schedule of Federal Debt 
for the fiscal year ended September 30, 2009. We caution that 
noncompliance may occur and not be detected by these tests and that 
such testing may not be sufficient for other purposes. 

We performed our audit in accordance with U.S. generally accepted 
government auditing standards. We believe our audit provides a 
reasonable basis for our opinions and other conclusions. 

Agency Comments: 

In commenting on a draft of this report, BPD concurred with the 
conclusions in our report. The comments are reprinted in appendix II. 

Signed by: 

Gary T. Engel: 

Director:
Financial Management and Assurance: 

November 2, 2009: 

[End of section] 

Overview, Schedules, and Notes: 

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

Gross Federal Debt Outstanding[Footnote 6]: 

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, 
2009 and 2008, outstanding gross federal debt managed by the bureau 
totaled $11,898 and $10,011 billion, respectively. The increase in 
gross federal debt of $1,887 billion during fiscal year 2009 was due to 
an increase in gross intragovernmental debt holdings of $144 billion 
and an increase in gross debt held by the public of $1,743 billion. As 
Figure 1 illustrates, both intragovernmental debt holdings and debt 
held by the public have increased since fiscal year 2005. The primary
reason for the increases in intragovernmental debt holdings is the 
Department of the Treasury's use of 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, 2009, gross debt held by the public totaled $7,552 
billion and gross intragovernmental debt holdings totaled $4,346 
billion. 

Figure 1: Total Gross Federal DEbt Outstanding (Fiscal Years Ended 
September 39, 2005-2009) (Dollars in billions) 

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

As of September 30, 2005: 
Intragovernmental holdings: $3,317; 
Held by the public: $4,601; 
Total: $7,918. 

As of September 30, 2006: 
Intragovernmental holdings: $3,650; 
Held by the public: $4,843; 
Total: $8,493. 

As of September 30, 2007: 
Intragovernmental holdings: $3,944; 
Held by the public: $5,049; 
Total: $8,993. 

As of September 30, 2008: 
Intragovernmental holdings: $4,202; 
Held by the public: $5,809; 
Total: $10,011. 

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

[End of figure] 

Interest Expense: 

Interest expense incurred during fiscal year 2009 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 2009, interest 
expense incurred totaled $381 billion, interest expense on debt held by 
the public was $189 billion, and $192 billion was interest incurred for
intragovernmental debt holdings. As Figure 2 illustrates, total 
interest expense has increased from fiscal years 2005 through 2008,
but decreased from fiscal year 2008 to fiscal year 2009. Due to the 
current economic conditions, there has been a significant increase
in the demand for government backed securities, which resulted in lower 
average interest rates and interest expense. For example, the average 
interest rates on Treasury bills outstanding as of September 30, 2009 
and 2008, were 0.3 percent and 1.6 percent, respectively. Average 
interest rates on principal balances outstanding as of September 30, 
2009 and 2008, are disclosed in the Notes to the Schedules of Federal 
Debt. 

Figure 2: Total Interest Expenses (in billions): 

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

Fiscal year ended September 30, 2005: 
Intragovernmental debt holdings: $174; 
Held by the public: $181; 
Total: $355. 

Fiscal year ended September 30, 2006: 
Intragovernmental debt holdings: $183; 
Held by the public: $221; 
Total: $404. 

Fiscal year ended September 30, 2007: 
Intragovernmental debt holdings: $184; 
Held by the public: $239; 
Total: $433. 

Fiscal year ended September 30, 2008: 
Intragovernmental debt holdings: $212; 
Held by the public: $242; 
Total: $454. 

Fiscal year ended September 30, 2009: 
Intragovernmental debt holdings: $192; 
Held by the public: $189; 
Total: $381. 

[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. During the fiscal 
year, changes in economic conditions resulted in the need for an 
increase in borrowings from the public to finance federal spending. 
Treasury responded to the increase in marketable borrowing requirements 
by raising issuance sizes of regular weekly and monthly bills, 
increasing the frequency and issuance sizes of cash management bills, 
increasing the issuance sizes of nominal coupon security offerings, and 
adjusting the securities offering calendar to include the 
reintroduction of certain Treasury notes. As a result of this change in 
debt management strategy, Treasury bill and Treasury note issuances 
increased by $2,288 billion and $1,008 billion, respectively, in fiscal 
year 2009. Due to the increase in short-term debt issuances, repayments 
increased by $2,317 billion during the fiscal year. As of September 30, 
2009 and 2008, gross debt held by the public totaled $7,552 billion and 
$5,809 billion, respectively (see Figure 1), an increase of $1,743 
billion. 

