Financial Audit: Examination of the Bureau of the Public Debt's Fiscal
Year 1997 Schedule of Federal Debt (Letter Report, 02/27/98,
GAO/AIMD-98-65).

Pursuant to a legislative requirement, GAO reported on the results of
its audit of the Schedule of Public Debt managed by the Bureau of Public
Debt (BPD) for the fiscal year ended September 30, 1997.

GAO noted that: (1) the Schedule of Federal Debt was reliable in all
material aspects; (2) management fairly stated that the related internal
controls in place on September 30, 1997, were effective in safeguarding
assets, as reflected in footnotes 5 and 6 to the Schedule of Federal
Debt, from material loss, assuring material compliance with laws
governing the use of budget authority and with other laws and
regulations relevant to the Federal Debt managed by BPD, and assuring
that there were no material misstatements in the Schedule of Federal
Debt; and (3) there was no reportable noncompliance with selected
provisions of laws and regulations tested by GAO, and there were no
instances where BPD's financial management systems, related to the
Schedule of Federal Debt, did not substantially comply with the
requirements of the Federal Financial Management Improvement Act of
1996.

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

 REPORTNUM:  AIMD-98-65
     TITLE:  Financial Audit: Examination of the Bureau of the Public 
             Debt's Fiscal Year 1997 Schedule of Federal Debt
      DATE:  02/27/98
   SUBJECT:  Accounting procedures
             Debt held by public
             Federal agency accounting systems
             Public debt
             Auditing procedures
             Internal controls
             Financial management systems
IDENTIFIER:  Bureau of the Public Debt Schedule of Federal Debt
             
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Cover
================================================================ COVER


Report to the Secretary of the Treasury

February 1998

FINANCIAL AUDIT - EXAMINATION OF
THE BUREAU OF THE PUBLIC DEBT'S
FISCAL YEAR 1997 SCHEDULE OF
FEDERAL DEBT

GAO/AIMD-98-65

Schedule of Federal Debt

(919106)


Abbreviations
=============================================================== ABBREV

  BPD - Bureau of the Public Debt
  CFO - Chief Financial Officer
  FFMIA - Federal Financial Management Improvement Act of 1996
  GMRA - Government Management Reform Act of 1994
  OMB - Office of Management and Budget

Letter
=============================================================== LETTER


B-277771

February 27, 1998

The Honorable Robert E.  Rubin
The Secretary of the Treasury

Dear Mr.  Secretary: 

This report presents the results of our audit of the Schedule of
Federal Debt Managed by the Bureau of the Public Debt for the fiscal
year ended September 30, 1997.  The Schedule of Federal Debt presents
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 Interest Payables, and (3) the
related Net Unamortized Discounts and Premiums, managed by the
Bureau.  At September 30, 1997, Federal Debt managed by the Bureau
totaled about $5.4 trillion, which consisted of $3.8 trillion owed to
the public and $1.6 trillion owed to federal entities, such as the
Social Security Trust funds, for monies borrowed to fund the
government's operations.  Total related interest expense for fiscal
year 1997 was $356 billion, which consisted of $246 billion of
interest expense on debt owed to the public and $110 billion of
interest expense on debt owed to federal entities. 

This report contains our (1) opinion on the Schedule of Federal Debt
for the fiscal year ended September 30, 1997, (2) opinion on Bureau
management's assertion about the effectiveness of related internal
controls, and (3) conclusions on the Bureau's compliance with
significant laws and regulations we tested, and on whether the
Bureau's financial management systems, related to the Schedule of
Federal Debt, substantially comply with requirements of the Federal
Financial Management Improvement Act of 1996. 

We are sending copies of this report to the Acting Commissioner of
the Bureau of the Public Debt; the Director of the Office of
Management and Budget; the Chairmen and Ranking Minority Members of
the Senate Committee on Appropriations, Senate Subcommittee on
Treasury and General Government, Senate Committee on Finance, Senate
Committee on Governmental Affairs, and Senate Committee on the
Budget; the Chairmen and Ranking Minority Members of the House
Committee on Appropriations, House Subcommittee on Treasury, Postal
Service, and General Government, House Committee on Ways and Means,
House Committee on Government Reform and Oversight, House
Subcommittee on Government Management, Information and Technology and
House Committee on the Budget; and other interested congressional
committees.  Copies will be made available to others upon request. 

