Financial Audit: Bureau of the Public Debt's Fiscal Years 1998 and 1997
Schedules of Federal Debt (Letter Report, 03/01/99, GAO/AIMD-99-70).

Pursuant to a legislative requirement, GAO reported on the results of
its audit of the Schedules of Federal Debt managed by the Bureau of the
Public Debt for the fiscal years ended September 30, 1998 and 1997.

GAO noted that: (1) the Schedules of Federal Debt were reliable in all
material respects; (2) management fairly stated that the related
internal control in place on September 30, 1998, was effective in
assuring that there were no material misstatements in the Schedule of
Federal Debt for the fiscal year ended September 30, 1998, including
safeguarding assets from material loss, and assuring material compliance
with laws governing the use of budget authority and with other laws and
regulations relevant to the Federal Debt managed by the Bureau of the
Public Debt; and (3) no reportable noncompliance in fiscal year 1998
with a selected provision of a law and regulation GAO tested.

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

 REPORTNUM:  AIMD-99-70
     TITLE:  Financial Audit: Bureau of the Public Debt's Fiscal Years 
             1998 and 1997 Schedules of Federal Debt
      DATE:  03/01/99
   SUBJECT:  Financial management systems
             Auditing standards
             Reporting requirements
             Internal controls
             Auditing procedures
             Debt held by public
             Accounting procedures
IDENTIFIER:  Bureau of the Public Debt Schedule of Federal Debt
             
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ai99070.book GAO United States General Accounting Office

Report to the Secretary of the Treasury

March 1999 FINANCIAL AUDIT Bureau of the Public Debt's Fiscal
Years 1998 and 1997 Schedules of Federal Debt




GAO/AIMD-99-70

  GAO/AIMD-99-70

United States General Accounting Office Washington, D. C. 20548
Lett er

Page 1 GAO/AIMD-99-70 Schedules of Federal Debt

GAO

Comptroller General Lett er

B-279642 March 1, 1999 The Honorable Robert E. Rubin 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, 1998 and
1997. 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, 1998 and 1997, federal debt managed by the
bureau totaled about $5.5 trillion and $5. 4 trillion,
respectively, for monies borrowed to fund the government's
operations. These balances consisted

of (1) $3.8 trillion as of September 30, 1998 and 1997 owed to the
public and (2) $1. 7 trillion as of September 30, 1998, and $1.6
trillion as of September 30, 1997, owed to federal entities, such
as the Social Security Trust funds. Total interest expense for
fiscal years 1998 and 1997 was $363 billion and $356 billion,
respectively. These amounts consisted of (1) $243 billion and $246
billion of interest expense on debt owed to the public for fiscal
years 1998 and 1997, respectively, and (2) $120 billion and $110
billion of interest

expense on debt owed to federal entities for fiscal years 1998 and
1997, respectively.

This report contains our (1) opinion on the Schedules of Federal
Debt for the fiscal years ended September 30, 1998 and 1997, (2)
opinion on bureau management's assertion about the effectiveness
of related internal control in place on September 30, 1998, and
(3) conclusion on the bureau's compliance in fiscal year 1998 with
a selected provision of a significant law

and regulation we tested. We are sending copies of this report to
the Chairmen and Ranking Minority Members of the Senate Committee
on Appropriations and its Subcommittee on Treasury and General
Government; Senate Committee on

Finance; Senate Committee on Governmental Affairs; Senate
Committee on the Budget; House Committee on Appropriations and its
Subcommittee on Treasury, Postal Service, and General Government;
House Committee on Ways and Means; House Committee on Government
Reform and its Subcommittee on Government Management, Information,
and Technology;

B-279642 Page 2 GAO/AIMD-99-70 Schedules of Federal Debt

and House Committee on the Budget. We are also sending copies to
other interested congressional committees, the Commissioner of the
Bureau of the Public Debt, and the Director of the Office of
Management and Budget. 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

contact Mr. Engel on (202) 512- 3406. Major contributors to this
report are listed in appendix II.

Sincerely yours, David M. Walker Comptroller General of the United
States

Page 3 GAO/AIMD-99-70 Schedules of Federal Debt

Page 4 GAO/AIMD-99-70 Schedules of Federal Debt

Contents Letter 1 Opinion Letter 7 Schedules and Notes Schedules
of Federal Debt 13

Notes to the Schedules of Federal Debt 14 Appendix I Comments From
the Bureau of the Public Debt

19 Appendix II Major Contributors to This Report

20

Abbreviations

BPD Bureau of the Public Debt OMB Office of Management and Budget

Page 5 GAO/AIMD-99-70 Schedules of Federal Debt

Page 6 GAO/AIMD-99-70 Schedules of Federal Debt

United States General Accounting Office Washington, D. C. 20548
Lett er

Page 7 GAO/AIMD-99-70 Schedules of Federal Debt

GAO

Comptroller General Lett er

B-279642 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
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, 1998 and 1997. 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,
1998 and 1997, we found

 the Schedules of Federal Debt were reliable in all material
respects;  management fairly stated that the related internal
control in place on

September 30, 1998, was effective in assuring that there were no
material misstatements in the Schedule of Federal Debt for the
fiscal year ended September 30, 1998, including safeguarding
assets, as reflected in note 5 to the Schedules of Federal Debt,
from material loss, and 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

 no reportable noncompliance in fiscal year 1998 with a selected
provision of a law and regulation we tested.

The following sections outline each conclusion in more detail and
discuss 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 federal accounting

standards as described in note 1, the balances as of September 30,
1998, 1997, and 1996, for Federal Debt managed by BPD, the related
Accrued Interest Payables and Net Unamortized Discounts and
Premiums, and the

1 31 U. S. C. 331( e) (1994).