As of September 30, 2009, $6,988 billion, or 93 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, 2009, $4,509 billion, or 65 percent, will mature 
within the next 4 years (see Figure 3). As of September 30, 2009 and 
2008, notes and TIPS held by the public maturing within the next 10 
years totaled $4,169 billion and $3,004 billion, respectively, an 
increase of $1,165 billion. 

Figure 3: Maturity Dates[Footnote 7] of Marketable Debt eld by the 
Public as of September 30, 2009: 

[Refer to PDF for image: multiple line graph] 

Plots Fiscal year of maturity versus debt in billions for: 
TIPS: 
Bonds: 
Notes: 
Bills: 

[To obtain specific data represented in this graph, please contact the 
Bureau of Public Debt] 

[End of figure] 

The Federal Government also issues to the public nonmarketable 
securities, which cannot be resold, and have maturity dates from on 
demand out to 40 years. As of September 30, 2009, nonmarketable 
securities totaled $564 billion, or 7 percent of debt held by the 
public. As of that date, nonmarketable securities primarily consisted 
of savings securities totaling $192 billion, special securities for 
state and local governments totaling $216 billion, and Government 
Account Series securities totaling $119 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 7] As of 
September 30, 2009, such funds accounted for $3,986 billion, or 92 
percent, of the $4,346 billion intragovernmental debt holdings balances 
(see Figure 4). As of September 30, 2009 and 2008, gross 
intragovernmental debt holdings totaled $4,346 billion and $4,202 
billion, respectively (see Figure 1), an increase of $144 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, 2009: 

[Refer to PDF for image: pie-chart] 

Social Security trust funds: 58%; 
Civil Service Retirement and Disability trust fund: 17%; 
Medicate trust funds: 9%; 
Military Retirement and Health Care funds: 9%; 
Other programs and trust funds: 8%. 

[End of figure] 

Significant Events in Fiscal Year 2009: 

Changes to the Statutory Debt Ceiling: 
On October 3, 2008, the Emergency Economic Stabilization Act of 2008 
was signed into law becoming Public Law No. 110-343. This legislation, 
as amended by the Helping Families Save Their Homes Act of 2009, Pub. 
L. No. 111-22, Div. A, provides authority for the Department of the 
Treasury to purchase or insure almost $700 billion in troubled assets 
held by financial institutions for the purposes of, among other things, 
restoring liquidity and stability to the financial system. Section
122 of this law increased the statutory debt limit by $700 billion from 
$10,615 billion to $11,315 billion. 

On February 17, 2009, the American Recovery and Reinvestment Act of 
2009 was signed into law becoming Public Law No. 111-5. This 
legislation supports job preservation and creation, infrastructure 
investment, energy efficiency and science, assistance to the 
unemployed, and State and Local fiscal stabilization. Section 1604 of 
this law increased the statutory debt limit by $789 billion from 
$11,315 billion to $12,104 billion. 

The House of Representatives approved a $925 billion increase in the 
statutory debt limit on April 29, 2009. H.J. Res. 45 passed the House 
pursuant to the provisions of S. Con. Res. 13. In an August 7, 2009, 
letter to Senate Majority Leader Harry Reid, the Secretary of the 
Treasury requested that the statutory debt limit be raised. An increase 
in the limitation is now awaiting Senate approval. As of September 30, 
2009, the total public debt outstanding subject to the statutory debt 
limit was $11,853 billion. 

Increase in System Open Market Account Holdings: 
The amount of the Federal Reserve Bank's System Open Market Account 
(SOMA) holdings has increased significantly from fiscal year 2008 to 
fiscal year 2009. Specifically, total SOMA holdings were $769 billion 
as of September 30, 2009 compared to $477 billion as of September 30, 
2008. This increase is due to the Treasury portion of the large scale 
asset purchase program announced by the Federal Open Market Committee 
on March 18, 2009. This portion of the program authorized the Federal
Reserve to purchase up to $300 billion of U.S. Treasury securities to 
help improve conditions in private credit markets. 

Decrease in the Supplementary Financing Program: 
The Supplementary Financing Program (SFP) is a temporary program 
announced on September 17, 2008, by Treasury and the Federal Reserve to 
provide emergency cash for Federal Reserve initiatives aimed at 
addressing the ongoing crisis in financial markets. At the height of 
this program's activity, during the week of November 6, 2008, there 
were a total of 15 cash management bills outstanding that totaled $560 
billion. As of September 30, 2009, there were a total of 5 cash 
management bills outstanding that totaled $165 billion. The decrease is 
a result of outstanding SFP bills that have matured and have not been 
reinvested in the program. On September 16, 2009, Treasury announced 
its intention to reduce the balance to $15 billion in the short run to 
preserve flexibility in the conduct of debt management policy. 

