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entitled 'Financial Audit: Bureau of the Public Debt's Fiscal Years
2012 and 2011 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 2012:
Financial Audit:
Bureau of the Public Debt's Fiscal Years 2012 and 2011 Schedules of
Federal Debt:
GAO-13-114:
GAO Highlights:
Highlights of GAO-13-114, a report to the Secretary of the Treasury.
Why GAO Did This Study:
GAO is required to audit the consolidated financial statements of the
U.S. government. Because of the significance of the federal debt held
by the public to the government-wide financial statements, GAO audits
BPD’s Schedules of Federal Debt annually 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 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 essentially
represents the amount the federal government has borrowed to finance
cumulative cash deficits. Intragovernmental debt holdings represent
balances of Treasury securities held by federal government accounts—-
primarily federal trust funds such as Social Security and Medicare—-
that typically have an obligation to invest their excess annual
receipts (including interest earnings) over disbursements in federal
securities.
In commenting on a draft of this report, BPD’s Commissioner concurred
with our conclusions.
What GAO Found:
In GAO’s opinion, the Bureau of the Public Debt’s (BPD) Schedules of
Federal Debt for fiscal years 2012 and 2011 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, 2012. GAO’s tests of BPD’s compliance in fiscal year
2012 with selected provisions of laws related to the Schedule of
Federal Debt disclosed no instances of noncompliance.
As of September 30, 2012 and 2011, federal debt managed by BPD totaled
$16,059 billion and $14,781 billion, respectively. GAO has audited the
Schedule of Federal Debt since fiscal year 1997. Over this period,
total federal debt has increased by 197 percent. Also during this
period, the statutory debt limit was raised 13 times, from $5,950
billion to its current level of $16,394 billion.
Figure: Total Federal Debt Outstanding, September 30, 1997, through
September 30, 2012:
[Refer to PDF for image: stacked vertical bar graph]
As of September 30, 1997:
Held by public: $3,815 billion;
Intragovernmental debt holdings: $1,583 billion;
Total: $5,398 billion.
As of September 30, 1998:
Held by public: $3,761 billion;
Intragovernmental debt holdings: $1,750 billion;
Total: $5,511 billion.
As of September 30, 1999:
Held by public: $3,668 billion;
Intragovernmental debt holdings: $1,973 billion;
Total: $5,641 billion.
As of September 30, 2000:
Held by public: $3,439 billion;
Intragovernmental debt holdings: $2,220 billion;
Total: $5,659 billion.
As of September 30, 2001:
Held by public: $3,339 billion;
Intragovernmental debt holdings: $2,453 billion;
Total: $5,792 billion.
As of September 30, 2002:
Held by public: $3,553 billion;
Intragovernmental debt holdings: $2,660 billion;
Total: $6,213 billion.
As of September 30, 2003:
Held by public: $3,924 billion;
Intragovernmental debt holdings: $2.859 billion;
Total: $6,783 billion.
As of September 30, 2004:
Held by public: $4,307 billion;
Intragovernmental debt holdings: $3,072 billion;
Total: $7,379 billion.
As of September 30, 2005:
Held by public: $4,601 billion;
Intragovernmental debt holdings: $3,317 billion;
Total: $7.918 billion.
As of September 30, 2006:
Held by public: $4,843 billion;
Intragovernmental debt holdings: $3,650 billion;
Total: $8,493 billion.
As of September 30, 2007:
Held by public: $5,049 billion;
Intragovernmental debt holdings: $3,944 billion;
Total: $8,933 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.
As of September 30, 2012:
Held by public: $11,270 billion;
Intragovernmental debt holdings: $4,789 billion;
Total: $16,059 billion.
Source: BPD.
[End of figure]
During fiscal year 2012, delays in raising the statutory debt limit
occurred prior to the January 2012 increase in the limit, with the
Department of the Treasury (Treasury) deviating from its normal debt
management operations and taking certain extraordinary actions within
its legal authorities to avoid exceeding the debt limit. As part of
the process established by the Budget Control Act of 2011, the
statutory debt limit was increased by $1,200 billion effective after
close of business on January 27, 2012. In July 2012, GAO reported on
extraordinary actions Treasury took during 2011 and January 2012 to
manage federal debt when delays in raising the debt limit occurred and
the effect of delayed increases on Treasury borrowing costs. As with
its February 2011 report, GAO also noted in its July 2012 report that
Congress should consider ways to better link decisions about the debt
limit with decisions about spending and revenue to avoid potential
disruptions to the Treasury market and to help inform the fiscal
policy debate in a timely way.
View [hyperlink, http://www.gao.gov/products/GAO-13-114]. For more
information, contact Gary T. Engel at (202) 512-3406 or engelg@gao.gov.
[End of section]
Contents:
Letter:
Independent Auditor's Report:
Opinion on the Schedules of Federal Debt:
Opinion on Internal Control:
Compliance with Selected Provisions of Laws:
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:
Appendix I: Management's Report on Internal Control over Financial
Reporting Relevant to the Schedule of Federal Debt:
Appendix I: Comments from the Bureau of the Public Debt:
Abbreviations:
BCA: Budget Control Act of 2011:
BPD: Bureau of the Public Debt:
ESF: Exchange Stabilization Fund:
GDP: gross domestic product:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
November 8, 2012:
The Honorable Timothy F. Geithner:
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, 2012 and 2011. 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,
2012 and 2011; (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, 2012; and (3)
conclusion that our tests of BPD's compliance with selected provisions
of laws related to the Schedule of Federal Debt disclosed no instances
of reportable noncompliance.
