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2011 and 2010 Schedules of Federal Debt' which was released on 
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United States Government Accountability Office: 
GAO: 

Report to the Secretary of the Treasury: 

November 2011: 

Financial Audit: 
Bureau of the Public Debt’s Fiscal Years 2011 and 2010 Schedules of 
Federal Debt: 

GAO-12-164: 

GAO Highlights: 

Highlights of GAO-12-164, a report to the Secretary of the Treasury. 

Why GAO Did This Study: 

In connection with GAO’s requirement to audit the consolidated 
financial statements of the U.S. government, GAO audits the Schedules 
of Federal Debt managed by the Department of the Treasury's (Treasury) 
Bureau of the Public Debt (BPD) annually to determine whether, in all 
material respects, (1) the schedules are reliable and (2) BPD 
maintained effective internal control over financial reporting 
relevant to the Schedule of Federal Debt. Further, GAO tests 
compliance with selected provisions of laws related to the Schedule of 
Federal Debt. 

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. Debt held by the public primarily 
represents the amount the federal government has borrowed from the 
public to finance cumulative cash deficits. Intragovernmental debt 
holdings represent federal debt owed by Treasury to federal government 
accounts—-primarily federal trust funds such as Social Security and 
Medicare-—that typically have an obligation to invest their excess 
annual receipts (including interest earnings) over disbursements in 
federal securities. 

What GAO Found: 

In GAO’s opinion, BPD’s Schedules of Federal Debt for fiscal years 
2011 and 2010 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, 2011. 
GAO’s tests of BPD’s compliance in fiscal year 2011 with selected 
provisions of laws disclosed no instances of noncompliance. 

As of September 30, 2011 and 2010, federal debt managed by BPD totaled 
about $14,781 billion and $13,551 billion, respectively. 

Figure 1: Total Federal Debt Outstanding (Fiscal Years Ended September 
30, 2007-2011): 

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

As of September 30, 2007: 
Held by public: $5.069 billion; 
Intragovernmental debt holdings: $3.944 billion; 
Total: $8.93 billion. 

As of September 30, 2008: 
Held by public: $5.809 billion; 
Intragovernmental debt holdings: $4.202 billion; 
Total: $10.011 billion. 

As of September 30, 2009: 
Held by public: $7.552 billion; 
Intragovernmental debt holdings: $4.346 billion; 
Total: $11.898 billion. 

As of September 30, 2010: 
Held by public: $9.023 billion; 
Intragovernmental debt holdings: $4.528 billion; 
Total: $13.551 billion. 

As of September 30, 2011:
Held by public: $10.127 billion; 
Intragovernmental debt holdings: $4.654 billion; 
Total: $14.781 billion. 

Source: BPD. 

[End of figure] 

During the last 4 fiscal years, total federal debt has increased by 
$5,788 billion, or 64 percent, from $8,993 billion as of September 30, 
2007, to $14,781 billion as of September 30, 2011. The rapid growth in 
federal debt during this period presented debt management challenges 
for Treasury. The increases to total federal debt over the past 4 
fiscal years represent the largest dollar increases over a 4-year 
period in history. Notably, the statutory debt limit was raised on 
seven different occasions during the last 4 fiscal years, increasing 
by about 55 percent, from $9,815 billion to its current level of 
$15,194 billion. During fiscal year 2011, Treasury faced an additional 
challenge of managing federal debt close to the statutory debt limit. 
A debt issuance suspension period was declared by Treasury from May 
16, 2011, through August 2, 2011. Treasury utilized a number of 
extraordinary actions within its legal authorities to avoid exceeding 
the debt limit. On August 2, 2011, the Budget Control Act of 2011 was 
enacted by Congress and signed into law by the President, which 
resulted in increases to the statutory debt limit of $400 billion on 
August 2, 2011, and $500 billion on September 22, 2011. 

What GAO Recommends: 

GAO is not making recommendations in this report, but will be 
reporting separately on matters identified during its audit, along 
with recommendations for strengthening internal controls relevant to 
the Schedule of Federal Debt. In commenting on a draft of this report, 
BPD’s Commissioner concurred with our conclusions. 

View [hyperlink, http://www.gao.gov/products/GAO-12-164]. 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 the Schedules of Federal Debt: 

Opinion on Internal Control: 

Compliance with Selected Provisions of Laws: 

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 Relevant to the Schedule of Federal Debt: 

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

Abbreviations: 

BPD: Bureau of the Public Debt: 

CSRDF: Civil Service Retirement and Disability Fund: 

ESF: Exchange Stabilization Fund: 

G Fund: Government Securities Investment Fund of the Federal Employees’
 Retirement System: 

GDP: Gross Domestic Product: 

Postal Benefits Fund: Postal Service Retiree Health Benefits Fund: 

Treasury: Department of the Treasury: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

November 8, 2011: 

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, 2011 and 2010. The 
Schedules of Federal Debt present the beginning balances, increases 
and decreases, and ending balances for (1) Federal Debt Held by the 
Public and Intragovernmental Debt Holdings, (2) the related Accrued 
Interest Payables, and (3) the related Net Unamortized Premiums and 
Discounts managed by the Department of the Treasury's (Treasury) 
Bureau of the Public Debt (BPD). 

The auditor's report contains our (1) unqualified opinions on the 
Schedules of Federal Debt for the fiscal years ended September 30, 
2011 and 2010, (2) opinion that BPD maintained, in all material 
respects, effective internal control over financial reporting relevant 
to the Schedule of Federal Debt as of September 30, 2011, and (3) 
conclusion that our tests of BPD's compliance with selected provisions 
of laws disclosed no instances of reportable noncompliance. 

As of September 30, 2011 and 2010, federal debt managed by BPD totaled 
about $14,781 billion and $13,551 billion, respectively, primarily for 
borrowings to fund the federal government's operations. As shown on 
the Schedules of Federal Debt, these balances consisted of 
approximately (1) $10,127 billion as of September 30, 2011, and $9,023 
billion as of September 30, 2010, of debt held by the public and (2) 
$4,654 billion as of September 30, 2011, and $4,528 billion as of 
September 30, 2010, of intragovernmental debt holdings. 