Equity Decline in Unemployment Trust Fund Investments: 

Amounts invested in Government Account Series securities by the 
Unemployment Trust Fund have significantly declined during fiscal year 
2009. This reduction is primarily attributable to elevated nationwide 
unemployment rates and the corresponding withdrawal of trust fund 
monies for payment of unemployment insurance benefits to eligible 
claimants. Additionally, the fund's investment holdings have been 
further reduced as a result of statutory changes enacted during the 
year. In response to recent economic conditions, Congress passed 
legislation authorizing the creation of new and modification of
existing unemployment programs, including Unemployment Compensation 
Modernization Incentive Payments, Administrative Grants to States, and 
extension of Emergency Unemployment Compensation benefits. In 
accordance with statutory language, much of the funding for the 
aforementioned programs was derived from amounts held within the 
Unemployment Trust Fund. 

Reopening of the 10-year Note and 30-year Bond and the Reintroduction 
of the 3-Year and 7-Year Note: 
In response to the large increase in projected financing needs, to 
better manage the overall debt portfolio, and to create additional 
flexibility in meeting uncertainty in borrowing requirements, Treasury 
implemented changes to the auction calendar. The changes included 
adding monthly 3-year notes and 7-year notes; adding a reopening of 10-
year notes; and issuing 30-year bonds on a monthly basis. During the 
fiscal year, Treasury conducted over 290 auctions, resulting in the 
issuance of over $8 trillion dollars in marketable securities. 

On November 5, 2008, Treasury announced the reintroduction of the 3-
year note as a result of the ongoing assessment of its debt management 
strategy. The last issue date for a 3-year note was in May 2007. The 
first auction of the reintroduced 3-year notes occurred on November 10, 
2008, with a settlement date on November 17, 2008. 

On November 5, 2008, Treasury announced it was moving to new-issue 
quarterly 30-year bond auctions beginning with the February 2009 
quarterly refunding. The first auction of the reopening of 30-year 
bonds occurred on March 12, 2009, with a settlement on March 16, 2009. 
On April 29, 2009, Treasury announced a second reopening of the 30-year 
bond. The second reopening results in a monthly issuance of the 30-year 
bond. The auction of the second reopening of the 30-year bond occurred
on July 9, 2009, with a settlement on July 15, 2009. 

On November 5, 2008, Treasury announced the addition of a regular 
second reopening of the 10-year note in the month following the first 
reopening. Specifically, Treasury auctioned a new-issue 10-year note on 
November 12, 2008 during the refunding, reopened the security in 
December 2008, and then reopened the security again in January 2009. 
The first auction of the second reopening of the 10-year note occurred 
on January 8, 2009, for settlement on January 15, 2009. The issuance 
pattern of the 10-year note changed from twice a quarter to monthly. 

On February 4, 2009, Treasury announced the reintroduction of the 7-
year note as a result of the ongoing assessment of its debt management 
strategy. The last issue date for a 7-year note was in April 1993. The 
first auction of the reintroduced 7-year note occurred on February 26, 
2009, with a settlement on March 2, 2009. 

Improved Retail Securities Services: 
TreasuryDirect, BPD's internet-accessed retail system that is integral 
to Treasury's goal of promoting paperless systems, continues to grow. 
Account establishments rose by 88 thousand this past year, from 696 
thousand in FY 2008 to 784 thousand in FY 2009--an increase of 13 
percent. TreasuryDirect became fully functional as it was expanded to 
enable entities such as trusts, corporations, fiduciaries, and estates 
to open accounts and conduct transactions. BPD modified TreasuryDirect 
to support changes in Treasury's auction schedule to offer 7-year notes 
and to more frequently re-open notes and bonds. 

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 
$1,572 billion as of September 30, 1984, to $11,898 billion as of 
September 30, 2009 (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 more than three fold 
between 1984 and 1997. 

Figure 5: Total Gross Federal Debt Outstanding (in billions): 

[Refer to PDF for image: vertical bar graph] 

Graph plots September 30 of each year from 1984 through 2009 against 
debt in billions. 

Source: Statement of Public Debt. 

Figures shown prior to 1996 are unaudited and include securities issued 
by the Federal Financing Bank. 