As of September 30, 2012 and 2011, federal debt managed by BPD totaled
$16,059 billion and $14,781 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) $11,270 billion as of September 30, 2012, and
$10,127 billion as of September 30, 2011, of debt held by the public
and (2) $4,789 billion as of September 30, 2012, and $4,654 billion as
of September 30, 2011, of intragovernmental debt holdings.
Debt held by the public essentially represents the amount the federal
government has borrowed from the public to finance cumulative cash
deficits. When a cash surplus occurs, the annual excess funds can be
used to reduce debt held by the public. In other words, annual cash
deficits or surpluses generally approximate the annual net change in
the amount of federal government borrowing from the public. Debt held
by the public represents federal debt issued by Treasury and held by
investors outside of the federal government, including individuals,
corporations, state or local governments, the Federal Reserve, and
foreign governments. The majority of debt held by the public consists
of marketable Treasury securities, such as bills, notes, bonds, and
Treasury Inflation-Protected Securities that are sold through auctions
and can be resold by whoever owns them. Treasury also issues a smaller
amount of nonmarketable securities, such as savings securities and
State and Local Government Series securities.
As we have noted in previous years, Treasury reporting shows that
foreign ownership of Treasury securities represents a significant
portion of debt held by the public. As of June 30, 2012, the reported
amount of Treasury securities held by foreign and international
investors represented an estimated 48 percent of debt held by the
public. This percentage is slightly higher than the 46 percent as of
June 30, 2011, and remains considerably higher than the estimated 30
percent of debt held by the public as of June 30, 2001. Treasury
estimates that the amount of Treasury securities held by foreign and
international investors has increased from $983 billion as of June 30,
2001, to $5,311 billion as of June 30, 2012--an increase of $4,328
billion. Estimates of foreign ownership of Treasury securities are
derived from information reported under the Treasury International
Capital reporting system not from the financial system used to prepare
the Schedule of Federal Debt. These estimates are not reported on the
Schedules of Federal Debt and as such we do not audit these amounts.
[Footnote 1]
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 reflects a burden on
taxpayers and the economy in the future. Specifically, when federal
government accounts redeem Treasury securities to obtain cash to fund
expenditures, Treasury usually borrows from the public to finance
these redemptions.[Footnote 2]
We have audited the Schedule of Federal Debt since fiscal year 1997.
Over this period, total federal debt has increased by 197 percent.
Also during this period, the statutory debt limit was raised 13 times,
from $5,950 billion to $16,394 billion. During the last 4 fiscal
years, total federal debt has increased by $6,048 billion, or 60
percent, from $10,011 billion as of September 30, 2008, to $16,059
billion as of September 30, 2012. The rapid growth in federal debt
during this period presented debt management challenges for Treasury.
[Footnote 3] The economic downturn along with the federal government's
response to it contributed to this rapid buildup in federal debt held
by the public. As a result, the increases to total federal debt over
the past 4 fiscal years represent the largest dollar increases over a
4-year period in history. During fiscal year 2012 alone, total federal
debt increased by $1,278 billion. Of the fiscal year 2012 increase,
$1,143 billion was from the increase in debt held by the public and
$135 billion was from the increase in intragovernmental debt holdings.
Notably, the statutory debt limit was raised on seven different
occasions during the last 4 fiscal years, increasing by about 54
percent, from $10,615 billion to its current level of $16,394 billion.
As of September 30, 2012, debt subject to the limit totaled $16,027
billion.[Footnote 4]
During fiscal year 2012, Treasury faced an additional challenge of
managing federal debt close to the statutory debt limit. Delays in
raising the statutory debt limit occurred prior to the January 2012
increase in the limit, with Treasury deviating from its normal debt
management operations and taking certain extraordinary actions within
its legal authorities from January 4, 2012, through January 27, 2012,
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)[Footnote 5] and the
Exchange Stabilization Fund (ESF).[Footnote 6] As part of the process
established by the Budget Control Act of 2011 (BCA), the statutory
debt limit was increased by $1,200 billion to its current level of
$16,394 billion effective after close of business on January 27, 2012.
[Footnote 7] Subsequent to the January 2012 increase in the statutory
debt limit, Treasury fully restored the G-Fund to the position it
would have been in had the suspensions of debt not occurred. Treasury
also invested the uninvested principal for January 2012 to the ESF.