Should you or members of your staff have any questions concerning
this report, please contact me on (202) 512-3406.  Major contributors
to this report are listed in appendix II. 

Sincerely yours,

Gary T.  Engel
Associate Director
Governmentwide Accounting and
 Financial Management Issues


Letter
=============================================================== LETTER


B-277771

To the Acting Commissioner of the Bureau of the Public Debt

In accordance with the Chief Financial Officers (CFO) Act of 1990, as
expanded by the Government Management Reform Act of 1994 (GMRA), this
report presents the results of our audit of the Schedule of Federal
Debt Managed by the Bureau of the Public Debt for the fiscal year
ended September 30, 1997.  GMRA requires the Director of the Office
of Management and Budget (OMB) to identify components of executive
agencies that must issue audited financial statements.  OMB
designated the Bureau of the Public Debt (BPD) as a component of the
Department of the Treasury required to issue audited financial
statements.\1

The Schedule of Federal Debt presents 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 Interest Payables, and (3) the related Net Unamortized
Premiums and Discounts, managed by BPD. 

In our audit of the Schedule of Federal Debt for the fiscal year
ended September 30, 1997, we found the following: 

  -- The Schedule of Federal Debt was reliable in all material
     respects. 

  -- Management fairly stated that the related internal controls in
     place on September 30, 1997, were effective in safeguarding
     assets, as reflected in footnote 5 to the Schedule of Federal
     Debt, from material loss, assuring material compliance with laws
     governing the use of budget authority and with other laws and
     regulations relevant to the Federal Debt managed by BPD, and
     assuring that there were no material misstatements in the
     Schedule of Federal Debt. 

  -- There was no reportable noncompliance with selected provisions
     of laws and regulations we tested, and there were no instances
     where BPD financial management systems related to the Schedule
     of Federal Debt did not substantially comply with the
     requirements of the Federal Financial Management Improvement Act
     of 1996 (FFMIA). 

The following sections outline each conclusion in more detail and
discuss the scope of our audit. 


--------------------
\1 As approved by OMB, BPD's fiscal year 1997 financial statements
submission, which also represents BPD's annual report, will consist
of the (1) Administrative Financial Statements, (2) Schedule of
Federal Debt Managed by the Bureau of the Public Debt for the fiscal
year ended September 30, 1997, (3) Schedule of Loans Receivable From
Federal Entities and Related Interest Receivable Serviced by the
Bureau of the Public Debt at September 30, 1997, and (4) Overview to
the Financial Statements. 


   OPINION ON SCHEDULE OF FEDERAL
   DEBT
------------------------------------------------------------ Letter :1

The Schedule of Federal Debt including the accompanying notes
presents fairly, in all material respects, in conformity with a
comprehensive basis of accounting other than generally accepted
accounting principles, as described in note 1, the fiscal year 1997
activity relating to the Federal Debt, related Interest Payables, and
related Net Unamortized Premiums and Discounts that were managed by
BPD. 


   OPINION ON MANAGEMENT'S
   ASSERTION ABOUT THE
   EFFECTIVENESS OF INTERNAL
   CONTROLS
------------------------------------------------------------ Letter :2

We evaluated management's assertion about the effectiveness of its
internal controls designed to

  -- safeguard assets, as reflected in footnote 5 of the Schedule of
     Federal Debt, against loss from unauthorized acquisition, use,
     or disposition;

  -- assure the execution of transactions on the Schedule of Federal
     Debt in accordance with laws governing the use of budget
     authority and with other laws and regulations that have a direct
     and material effect on the Schedule of Federal Debt or that are
     listed in OMB audit guidance Bulletin 93-06, Audit Requirements
     for Federal Financial Statements, and could have a material
     effect on the Schedule of Federal Debt; and

  -- properly record, process, and summarize transactions to permit
     the preparation of a reliable Schedule of Federal Debt and to
     maintain accountability for assets, as reflected in footnote 5
     to the Schedule of Federal Debt. 