[To obtain specific data represented in this graph, please contact the 
Bureau of Public Debt] 

[End of figure] 

By fiscal year 1998, federal debt held by the public was beginning to 
decline. In fiscal years 1998 through 2001, the amount of debt held by 
the public fell by $476 billion, from $3,815 billion to $3,339 billion. 
However, federal debt held by the public began to increase in fiscal 
year 2002 as a result of higher federal outlays and tax policy 
decisions. Federal debt held by the public increased by 51.2 percent 
from fiscal year 2002 to fiscal year 2007. From fiscal year 2008 to 
fiscal year 2009, federal debt held by the public increased an 
additional 49.6 percent rising by $2,503 billion. This increase is 
primarily a result of the federal government's response to the 
financial market crisis and the economic downturn. As a result, debt 
held by the public has increased from $3,339 billion in 2001 to $7,552 
billion in 2009. 

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 $1,029 billion, from $3,317 billion as of September 30, 
2005, to $4,346 billion as of September 30, 2009. 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 Rate of Federal Debt Outstanding: 

[Refer to PDF for image: line graph] 

Graph plots September 30 of each year from 1984 through 2009 against 
average interest rates from 0% to 12%. 

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

[To obtain specific data represented in this graph, please contact the 
Bureau of Public Debt] 

[End of figure] 

[End of section] 

Schedules of Federal Debt: 

Schedules of Federal Debt: 
Managed by the Bureau of the Public Debt: 
For the Fiscal Years Ended September 30, 2009 and 2008 (Dollars in 
Millions): 

Federal Debt: 

Balance as of September 30, 2007: 

Held by the Public, Principal (Note 2): $5,409,305; 
Held by the Public, Accrued Interest Payable: $44,386; 
Held by the Public, Net Unamortized Premiums/(Discounts): ($39,411); 
Intragovernmental Debt Holdings, Principal (Note 3): $3,944,348; 
Intragovernmental Debt Holdings, Accrued Interest Payable: $48,611; 
Intragovernmental Debt Holdings, Net Unamortized 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 Premiums/(Discounts): ($29,192)
Intragovernmental Debt Holdings, Principal (Note 3): [Empty]; 
Intragovernmental Debt Holdings, Accrued Interest Payable: [Empty]; 
Intragovernmental Debt Holdings, Net Unamortized 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 Premiums/(Discounts): [Empty]; 
Intragovernmental Debt Holdings, Principal (Note 3): $257,656; 
Intragovernmental Debt Holdings, Accrued Interest Payable: [Empty]; 
Intragovernmental Debt Holdings, Net Unamortized 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 Premiums/(Discounts): [Empty]; 
Intragovernmental Debt Holdings, Principal (Note 3): [Empty]; 
Intragovernmental Debt Holdings, Accrued Interest Payable: $213,943; 
Intragovernmental Debt Holdings, Net Unamortized 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 Premiums/(Discounts): ($29,192); 
Intragovernmental Debt Holdings, Principal (Note 3): $257,656; 
Intragovernmental Debt Holdings, Accrued Interest Payable; $213,943; 
Intragovernmental Debt Holdings, Net Unamortized Premiums/(Discounts): 
$30,342. 

Decreases: Repayments of Debt Held by the Public: 

Held by the Public, Principal (Note 2): $4,885,627; 
Held by the Public, Accrued Interest Payable: [Empty]; 
Held by the Public, Net Unamortized Premiums/(Discounts): [Empty]; 
Intragovernmental Debt Holdings, Principal (Note 3): [Empty]; 
Intragovernmental Debt Holdings, Accrued Interest Payable: [Empty]; 
Intragovernmental Debt Holdings, Net Unamortized 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 Premiums/(Discounts): [Empty]; 
Intragovernmental Debt Holdings, Principal (Note 3): [Empty]; 
Intragovernmental Debt Holdings, Accrued Interest Payable: $212,161; 
Intragovernmental Debt Holdings, Net Unamortized Premiums/(Discounts): 
[Empty]. 

Decreases: Net Amortization (Note 4): 

Held by the Public, Principal (Note 2): 
Held by the Public, Accrued Interest Payable: 
Held by the Public, Net Unamortized Premiums/(Discounts): ($32,509)
Intragovernmental Debt Holdings, Principal (Note 3): 
Intragovernmental Debt Holdings, Accrued Interest Payable: 
Intragovernmental Debt Holdings, Net Unamortized 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 Premiums/(Discounts): ($32,509); 
Intragovernmental Debt Holdings, Principal (Note 3): 0; 
Intragovernmental Debt Holdings, Accrued Interest Payable: $212,161; 
Intragovernmental Debt Holdings, Net Unamortized 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 Premiums/(Discounts): ($36,124); 
Intragovernmental Debt Holdings, Principal (Note 3): $4,202,004; 
Intragovernmental Debt Holdings, Accrued Interest Payable: $50,393; 
Intragovernmental Debt Holdings, Net Unamortized Premiums/(Discounts): 
$32,567. 