However, Treasury did not restore interest losses to the ESF because
it lacks legislative authority to do so. Additionally, as a result of
extraordinary actions taken in fiscal year 2011 to manage federal debt
within the statutory debt limit, Treasury restored interest losses to
the Civil Service Retirement and Disability Fund[Footnote 8] and the
Postal Service Retiree Health Benefits Fund[Footnote 9] on December
30, 2011, in accordance with the legal authorities provided to the
Secretary of the Treasury. In July 2012, we reported on the
extraordinary actions Treasury took during 2011 and January 2012 to
manage federal debt when delays in raising the debt limit occurred and
the effect of delayed increases on Treasury borrowing costs. As with
our February 2011 report, we also noted in our July 2012 report that
Congress should consider ways to better link decisions about the debt
limit with decisions about spending and revenue to avoid potential
disruptions to the Treasury market and to help inform the fiscal
policy debate in a timely way.[Footnote 10]
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 2012 was $1,089
billion, down from the fiscal year 2011 reported federal deficit of
$1,297 billion. Correspondingly, debt held by the public increased
from roughly 68 percent of gross domestic product (GDP) at the end of
fiscal year 2011 to roughly 73 percent at the end of fiscal year 2012.
The pace at which federal debt held by the public increases over the
next several years depends largely on whether current laws, such as
spending limits pursuant to the BCA[Footnote 11] and the expiration of
certain tax cuts enacted in 2001 and 2003, take effect. Over the
longer term, debt held by the public as a share of GDP is expected to
grow as a result of the structural imbalance between revenue and
spending driven by rising health care costs and demographics.
Increasing numbers of baby-boom generation members are becoming
eligible for Social Security retirement benefits and for Medicare. In
addition, although health care spending growth recently slowed, it has
been growing faster than the overall economy and is expected to
continue to grow at an increased rate as more members of the baby-boom
generation retire and become eligible for federal health programs. The
aging of the population and rising health care costs will continue to
put upward pressure on spending and, absent action to address the
growing imbalance between spending and revenue, the federal government
faces an unsustainable growth in debt.[Footnote 12]
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 Acting
Director of the Office of Management and Budget, and other agency
officials. In addition, the report is available at no charge on the
GAO website 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, DC 20548:
Independent Auditor's Report:
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
13]
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, 2012 and 2011. 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) BPD.[Footnote 14]
In our audits of the Schedules of Federal Debt Managed by BPD for the
fiscal years ended September 30, 2012 and 2011, 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, 2012; and:
* no reportable noncompliance in fiscal year 2012 with selected
provisions of laws we tested related to the Schedule of Federal Debt.
The following sections discuss in more detail (1) these conclusions;
(2) other information included with the Schedules of Federal 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, 2012,
2011, and 2010 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, 2012 and 2011.
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, 2012, 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 15] We have communicated these matters to management and,
where appropriate, will report on them separately. In late fiscal year
2011, Treasury began consolidating the data centers and related
operations of BPD and Treasury's Financial Management Service. Given
the significant role that certain information systems have in managing
federal debt, it will be important that BPD management assesses risks
associated with the consolidation and ensures that internal control
over the information systems in these data centers is effectively
designed and implemented.
Compliance with Selected Provisions of Laws:
Our tests of BPD's compliance in fiscal year 2012 with selected
provisions of laws related to the Schedule of Federal Debt disclosed
no instances of noncompliance that would be reportable under U.S.
generally accepted government auditing standards. The objective of our
audit was not to provide an opinion on overall compliance with laws
and regulations. Accordingly, we do not express such an opinion.
Other Information:
BPD's other information, which consists of the Overview on Federal
Debt Managed by the Bureau of the Public Debt, contains a wide range
of information, some of which is not directly related to the Schedules
of Federal Debt. This information is presented for purposes of
additional analysis and is not a required part of the Schedules of
Federal Debt. Our audit was conducted for the purpose of forming an
opinion on the Schedules of Federal Debt. We did not audit and do not
express an opinion or provide any assurance on the other information.
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) preparing and presenting other information included
with the audited Schedules of Federal Debt and auditor's report, and
ensuring the consistency of that information with the audited
Schedules of Federal Debt; (3) establishing and maintaining effective
internal control over financial reporting, and evaluating its
effectiveness; and (4) 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, 2012, 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, 2012. 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) applying certain limited procedures
to the other information included with the Schedules of Federal Debt.
In order to fulfill these responsibilities, we:
* examined, on a test basis, evidence supporting the amounts and
disclosures in the Schedules of Federal Debt;
* assessed the accounting principles used and any significant
estimates made by BPD management;
* evaluated the overall presentation of the Schedules of Federal Debt;
* obtained an understanding of BPD 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 of (1) material misstatement in the Schedule of
Federal Debt and (2) material weaknesses in BPD's internal control
over financial reporting relevant to the Schedule of Federal Debt;
* evaluated the design and operating effectiveness of BPD's internal
control over financial reporting relevant to the Schedule of Federal
Debt based on the assessed risk;
* tested BPD's internal control over financial reporting relevant to
the Schedule of Federal Debt;
* tested compliance in fiscal year 2012 with the (1) statutory debt
limit (31 U.S.C. §§ 3101(b), as amended, and 3101A) and (2) suspension
of investments from the Government Securities Investment Fund (G-Fund)
(5 U.S.C. § 8438(g));
* read the other information included with the Schedules of Federal
Debt in order to identify material inconsistencies, if any, with the
audited Schedules of Federal Debt; 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, 2012. 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's Commissioner concurred
with our conclusions. BPD's comments are reprinted in their entirety
in appendix II.