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

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

Debt held by the public and intragovernmental debt holdings are very 
different. Debt held by the public represents a burden on today's 
economy as borrowing from the public 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. Moreover, the interest paid 
on this debt may reduce budget flexibility because, unlike most of the 
budget, it cannot be controlled directly. In contrast, 
intragovernmental debt holdings 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, Treasury's 
interest payments to federal government accounts are entirely offset 
by the income received by such accounts. However, this 
intragovernmental debt and related interest represent a claim on 
future resources and therefore represent a burden on future taxpayers 
and the future economy. Specifically, when federal trust funds redeem 
Treasury securities to obtain cash to fund expenditures, Treasury 
usually borrows from the public to finance these redemptions.[Footnote 
1] 

We have audited the Schedule of Federal Debt since fiscal year 1997. 
Over this period, total federal debt has increased by 174 percent. 
During the last four fiscal years, total federal debt has increased by 
$5,788 billion, or 64 percent, from $8,993 billion as of September 30, 
2007, to $14,781 billion as of September 30, 2011. The rapid growth in 
federal debt during this period presented a significant debt 
management challenge for Treasury.[Footnote 2] Increases to the 
federal debt became particularly acute with the onset of the recession 
in December 2007. The economic downturn along with the federal 
government's response to it and other actions taken to stabilize 
financial markets contributed to a rapid buildup in federal debt held 
by the public. As a result, the increases to total federal debt over 
the past four fiscal years represent the largest dollar increases over 
a four year period in history. Notably, the statutory debt limit was 
raised on seven different occasions during the last four fiscal years, 
increasing by about 55 percent, from $9,815 billion to its current 
level of $15,194 billion. During fiscal year 2011 alone, total federal 
debt increased by $1,230 billion. Of the fiscal year 2011 increase, 
about $1,104 billion was from the increase in debt held by the public 
and about $126 billion was from the increase in intragovernmental debt 
holdings. 

During fiscal year 2011, Treasury faced an additional challenge of 
managing federal debt close to the statutory debt limit. On May 16, 
2011, you, as the Secretary of the Treasury, declared a debt issuance 
suspension period beginning on that date, and extending through August 
2, 2011.[Footnote 3] Treasury utilized a number of extraordinary 
actions within its legal authorities to avoid exceeding the debt 
limit. These actions included suspending investments to the Government 
Securities Investment Fund of the Federal Employees' Retirement System 
(G Fund), the Civil Service Retirement and Disability Fund (CSRDF), 
the Postal Service Retiree Health Benefits Fund (Postal Benefits 
Fund), and the Exchange Stabilization Fund (ESF), as well as 
disinvesting a security held by CSRDF. In addition to these actions, 
Treasury also suspended new issuances of State and Local Government 
Series securities from May 6, 2011 through August 1, 2011, to manage 
federal debt within the statutory debt limit. On August 2, 2011, the 
Budget Control Act of 2011 was enacted by Congress and signed into law 
by the President, thereby establishing procedures to increase the 
statutory debt limit by $900 billion - $400 billion immediately and an 
additional $500 billion after 50 calendar days.[Footnote 4] As a 
result, the statutory debt limit was increased to $14,694 billion on 
August 2, 2011, and to its current level of $15,194 billion on 
September 22, 2011. As of September 30, 2011, debt subject to the 
limit totaled $14,747 billion.[Footnote 5] Subsequent to the August 2, 
2011 increase in the statutory debt limit, Treasury fully restored the 
G Fund to the position it would have been in had there not been a debt 
issuance suspension period. Treasury also processed suspended 
principal investments to CSRDF, the Postal Benefits Fund, and ESF. 
Additionally, Treasury has established plans to restore all interest 
losses - currently included on the Schedule of Federal Debt in accrued 
interest payable on intragovernmental debt holdings - to CSRDF and the 
Postal Benefits Fund with the next semiannual interest payment for 
these funds on December 31, 2011, in accordance with the legal 
authorities provided to the Secretary of the Treasury. 

Federal financing needs remain high, in part due to the persistent 
effects of the economic downturn and its impact on the federal 
deficit. The reported federal deficit for fiscal year 2011 was $1,299 
billion, approximately the same amount reported for fiscal year 2010. 
Correspondingly, debt held by the public has increased from roughly 62 
percent of Gross Domestic Product (GDP) at the end of fiscal year 2010 
to roughly 68 percent at the end of fiscal year 2011. This growth in 
federal debt comes at a time when the budgetary pressures from rising 
health care costs and the aging of the U.S. population have begun to 
build. The oldest members of the baby-boom generation are already 
eligible for early Social Security retirement benefits and become 
eligible for Medicare this year. The Social Security program, which 
historically ran large cash surpluses that helped reduce the 
government's need to borrow from the public to finance other programs, 
is now projected to pay more in benefits than it receives in tax 
income each year into the future. These pressures will increase in 
coming decades as more members of the baby-boom generation retire and 
become eligible for federal health programs. 

The federal government's fiscal outlook has improved, largely due to 
provisions in the Budget Control Act of 2011. However, GAO's recent 
long-range federal budget simulations continue to show an 
unsustainable fiscal path driven by a structural imbalance between 
revenues and spending for major entitlement programs.[Footnote 6] 
Addressing the long-term fiscal challenge will not be easy. It will 
likely require difficult decisions affecting both federal spending and 
revenue. The challenge is made greater by the need to balance the 
fragile economic recovery with the need to act soon to change the path. 

As we have noted in previous years, Treasury reporting shows that 
foreign ownership of Treasury securities represents a significant 
portion of debt held by the public. As of June 30, 2011, the reported 
amount of Treasury securities held by foreign and international 
investors represented an estimated 46 percent of debt held by the 
public. While this percentage remained constant with that as of June 
30, 2010, it remains considerably higher than the estimated 30 percent 
of debt held by the public as of June 30, 2001. According to amounts 
reported under the Treasury International Capital reporting system, 
Treasury estimates that the amount of Treasury securities held by 
foreign and international investors has increased by a total of $3,518 
billion--from $983 billion as of June 30, 2001, to $4,501 billion as 
of June 30, 2011.[Footnote 7] 

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. 