Increases: Borrowings from the Public: 

Held by the Public, Principal (Note 2): $8,946,010; 
Held by the Public, Accrued Interest Payable: [Empty]; 
Held by the Public, Net Unamortized Premiums/(Discounts): ($15,054)
Intragovernmental Debt Holdings, Principal (Note 3): [Empty]; 
Intragovernmental Debt Holdings, Accrued Interest Payable: [Empty]; 
Intragovernmental Debt Holdings, Net Unamortized 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 Premiums/(Discounts): [Empty]; 
Intragovernmental Debt Holdings, Principal (Note 3): $143,550; 
Intragovernmental Debt Holdings, Accrued Interest Payable: [Empty]; 
Intragovernmental Debt Holdings, Net Unamortized Premiums/(Discounts): 
$1,718. 

Increases: Accrued Interest (Note 4): 

Held by the Public, Principal (Note 2): [Empty]; 
Held by the Public, Accrued Interest Payable: $171,875; 
Held by the Public, Net Unamortized Premiums/(Discounts): [Empty]; 
Intragovernmental Debt Holdings, Principal (Note 3): [Empty]; 
Intragovernmental Debt Holdings, Accrued Interest Payable: $191,955; 
Intragovernmental Debt Holdings, Net Unamortized Premiums/(Discounts): 
[Empty]. 

Total Increases: 

Held by the Public, Principal (Note 2): $8,946,010; 
Held by the Public, Accrued Interest Payable; $171,875; 
Held by the Public, Net Unamortized Premiums/(Discounts): ($15,0542); 
Intragovernmental Debt Holdings, Principal (Note 3): $143,550; 
Intragovernmental Debt Holdings, Accrued Interest Payable; $191,955; 
Intragovernmental Debt Holdings, Net Unamortized Premiums/(Discounts): 
$1,718. 

Decreases: Repayments of Debt Held by the Public: 

Held by the Public, Principal (Note 2): $7,202,840; 
Held by the Public, Accrued Interest Payable: [Empty]; 
Held by the Public, Net Unamortized Premiums/(Discounts): [Empty]; 
Intragovernmental Debt Holdings, Principal (Note 3): [Empty]; 
Intragovernmental Debt Holdings, Accrued Interest Payable: [Empty]; 
Intragovernmental Debt Holdings, Net Unamortized Premiums/(Discounts): 
[Empty]; 

Decreases: Interest Paid: 

Held by the Public, Principal (Note 2): [Empty]; 
Held by the Public, Accrued Interest Payable: $170,654; 
Held by the Public, Net Unamortized Premiums/(Discounts): [Empty]; 
Intragovernmental Debt Holdings, Principal (Note 3): [Empty]; 
Intragovernmental Debt Holdings, Accrued Interest Payable: $192,905; 
Intragovernmental Debt Holdings, Net Unamortized Premiums/(Discounts): 
[Empty]. 

Decreases: Net Amortization (Note 4): 

Held by the Public, Principal (Note 2): 
Held by the Public, Accrued Interest Payable: 
Held by the Public, Net Unamortized Premiums/(Discounts): ($17,273)
Intragovernmental Debt Holdings, Principal (Note 3): 
Intragovernmental Debt Holdings, Accrued Interest Payable: 
Intragovernmental Debt Holdings, Net Unamortized Premiums/(Discounts): 
$399. 

Total Decreases: 

Held by the Public, Principal (Note 2): $7,202,840; 
Held by the Public, Accrued Interest Payable: $170,654; 
Held by the Public, Net Unamortized Premiums/(Discounts): ($17,273); 
Intragovernmental Debt Holdings, Principal (Note 3): 0; 192,905212,161; 
Intragovernmental Debt Holdings, Net Unamortized Premiums/(Discounts): 
$399. 

Balance as of September 30, 2008: 

Held by the Public, Principal (Note 2): $7,551,862; 
Held by the Public, Accrued Interest Payable: $41,348; 
Held by the Public, Net Unamortized Premiums/(Discounts): ($33,9054); 
Intragovernmental Debt Holdings, Principal (Note 3): $4,345,554; 
Intragovernmental Debt Holdings, Accrued Interest Payable: $49,443; 
Intragovernmental Debt Holdings, Net Unamortized Premiums/(Discounts): 
$33,886. 

[End of table] 

The accompanying notes are an integral part of these schedules. 