Signed by:
Gary T. Engel:
Director Financial Management and Assurance:
November 1, 2012:
[End of section]
Overview, Schedules, and Notes:
Overview on Federal Debt Managed by the Bureau of the Public Debt:
Gross Federal Debt Outstanding:
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, 2012 and 2011,
outstanding gross federal debt managed by BPD totaled $16,059 billion
and $14,781 billion, respectively.[Footnote 1] The increase in gross
federal debt of $1,278 billion during fiscal year 2012 was due to an
increase in gross intragovemmental debt holdings of $135 billion and
an increase in gross debt held by the public of $1,143 billion. As
Figure 1 illustrates, intragovenunental debt holdings and debt held by
the public increased by $587 billion and $5,461 billion, respectively,
from September 30, 2008 to September 30, 2012. The primly 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, 2012, gross debt held by
the public totaled $11,270 billion and gross intragovermnental debt
holdings totaled $4,789 billion.
Figure 1: Total Gross Federal Debt Outstanding:
[Refer to PDF for image: stacked vertical bar graph]
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.
As of September 30, 2012:
Held by public: $11,270 billion;
Intragovernmental debt holdings: $4,789 billion;
Total: $16,059 billion.
[End of figure]
Interest Expense:
Interest expense incurred during fiscal year 2012 consists of (1)
interest accrued and paid on debt held by the public or credited to
accounts holding intragovenunental debt during the fiscal year, (2)
interest accrued during the fiscal year, but not yet paid on debt held
by the public or credited to accounts holding intragovernmental debt,
and (3) net amortization of premiums and discounts. The primary
components of interest expense are interest paid on the debt held by
the public and interest credited to federal government trust funds and
other federal government accounts that hold Treasury securities. The
interest paid on the debt held by the public affects the current
spending of the federal government and represents the burden of
servicing its debt (i.e., payments to outside creditors). Interest
credited to federal government trust funds and other federal
government accounts, on the other hand, does not result in an
immediate outlay of the Federal Government because one part of the
government pays the interest and another part receives it. However,
this interest represents a claim on future budgetary resources and
hence an obligation on future taxpayers. This interest, when
reinvested by the trust funds and other federal government accounts,
is included in the programs' excess funds not currently needed in
operations, which are invested in federal securities. For fiscal year
2012, interest expense incurred totaled $432 billion; this consisted
of interest expense on debt held by the public of $245 billion, and
$187 billion in interest incurred for intragovenunental debt holdings.
As Figure 2 illustrates, 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 had higher
average interest rates than Treasury bills. Interest expense decreased
for fiscal year 2012 due primarily to a decrease in the average
interest rates for Treasury notes, bonds, and Treasury Inflation-
Protected Securities (TIPS). Average interest rates on principal
balances outstanding as of September 30, 2012 and 2011, 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, 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.
Fiscal year ended September 30, 2012:
Held by public: $245 billion;
Intragovernmental debt holdings: $187 billion;
Total: $432 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 2012, Treasury used the existing suite of securities to
meet the borrowing needs of the Federal Government while primarily
increasing its offerings of Treasury notes over offerings of Treasury
bills, Treasury bonds, or TIPS. As a result, Treasury notes increased
by $708 billion; whereas, Treasury bills, bonds, and TIPS increased by
$137 billion, $178 billion, and $102 billion, respectively, in fiscal
year 2012. As of September 30, 2012 and 2011, gross debt held by the
public totaled $11,270 billion and $10,127 billion, respectively (see
Figure 1), an increase of $1,143 billion. This increase was primarily
the result of borrowings needed to finance the governments fiscal year
2012 deficit. As a result of the increase in outstanding gross debt
held by the public primarily 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
2012.
As of September 30, 2012, $10,730 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 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, 2012,
$6,225 billion, or 58 percent, will mature within the next 4 years
(see Figure 3). As of September 30, 2012 and 2011, notes and TIPS held
by the public maturing within the next 10 years totaled $7,646 billion
and $6,916 billion, respectively, an increase of $730 billion.
Figure 3: Maturity Dates of Marketable Debt Held by the Public as of
September 30, 2012:
[Refer to PDF for image: stacked line graph]
Figure indicates the fiscal year of maturity, 2011 through 2042, 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 ranging
from on demand out to 40 years. As of September 30, 2012,
nonmarketable securities totaled $539 billion, or 5 percent of debt
held by the public. As of that date. nonmarketable securities
primarily consisted of savings securities totaling $184 billion, State
and Local Government Series securities totaling $159 billion, and
Government Account Series securities totaling $163 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 print and deliver savings bonds purchased with
federal income tax refunds; and redeem savings bonds, including
handling the related transfers of cash.
Intragovemmental Debt Holdings:
Intragovenunental debt holdings represent balances of Treasury
securities held by 239 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.
