Financial Audit: Bureau of the Public Debt's Fiscal Years

Financial Audit: Bureau of the Public Debt's Fiscal Years 1999 and 1998
Schedules of Federal Debt (Letter Report, 03/01/2000, GAO/AIMD-00-79).

Pursuant to a legislative requirement, GAO audited the Bureau of the
Public Debt's (BPD) Schedules of Federal Debt for the fiscal years that
ended September 30, 1999 and 1998.

GAO noted that: (1) the Schedules of Federal Debt, including the
accompanying notes, present fairly, in all material respects, in
conformity with generally accepted accounting principles, the balances
as of September 30, 1999, 1998, and 1997, for federal debt managed by
BPD, the related accrued interest payables and net unamortized discounts
and premiums, and the related increases and decreases for the fiscal
years ended September 30, 1999 and 1998; (2) BPD maintained, in all
material respects, effective internal control over financial reporting
and compliance as of September 30, 1999, that provided reasonable
assurance that misstatements, losses, or noncompliance, material in
relation to the Schedule of Federal Debt for the fiscal year (FY) ended
September 30, 1999, would be prevented or detected on a timely basis;
(3) management asserted that its internal control is effective based on
criteria established under the Federal Managers' Financial Integrity Act
of 1982 and the Office of Management and Budget (OMB) Circular A-123;
(4) GAO found matters involving computer controls that it does not
consider to be reportable conditions; (5) GAO's tests for compliance in
FY 1999 with Statutory Debt Limits disclosed no instances of
noncompliance that would be reportable under generally accepted
government auditing standards or OMB Bulletin No. 98-08; (6) however,
the objective of GAO's audit of the Schedule of Federal Debt for the FY
ended September 30, 1999, was not to provide an opinion on overall
compliance with laws and regulations; and (7) accordingly, GAO does not
express such an opinion.

--------------------------- Indexing Terms -----------------------------

REPORTNUM: AIMD-00-79
TITLE: Financial Audit: Bureau of the Public Debt's Fiscal Years
1999 and 1998 Schedules of Federal Debt
DATE: 03/01/2000
SUBJECT: Financial statement audits
Auditing standards
Reporting requirements
Financial management
Federal agency accounting systems
Internal controls
Public debt
Federal debt
Financial records
IDENTIFIER: Social Security Trust Fund

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Rev-LG logo.eps
GAO United States General Accounting Office
Report to the Secretary of the Treasury
March 2000 FINANCIAL AUDIT Bureau of the Public Debt's Fiscal Years 1999 and 1998 Schedules of Federal Debt

GAO/AIMD-00-79

Page 1 GAO/ AIMD- 00- 79 Schedules of Federal Debt
Contents Letter 3 Opinion Letter 7 Schedules and Notes 13
Schedules of Federal Debt 13 Notes to the Schedules of Federal Debt 14
Appendixes Appendix I: Comments From the Bureau of the Public Debt 20 Appendix II: GAO Contact and Staff Acknowledgments 21
Abbreviations
BPD Bureau of the Public Debt OMB Office of Management and Budget
Page 2 GAO/ AIMD- 00- 79 Schedules of Federal Debt
Page 3 GAO/ AIMD- 00- 79 Schedules of Federal Debt United States General Accounting Office
Washington, D. C. 20548 Page 3 GAO/ AIMD- 00- 79 Schedules of Federal Debt
Comptroller General of the United States
B- 282643 Lett er
March 1, 2000 The Honorable Lawrence H. Summers The Secretary of the Treasury
Dear Mr. Secretary: This 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, 1999 and 1998. The Schedules of Federal Debt present the beginning balances, increases and decreases, and ending balances for (1) Federal Debt Held by the Public and Federal Debt Held by Federal Entities, (2) the related Accrued Interest Payables, and (3) the related Net Unamortized Discounts and Premiums, managed by the bureau.