Notes to the Schedules of Federal Debt Managed by the Bureau of the 
Public Debt: 

For the Fiscal Years Ended September 30, 2009 and 2008 (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 2009 and fiscal year 
2008 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: 

As of September 30, 2009 and 2008, Federal Debt Held by the Public 
consisted of the following: 

Marketable: Treasury Bills; 
2009: Amount: $1,986,174; 
2009: Average Interest Rates: 0.3%; 
2008: Amount: $1,484,332; 
2008: Average Interest Rates: 1.6%. 

Marketable: Treasury Notes; 
2009: Amount: $3,772,964; 
2009: Average Interest Rates: 3.0%; 
2008: Amount: $2,623,364; 
2008: Average Interest Rates: 4.1%. 

Marketable: Treasury Bonds; 
2009: Amount: $677,491; 
2009: Average Interest Rates: 6.5%; 
2008: Amount: $578,504; 
2008: Average Interest Rates: 4.1%. 

Marketable: TIPS; 
2009: Amount: $551,308; 
2009: Average Interest Rates: 2.1%; 
2008: Amount: $523,951; 
2008: Average Interest Rates: 2.0%. 

Total Marketable: 
2009: Amount: $6,987,937; 
2008: Amount: $5,210,151. 

Nonmarketable: 
2009: Amount: $563,925; 
2009: Average Interest Rates: 3.7%; 
2008: Amount: $598,541; 
2008: Average Interest Rates: 4.1%. 

Total Federal Debt Held by the Public: 
2009: Amount: $7,551,862; 
2008: Amount: $5,808,692. 

[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, 
2009 and 2008, 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, 2009 and 2008. Treasury notes are issued with a term of 2 – 10 
years and Treasury bonds are issued with a term of more than 10 years. 

Treasury also issues TIPS that have interest and redemption payments, 
which are tied to the Consumer Price Index for all Urban Consumers, a 
widely used measure of inflation. TIPS are issued with a term of 5 
years or more. At maturity, TIPS are redeemed at the inflation-adjusted 
principal amount, or the original par value, whichever is greater. TIPS 
pay a semi-annual fixed rate of interest applied to the inflation-
adjusted principal. The average interest rate on TIPS represents the 
stated interest rate on principal plus inflation, adjusted by any 
discount or premium on securities outstanding as of September 30, 2009 
and 2008. The TIPS Federal Debt Held by the Public inflation-adjusted 
principal balance includes inflation of $57,552 million and $72,930 
million as of September 30, 2009 and 2008, 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, 2009, the FRB had total holdings of 
$769 billion, with a very small amount lent to dealers and not 
collateralized by other Treasury securities. As of September 30, 2008, 
the FRB owned $221 billion, net of $256 billion in securities lent to 
dealers and not collateralized by other Treasury securities, for total 
holdings of $477 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, 2009 and 
2008. Nonmarketable securities are issued with a term of on demand out 
to 40 years. 

As of September 30, 2009 and 2008, nonmarketable securities consisted 
of the following: 

Domestic Series: 
2009: $29,995; 
2008: $29,995. 

Foreign Series: 
2009: $4,886; 
2008: $2,986. 

R.E.A. Series: 
2009: $1; 
2008: $1. 

State and Local Government Series: 
2009: $216,488; 
2008: $260,238. 

United States Savings Securities: 
2009: $192,452; 
2008: $194,253. 

Government Account Series: 
2009: $118,636; 
2008: $107,498. 

Other: 
2009: $1,467; 
2008: $3,570. 

Total Nonmarketable: 
2009: $563,925; 
2008: $598,541. 

[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 2009 and 2008 are included in the respective Borrowings from the 
Public amounts reported on the Schedules of Federal Debt. 

Note 3. Intragovernmental Debt Holdings: 

As of September 30, 2009 and 2008, Intragovernmental Debt Holdings are 
owed to the following: 

SSA: Federal Old-Age and Survivors Insurance Trust Fund: 
2009: $2,296,316; 
2008: $2,150,651. 

OPM: Civil Service Retirement and Disability Fund: 
2009: $742,322; 
2008: $714,850. 

HHS: Federal Hospital Insurance Trust Fund: 
2009: $309,702; 
2008: $318,741. 

DOD: Military Retirement Fund: 
2009: $240,807; 
2008: $215,949. 

SSA: Federal Disability Insurance Trust Fund: 
2009: $207,932; 
2008: $216,487. 

DOD: DOD Medicare-Eligible Retiree Health Care Fund: 
2009: $126,821; 
2008: $112,726. 