Intragovenunental debt holdings primarily consist of balances in the
Social Security, Medicare, Military Retirement and Health Care, and
Civil Service Retirement and Disability trust funds.[Footnote 2] As of
September 30, 2012, such funds accounted for $4,389 billion, or 92
percent, of the $4,789 billion intergovernmental debt holdings
balances (see Figure 4). As of September 30, 2012 and 2011, gross
intragovernmental debt holdings totaled $4,789 billion and $4,654
billion, respectively (see Figure 1), an increase of $135 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, 2012:
[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: 12%;
Medicare trust funds: 6%;
Other programs and trust funds: 8%.
[End of figure]
Significant Events in Fiscal Year 2012:
Statutory Debt Limit Raised:
Prior to the enactment of the Budget Control Act of 2011, which was
signed into law on August 2, 2011, (Public Law No, 112-25), delays in
raising the statutory debt limit occurred that required Treasury to
depart from its normal debt management procedures and invoke legal
authorities to avoid exceeding the statutory debt limit. In accordance
with relevant legislation, on December 30, 2011, BPD restored the
Civil Service Retirement and Disability Fund (Civil Service Fund) and
the Postal Service Retiree Health Benefits Fund (Postal Benefits Fund)
portfolios for the interest lost front the delays in raising the
statutory debt limit, which ended on August 2, 2011. The restoration
amounted to nearly $517 million for the Civil Service Fund and $22
million for the Postal Benefits Fund.
After close of business on January 27, 2012, the statutory debt limit
was increased by $1.2 trillion, from $15.194 trillion to $16.394
trillion. The increase was authorized under the terms of the Budget
Control Act of 2011. However, prior to the statutory debt limit
increase, beginning on January 4, 2012, delays in raising the
statutory debt limit resulted in Treasury departing from its normal
debt management procedures and invoking legal authorities to keep the
debt outstanding no closer than $25 million to the statutory debt
limit. Treasury maintained the $25 million window by utilizing
extraordinary actions within its legal authorities, which included
suspending investments of the Exchange Stabilization Fund (ESF) and
the Government Securities Investment Fund of the Federal Employees'
Retirement System (G-Fund).
In accordance with relevant legislation, on January 30, 2012, BPD
restored foregone principal and interest for the G-Fund totaling $36.9
billion and foregone principal to the ESF totaling $22.7 billion. BPD
only restored forgone principal to the ESF as the ESF is not entitled
to interest losses resulting from authorized actions taken by Treasury
to manage federal debt when delays in miring the debt limit occur.
FY 2013 Budget Proposes BPD and Financial Management Service (FMS)
Consolidation:
In his fiscal year 2013 Budget request, President Obama proposed a
consolidation of BPD and FMS, both under Treasury's Office of the
Fiscal Assistant Secretary (OFAS), into one organization called the
Bureau of the Fiscal Service. Beyond the financial and operational
benefits, this effort will enable the Department of the Treasury to
better address the financial management needs of the federal
government and realize administrative efficiencies while retaining
existing core federal financial management responsibilities. Beginning
in fiscal year 2014, the combined BPD and FMS cumulative net savings
from the proposed consolidation is projected to be $36 million over a
five year period. Areas identified for cost reduction included:
* Headquarters staff, by transitioning to one Commissioner responsible
for Fiscal Service operations;
* Finance and budget, by transitioning to one Chief Financial Officer;
* Information technology, by transitioning to one Chief Information
Officer;
* Legal support, by transitioning to one Chief Counsel; and;
* Legislative and Public Affairs, by transitioning to one office.
The proposed consolidation of BPD and FMS will position the Fiscal
Service to create a new standard of excellence and leadership for the
federal community.
Ready.Save.Grow:
On March 27, 2012, BPD kicked off a public education campaign,
Ready.Save.Grow.[SM} to raise awareness of Treasury securities and to
remind the public that, although paper savings bonds can only be
purchased with tax refunds, electronic savings bonds remain available
through TreasuryDirect. To aid the campaign, BPD is partnering with
several non-profit organizations such as AARP, American Savings
Education Council, Center for Financial Services Innovation, and
Consumer Federation of America The campaign's website [hyperlink,
http://www.treasurydirect.gov/readysavegrow] organizes Treasury
investment information in an easy-to-read format for new and
prospective investors. The Treasurer of the United States is the
spokesperson for the campaign.
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 $2,350 billion as of September 30, 1987, to $16,059 billion as of
September 30, 2012 (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 mom than doubled between
1987 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 1988 through 2012.
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 2012, federal debt held by the public more than doubled,
rising by $6,221 billion. This increase was primarily a result of the
economic downturn and the federal government's response to it. Since
fiscal year 2002, debt held by the public has increased from $3,339
billion as of September 30, 2001 to $11,270 billion as of September
30, 2012.
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 $587 billion, from $4,202 billion as of
September 30, 2008, to $4,789 billion as of September 30, 2012. 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 intragovenunental 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
intragovenunental 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:
Schedules of Federal Debt:
Managed by the Bureau of the For the Fiscal Years Ended September 30,
2012 and 2011.
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.
Balance as of September 30, 2011:
Federal Debt: Held by the Public:
Principal (Note 2): $10,127,031;
Accrued Interest Payable: $51,470;
Net Unamortized Premiums/(Discounts): ($29,538).
Federal Debt: Intragovernmental Debt Holdings:
Principal (Note 3): $4,654,374;
Accrued Interest Payable: $47,778;
Net Unamortized Premiums/(Discounts): $47,624.