B-279642 Page 8 GAO/AIMD-99-70 Schedules of Federal Debt

related increases and decreases for the fiscal years ended
September 30, 1998 and 1997. The basis of accounting described in
note 1 is a comprehensive basis of accounting other than generally
accepted accounting principles.

Opinion on Management's Assertion About the Effectiveness of
Internal Control

We evaluated management's assertion about the effectiveness of its
internal control designed to provide reasonable assurance that the
following objectives are met:

 Reliability of 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, 1998, in accordance with federal accounting standards 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 applicable laws and regulations
transactions on the

Schedule of Federal Debt for the fiscal year ended September 30,
1998, 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 the Office
of Management and Budget (OMB) in Bulletin No. 98- 08, Audit
Requirements for Federal Financial Statements, Appendix C.
Management of BPD fairly stated that internal control in place on
September 30, 1998, provided reasonable assurance that
misstatements, losses, or noncompliance, material in relation to
the Schedule of Federal Debt for the fiscal year ended September
30, 1998, 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 No. 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 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-279642 Page 9 GAO/AIMD-99-70 Schedules of Federal Debt

to BPD's management, along with our suggestions for improvement.
Compliance With Laws and Regulations

Our tests for compliance in fiscal year 1998 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. However,
the objective of our audit

of the Schedule of Federal Debt for the fiscal year ended
September 30, 1998, was not to provide an opinion on overall
compliance with laws and regulations. Accordingly, we do not
express such an opinion.

Year 2000 Date Conversion

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 ensures that its
mission- critical and other key systems are Year 2000 compliant.
BPD officials stated that BPD has completed actions and has
actions planned to ensure that it is Year 2000 compliant. A review
of such actions was not included in the

scope of our audits of the Schedules of Federal Debt. We are
working with the Congress and the executive branch to monitor the
progress being made by federal agencies and to identify specific
recommendations for resolving the Year 2000 problem. Objectives,
Scope, and Methodology

Management is responsible for  preparing the Schedules of Federal
Debt in conformity with federal

accounting standards;  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.

B-279642 Page 10 GAO/AIMD-99-70 Schedules of Federal Debt

We are responsible for obtaining reasonable assurance about
whether (1) the Schedules of Federal Debt are reliable (free of
material misstatement and presented fairly, in all material
respects, in conformity with federal accounting standards as
described in note 1) and (2) management's assertion about the
effectiveness of related internal control is fairly stated, in all
material respects, based upon criteria established under the
Federal

Managers' Financial Integrity Act of 1982 and OMB's Circular No.
A- 123, Management Accountability and Control. We are also
responsible for testing compliance with selected provisions of
laws and regulations. 3 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, 1998, 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;

 tested relevant internal controls over financial reporting,
including safeguarding assets, as reflected in note 5 to the
schedules, and compliance, and evaluated management's assertion
about the effectiveness of internal control related to the
Schedule of Federal Debt for the fiscal year ended September 30,
1998;

 considered the process required by the Federal Managers'
Financial Integrity Act of 1982 for evaluating and reporting on
internal control and financial management systems; and  tested
compliance in fiscal year 1998 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

3 These are laws and regulations that have a direct and material
effect on the Schedules of Federal Debt or that are listed in OMB
guidance and could have a material effect on the Schedules of
Federal Debt.

B-279642 Page 11 GAO/AIMD-99-70 Schedules of Federal Debt

controls necessary to achieve the objectives outlined in our
opinion on management's assertion about the effectiveness of
internal control. Because of inherent limitations in internal
control, misstatements, 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 and which we deemed applicable
to the Schedule of Federal Debt for the fiscal year ended
September 30, 1998. 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. Agency Comments We
requested comments on a draft of this report from BPD. On February
18, 1999, the Commissioner of BPD provided us with written
comments,

which are presented in appendix I. BPD concurred with our audit
report's conclusions.

David M. Walker Comptroller General of the United States

January 29, 1999

Page 12 GAO/AIMD-99-70 Schedules of Federal Debt

Page 13 GAO/AIMD-99-70 Schedules of Federal Debt

Schedules and Notes

Schedules of Federal Debt

Schedules and Notes Page 14 GAO/AIMD-99-70 Schedules of Federal
Debt

Notes to the Schedules of Federal Debt

Schedules and Notes Page 15 GAO/AIMD-99-70 Schedules of Federal
Debt

Schedules and Notes Page 16 GAO/AIMD-99-70 Schedules of Federal
Debt

Schedules and Notes Page 17 GAO/AIMD-99-70 Schedules of Federal
Debt

Schedules and Notes Page 18 GAO/AIMD-99-70 Schedules of Federal
Debt

Page 19 GAO/AIMD-99-70 Schedules of Federal Debt

Appendix I Comments From the Bureau of the Public Debt Appendi x I

Page 20 GAO/AIMD-99-70 Schedules of Federal Debt

Appendix II Major Contributors to This Report Appendi x I I

Accounting and Information Management Division, Washington, D. C.

J. Lawrence Malenich, Assistant Director William E. Boutbol,
Senior Audit Manager Dawn B. Simpson, Senior Audit Manager Dean D.
Carpenter, Audit Manager Daniel G. Mesler, Auditor Michael S.
Wetklow, Auditor

Boston Field Office Leslie V. Mahagan, Audit Manager Kevin F.
Murphy, Auditor

Dallas Field Office John V. Kelly, Audit Manager Michael J. Coy,
Auditor

San Francisco Field Office

John M. Lord, Audit Manager Yola C. Lewis, Auditor

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