HHS: Federal Supplementary Medical Insurance Trust Fund: 
2009: $61,764; 
2008: $59,090. 

DOE: Nuclear Waste Disposal Fund: 
2009: $44,643; 
2008: $42,570. 

OPM: Employees Life Insurance Fund: 
2009: $36,146; 
2008: $34,397. 

OPM: Postal Service Retiree Health Benefits Fund: 
2009: $35,115; 
2008: $32,294. 

DOL: Unemployment Trust Fund: 
2009: $19,628; 
2008: $72,432. 

Treasury: Exchange Stabilization Fund: 
2009: $18,615; 
2008: $16,847. 

DOL: Pension Benefit Guaranty Corporation: 
2009: $17,459*; 
2008: $22,367*. 

FDIC: The Deposit Insurance Fund: 
2009: $16,076; 
2008: $29,937. 

OPM: Employees Health Benefits Fund: 
2009: $15,367; 
2008: $15,563. 

DOS: Foreign Service Retirement and Disability Fund: 
2009: $15,334; 
2008: $14,855. 

DOT: Highway Trust Fund: 
2009: $11,484; 
2008: $12,811. 

HUD: FHA – Liquidating Account: 
2009: $10,664; 
2008: $19,085. 

Other Programs and Funds: 
2009: $119,359; 
2008: $100,352. 

Total Intragovernmental Debt Holdings:
2009: $4,345,554; 
2008: $4,202,004. 

* These amounts include $2,676 million and $5,580 million of marketable 
Treasury securities as well as $14,783 million and $16,787 million of 
GAS securities as of September 30, 2009 and 2008, respectively. 

Social Security Administration (SSA); Office of Personnel Management 
(OPM); Department of Health and Human Services (HHS); Department of 
Defense (DOD); Department of Energy (DOE); Department of Labor (DOL);
Department of the Treasury (Treasury); Federal Deposit Insurance 
Corporation (FDIC); Department of State (DOS); Department of 
Transportation (DOT); Department of Housing and Urban Development 
(HUD). 

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 on 
Intragovernmental Debt Holdings for fiscal years 2009 and 2008 were 4.3 
and 4.8 percent, respectively. The average interest rate represents the 
original issue weighted effective yield on securities outstanding as of 
September 30, 2009 and 2008. 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 for all Urban Consumers. As of September 30, 2009 and 2008, the 
inflation-adjusted principal balance included inflation of $54,775 
million and $54,776 million, respectively. 

Note 4. Interest Expense: 

Interest expense on Federal Debt Managed by BPD for fiscal years 2009 
and 2008 consisted of the following: 

Federal Debt Held by the Public: Accrued Interest: 
2009: $171,875; 
2008: $209,068. 

Federal Debt Held by the Public: Net Amortization of Premiums and 
Discounts: 
2009: $17,273; 
2008: $32,509. 

Total Interest Expense on Federal Debt Held by the Public: 
2009: $189,148; 
2008: $241,577. 

Intragovernmental Debt Holdings: Accrued Interest: 
2009: $191,955; 
2008: $213,943. 

Intragovernmental Debt Holdings: Net Amortization of Premiums and 
Discounts: 
2009: ($399); 
2008: ($1,505). 

Total Interest Expense on Intragovernmental Debt Holdings: 
2009: $191,556; 
2008: $212,438. 

Total Interest Expense on Federal Debt Managed by BPD: 
2009: $380,704; 
2008: $454,015. 

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 deflation 
adjustments of $10,607 million and inflation adjustments of $26,982 
million for fiscal years 2009 and 2008, respectively. Accrued interest 
on Intragovernmental Debt Holdings includes deflation adjustments of 
$6,571 million and inflation adjustments of $14,479 million for fiscal 
years 2009 and 2008, respectively. 

Note 5. Fund Balance With Treasury: 

Appropriated Funds Obligated: 
As of September 30, 2009: $115; 
As of September 30, 2008: $168. 

Fiduciary Funds Obligated: 
As of September 30, 2009: $3; 
As of September 30, 2008: $0. 

Total FBWT: 
As of September 30, 2009: $118; 
As of September 30, 2008: $168. 

The Fund Balance with Treasury (FBWT), a non-entity, intragovernmental 
account, is not included on the Schedules of Federal Debt and is 
presented for informational purposes. Prior to October 1, 2008, all 
FBWT balances were recognized on Treasury's Balance Sheet as 
Appropriated Funds Obligated. Beginning with fiscal year 2009, and in 
conjunction with SFFAS No. 31: Accounting for Fiduciary Activities, 
FBWT related to Fiduciary Funds Obligated are no longer shown on the 
face of Treasury's financial statements but are presented as a note 
disclosure. The $3 million of Fiduciary Funds Obligated relates to 
agency securities backed by the full faith and credit of the federal 
government. 