As of September 30, 1999 and 1998, federal debt managed by the bureau totaled about $5.6 trillion and $5. 5 trillion, respectively, for monies borrowed to fund the government's operations. These balances consisted
of approximately (1) $3.6 trillion as of September 30, 1999, and $3. 8 trillion as of September 30, 1998, owed to the public and about (2) $2.0 trillion as of September 30, 1999, and $1. 7 trillion as of September 30, 1998, owed to federal entities, such as the Social Security Trust funds. Total interest expense for fiscal years 1999 and 1998 was $356 billion and $363 billion, respectively. These amounts consisted of (1) $230 billion and $243 billion of interest expense on debt owed to the public for fiscal years 1999 and 1998, respectively, and (2) $126 billion and $120 billion of interest expense on debt owed to federal entities for fiscal years 1999 and 1998, respectively.
This report contains our (1) opinion on the Schedules of Federal Debt for the fiscal years ended September 30, 1999 and 1998, (2) opinion on the effectiveness of related internal control as of September 30, 1999, and (3) conclusion on the bureau's compliance in fiscal year 1999 with a selected provision of a significant law we tested. The level of debt held by the public reflects how much of the nation's wealth is absorbed by the federal government to finance its obligations. It best represents the cumulative effect of past federal borrowing on today's economy and the federal budget. Debt held by federal entities primarily represents balances in the Social Security and federal civilian employee
and military retirement trust funds, which account for almost 74 percent of
B- 282643 Page 4 GAO/ AIMD- 00- 79 Schedules of Federal Debt
the debt held by federal entities. The money is invested in special U. S. Treasury securities that are guaranteed for principal and interest by the full faith and credit of the U. S. government. These trust funds have been running annual surpluses, which are loaned to the Treasury and reduce the
need for the government to borrow from the public today. The transactions net out on the government's consolidated financial statements because, in effect, they represent loans from one part of the government to another. However, they also constitute future obligations of the Treasury since the
Treasury must pay back debt held by federal entities when these entities need to redeem their Treasury security holdings. Interest on Treasury securities held by federal entities may be used for outlays by the entity or invested in additional Treasury securities.
Debt held by the public and debt held by federal entities are very different. Debt held by the public approximates the federal government's competition with other sectors in the credit markets. This competition affects current interest rates and private capital accumulation. In addition, interest on debt held by the public is a current burden on taxpayers. In contrast, debt held by federal entities performs an accounting function, but it typically does not constitute the government's total future commitment to trust fund financed programs. It represents the cumulative annual surpluses of those trust funds plus accrued interest and also reflects a future claim on the U. S.
Treasury. It does not have the current economic effects of borrowing from the public and does not currently compete with the private sector for available funds in the credit market. However, when trust funds redeem Treasury securities to obtain cash to fund expenditures, they compete with the private sector and thus have an effect on the economy.
As we reported in May 1999, 1 although the federal government has carried debt throughout virtually all of U. S. history, large annual budget deficits over the past two decades sharply increased the total amount of debt owed
to the public and its associated annual interest payments. Policymakers responded to the historically high debt levels in recent years by passing several deficit reduction initiatives. These actions, along with economic
growth, helped shrink annual deficits and bring about the 1999 and 1998 surpluses. 1 Federal Debt: Answers to Frequently Asked Questions An Update (GAO/ OCG- 99- 27,
May 28, 1999).
B- 282643 Page 5 GAO/ AIMD- 00- 79 Schedules of Federal Debt
Even after 2 years of budgetary surpluses, debt held by the public stands at about 40 percent of the annual size of the U. S. economy, a level that the United States rarely exceeded before 1940. However, the projected surpluses, if they materialize, would lead to a further reduction in debt held by the public. Over the longer term, the retirement of the baby boom generation will place additional pressures on the budget. These pressures including, for example, increasing demand for health services will require further action to prevent debt held by the public from rising again in future decades.
We are sending copies of this report to Senator Ted Stevens, Senator Robert Byrd, Senator Ben Nighthorse Campbell, Senator Byron Dorgan, Senator William Roth, Senator Daniel Moynihan, Senator Fred Thompson, Senator Joseph Lieberman, Senator Pete Domenici, Senator Frank Lautenburg, and to Representative C. W. Bill Young, Representative David Obey, Representative Jim Kolbe, Representative Steny Hoyer, Representative Bill Archer, Representative Charles Rangel, Representative Dan Burton, Representative Henry Waxman, Representative Stephen Horn, Representative Jim Turner, Representative John Kasich, and Representative John Spratt in their capacities as Chairmen or Ranking Minority Members of Sentate or House Committees and Subcommittees. We are also sending copies of this report to Mr. Van Zeck, Commissioner, Bureau of the Public Debt; the Honorable Jeffrey Rush, Jr., Inspector General, Department of the Treasury; the Honorable Jacob Lew, Director, Office of Management and Budget; and other agency officials. Copies will be made available to others upon request.