Increases: Borrowings from the Public:
Federal Debt: Held by the Public:
Principal (Note 2): $7,761,885;
Accrued Interest Payable: [Empty];
Net Unamortized Premiums/(Discounts): $4,995.
Increases: Net Increase in Intragovernmental Debt Holdings;
Federal Debt: Intragovernmental Debt Holdings:
Principal (Note 3): $134,677;
Accrued Interest Payable: [Empty];
Net Unamortized Premiums/(Discounts): $13,242.
Increases: Accrued Interest (Note 4);
Federal Debt: Held by the Public:
Accrued Interest Payable: $240,097.
Increases: Accrued Interest (Note 4);
Federal Debt: Intragovernmental Debt Holdings:
Accrued Interest Payable: $191,656.
Total Increases:
Federal Debt: Held by the Public:
Principal (Note 2): $7,761,885;
Accrued Interest Payable: $240,097;
Net Unamortized Premiums/(Discounts): $4,995.
Federal Debt: Intragovernmental Debt Holdings:
Principal (Note 3): $134,677;
Accrued Interest Payable: $191,656;
Net Unamortized Premiums/(Discounts): $13,242.
Decreases:
Federal Debt: Held by the Public:
Principal (Note 2): Repayments of Debt Held by the Public: $6,619,330
Accrued Interest Payable: Interest Paid: $234,345;
Net Unamortized Premiums/(Discounts): Net Amortization (Note 4):
($5,318).
Federal Debt: Intragovernmental Debt Holdings:
Principal (Note 3): Repayments of Debt Held by the Public: [Empty];
Accrued Interest Payable: Interest Paid: $193,886;
Net Unamortized Premiums/(Discounts): Net Amortization (Note 4):
$4,616.
Total Decreases:
Federal Debt: Held by the Public:
Principal (Note 2): $6,619,330;
Accrued Interest Payable: $234,345;
Net Unamortized Premiums/(Discounts): ($5,318).
Federal Debt: Intragovernmental Debt Holdings:
Principal (Note 3): 0;
Accrued Interest Payable: $193,886;
Net Unamortized Premiums/(Discounts): $4,616.
Balance as of September 30, 2012:
Federal Debt: Held by the Public:
Principal (Note 2): $11,269,586;
Accrued Interest Payable: $57,222;
Net Unamortized Premiums/(Discounts): ($19,225).
Federal Debt: Intragovernmental Debt Holdings:
Principal (Note 3): $4,789,051;
Accrued Interest Payable: $45,548;
Net Unamortized Premiums/(Discounts): $56.250.
[End of table]
The accompanying notes are an integral part of these schedules.
Notes to the Schedules of Federal Debt:
Notes to the Schedules of Federal Debt Managed by the Bureau of the
Public Debt For the Fiscal Years Ended September 30, 2012 and 2011:
(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 2012 and fiscal year
2011 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, 2012 and 2011, Federal Debt Held by the Public
consisted of the following:
Dollars in millions:
Marketable:
Treasury Bills:
2012 Amount: $1,613,026;
2012 Average Interest Rates: 0.1%;
2011 Amount: $1,475,557;
2011 Average Interest Rates: 0.1%.
Treasury Notes:
2012 Amount: $7,114,960;
2012 Average Interest Rates: 2.0%;
2011 Amount: $6,406,983;
2011 Average Interest Rates: 2.3%.
Treasury Bonds:
2012 Amount: $1,194,715;
2012 Average Interest Rates: 5.4%;
2011 Amount: $1,016,408;
2011 Average Interest Rates: 5.8%.
TIPS:
2012 Amount: $807,469;
2012 Average Interest Rates: 1.4%;
2011 Amount: $705,352;
2011 Average Interest Rates: 1.9%.
Total Marketable:
2012 Amount: $10,730,170;
2011 Amount: $9,604,300.
Nonmarketable:
2012 Amount: $539,416;
2012 Average Interest Rates: 2.1%;
2011 Amount: $522,731;
2011 Average Interest Rates: 2.8%.
Total Federal Debt Held by the Public:
2012 Amount: $11,269,586;
2011 Amount: $10,127,031.
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,
2012 and 2011. 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, 2012 and 2011. 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 ate 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, 2012 and 2011. The TIPS Federal Debt Held by the Public
inflation-adjusted principal balance includes inflation of $77,909
million and $76,133 million as of September 30, 2012 and 2011,
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, 2012, the FRB had total holdings of
$1,646,809 million, including a net of $1,523 million in Treasury
securities held by the FRB as collateral for securities lending
activities. 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. 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,
2012 and 2011. Nonmarketable securities are issued with a term of on
demand out to 40 years.
As of September 30, 2012 and 2011, nonmarketable securities consisted
of the following:
Domestic Series:
2012: $29,995;
2011: $29,995.
Foreign Series:
2012: $2,986;
2011: $2,986.
State and Local Government Series:
2012: $158,514;
2011: $151,831.
United States Savings Securities:
2012: $183,661;
2011: $185,187.
Government Account Series:
2012: $162,880;
2011: $151,346.