Sincerely yours, 

Signed by: 

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

[End of section] 

United States Government Accountability Office: 
Washington, D.C. 20548: 

To the Commissioner of the Bureau of the Public Debt: 

In connection with fulfilling our requirement to audit the 
consolidated financial statements of the U.S. government, we have 
audited the Schedules of Federal Debt Managed by the Bureau of the 
Public Debt (BPD) because of the significance of the federal debt to 
the federal government's consolidated financial statements.[Footnote 8] 

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, 2011 and 2010. The Schedules of Federal Debt present the 
beginning balances, increases and decreases, and ending balances for 
(1) Federal Debt Held by the Public and Intragovernmental Debt 
Holdings, (2) the related Accrued Interest Payables, and (3) the 
related Net Unamortized Premiums and Discounts managed by the 
Department of the Treasury's BPD.[Footnote 9] 

In our audits of the Schedules of Federal Debt Managed by BPD for the 
fiscal years ended September 30, 2011 and 2010, 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, 2011; and: 

* no reportable noncompliance in fiscal year 2011 with selected 
provisions of laws 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) BPD's comments on a draft of this report. 

Opinion on the 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, 2011, 
2010, and 2009 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, 2011 and 2010. 

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, 2011, 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 on internal control 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 10] We have communicated these matters to management and, 
where appropriate, will report on them separately. 

Compliance with Selected Provisions of Laws: 

Our tests of BPD's compliance in fiscal year 2011 with selected 
provisions of laws 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, 2011, 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 of Federal Debt 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 of Federal Debt 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 effective 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, 
2011, based on the criteria established under FMFIA. BPD management's 
assertion based on its evaluation 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, 2011. 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; 

* 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 
based on the assessed risk; 

* tested internal control over financial reporting relevant to the 
Schedule of Federal Debt; 

* tested compliance in fiscal year 2011 with the (1) statutory debt 
limit (31 U.S.C. §§ 3101 and 3101A); (2) suspension and early 
redemption of investments from the Civil Service Retirement and 
Disability Fund (5 U.S.C. § 8348(j)(k)); and (3) suspension of 
investments from the Government Securities Investment Fund (G-Fund) (5 
U.S.C. § 8438(g)); 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 conformity 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 testing 
controls over financial reporting. Our internal control testing was 
for the purpose of expressing an opinion on the effectiveness of 
internal control over financial reporting and may not be sufficient 
for other purposes. Consequently, our audit may not identify all 
deficiencies in internal control over financial reporting that are 
less severe than a material weakness. 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 selected provisions of laws 
that have a direct and material effect on the Schedule of Federal Debt 
for the fiscal year ended September 30, 2011. 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 1, 2011: 

[End of section] 

Overview, Schedules, and Notes: 

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

Gross Federal Debt Outstanding:[Footnote 11]: 

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 31 U.S.C. § 3101), the latter of which is referred to 
as intragovemmental debt holdings. As of September 30, 2011 and 2010, 
outstanding gross federal debt managed by BPD totaled $14,781 and 
$13,551 billion, respectively. The increase in gross federal debt of 
$1,230 billion during fiscal year 2011 was due to an increase in gross 
intragovemmental debt holdings of $126 billion and an increase in 
gross debt held by the public of $1,104 billion. As Figure 1 
illustrates, both intragovernmental debt holdings and debt held by    
the public have increased since fiscal year 2007. The primary reason 
for the increases in intragovernmental debt holdings is the excess 
annual receipts (including interest earnings) over disbursements in 
the Federal Old-Age and Survivors Insurance Trust Fund, Civil Service 
Retirement and Disability Fund, 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, 2011, gross debt held by 
the public totaled $10,127 billion and gross intragovemmental debt 
holdings totaled $4,654 billion.  

Figure 1: Total Gross Federal Debt Outstanding: 

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

As of September 30, 2007: 
Held by public: $5.069 billion; 
Intragovernmental debt holdings: $3.944 billion; 
Total: $8.93 billion. 

As of September 30, 2008: 
Held by public: $5.809 billion; 
Intragovernmental debt holdings: $4.202 billion; 
Total: $10.011 billion. 

As of September 30, 2009: 
Held by public: $7.552 billion; 
Intragovernmental debt holdings: $4.346 billion; 
Total: $11.898 billion. 

As of September 30, 2010: 
Held by public: $9.023 billion; 
Intragovernmental debt holdings: $4.528 billion; 
Total: $13.551 billion. 

As of September 30, 2011:
Held by public: $10.127 billion; 
Intragovernmental debt holdings: $4.654 billion; 
Total: $14.781 billion. 

[End of figure] 
 
Interest Expense: 

Interest expense incurred during fiscal year 2011 consists of (1) 
interest accrued and paid on debt held by the public or credited to 
accounts holding intragovemmental 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 intragovemmental debt, 
and (3) net amortization of premiums and discounts. The primary 
components of interest expense are interest paid on the debt held by 
the public and interest credited to federal government trust funds and 
other federal government accounts that hold Treasury securities. The 
interest paid on the debt held by the public affects the current 
spending of the federal government and represents the burden of 
servicing its debt (i.e., payments to outside creditors). Interest 
credited to federal government trust funds and other federal 
government accounts, on the other hand, does not result in an 
immediate outlay of the Federal Government because one part of the 
government pays the interest and another part receives it. However, 
this interest represents a claim on future budgetary resources and 
hence an obligation on future taxpayers. This interest, when 
reinvested by the trust funds and other federal government accounts, is 
included in the programs' excess funds not currently needed in 
operations, which are invested in federal securities. For fiscal year 
2011, interest expense incurred totaled $454 billion, interest expense 
on debt held by the public was $251 billion, and $203 billion was 
interest incurred for intragovemmental debt holdings. As Figure 2 
illustrates, total interest expense increased from fiscal year 2007 to 
2008. However, due to the economic conditions, there was a significant 
increase in the demand for government backed securities during fiscal 
year 2009, which resulted in lower average interest rates and interest 
expense for that year. 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. Interest expense increased for 
fiscal years 2010 and 2011 due primarily to an increase in Treasury 
notes and bonds outstanding, which have higher average interest rates 
than Treasury bills. Average interest rates on principal balances 
outstanding as of September 30, 2011 and 2010, are disclosed in the 
Notes to the Schedules of Federal Debt.  

Figure 2: Total Interest Expense: 

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

Fiscal Year ended September 30, 2007: 
Held by public: $239 billion; 
Intragovernmental debt holdings: $194 billion; 
Total: $433 billion. 