If I can be of further assistance, please call me at (202) 512- 5500. This report was prepared under the direction of Gary T. Engel, Associate Director, Governmentwide Accounting and Financial Management Issues, Accounting and Information Management Division. Should you or members of your staff have any questions concerning this report, please
B- 282643 Page 6 GAO/ AIMD- 00- 79 Schedules of Federal Debt
contact Mr. Engel at (202) 512- 3406. Another key contact and staff acknowledgements are in appendix II. Sincerely yours,
David M. Walker Comptroller General of the United States
Page 7 GAO/ AIMD- 00- 79 Schedules of Federal Debt United States General Accounting Office
Washington, D. C. 20548 Comptroller General
of the United States
B- 282643 Opi ni on Let ter
To the Commissioner of the Bureau of the Public Debt In connection with fulfilling our requirement to audit the financial statements of the U. S. government, we audited the federal debt managed by the Bureau of the Public Debt (BPD) due to the significance of the federal debt on the federal government's financial statements. 1 This report presents the results of our audits of the Schedules of Federal
Debt Managed by BPD for the fiscal years ended September 30, 1999 and 1998. The Schedules of Federal Debt present the beginning balances, increases and decreases, and ending balances for (1) Federal Debt Held by the Public and Federal Debt Held by Federal Entities, (2) the related
Accrued Interest Payables, and (3) the related Net Unamortized Discounts and Premiums, managed by BPD. In our audits of the Schedules of Federal Debt for the fiscal years ended September 30, 1999 and 1998, we found
the Schedules of Federal Debt are presented fairly in conformity with generally accepted accounting principles, BPD had effective internal control over financial reporting (including safeguarding assets) and compliance with laws and regulations related to the Schedule of Federal Debt for the fiscal year ended September 30, 1999, and no reportable noncompliance in fiscal year 1999 with a selected
provision of a law we tested. The following sections discuss, in more detail, these conclusions and the scope of our audits. Opinion on Schedules
of Federal Debt The Schedules of Federal Debt including the accompanying notes present fairly, in all material respects, in conformity with generally accepted
accounting principles, the balances as of September 30, 1999, 1998, and 1997, for Federal Debt managed by BPD, the related Accrued Interest Payables and Net Unamortized Discounts and Premiums, and the related 1 31 U. S. C. 331( e) (1994).
B- 282643 Page 8 GAO/ AIMD- 00- 79 Schedules of Federal Debt
increases and decreases for the fiscal years ended September 30, 1999 and 1998.
Opinion on Internal Control BPD maintained, in all material respects, effective internal control over financial reporting and compliance as of September 30, 1999, that provided reasonable assurance that misstatements, losses, or noncompliance,
material in relation to the Schedule of Federal Debt for the fiscal year ended September 30, 1999, would be prevented or detected on a timely basis. Management asserted that its internal control is effective based on criteria established under the Federal Managers' Financial Integrity Act of 1982 and the Office of Management and Budget (OMB) Circular A- 123, Management Accountability and Control.
We found matters involving computer controls that we do not consider to be reportable conditions. 2 We will communicate these matters separately to BPD's management, along with our suggestions for improvement. Compliance With Laws and Regulations
Our tests for compliance in fiscal year 1999 with Statutory Debt Limits, 31 U. S. C. 3101( b), as amended, disclosed no instances of noncompliance that would be reportable under generally accepted government auditing
standards or OMB Bulletin No. 98- 08, Audit Requirements for Federal Financial Statements, as amended. However, the objective of our audit of the Schedule of Federal Debt for the fiscal year ended September 30, 1999, was not to provide an opinion on overall compliance with laws and regulations. Accordingly, we do not express such an opinion.