Management of BPD fairly stated that those controls in place on
September 30, 1997, provided reasonable assurance that losses,
noncompliance, or misstatements material in relation to the Schedule
of Federal Debt would be prevented or detected on a timely basis. 
Management made this assertion based upon criteria established under
the Federal Managers' Financial Integrity Act of 1982 and OMB
Circular A-123, Management Accountability and Control. 

We found matters involving the internal controls, including computer
general 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. 


--------------------
\2 Reportable conditions involve matters coming to our attention
relating to significant deficiencies in the design or operation of
internal controls that, in the auditor's judgment, could adversely
affect an entity's ability to (1) safeguard assets against loss from
unauthorized acquisition, use, or disposition, (2) ensure the
execution of transactions in accordance with management's authority
and in accordance with laws and regulations, or (3) properly record,
process, and summarize transactions to permit the preparation of the
schedule or to maintain accountability for assets. 


   COMPLIANCE WITH LAWS AND
   REGULATIONS AND FFMIA
   REQUIREMENTS
------------------------------------------------------------ Letter :3

Our tests for compliance with selected provisions of laws and
regulations disclosed no instances of noncompliance that would be
reportable under generally accepted government auditing standards or
OMB's Bulletin 93-06.  Under FFMIA and OMB Bulletin 98-04,\3 our
tests disclosed no instances where BPD financial management systems
related to the Schedule of Federal Debt did not substantially comply
with the following requirements: 

  -- federal financial management systems,

  -- applicable federal accounting standards,\4 and

  -- the United States Standard General Ledger at the transaction
     level. 

However, the objective of our audit was not to provide an opinion on
overall compliance with the laws, regulations, and requirements
tested.  Accordingly, we do not express such an opinion. 


--------------------
\3 On January 16, 1998, OMB issued Bulletin 98-04 as an addendum to
OMB Bulletin 93-06, which generally revised the Bulletin's reporting
requirements and implemented the reporting requirements of the
Federal Financial Management Improvement Act of 1996 (Public Law
104-208). 

\4 The Federal Accounting Standards Advisory Board recommends
accounting standards, and OMB, Treasury, and GAO decide whether to
adopt the recommended standards; if they are adopted, the standards
are published by OMB and GAO. 


   YEAR 2000 DATE CONVERSION
------------------------------------------------------------ Letter :4

The Year 2000 date conversion poses a challenge for many
organizations, including federal agencies.  The Year 2000 problem is
rooted in the way dates are recorded and calculated in many computer
systems.  For the past several decades, systems have typically used
two digits to represent the year in order to conserve on electronic
data storage and reduce operating costs.  With this two-digit format,
however, the year 2000 is indistinguishable from the year 1900.  As a
result, system or application programs that use dates to perform
calculations, comparisons, or sorting may generate incorrect results
when working with years after 1999. 

Because many of BPD's core business areas and processes involve
information systems, it is critical that BPD ensure that its
mission-critical and other key systems are Year 2000 compliant.  BPD
officials stated that BPD has actions completed and planned to ensure
that it is Year 2000 compliant.  A review of such actions was not
included in the scope of our audit of the Schedule of Federal Debt. 
We are working with the Congress and the executive branch to monitor
the progress being made by federal agencies and identify specific
recommendations for resolving the Year 2000 problem.  In connection
with this work, we will review BPD's actions. 


   OBJECTIVES, SCOPE, AND
   METHODOLOGY
------------------------------------------------------------ Letter :5

Management is responsible for

  -- preparing the Schedule of Federal Debt in conformity with the
     basis of accounting described in note 1;

  -- establishing, maintaining, and assessing the internal controls
     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 and FFMIA
     requirements. 

We are responsible for obtaining reasonable assurance about whether
(1) the Schedule of Federal Debt is reliable (free of material
misstatements and presented fairly, in all material respects, in
conformity with the basis of accounting described in note 1) and (2)
management's assertion about the effectiveness of related internal
controls is fairly stated, in all material respects, based upon
criteria established under the Federal Managers' Financial Integrity
Act of 1982 and OMB Circular A-123, Management Accountability and
Control.  We are also responsible for testing compliance with
selected provisions of laws and regulations\5 and FFMIA requirements. 