Other:
2012: $1,380;
2011: $1,386.
Total Nonmarketable:
2012: $539,416;
2011: $522,731.
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 Intragovenunental 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 2012 and 2011 are
included in the respective Borrowings from the Public amounts reported
on the Schedules of Federal Debt.
Fiscal year-end September 30, 2012, occurred on a Sunday. As a result,
$53,003 million of marketable Treasury notes, $35 million of
Government Account Series securities, and $1 million of State and
Local Government Series securities, matured but not repaid are
included in the balance of the total debt held by the public as of
September 30, 2012. Settlement of this debt repayment occurred on
Monday, October 1, 2012.
Note 3. Intragovernmental Debt Holdings:
As of September 30, 2012 and 2011, Intragovernmental Debt Holdings are
owed to the following:
Dollars in millions:
SSA: Federal Old-Age and Survivors Insurance Trust Fund:
2012: $2,586,697;
2011: $2,492,531.
OPM: Civil Service Retirement and Disability Fund:
2012: $819,444;
2011: $795,371.
DOD: Military Retirement Fund:
2012: $376,439;
2011: $326,040.
HHS: Federal Hospital Insurance Trust Fund:
2012: $228,292;
2011: $245,939.
DOD: DOD Medicare-Eligible Retiree Health Care Fund:
2012: $176,113;
2011: $161,741.
SSA: Federal Disability Insurance Trust Fund:
2012: $132,345;
2011: $161,965.
HHS: Federal Supplementary Medical Insurance Trust Fund:
2012: $69,324;
2011: $70,466.
DOE: Nuclear Waste Disposal Fund:
2012: $49,552;
2011: $48,611.
OPM: Postal Service Retiree Health Benefits Fund:
2012: $45,347;
2011: $43,708.
OPM: Employees Life Insurance Fund:
2012: $41,250;
2011: $39,678.
FDIC: Deposit Insurance Fund:
2012: $36,498;
2011: $34,926.
Treasury: Exchange Stabilization Fund:
2012: $22,680;
2011: $22,721.
OPM: Employees Health Benefits Fund:
2012: $21,259;
2011: $19,191.
DOL: Pension Benefit Guaranty Corporation:
2012: $21,114[A];
2011: $20,974[A].
DOL: Unemployment Trust Fund:
2012: $20,673;
2011: $16,030.
DOS: Foreign Service Retirement and Disability Fund:
2012: $16,893;
2011: $16,397.
NCUA: National Credit Union Share Insurance Fund:
2012: $10,297;
2011: $10,733.
DOT: Highway Trust Fund:
2012: $9,970;
2011: $16,302.
Other Programs and Funds:
2012: $94,439;
2011: $111,070.
Total Intragovernmental Debt Holdings:
2012: $4,789,051;
2011: $4,654,374.
[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).
Intragovernmental Debt Holdings primarily consist of GAS securities.
Treasury issues GAS securities at either par value or at an amount
that reflects a discount or a premium. GAS securities are issued with
a term of on demand out to 30 years. GAS securities include TIPS,
which are reported at an inflation-adjusted principal balance using the
Consumer Price Index for all Urban Consumers, As of September 30, 2012
and 2011, the inflation-adjusted principal balance included inflation
of $96,075 million and $87,986 million, respectively. The average
interest rates on Intragovernmental Debt Holdings, excluding TIPS, for
fiscal years 2012 and 2011 were 3.7 and 4.1 percent, respectively. The
average interest rates on TIPS for fiscal years 2012 and 2011 were 1.5
and 1.8 percent, respectively. The average interest rate represents
the original issue weighted effective yield on securities outstanding
as of September 30, 2012 and 2011.
Fiscal year-end September 30, 2012, occurred on a Sunday. As a result,
$2,145 million of GAS securities held by federal government accounts
matured but not repaid is included in the balance of the
Intragovernmental Debt Holdings as of September 30, 2012. Settlement
of this debt repayment occurred on Monday, October 1, 2012.
Note 4. Interest Expense:
Interest expense on Federal Debt Managed by BPD for fiscal years 2012
and 2011 consisted of the following:
Federal Debt Held by the Public: Accrued Interest;
2012: $240,097;
2011: $244,218.
Federal Debt Held by the Public: Net Amortization of Premiums and
Discounts;
2012: $5,318;
2011: $6,700.
Total Interest Expense on Federal Debt Held by the Public:
2012: $245,415;
2011: $250,918.
Intragovernmental Debt Holdings: Accrued Interest;
2012: $191,656;
2011: $205,881.
Intragovernmental Debt Holdings: Net Amortization of Premiums and
Discounts;
2012: ($4,616);
2011: ($3,144).
Total Interest Expense on Intragovernmental Debt Holdings:
2012: $187,040;
2011: $202,737.
Total Interest Expense on Federal Debt Managed by BPD:
2012: $432,455;
2011: $453,655.
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 BPD. Accrued interest on Federal
Debt Held by the Public includes inflation adjustments of $10,652
million and $22,735 million for fiscal years 2012 and 2011,
respectively, Accrued interest on Intragovernmental Debt Holdings
includes inflation adjustments of $7,160 million and $15,220 million
for fiscal years 2012 and 2011, respectively.