Objectives, Scope, and Methodology
Management is responsible for preparing the Schedules of Federal Debt in conformity with generally accepted accounting principles; 2 Reportable conditions are matters coming to our attention that, in our judgment, should be communicated because they represent significant deficiencies in the design or operation of internal control that could adversely affect the organization's ability to meet the objectives of reliable financial reporting and compliance with applicable laws and regulations.
B- 282643 Page 9 GAO/ AIMD- 00- 79 Schedules of Federal Debt
establishing, maintaining, and assessing internal control to provide reasonable assurance that the broad control objectives of the Federal Managers' Financial Integrity Act of 1982 are met; and
complying with applicable laws and regulations. We are responsible for obtaining reasonable assurance about whether (1) the Schedules of Federal Debt are presented fairly, in all material respects, in conformity with generally accepted accounting principles and
(2) management maintained effective related internal control as of September 30, 1999, the objectives of which are financial reporting - transactions are properly recorded, processed, and
summarized to permit the preparation of the Schedule of Federal Debt for the fiscal year ended September 30, 1999, in conformity with generally accepted accounting principles and assets are safeguarded, as reflected in note 5 of the Schedules of Federal Debt, against loss from unauthorized acquisition, use, or disposition, and compliance with laws and regulations - transactions on the Schedule of Federal Debt for the fiscal year ended September 30, 1999, are executed in accordance with laws governing the use of budget authority and with other laws and regulations that could have a direct and material effect on the Schedules of Federal Debt and any other laws, regulations, and
governmentwide policies identified by OMB Bulletin No. 98- 08, Appendix C, as amended. We are also responsible for testing compliance with selected provisions of laws and regulations that have a direct and material effect on the Schedules of Federal Debt. In order to fulfill these responsibilities, we examined, on a test basis, evidence supporting the amounts and
disclosures in the Schedules of Federal Debt; assessed the accounting principles used and significant estimates made
by management; evaluated the overall presentation of the Schedules of Federal Debt; obtained an understanding of internal control relevant to the Schedule of Federal Debt for the fiscal year ended September 30, 1999, and related to financial reporting, including safeguarding assets, as reflected in note 5 to the schedules, and compliance with laws and regulations, including execution of transactions in accordance with budget authority;
B- 282643 Page 10 GAO/ AIMD- 00- 79 Schedules of Federal Debt
tested relevant internal controls over financial reporting, including safeguarding assets, as reflected in note 5 to the schedules, and compliance, and evaluated the design and operating effectiveness of internal control related to the Schedule of Federal Debt for the fiscal
year ended September 30, 1999; considered the process for evaluating and reporting on internal control and financial management systems under the Federal Managers' Financial Integrity Act of 1982; and tested compliance in fiscal year 1999 with Statutory Debt Limits,
31 U. S. C 3101( b), as amended. We did not evaluate all internal controls relevant to operating objectives as broadly defined by the Federal Managers' Financial Integrity Act of 1982, such as those controls relevant to preparing statistical reports and ensuring efficient operations. We limited our internal control testing to those controls over financial reporting and compliance. Because of inherent
limitations in internal control, misstatements due to error or fraud, losses, or noncompliance may nevertheless occur and not be detected. We also caution that projecting our evaluation to future periods is subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with controls may deteriorate.
We did not test compliance with all laws and regulations applicable to BPD. We limited our tests of compliance to those required by OMB Bulletin No. 98- 08, as amended, and which we deemed applicable to the Schedule of Federal Debt for the fiscal year ended September 30, 1999. 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 did our work in accordance with generally accepted government auditing standards and applicable OMB guidance.
B- 282643 Page 11 GAO/ AIMD- 00- 79 Schedules of Federal Debt
Agency Comments In commenting on a draft of this report (see appendix I), BPD concurred with the facts and conclusions in our report.