In order to fulfill these responsibilities, we

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

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

  -- evaluated the overall presentation of the Schedule of Federal
     Debt;

  -- obtained an understanding of the internal controls relevant to
     the Schedule of Federal Debt and related to safeguarding assets,
     as reflected in footnote 5 to the schedule, compliance with laws
     and regulations including execution of transactions in
     accordance with budget authority, and financial reporting;

  -- tested relevant internal controls over safeguarding, compliance,
     and financial reporting and evaluated management's assertion
     about the effectiveness of internal controls related to the
     Schedule of Federal Debt;

  -- tested compliance with the following selected provisions of laws
     and regulations: 

Government Management Reform Act of 1994, 31 U.S.C.  3515,
3521(e)-(f);

Federal Managers' Financial Integrity Act of 1982, 31 U.S.C. 
3512(d); and

Statutory Debt Limits, 31 U.S.C.  3101(b), as amended; and

  -- tested whether BPD financial management systems related to the
     Schedule of Federal Debt substantially comply with the following
     FFMIA requirements, considering the implementation guidance for
     FFMIA issued by OMB on September 9, 1997: 

federal financial management systems,

applicable federal accounting standards, and

the United States Standard General Ledger at the transaction level. 

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 necessary to achieve
the objectives outlined in our opinion on management's assertion
about the effectiveness of internal controls.  Because of inherent
limitations in any internal controls, losses, noncompliance, or
misstatements 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. 

As the auditor of the Schedule of Federal Debt Managed by the Bureau
of the Public Debt, we are reporting under FFMIA whether BPD
financial management systems related to the Schedule of Federal Debt
substantially comply with the federal financial management systems
requirements, applicable federal accounting standards, and the United
States Standard General Ledger at the transaction level.  In making
this report, we considered the implementation guidance for FFMIA
issued by OMB on September 9, 1997. 

We did our work in accordance with generally accepted government
auditing standards, OMB Bulletin 93-06 and OMB Bulletin 98-04. 


--------------------
\5 These are laws and regulations that have a direct and material
effect on the Schedule of Federal Debt or that are listed in OMB
guidance and could have a material effect on the Schedule of Federal
Debt. 


   AGENCY COMMENTS
------------------------------------------------------------ Letter :6

We requested comments on a draft of this audit report from BPD.  On
February 17, 1998, the Acting Commissioner of BPD provided us with
written comments, which are presented in appendix I.  BPD concurred
with our audit report's conclusions. 

Gary T.  Engel
Associate Director
Governmentwide Accounting and
 Financial Management Issues

January 23, 1998



SCHEDULE AND FOOTNOTES
============================================================ Chapter 0

   Schedule of Federal Debt

   (See figure in printed
   edition.)

   Notes to the Schedule of
   Federal Debt

   (See figure in printed
   edition.)



   (See figure in printed
   edition.)



   (See figure in printed
   edition.)



   (See figure in printed
   edition.)



   (See figure in printed
   edition.)




(See figure in printed edition.)Appendix I
COMMENTS FROM THE BUREAU OF THE
PUBLIC DEBT
============================================================ Chapter 0


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix II

ACCOUNTING AND INFORMATION
MANAGEMENT DIVISION, WASHINGTON,
D.C. 

J.  Lawrence Malenich, Assistant Director
Margaret A.  Sherry, Senior Audit Manager
William E.  Boutboul, Audit Manager
Dean D.  Carpenter, Audit Manager
Barbara S.  Oliver, Audit Manager
Dawn B.  Simpson, Audit Manager
Harold W.  Fulk, Auditor
Ellen J.  Herr, Auditor
Daniel G.  Mesler, Auditor

BOSTON FIELD OFFICE

Leslie V.  Mahagan, Audit Manager
Kevin F.  Murphy, Auditor

DALLAS FIELD OFFICE

John V.  Kelly, Audit Manager
Gloria Cano, Auditor

SAN FRANCISCO FIELD OFFICE

John M.  Lord, Audit Manager
Elizabeth A.  Oliverez, Auditor

*** End of document. ***