Note 5. Fund Balance with Treasury:
Dollars in millions:
Appropriated Funds Obligated:
As of September 30, 2012: $98;
As of September 30, 2011: $107.
Fiduciary Funds Obligated:
As of September 30, 2012: $0[A]
As of September 30, 2011: $2.
Total FBWT:
As of September 30, 2012: $98;
As of September 30, 2011: $109.
The Fund Balance with Treasury, a non-entity, intragovernmental
account, is not included on the Schedules of Federal Debt and is
presented for informational purposes.
[A] Fiduciary Funds Obligated were definitive agency securities
reported in deposit fund 20X6008, Payment of Principal and Interest on
securities of Various Government Agencies. BPD no longer processes
these securities, and the funds were returned to the agencies. There
are no plans to resume accounting for these securities in the future.
Overview, Schedules, and Notes Footnotes:
[1] Federal debt outstanding reported here differs from the amount
reported in the Financial Report of the United States Government
because of the securities not maintained or reported by 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.
[2] The Social Security trust funds consist of the Federal Old-Age and
Survivors Insurance Trust Fund and the Federal Disability Insurance
Trust Fund. The Medicare trust funds are made up of the Federal
Hospital Insurance Trust Fund and the Federal Supplementary Medical
Insurance Trust Fund. The Military Retirement and Health Care Funds
consist of the Military Retirement Fund and the DOD Medicare-Eligible
Retiree Health Care Fund.
[End of section]
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
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.
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,
2012, 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, 2012,
BPD's internal control over financial reporting relevant to the
Schedule of Federal Debt was effective.
Signed by:
David A Lebryk:
Commissioner:
Signed by:
Patricia M. Greiner:
Chief Financial Officer:
Signed by:
Matthew J. Miller:
Assistant Commissioner:
Office of Public Debt Accounting:
Signed by:
Kimberly McCoy:
Chief Information Officer
November 1, 2012.
[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, 2012:
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, 2012 and 2011. We agree with the conclusions of
your audit report.
We appreciate the knowledge and experience displayed by your audit
team as we finalize the sixteenth year of our professional
relationship. Your team's experience with our accounting operations
provides timeliness and efficiency to the audit process. We would like
to thank you and your staff for the thorough audit of these schedules.
With the recent management changes resulting from the proposed
consolidation of the Bureau of the Public Debt and the Financial
Management Service, we are dedicated to continued excellence and
accuracy in our business environment. We look forward to sustaining a
productive and successful relationship with your staff.
Sincerely,
Signed by:
David A. Lebryk:
Commissioner:
[End of section]
Footnotes:
[1] Treasury, Major Foreign Holders of Treasury Securities, accessed
November 1, 2012, [hyperlink, http://www.treasury.gov/resource-
center/data-chart-center/tic/Documents/mfh.txt].
[2] For more information regarding the federal debt, see GAO, Federal
Debt: Answers to Frequently Asked Questions, accessed November 1,
2012, [hyperlink, http://www.gao.gov/special.pubs/longterm/debt].
[3] 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).
[4] 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.
[5] The G-Fund contains contributions made by federal employees toward
their retirement as part of the Thrift Savings Plan program.
[6] The ESF is used to help provide a stable system of monetary
exchange rates.
[7] On August 2, 2011, Congress and the President enacted the Budget
Control Act of 2011 (Pub. L. No. 112-25), which established a process
that resulted in debt limit increases in three increments--$400
billion effective on August 2, 2011, $500 billion effective after
close of business on September 21, 2011, and $1,200 billion effective
after close of business on January 27, 2012.
[8] The Civil Service Retirement and Disability Fund contains
contributions made by federal government agencies and their civilian
employees toward retirement benefits.
[9] The Postal Service Retiree Health Benefits Fund contains
contributions made by the United States Postal Service toward its
retirees' health benefits.
[10] For more information, see GAO, Debt Limit: Analysis of 2011-2012
Actions Taken and Effect of Delayed Increase on Borrowing Costs,
[hyperlink, http://www.gao.gov/products/GAO-12-701] (Washington, D.C.:
July 23, 2012).
[11] The BCA (Pub. L. No. 112-25) enacted caps on discretionary
spending for fiscal years 2012 through 2021. In addition, the BCA
specified additional limits on discretionary spending and automatic
reductions in direct spending that would take effect if lawmakers did
not enact legislation originating from the Joint Select Committee on
Deficit Reduction that would reduce projected deficits by at least
$1.2 trillion. Because no such legislation was enacted, those
procedures are now scheduled to go into effect.
[12] For more information, see GAO, The Federal Government's Long-Term
Fiscal Outlook: Spring 2012 Update, [hyperlink,
http://www.gao.gov/products/GAO-12-521SP] (Washington, D.C.: April
2012).
[13] 31 U.S.C. § 331(e)(2). As a bureau within the Department of the
Treasury, federal debt and related activity and balances managed by
BPD are also significant to the consolidated financial statements of
the Department of the Treasury (see 31 U.S.C. § 3515(b)).
[14] [2] 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.
[15] [3] 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.
[End of section]
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