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

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

Fiscal Year ended September 30, 2010: 
Held by public: $215 billion; 
Intragovernmental debt holdings: $198 billion; 
Total: $413 billion. 

Fiscal Year ended September 30, 2011:
Held by public: $251 billion; 
Intragovernmental debt holdings: $203 billion; 
Total: $454 billion. 

[End of figure] 

Debt Held by the Public: 

Debt held by the public primarily represents the amount the Federal 
Government has borrowed to finance cumulative cash deficits. During 
fiscal year 2011, Treasury primarily used the existing suite of 
securities to meet the borrowing needs of the Federal Government while 
increasing its offerings of longer term securities to extend the 
average length of maturity. As a result, Treasury bills decreased by 
$308 billion; whereas, Treasury notes, bonds, and TIPS increased by 
$1,154 billion, $170 billion, and $112 billion respectively, in fiscal 
year 2011. As of September 30, 2011 and 2010, gross debt held by the 
public totaled $10,127 billion and $9,023 billion, respectively (see 
Figure 1), an increase of $1,104 billion. This increase was primarily 
the result of borrowings needed to finance the government's fiscal 
year 2011 deficit. However, as a result of the increase in outstanding 
gross debt held by the public being in the form of longer term 
securities, the total dollar amount of activity for both borrowings 
and repayments of debt held by the public decreased for fiscal year 
2011. 

As of September 30, 2011, $9,604 billion, or 95 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, 2011, $5,625 billion, or 59 percent, 
will mature within the next 4 years (see Figure 3). As of September 
30, 2011 and 2010, notes and TIPS held by the public maturing within 
the next 10 years totaled $6,916 billion and $5,673 billion, 
respectively, an increase of $1,243 billion.  

Figure 3: Maturity Dates of Marketable Debt Held by the Public as of   
$3.000 September 30, 2011: 

[Refer to PDF for image: stacked line graph] 

Figure indicates the fiscal year of maturity, 2011 through 2041, and 
amounts of marketable debt in the following categories: 
TIPS; 
Bonds; 
Notes; 
Bills. 

[End of figure] 

The Federal Government also issues to the public nonmarketable 
securities, which cannot be resold, and have maturity dates from on 
demand out to 40 years. As of September 30, 2011, nonmarketable 
securities totaled $523 billion, or 5 percent of debt held by the 
public. As of that date, nonmarketable securities primarily consisted 
of savings securities totaling $185 billion, State and Local 
Government Series securities totaling $152 billion, and Government 
Account Series securities totaling $151 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 payments on behalf of 
Treasury; and make interest and redemption payments from Treasury's 
account to the accounts of security holders. For paper U.S. savings 
bonds, selected FRBs sell, print, and deliver savings bonds; redeem 
savings bonds; and handle the related transfers of cash. 

Intragovemmental Debt Holdings: 

Intragovemmental 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.
Intragovemmental 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 12] As 
of September 30, 2011, such funds accounted for $4,254 billion, or 91 
percent, of the $4,654 billion intragovemmental debt holdings balances 
(see Figure 4). As of September 30, 2011 and 2010, gross 
intragovemmental debt holdings totaled $4,654 billion and $4,528 
billion, respectively (see Figure 1), an increase of $126 billion. 

The majority of intragovemmental 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, 2011: 

[Refer to PDF for image: pie-chart] 

Social Security trust funds: 57%; 
Civil Service Retirement and Disability trust fund: 17%; 
Military Retirement and Health Care funds: 10%; 
Medicare trust funds: 7%; 
Other programs and trust funds: 8%. 

[End of figure] 

Significant Events in Fiscal Year 2011: 

Statutory Debt Limit Raised: 

On August 2, 2011, the Budget Control Act of 2011 was signed into law, 
becoming Public Law No. 112-25. Pursuant to Public Law No. 112-25, the 
statutory debt limit was raised by $400 billion to $14,694 billion on 
August 2, 2011, and by $500 billion to $15,194 billion on September 
22, 2011. The Budget Control Act of 2011 also enacted caps on 
discretionary spending for fiscal years 2012 through 2021 and created 
the Joint Select Committee on Deficit Reduction, which is tasked with 
proposing legislation for additional deficit reduction over the same 
period. 

Prior to the enactment of the Budget Control Act of 2011, Treasury 
faced a period that required it to depart from its normal debt 
management procedures and to invoke legal authorities to avoid 
exceeding the statutory debt limit. On May 16, 2011, the Secretary of 
the Treasury declared a debt issuance suspension period beginning on 
that date, and extending through August 2, 2011. Treasury then 
utilized a number of extraordinary actions within its legal
authorities, which included suspending investment of receipts and 
reinvestment of maturities (including interest earnings) of the 
Government Securities Investment Fund of the Federal Employees' 
Retirement System (G-Fund), the Exchange Stabilization Fund (ESF), the 
Civil Service Retirement and Disability Fund (Civil Service Fund), and 
the Postal Service Retiree Health Benefits Fund (Postal Benefits 
Fund); and redeeming a Civil Service Fund security early to make 
benefit payments. In addition to these actions, sales of State and 
Local Government Series securities were suspended from May 6, 2011 
through August 1, 2011. 

Subsequent to the August 2, 2011 increase to the statutory debt limit, 
BPD took steps to restore foregone principal and interest to the four 
funds used as "extraordinary measures" to keep the debt under the 
limit. Principal for the four funds (nearly $240 billion) was restored 
on August 2, 2011, and interest for the G-Fund ($378 million) was 
restored on August 3, 2011. ESF is not entitled to foregone interest. 
Interest for the Civil Service Fund and the Postal Benefits Fund — 
currently included on the Schedule of Federal Debt in accrued interest 
payable on intragovemmental debt holdings — will be restored on the 
next semi-annual interest payment date of December 31, 2011. 

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 financial markets crisis. As of September 30, 2010, 
there were a total of 8 cash management bills outstanding that totaled 
$200 billion. In July 2011, the balance in the SFP declined to zero 
and remained at that balance through September 30, 2011. At this time, 
Treasury does not plan to resume auctions of bills under the SFP in 
the near term. 

However, Treasury retains the flexibility to increase the size of the 
SFP in the future. Such a decision will be made in consultation with 
the Federal Reserve. 