David M. Walker Comptroller General of the United States
January 28, 2000
Page 12 GAO/ AIMD- 00- 79 Schedules of Federal Debt
Page 13 GAO/ AIMD- 00- 79 Schedules of Federal Debt
Schedules and Notes
Schedules of Federal Debt
Schedules and Notes Page 14 GAO/ AIMD- 00- 79 Schedules of Federal Debt
Notes to the Schedules of Federal Debt
Schedules and Notes Page 15 GAO/ AIMD- 00- 79 Schedules of Federal Debt
Schedules and Notes Page 16 GAO/ AIMD- 00- 79 Schedules of Federal Debt
Schedules and Notes Page 17 GAO/ AIMD- 00- 79 Schedules of Federal Debt
Schedules and Notes Page 18 GAO/ AIMD- 00- 79 Schedules of Federal Debt
Schedules and Notes Page 19 GAO/ AIMD- 00- 79 Schedules of Federal Debt
Page 20 GAO/ AIMD- 00- 79 Schedules of Federal Debt
Appendix I Comments From the Bureau of the Public Debt Appendi x I
Page 21 GAO/ AIMD- 00- 79 Schedules of Federal Debt
Appendix II GAO Contact and Staff Acknowledgments Appendi x II
GAO Contact J. Lawrence Malenich (202) 512- 9399 Acknowledgments In addition to the individual named above, William E. Boutboul, Dawn B.
Simpson, Dean D. Carpenter, Casey L. Keplinger, Ogbeide O. Oniha, Carolyn M. Voltz, and Michael S. Wetklow made key contributions to this report.
(919401) Lett er
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Rev-LG logo.eps GAO United States General Accounting Office Report
to the Secretary of the Treasury March 2000 FINANCIAL AUDIT Bureau
of the Public Debt's Fiscal Years 1999 and 1998 Schedules of
Federal Debt GAO/AIMD-00-79 Page 1 GAO/AIMD-00-79 Schedules of
Federal Debt Contents Letter 3 Opinion Letter 7 Schedules and
Notes 13 Schedules of Federal Debt 13 Notes to the Schedules of
Federal Debt 14 Appendixes Appendix I: Comments From the Bureau of
the Public Debt 20 Appendix II: GAO Contact and Staff
Acknowledgments 21 Abbreviations BPD Bureau of the Public Debt OMB
Office of Management and Budget Page 2 GAO/AIMD-00-79 Schedules of
Federal Debt Page 3 GAO/AIMD-00-79 Schedules of Federal Debt
United States General Accounting Office Washington, D. C. 20548
Page 3 GAO/AIMD-00-79 Schedules of Federal Debt Comptroller
General of the United States B-282643 Lett er March 1, 2000 The
Honorable Lawrence H. Summers The Secretary of the Treasury Dear
Mr. Secretary: This 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, 1999 and 1998. The
Schedules of Federal Debt present the beginning balances,
increases and decreases, and ending balances for (1) Federal Debt
Held by the Public and Federal Debt Held by Federal Entities, (2)
the related Accrued Interest Payables, and (3) the related Net
Unamortized Discounts and Premiums, managed by the bureau. As of
September 30, 1999 and 1998, federal debt managed by the bureau
totaled about $5.6 trillion and $5. 5 trillion, respectively, for
monies borrowed to fund the government's operations. These
balances consisted of approximately (1) $3.6 trillion as of
September 30, 1999, and $3. 8 trillion as of September 30, 1998,
owed to the public and about (2) $2.0 trillion as of September 30,
1999, and $1. 7 trillion as of September 30, 1998, owed to federal
entities, such as the Social Security Trust funds. Total interest
expense for fiscal years 1999 and 1998 was $356 billion and $363
billion, respectively. These amounts consisted of (1) $230 billion
and $243 billion of interest expense on debt owed to the public
for fiscal years 1999 and 1998, respectively, and (2) $126 billion
and $120 billion of interest expense on debt owed to federal
entities for fiscal years 1999 and 1998, respectively. This report
contains our (1) opinion on the Schedules of Federal Debt for the
fiscal years ended September 30, 1999 and 1998, (2) opinion on the
effectiveness of related internal control as of September 30,
1999, and (3) conclusion on the bureau's compliance in fiscal year
1999 with a selected provision of a significant law we tested. The
level of debt held by the public reflects how much of the nation's
wealth is absorbed by the federal government to finance its
obligations. It best represents the cumulative effect of past
federal borrowing on today's economy and the federal budget. Debt
held by federal entities primarily represents balances in the
Social Security and federal civilian employee and military
retirement trust funds, which account for almost 74 percent of B-
282643 Page 4 GAO/AIMD-00-79 Schedules of Federal Debt the debt
held by federal entities. The money is invested in special U. S.