[End of section] 

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

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

The Bureau of the Public Debt's (BPD) internal control over financial 
reporting related to the Schedule of Federal Debt is a process effected 
by those charged with governance, management, and other personnel, the 
objectives of which are to provide reasonable assurance that (1) 
transactions are properly recorded, processed, and summarized to permit 
the preparation of the Schedule of Federal Debt in accordance with U.S. 
generally accepted accounting principles; and (2) transactions related 
to the Schedule of Federal Debt are executed in accordance with laws 
governing the use of budget authority and other laws and regulations 
that could have a direct and material effect on the Schedule of Federal 
Debt. 

BPD management is responsible for establishing and maintaining 
effective internal control over financial reporting. BPD management 
evaluated the effectiveness of BPD's internal control over financial 
reporting related to the Schedule of Federal Debt as of September 30, 
2009, based on the criteria established under 31 U.S.C. 3512 (c), (d) 
(commonly known as the Federal Manager's Financial Integrity Act).
Based on that evaluation, we conclude that, as of September 30, 2009, 
BPD's internal control over financial reporting related to the Schedule 
of Federal Debt was effective. 

Bureau of the Public Debt: 
November 2, 2009: 

Signed by: 

Debra L. Hines
Assistant Commissioner, OPDA: 

Signed by: 

Kimberly McCoy: 
Chief Information Officer: 

Signed by: 

Van Zeck: 
Commissioner: 

Signed by: 

Fred Pyatt: 
Chief Financial Officer: 

[End of section] 

Appendix II: Comments from the Bureau of the Public Debt: 

Department Of The Treasury: 
Bureau Of The Public Debt: 
Washington, DC 20239-0001: 
[hyperlink, http://www.treasurydirect.gov] 

November 6, 2009: 

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, 2009 and 2008. We agree with your audit report's 
conclusions. 

This year was an especially challenging year as we were faced with the 
compliance of the auditing standard, AT Section 501, and the 
implementation of the Management's Report on Internal Control over 
Financial Reporting Related to the Schedule of Federal Debt letter. We 
appreciate the knowledge and experience displayed by your audit team as 
we finalize the thirteenth consecutive year of our professional 
relationship. 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 III: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Gary T. Engel, (202) 512-3406 or engelg@gao.gov. 

Acknowledgments: 

The following individuals made key contributions to this report: Dawn 
B. Simpson, Assistant Director; Dean D. Carpenter; Lauren J. Catchpole; 
Dennis L. Clarke; Francisco Diaz, Jr.; Michael T. Grimes; Vivian M. 
Gutierrez; Nicole M. McGuire; Yvonne D. Moss; Seong Bin Park; Gabrielle 
N. Perret; Eric H. Stalcup; Carolyn M. Voltz; Melissa A. Wolf; and Tory 
E. Wudtke. 

[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] See GAO, The Federal Government’s Long-Term Fiscal Outlook: Fall 
2009 Update, [hyperlink, http://www.gao.gov/products/GAO-10-137SP] 
(Washington, D.C.: October 2009) and the Congressional Budget Office, 
The Long-Term Budget Outlook (Washington, D.C.: June 2009). 

[3] 31 U.S.C. § 331(e). Federal debt and related activity and balances 
are also significant to the consolidated financial statements of the 
Department of the Treasury (see 31 U.S.C. § 3515). 

[4] 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. 

[5] A significant deficiency is a deficiency, or combination of 
deficiencies, in internal control that is less severe than a material 
weakness, yet important enough to merit attention by those charged with 
governance. A material weakness is a deficiency, or a combination of 
deficiencies, in internal control such that there is a reasonable 
possibility that a material misstatement of the entity's financial 
statements will not be prevented, or detected and corrected on a timely 
basis. A deficiency in internal control exists when the design or 
operation of a control does not allow management or employees, in the 
normal course of performing their assigned functions, to prevent, or 
detect and correct misstatements on a timely basis. 

[6] 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. 

[7] The Social Security trust funds consist of the Federal Old-Age and 
Survivors Insurance Trust Fund and the Federal Disability Insurance 
Trust Fund. The Medicare trust funds are made up of the Federal 
Hospital Insurance Trust Fund and the Federal Supplementary Medical 
Insurance Trust Fund. The Military Retirement and Health Care Funds 
consist of the Military Retirement Fund and the DOD Medicare-Eligible 
Retiree Health Care Fund. 

[End of section] 

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