Treasury Inflation-Indexed Securities (TIPS): 

TIPS are an important component of Treasury's debt management 
strategy. Over the past year, Treasury has made changes to TIPS 
issuances to improve liquidity in the TIPS market. These changes have 
included increasing overall TIPS issuances and adding reopenings of 
TIPS. 

After extensive consultation with market participants, Treasury added 
a second reopening to each of its 5-year and 30-year TIPS offerings. 
As a result, the original-issue 5-year TIPS are now auctioned in April 
with reopening auctions in August and December. Similarly, the 
original-issue 30-year TIPS are now auctioned in February with 
subsequent reopening auctions in June and October. As a result of 
these changes, Treasury is now holding a TIPS auction in every month 
of the year. 

System Open Market Account (SOMA) Holdings: 

Federal Debt held by the Public includes debt held by the Federal 
Reserve Bank (FRB) of New York in SOMA holdings. These securities are 
held by the FRB of New York for the purpose of conducting monetary 
policy. On June 22, 2011, the Federal Open Market Committee (FOMC) 
directed the Open Market Trading Desk at the FRB of New York (the 
Desk) to complete purchases of $600 billion of longer-term Treasury 
securities, which began in November 2010, by the end of June 2011. The 
FOMC also directed the Desk to maintain its existing policy of 
reinvesting principal payments on all domestic securities, which 
include Treasury and Agency securities in SOMA, in Treasury 
securities. As of September 30, 2011, the FRB had total holdings of 
$1,665 billion, including a net of $759 million in Treasury securities 
held by the FRB as collateral for securities lending activities. 

Decommissioning Legacy Treasury Direct: 

In April 2011, BPD announced to its customers that it will 
decommission Legacy Treasury Direct (LTD), a book-entry system used to 
purchase marketable securities directly from the Treasury. Effective 
May 1, 2011, no new accounts or incoming transfers were permitted in 
LTD and only 13-week and 26-week Treasury bills were available for 
purchase. BPD intends to stop all purchases in LTD no later than 
November 1, 2012. LTD customers were encouraged to open an account in 
Treasury Direct, BPD's online system for purchasing electronic 
securities, to continue investing in marketable securities or to 
convert their existing securities. 

Historical Perspective: 

Federal debt outstanding is one of the largest legally binding 
obligations of the Federal Government. Nearly all the federal debt has 
been issued by the Treasury with a small portion being issued by other 
federal government agencies. Treasury issues debt securities for two 
principal reasons, (1) to borrow needed funds to finance the current 
operations of the Federal Government and (2) to provide an investment 
and accounting mechanism for certain federal government accounts' 
(primarily federal trust funds) excess receipts. Total gross federal 
debt outstanding has dramatically increased over the past 25 years 
from $2,125 billion as of September 30, 1986, to $14,781 billion as of 
September 30, 2011 (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 more than doubled between 
1986 and 1997. 

Figure 5: Total Gross Federal Debt Outstanding: 

[Refer to PDF for image: vertical bar graph] 

Graph depicts total gross federal debt outstanding as of September 30 
for the years 1986 through 2011. 

Figures shown prior to 1996 are unaudited and include securities 
issued by the Federal Financing Bank. 
                    
Source: Monthly Statement of the 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, primarily as a result of higher federal outlays. 
Federal debt held by the public increased by 51.2 percent from fiscal 
year 2002 through fiscal year 2007. From fiscal year 2008 through 
fiscal year 2011, federal debt held by the public more than doubled 
rising by $5,078 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 $10,127 billion in 2011. 

Even in those years where debt held by the public declined, total 
federal debt increased because of increases in intragovemmental debt 
holdings. Over the past 4 fiscal years, intragovernmental debt 
holdings increased by $710 billion, from $3,944 billion as of 
September 30, 2007, to $4,654 billion as of September 30, 2011. By 
law, federal government accounts, including trust funds, have the 
authority or are required to invest their excess annual receipts   
(including interest earnings) over disbursements in federal 
securities. As a result, the intragovernmental debt holdings balances 
primarily represent the cumulative surplus of funds due to the trust 
funds' cumulative annual excess of tax receipts, interest credited, 
and other collections compared to spending. 

As shown in Figure 6, interest rates have fluctuated over the past 25 
years. The average interest rates reflected here represent the 
original issue weighted effective yield on debt held by the public and 
intragovemmental debt holdings outstanding at the end of the fiscal 
year. 

Figure 6: Average Interest Rates of Federal Debt Outstanding: 

[Refer to PDF for image: line graph] 

Graph depicts average interest rates of federal debt outstanding as of 
September 30 for the years 1986 through 2011. 

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

[End of figure] 
  
Schedules of Federal Debt: 

Managed by the Bureau of the Public Debt: 
For the Fiscal Years Ended September 30, 2011 and 2010 (Dollars in 
Millions): 

Balance as of September 30, 2009: 

Federal Debt: Held by the Public: 
Principal (Note 2): $7,551,862; 
Accrued Interest Payable: $41,348; 
Net Unamortized Premiums/(Discounts): ($33,905). 

Federal Debt: Intragovernmental Debt Holdings: 
Principal (Note 3): $4,345,554; 
Accrued Interest Payable: $49,443; 
Net Unamortized Premiums/(Discounts): $33,886. 

Increases: Borrowings from the Public: 
Federal Debt: Held by the Public: 
Principal (Note 2): $8,533,376; 
Accrued Interest Payable: [Empty]; 
Net Unamortized Premiums/(Discounts): ($7,912). 

Increases: Net Increase in Intragovernmental Debt Holdings; 
Federal Debt: Intragovernmental Debt Holdings: 
Principal (Note 3): $182,529; 
Accrued Interest Payable: [Empty]; 
Net Unamortized Premiums/(Discounts): $6,067. 

Increases: Accrued Interest (Note 4); 
Federal Debt: Held by the Public: 
Accrued Interest Payable: $206,843. 

Increases: Accrued Interest (Note 4); 
Federal Debt: Intragovernmental Debt Holdings: 
Accrued Interest Payable: $199,789. 

Total Increases: 

Federal Debt: Held by the Public: 
Principal (Note 2): $8,533,376; 
Accrued Interest Payable: $206,843; 
Net Unamortized Premiums/(Discounts): ($7,912). 