Treasury securities that are guaranteed for principal and interest
by the full faith and credit of the U. S. government. These trust
funds have been running annual surpluses, which are loaned to the
Treasury and reduce the need for the government to borrow from the
public today. The transactions net out on the government's
consolidated financial statements because, in effect, they
represent loans from one part of the government to another.
However, they also constitute future obligations of the Treasury
since the Treasury must pay back debt held by federal entities
when these entities need to redeem their Treasury security
holdings. Interest on Treasury securities held by federal entities
may be used for outlays by the entity or invested in additional
Treasury securities. Debt held by the public and debt held by
federal entities are very different. Debt held by the public
approximates the federal government's competition with other
sectors in the credit markets. This competition affects current
interest rates and private capital accumulation. In addition,
interest on debt held by the public is a current burden on
taxpayers. In contrast, debt held by federal entities performs an
accounting function, but it typically does not constitute the
government's total future commitment to trust fund financed
programs. It represents the cumulative annual surpluses of those
trust funds plus accrued interest and also reflects a future claim
on the U. S. Treasury. It does not have the current economic
effects of borrowing from the public and does not currently
compete with the private sector for available funds in the credit
market. However, when trust funds redeem Treasury securities to
obtain cash to fund expenditures, they compete with the private
sector and thus have an effect on the economy. As we reported in
May 1999, 1 although the federal government has carried debt
throughout virtually all of U. S. history, large annual budget
deficits over the past two decades sharply increased the total
amount of debt owed to the public and its associated annual
interest payments. Policymakers responded to the historically high
debt levels in recent years by passing several deficit reduction
initiatives. These actions, along with economic growth, helped
shrink annual deficits and bring about the 1999 and 1998
surpluses. 1 Federal Debt: Answers to Frequently Asked Questions
An Update (GAO/OCG-99-27, May 28, 1999). B-282643 Page 5 GAO/AIMD-
00-79 Schedules of Federal Debt Even after 2 years of budgetary
surpluses, debt held by the public stands at about 40 percent of
the annual size of the U. S. economy, a level that the United
States rarely exceeded before 1940. However, the projected
surpluses, if they materialize, would lead to a further reduction
in debt held by the public. Over the longer term, the retirement
of the baby boom generation will place additional pressures on the
budget. These pressures including, for example, increasing demand
for health services will require further action to prevent debt
held by the public from rising again in future decades. We are
sending copies of this report to Senator Ted Stevens, Senator
Robert Byrd, Senator Ben Nighthorse Campbell, Senator Byron
Dorgan, Senator William Roth, Senator Daniel Moynihan, Senator
Fred Thompson, Senator Joseph Lieberman, Senator Pete Domenici,
Senator Frank Lautenburg, and to Representative C. W. Bill Young,
Representative David Obey, Representative Jim Kolbe,
Representative Steny Hoyer, Representative Bill Archer,
Representative Charles Rangel, Representative Dan Burton,
Representative Henry Waxman, Representative Stephen Horn,
Representative Jim Turner, Representative John Kasich, and
Representative John Spratt in their capacities as Chairmen or
Ranking Minority Members of Sentate or House Committees and
Subcommittees. We are also sending copies of this report to Mr.
