oversight

Financial Audit: Bureau of the Public Debt's Fiscal Years 1998 and 1997 Schedules of Federal Debt

Published by the Government Accountability Office on 1999-03-01.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                 United States General Accounting Office

GAO              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
      United States
GAO   General Accounting Office
      Washington, D.C. 20548                                                           Leter




      Comptroller General                                                              Leter




      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;




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B-279642




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




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Contents



Letter                                                                                                 1


Opinion Letter                                                                                         7


Schedules and Notes     Schedules of Federal Debt                                                     13
                        Notes to the Schedules of Federal Debt                                        14


Appendix I                                                                                            19
Comments From the
Bureau of the Public
Debt

Appendix II                                                                                           20
Major Contributors to
This Report




                        Abbreviations

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



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                       United States
GAO                    General Accounting Office
                       Washington, D.C. 20548                                                        Leter




                       Comptroller General                                                           Leter




                       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   The Schedules of Federal Debt including the accompanying notes present
                       fairly, in all material respects, in conformity with federal accounting
of Federal Debt        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).




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                      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            We evaluated management's assertion about the effectiveness of its
                      internal control designed to provide reasonable assurance that the
Management’s          following objectives are met:
Assertion About the
                      • Reliability of financial reporting – transactions are properly recorded,
Effectiveness of        processed, and summarized to permit the preparation of the Schedule of
Internal Control        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.




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                         B-279642




                         to BPD's management, along with our suggestions for improvement.



Compliance With Laws     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
and Regulations          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           The Year 2000 date conversion poses a challenge for many organizations,
                         including federal agencies. The Year 2000 problem is rooted in the way
Conversion               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   Management is responsible for

Methodology              • 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.



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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.




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                  B-279642




                  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




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Schedules and Notes


Schedules of Federal Debt




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                                         Schedules and Notes




Notes to the Schedules of Federal Debt




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Schedules and Notes




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Schedules and Notes




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Schedules and Notes




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Schedules and Notes




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Appendix I

Comments From the Bureau of the Public
Debt                                                               AppenIx
                                                                         di




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

Major Contributors to This Report                                                                  AppeInx
                                                                                                         Idi




Accounting and         J. Lawrence Malenich, Assistant Director
                       William E. Boutbol, Senior Audit Manager
Information            Dawn B. Simpson, Senior Audit Manager
Management Division,   Dean D. Carpenter, Audit Manager
                       Daniel G. Mesler, Auditor
Washington, D.C.       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    John M. Lord, Audit Manager
                       Yola C. Lewis, Auditor
Office




(919204)      Letrt    Page 20                              GAO/AIMD-99-70 Schedules of Federal Debt
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