Federal Debt: Intragovernmental Debt Holdings: 
Principal (Note 3): $182,529; 
Accrued Interest Payable: $199,789; 
Net Unamortized Premiums/(Discounts): $6,067. 

Decreases: 

Federal Debt: Held by the Public: 
Principal (Note 2): Repayments of Debt Held by the Public: $7,062,430; 
Accrued Interest Payable: Interest Paid: $201,200; 
Net Unamortized Premiums/(Discounts): Net Amortization (Note 4): 
($7,947). 

Federal Debt: Intragovernmental Debt Holdings: 
Principal (Note 3): Repayments of Debt Held by the Public: [Empty]; 
Accrued Interest Payable: Interest Paid: $200,650; 
Net Unamortized Premiums/(Discounts): Net Amortization (Note 4): 
$1,549. 

Total Decreases: 

Federal Debt: Held by the Public: 
Principal (Note 2): $7,062,430; 
Accrued Interest Payable: $201,200; 
Net Unamortized Premiums/(Discounts): ($7,947). 

Federal Debt: Intragovernmental Debt Holdings: 
Principal (Note 3): 0; 
Accrued Interest Payable: $200,650; 
Net Unamortized Premiums/(Discounts): $1,549. 

Balance as of September 30, 2010: 

Federal Debt: Held by the Public: 
Principal (Note 2): $9,022,808; 
Accrued Interest Payable: $46,991; 
Net Unamortized Premiums/(Discounts): ($33,870). 

Federal Debt: Intragovernmental Debt Holdings: 
Principal (Note 3): $4,528,083; 
Accrued Interest Payable: $48,582; 
Net Unamortized Premiums/(Discounts): $38,404. 

Increases: Borrowings from the Public: 
Federal Debt: Held by the Public: 
Principal (Note 2): $7,965,202; 
Accrued Interest Payable: [Empty]; 
Net Unamortized Premiums/(Discounts): ($2,368). 

Increases: Net Increase in Intragovernmental Debt Holdings; 
Federal Debt: Intragovernmental Debt Holdings: 
Principal (Note 3): $126,291; 
Accrued Interest Payable: [Empty]; 
Net Unamortized Premiums/(Discounts): $12,364. 

Increases: Accrued Interest (Note 4); 
Federal Debt: Held by the Public: 
Accrued Interest Payable: $244,218. 

Increases: Accrued Interest (Note 4); 
Federal Debt: Intragovernmental Debt Holdings: 
Accrued Interest Payable: $205,881. 

Total Increases: 

Federal Debt: Held by the Public: 
Principal (Note 2): $7,965,202; 
Accrued Interest Payable: $244,218; 
Net Unamortized Premiums/(Discounts): ($2,368). 

Federal Debt: Intragovernmental Debt Holdings: 
Principal (Note 3): $126,291; 
Accrued Interest Payable: $205,881; 
Net Unamortized Premiums/(Discounts): $12,364. 

Decreases: 

Federal Debt: Held by the Public: 
Principal (Note 2): Repayments of Debt Held by the Public: $6,860,979; 
Accrued Interest Payable: Interest Paid: $239,739; 
Net Unamortized Premiums/(Discounts): Net Amortization (Note 4): 
($6,700). 

Federal Debt: Intragovernmental Debt Holdings: 
Principal (Note 3): Repayments of Debt Held by the Public: [Empty]; 
Accrued Interest Payable: Interest Paid: $206,685; 
Net Unamortized Premiums/(Discounts): Net Amortization (Note 4): 
$3,144. 

Total Decreases: 

Federal Debt: Held by the Public: 
Principal (Note 2): $6,860,979; 
Accrued Interest Payable: $239,739; 
Net Unamortized Premiums/(Discounts): ($6,700). 

Federal Debt: Intragovernmental Debt Holdings: 
Principal (Note 3): 0; 
Accrued Interest Payable: $206,685; 
Net Unamortized Premiums/(Discounts): $3,144. 

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, 2011 and 2010: 

(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 2011 and fiscal year 
2010 balances and activity relating to monies borrowed from the public 
and certain federal government accounts under 31 U.S.C. § 3101 to fund 
the operations of the U.S. government. Permanent, indefinite 
appropriations are available for the payment of interest on the 
federal debt and the redemption of Treasury securities. 

Reporting Entity: 

The Constitution empowers the Congress to borrow money on the credit 
of the United States. The Congress has authorized the Secretary of the 
Treasury to borrow monies to operate the federal government within a 
statutory debt limit. Title 31, U.S. Code authorizes Treasury to 
prescribe the debt instruments and otherwise limit and restrict the
amount and composition of the debt. 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 
maintains an investment program for federal government accounts, 
including trust funds, that have legislative authority to invest 
temporary cash reserves not needed for current benefits and expenses.
BPD issues and redeems Treasury securities for these federal 
government accounts based on data provided by the respective program 
agencies and other Treasury entities. BPD also issues other specific 
securities outside of the authority of 31 U.S.C. §3101, such as HOPE 
Bonds, that are not reported on the Schedules of Federal Debt
Managed by the Bureau of the Public Debt. 

Basis of Accounting: 

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

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

Note 2. Federal Debt Held by the Public: 

As of September 30, 2011 and 2010, Federal Debt Held by the Public 
consisted of the following: 

Marketable: 

Treasury Bills: 
2011 Amount: $1,475,557; 
2011 Average Interest Rates: 0.1%. 
2010 Amount: $1,783,675; 
2010 Average Interest Rates: 0.2%; 

Treasury Notes: 
2011 Amount: $6,406,983; 
2011 Average Interest Rates: 2.3%. 
2010 Amount: $5,252,585; 
2010 Average Interest Rates: 2.6%. 

Treasury Bonds: 
2011 Amount: $1,016,408; 
2011 Average Interest Rates: 5.8%. 
2010 Amount: $846,054; 
2010 Average Interest Rates: 6.1%. 

TIPS: 
2011 Amount: $705,352; 
2011 Average Interest Rates: 1.9%. 
2010 Amount: $593,614; 
2010 Average Interest Rates: 2.2%. 

Total Marketable: 
2011 Amount: $9,604,300. 
2010 Amount: $8,475,928. 

Nonmarketable: 
2011 Amount: $522,731; 
2011 Average Interest Rates: 2.8%. 
2010 Amount: $546,880; 
2010 Average Interest Rates: 2.8%. 