Van Zeck, Commissioner, Bureau of the Public Debt; the Honorable
Jeffrey Rush, Jr., Inspector General, Department of the Treasury;
the Honorable Jacob Lew, Director, Office of Management and
Budget; and other agency officials. Copies will be made available
to others upon request. If I can be of further assistance, please
call me at (202) 512- 5500. This report was prepared under the
direction of Gary T. Engel, Associate Director, Governmentwide
Accounting and Financial Management Issues, Accounting and
Information Management Division. Should you or members of your
staff have any questions concerning this report, please B-282643
Page 6 GAO/AIMD-00-79 Schedules of Federal Debt contact Mr. Engel
at (202) 512- 3406. Another key contact and staff acknowledgements
are in appendix II. Sincerely yours, David M. Walker Comptroller
General of the United States Page 7 GAO/AIMD-00-79 Schedules of
Federal Debt United States General Accounting Office Washington,
D. C. 20548 Comptroller General of the United States B-282643 Opi
ni on Let ter To the Commissioner of the Bureau of the Public Debt
In connection with fulfilling our requirement to audit the
financial statements of the U. S. government, we audited the
federal debt managed by the Bureau of the Public Debt (BPD) due to
the significance of the federal debt on the federal government's
financial statements. 1 This report presents the results of our
audits of the Schedules of Federal Debt Managed by BPD for the
fiscal years ended September 30, 1999 and 1998. The Schedules of
Federal Debt present the beginning balances, increases and
decreases, and ending balances for (1) Federal Debt Held by the
Public and Federal Debt Held by Federal Entities, (2) the related
Accrued Interest Payables, and (3) the related Net Unamortized
Discounts and Premiums, managed by BPD. In our audits of the
Schedules of Federal Debt for the fiscal years ended September 30,
1999 and 1998, we found the Schedules of Federal Debt are
presented fairly in conformity with generally accepted accounting
principles, BPD had effective internal control over financial
reporting (including safeguarding assets) and compliance with laws
and regulations related to the Schedule of Federal Debt for the
fiscal year ended September 30, 1999, and no reportable
noncompliance in fiscal year 1999 with a selected provision of a
law we tested. The following sections discuss, in more detail,
these conclusions and the scope of our audits. Opinion on
Schedules of Federal Debt The Schedules of Federal Debt including
the accompanying notes present fairly, in all material respects,
in conformity with generally accepted accounting principles, the
balances as of September 30, 1999, 1998, and 1997, for Federal
Debt managed by BPD, the related Accrued Interest Payables and Net
Unamortized Discounts and Premiums, and the related 1 31 U. S. C.
331( e) (1994). B-282643 Page 8 GAO/AIMD-00-79 Schedules of
Federal Debt increases and decreases for the fiscal years ended
September 30, 1999 and 1998. Opinion on Internal Control BPD
maintained, in all material respects, effective internal control
over financial reporting and compliance as of September 30, 1999,
that provided reasonable assurance that misstatements, losses, or
noncompliance, material in relation to the Schedule of Federal
Debt for the fiscal year ended September 30, 1999, would be
prevented or detected on a timely basis. Management asserted that
its internal control is effective based on criteria established
under the Federal Managers' Financial Integrity Act of 1982 and
the Office of Management and Budget (OMB) Circular A- 123,
Management Accountability and Control. We found matters involving
computer controls that we do not consider to be reportable
conditions. 2 We will communicate these matters separately to
BPD's management, along with our suggestions for improvement.
Compliance With Laws and Regulations Our tests for compliance in
fiscal year 1999 with Statutory Debt Limits, 31 U. S. C. 3101( b),
as amended, disclosed no instances of noncompliance that would be
reportable under generally accepted government auditing standards
or OMB Bulletin No. 98- 08, Audit Requirements for Federal
Financial Statements, as amended. However, the objective of our
audit of the Schedule of Federal Debt for the fiscal year ended
September 30, 1999, was not to provide an opinion on overall
compliance with laws and regulations. Accordingly, we do not
express such an opinion. Objectives, Scope, and Methodology
Management is responsible for preparing the Schedules of Federal
Debt in conformity with generally accepted accounting principles;
2 Reportable conditions are matters coming to our attention that,
in our judgment, should be communicated because they represent
significant deficiencies in the design or operation of internal
control that could adversely affect the organization's ability to
meet the objectives of reliable financial reporting and compliance
with applicable laws and regulations. B-282643 Page 9 GAO/AIMD-00-
79 Schedules of Federal Debt establishing, maintaining, and
assessing internal control to provide reasonable assurance that
the broad control objectives of the Federal Managers' Financial
Integrity Act of 1982 are met; and complying with applicable laws
and regulations. We are responsible for obtaining reasonable
assurance about whether (1) the Schedules of Federal Debt are
presented fairly, in all material respects, in conformity with
generally accepted accounting principles and (2) management
maintained effective related internal control as of September 30,
1999, the objectives of which are financial reporting -
transactions are properly recorded, processed, and summarized to
permit the preparation of the Schedule of Federal Debt for the
fiscal year ended September 30, 1999, in conformity with generally
accepted accounting principles and assets are safeguarded, as
reflected in note 5 of the Schedules of Federal Debt, against loss
from unauthorized acquisition, use, or disposition, and
compliance with laws and regulations - transactions on the
Schedule of Federal Debt for the fiscal year ended September 30,
1999, are executed in accordance with laws governing the use of
budget authority and with other laws and regulations that could
have a direct and material effect on the Schedules of Federal Debt
and any other laws, regulations, and governmentwide policies
identified by OMB Bulletin No. 98- 08, Appendix C, as amended. We
are also responsible for testing compliance with selected
provisions of laws and regulations that have a direct and material
effect on the Schedules of Federal Debt. In order to fulfill these
responsibilities, we examined, on a test basis, evidence
supporting the amounts and disclosures in the Schedules of Federal
Debt; assessed the accounting principles used and significant
estimates made by management; evaluated the overall presentation
of the Schedules of Federal Debt; obtained an understanding of
internal control relevant to the Schedule of Federal Debt for the
fiscal year ended September 30, 1999, and related to financial
reporting, including safeguarding assets, as reflected in note 5
to the schedules, and compliance with laws and regulations,
including execution of transactions in accordance with budget
authority; B-282643 Page 10 GAO/AIMD-00-79 Schedules of Federal
Debt tested relevant internal controls over financial reporting,
including safeguarding assets, as reflected in note 5 to the
schedules, and compliance, and evaluated the design and operating
effectiveness of internal control related to the Schedule of
Federal Debt for the fiscal year ended September 30, 1999;
considered the process for evaluating and reporting on internal
control and financial management systems under the Federal
Managers' Financial Integrity Act of 1982; and tested compliance
in fiscal year 1999 with Statutory Debt Limits, 31 U. S. C 3101(
b), as amended. We did not evaluate all internal controls relevant
to operating objectives as broadly defined by the Federal
Managers' Financial Integrity Act of 1982, such as those controls
relevant to preparing statistical reports and ensuring efficient
operations. We limited our internal control testing to those
controls over financial reporting and compliance. Because of
inherent limitations in internal control, misstatements due to
error or fraud, losses, or noncompliance may nevertheless occur
and not be detected. We also caution that projecting our
evaluation to future periods is subject to the risk that controls
may become inadequate because of changes in conditions or that the
degree of compliance with controls may deteriorate. We did not
test compliance with all laws and regulations applicable to BPD.
We limited our tests of compliance to those required by OMB
Bulletin No. 98- 08, as amended, and which we deemed applicable to
the Schedule of Federal Debt for the fiscal year ended September
30, 1999. 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 did our work in accordance with
generally accepted government auditing standards and applicable
OMB guidance. B-282643 Page 11 GAO/AIMD-00-79 Schedules of Federal
Debt Agency Comments In commenting on a draft of this report (see
appendix I), BPD concurred with the facts and conclusions in our
report. David M. Walker Comptroller General of the United States
January 28, 2000 Page 12 GAO/AIMD-00-79 Schedules of Federal Debt
Page 13 GAO/AIMD-00-79 Schedules of Federal Debt Schedules and
Notes Schedules of Federal Debt Schedules and Notes Page 14
GAO/AIMD-00-79 Schedules of Federal Debt Notes to the Schedules of
Federal Debt Schedules and Notes Page 15 GAO/AIMD-00-79 Schedules
of Federal Debt Schedules and Notes Page 16 GAO/AIMD-00-79
Schedules of Federal Debt Schedules and Notes Page 17 GAO/AIMD-00-
79 Schedules of Federal Debt Schedules and Notes Page 18 GAO/AIMD-
00-79 Schedules of Federal Debt Schedules and Notes Page 19
GAO/AIMD-00-79 Schedules of Federal Debt Page 20 GAO/AIMD-00-79
Schedules of Federal Debt Appendix I Comments From the Bureau of
the Public Debt Appendi x I Page 21 GAO/AIMD-00-79 Schedules of
Federal Debt Appendix II GAO Contact and Staff Acknowledgments
Appendi x II GAO Contact J. Lawrence Malenich (202) 512- 9399
Acknowledgments In addition to the individual named above, William
E. Boutboul, Dawn B. Simpson, Dean D. Carpenter, Casey L.
Keplinger, Ogbeide O. Oniha, Carolyn M. Voltz, and Michael S.
Wetklow made key contributions to this report. (919401) Lett er
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