Total Federal Debt Held by the Public: 
2011 Amount: $10,127,031. 
2010 Amount: $9,022,808. 

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, 
2011 and 2010. 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, 2011 and 2010. Treasury notes are issued with a term of 
2—10 years and Treasury bonds are issued with a term of more than 10 
years. 

Treasury also issues TIPS that have interest and redemption payments 
that are tied to the Consumer Price Index for all Urban Consumers, a 
widely used measure of inflation. TIPS are issued with a term of 5 
years or more. At maturity, TIPS are redeemed at the inflation-
adjusted principal amount, or the original par value, whichever is 
greater. TIPS pay a semi-annual fixed rate of interest applied to the 
inflation-adjusted principal. The average interest rate on TIPS 
represents the stated interest rate on principal plus inflation, 
adjusted by any discount or premium on securities outstanding as of 
September 30, 2011 and 2010. The TIPS Federal Debt Held by the Public 
inflation-adjusted principal balance includes inflation of $76,133 
million and $57,481 million as of September 30, 2011 and 2010, 
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, 2011, the FRB had total holdings of 
$1,665,419 million, including a net of $759 million in Treasury 
securities held by the FRB as collateral for securities lending 
activities. As of September 30, 2010, the FRB had total holdings of 
$813,550 million, including a net of $1,880 million in Treasury 
securities held by the FRB as collateral for securities lending 
activities. 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, 2011 and 2010. Nonmarketable securities are issued 
with a term of on demand out to 40 years. 

As of September 30, 2011 and 2010, nonmarketable securities consisted 
of the following: 

Domestic Series: 
2011: $29,995; 
2010: $29,995. 

Foreign Series: 
2011: $2,986; 
2010: $4,186. 

State and Local Government Series: 
2011: $151,831; 
2010: $193,208. 

United States Savings Securities: 
2011: $185,187; 
2010: $188,796. 

Government Account Series: 
2011: $151,346; 
2010: $129,355. 

Other: 
2011: $1,386; 
2010: $1,340. 

Total Nonmarketable: 
2011: $522,731; 
2010: $546,880. 

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 Intragovemmental 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 2011 and 2010 are 
included in the respective Borrowings from the Public amounts reported 
on the Schedules of Federal Debt. 

Note 3. Intragovernmental Debt Holdings (Dollars in millions): 

As of September 30, 2011 and 2010, Intragovernmental Debt Holdings are 
owed to the following: 

SSA: Federal Old-Age and Survivors Insurance Trust Fund: 
2011: $2,492,531; 
2010: $2,399,111. 

OPM: Civil Service Retirement and Disability Fund: 
2011: $795,371; 
2010: $770,126. 

DOD: Military Retirement Fund: 
2011: $326,040; 
2010: $282,006. 

HHS: Federal Hospital Insurance Trust Fund: 
2011: $245,939; 
2010: $279,475. 

SSA: Federal Disability Insurance Trust Fund: 
2011: $161,965; 
2010: $187,222. 

DOD: DOD Medicare-Eligible Retiree Health Care Fund: 
2011: $161,741; 
2010: $142,289. 

HHS: Federal Supplementary Medical Insurance Trust Fund: 
2011: $70,466; 
2010: $70,982. 

DOE: Nuclear Waste Disposal Fund: 
2011: $48,611; 
2010: $47,578. 

OPM: Postal Service Retiree Health Benefits Fund: 
2011: $43,708; 
2010: $42,115. 

OPM: Employees Life Insurance Fund: 
2011: $39,678; 
2010: $37,605. 

FDIC: The Deposit Insurance Fund: 
2011: $34,926; 
2010: $37,441. 

Treasury: Exchange Stabilization Fund: 
2011: $22,721; 
2010: $20,436. 

DOL: Pension Benefit Guaranty Corporation: 
2011: $20,974[A]; 
2010: $19,888[A]. 

OPM: Employees Health Benefits Fund: 
2011: $19,191; 
2010: $16,242. 

DOS: Foreign Service Retirement and Disability Fund: 
2011: $16,397; 
2010: $15,862. 

DOT: Highway Trust Fund: 
2011: $16,302; 
2010: $24,455. 

DOL: Unemployment Trust Fund: 
2011: $16,030; 
2010: $18,703. 

NCUA: National Credit Union Share Insurance Fund: 
2011: $10,733; 
2010: $9,279. 

Other Programs and Funds: 
2011: $111,070; 
2010: $112,353. 

Total Intragovernmental Debt Holdings: 
2011: $4,654,374; 
2010: $4,528,083. 

[A] These amounts consist of $5,243 million and $4,999 million of 
marketable Treasury securities as well as $15,731 million and $14,889 
million of GAS securities as of September 30, 2011 and 2010, 
respectively. 

Social Security Administration (SSA); Office of Personnel Management 
(OPM); Department of Defense (DOD); Department of Health and Human 
Services (HHS); Department of Energy (DOE); Federal Deposit Insurance  
Corporation (FDIC); Department of the Treasury (Treasury); Department 
of Labor (DOL); Department of State (DOS); Department of 
Transportation (DOT); National Credit Union Administration (NCUA).  
Notes to the Schedules of Federal Debt Managed by the Bureau of the 
Public Debt For the Fiscal Years Ended September 30, 2011 and 2010 

Intragovemmental Debt Holdings primarily consist of GAS securities. 
Treasury issues GAS securities at either par value or at an amount 
that reflects a discount or a premium. GAS securities are issued with 
a term of on demand out to 30 years. GAS securities include TIPS, 
which are reported at an inflation-adjusted principal balance using the
Consumer Price Index for all Urban Consumers. As of September 30, 2011 
and 2010, the inflation-adjusted principal balance included inflation 
of $87,986 million and $65,693 million, respectively. The average 
interest rates on Intragovemmental Debt Holdings, excluding TIPS, for 
fiscal years 2011 and 2010 were 4.1 and 4.3 percent, respectively. The 
average interest rates on TIPS for fiscal years 2011 and 2010 were 1.8 
and 1.9 percent, respectively. The average interest rate represents 
the original issue weighted effective yield on securities outstanding 
as of September 30, 2011 and 2010. 

Note 4. Interest Expense (Dollars in millions): 

Interest expense on Federal Debt Managed by BPD for fiscal years 2011 
and 2010 consisted of the following: 

Federal Debt Held by the Public: Accrued Interest;
2011: $244,218; 
2010: $206,843. 

Federal Debt Held by the Public: Net Amortization of Premiums and 
Discounts;
2011: $6,700; 
2010: $7,947. 

Total Interest Expense on Federal Debt Held by the Public:
2011: $250,918; 
2010: $214,790. 

Intragovernmental Debt Holdings: Accrued Interest;
2011: $205,881; 
2010: $199,789. 

Intragovernmental Debt Holdings: Net Amortization of Premiums and 
Discounts;
2011: ($3,144); 
2010: ($1,549). 

Total Interest Expense on Intragovernmental Debt Holdings:
2011: $202,737; 
2010: $198,240. 

Total Interest Expense on Federal Debt Managed by BPD:
2011: $453,655; 
2010: $413,030. 

The valuation of TIPS is adjusted daily over the life of the security 
based on the Consumer Price Index for all Urban Consumers. This daily 
adjustment is an interest expense for the Bureau of the Public Debt. 
Accrued interest on Federal Debt Held by the Public includes inflation 
adjustments of $22,735 million and $6,904 million for fiscal years 
2011 and 2010, respectively. Accrued interest on Intragovemmental Debt 
Holdings includes inflation adjustments of $15,220 million and $4,452 
million for fiscal years 2011 and 2010, respectively. 

Note 5. Fund Balance with Treasury (Dollars in millions): 

Appropriated Funds Obligated: 
As of September 30, 2011: $107; 
As of September 30, 2010: $102. 

Fiduciary Funds Obligated: 
As of September 30, 2011: $2; 
As of September 30, 2010: $2. 

Total FBWT: 
As of September 30, 2011: $109; 
As of September 30, 2010: $104. 

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

[End of section] 

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

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

The Bureau of the Public Debt's (BPD) 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. 

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 relevant to the Schedule of Federal Debt as of September 30, 
2011, based on the criteria established under 31 U.S.C. § 3512(c), (d) 
(commonly known as the Federal Managers' Financial Integrity Act). 

Based on that evaluation, we conclude that, as of September 30, 2011, 
BPD's internal control over financial reporting relevant to the 
Schedule of Federal Debt was effective. 

Bureau of the Public Debt: 
November 1, 2011: 

Signed by: 

Van Zeck: 
Commissioner: 

Signed by: 

Fred Pyatt: 
Chief Financial Officer: 

Signed by: 

Debra L. Hines: 
Assistant Commissioner, OPDA: 

Signed by: 

Kimberly McCoy: 
Chief Information 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: 

November 2, 2011: 

Mr. Gary T. Engel: 
Director, Financial Management and Assurance: 
Government Accountability Office: 
441 G Street, N.W. 
Washington, DC 20548: 

Dear Mr. Engel: 

This letter is in response to your audit of the Schedules of Federal 
Debt Managed by the Bureau of the Public Debt for the fiscal years 
ended September 30, 2011 and 2010. We agree with the conclusions of 
your audit report. 

This year was an especially challenging year as we were faced with a 
Debt Issuance Suspension Period (DISP) that spanned nearly three 
months. We value the involvement of your staff as we encountered 
unique accounting scenarios during the DISP. Their support allowed for 
continued accuracy and consistency when reporting for the debt. We 
appreciate the knowledge and experience displayed by your audit team 
as we finalize the fifteenth year of our professional relationship. We 
would also like to thank you and your staff for your efficiency and 
timeliness exhibited throughout the audit of these schedules. Through 
combined efforts, the usability of these reports continues to grow and 
we look forward to sustaining this productive and successful 
relationship. 

Sincerely, 

Signed by: 

Van Zeck: 
Commissioner: 

[End of section] 

Footnotes: 

[1] For more information regarding the federal debt, see GAO, Federal 
Debt: Answers to Frequently Asked Questions, accessed November 1, 
2011, [hyperlink, http://www.gao.gov/special.pubs/longterm/debt]. 

[2] For more information, see GAO, Debt Management: Treasury Was Able 
to Fund Economic Stabilization and Recovery Expenditures in a Short 
Period of Time, but Debt Management Challenges Remain, [hyperlink, 
http://www.gao.gov/products/GAO-10-498] (Washington, D.C.: May 18, 
2010). 

[3] A debt issuance suspension period is any period for which the 
Secretary of the Treasury determines that the issuance of obligations 
of the United States may not be made without exceeding the debt limit. 

[4] The Budget Control Act of 2011 (Public Law 112-25) also 
established procedures to further increase the statutory debt limit up 
to $1.5 trillion for a cumulative increase of up to $2.4 trillion. 
These potential increases are in conjunction with provisions for the 
enactment of caps on discretionary spending for fiscal years 2012 
through 2021 and the creation of the Joint Select Committee on Deficit 
Reduction, which is tasked with, by November 23, 2011, voting on (1) a 
report containing the committee's recommendations and (2) proposed 
legislation to carry out such recommendations for additional deficit 
reduction. 

[5] Debt subject to the limit is primarily comprised of total federal 
debt managed by BPD, as reported on the Schedule of Federal Debt, less 
unamortized discounts on Treasury bills and Zero Coupon Treasury bonds. 

[6] For more information, see GAO, The Federal Government's Long-Term 
Fiscal Outlook, Fall 2011 Update, [hyperlink, 
http://www.gao.gov/products/GAO-12-28SP] (Washington, D.C.: October 
24, 2011). 

[7] Treasury, Major Foreign Holders of Treasury Securities, accessed 
November 1, 2011, [hyperlink, http://www.treasury.gov/resource-
center/data-chart-center/tic/Documents/mfh.txt]. Estimates of foreign 
ownership of Treasury securities are not reported in the Schedules of 
Federal Debt and as such we do not audit these amounts. 

[8] 31 U.S.C. § 331(e)(2). As a bureau within the Department of the 
Treasury (Treasury), federal debt and related activity and balances 
are also significant to the consolidated financial statements of 
Treasury (see 31 U.S.C. § 3515(b)). 

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

[10] 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 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 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. 

[11] 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 BPD which are 
issued by the Federal Financing Bank and other specific securities 
issued outside of the authority of Title 31, U.S. Code, section 3101. 

[12] 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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