us treasury: feddebt ann1998

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GAOUnited States General Accounting Office

Report to the Secretary of the Treasury

March 199 9 FINANCIAL AUDIT

Bureau of the Public

Debt’s Fiscal Years1998 and 1997Schedules of FederalDebt

GAO/AIMD-99-70



United State sGeneral Account ing OfficeWashin gton , D.C. 205 48

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

GAOComptroller Gene ral

B-279642

March 1, 1999

The Honorable Robert E . RubinThe Secretary of the Treasury

Dear Mr. Secretary:

This report presents the results of our audits of the Schedules of FederalDebt Managed by the Bureau of the Public Debt for the fiscal years endedSeptember 30, 1998 and 1997. The Schedules of Federal Debt present thebeginning balances, increases and decreases, and ending balances for(1) Federal Debt Held by the Public and Federal Debt Held by Federal

Entities, (2) the re lated Accrued Interest Payables, and (3) the related NetUnamortized Discounts and Premiums, managed by the bureau.

As of September 30, 1998 and 1997, federal deb t managed by the bureau

totaled about $5.5 trillion and $5.4 trillion, respectively, for moniesborrowed to fund the government's operations. These balances consistedof (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 a s of September30, 1997, owed to federal entities, such as the Social Security Trust funds.Total interest expense for fisca l years 1998 and 1997 was $363 billion and

$356 billion, respect ively. These amounts co nsisted 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 inter estexpense on debt owed to federa l entities for fiscal years 1998 and 1997,respectively.

This repor t conta ins our (1) opinion on the Schedules of Federa l Debt forthe fiscal years ended September 30, 1998 and 1997, (2) op inion on bureaumanagement's assertion about the effectiveness of related internal control

in place on September 30, 1998, and (3) conclusion on the bureau'scompliance in fiscal year 1998 with a selected provision of a significant lawand regulation we tested.

We are sending copies of this repor t to the Chairmen and Ranking Minority

Members of the Senate Committee on Appropriations and itsSubcommittee on Treasury and General Government; Senate Committee onFinance; Senate Committee on Governmental Affairs; Senate Committee onthe Budget; House Committee on Appropriations and its Subcommittee onTreasury, Postal Service, and General Government; House Committee onWays and Means; House Committee on Government Reform and its

Subcommittee on Government Management, Information, and Technology



B-279642


and House Committee on the Budget. We are also sending copies to otherinterested 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 ass istance, please call me at (202) 512-5500. Thisrepor t was p repared under the direction of Gary T. Engel, AssociateDirector, Governmentwide Accounting and Financial Managemen t Issues,

Account ing and Information Management Division. Should you ormembers of your staff have any questions concern ing this report , pleasecontact Mr. Engel on (202) 512-3406. Major con tributors to th is repor t are

listed in appendix II.

Sincere ly yours,

David M. WalkerComptroller General

of the United States




Contents

Letter

Opinion Letter

Schedules and Notes Schedules of Federal Debt 1Notes to the Schedules of Federal Debt 1

Appendix IComments From theBureau of the PublicDebt

1

Appendix IIMajor Contributors toThis Report

2

Abbreviations

BPD Bureau of the Public DebtOMB Office of Management and Budget



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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 acomprehensive basis of accounting other than generally acceptedaccounting principles.

Opinion onManagement’sAssertion About the

Effectiveness of Internal Control

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

• Reliability of financial reporting – transactions are properly recorded,processed, and summarized to permit the prepa ration of the Schedule ofFederal Debt for the fiscal year ended September 30, 1998, inaccordance with federal accounting standards and assets aresafeguarded, as re flected in note 5 of the Schedules of Federa l Debt,

against loss from unauthor ized 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 budgetauthor ity and with other laws and regulations that cou ld have a directand material effect on the Schedules of Federal Debt and any other lawsregulations, and governmentwide policies identified by the Office of

Management and Budget (OMB) in Bulletin No. 98-08, AuditRequirements for Federal Financial Statements, Appendix C.

Management of BPD fairly stated that internal contro l in place onSeptember 30, 1998, provided reasonable assurance that misstatements,losses, or noncompliance, material in relation to the Schedule of FederalDebt for the fiscal year ended September 30, 1998, would be p revented ordetec ted on a timely basis. Management made this assertion based upon

criteria established under the Federal Managers' F inancial Integrity Act of 1982 and OMB Circular No. A-123, Management Accountability andControl.

We found matters involving computer contro ls that we do no t consider tobe reportable conditions.2 We will communicate these matte rs separately

2Reportable conditions are matters c oming to our attention that , in our judgment, should becommunicated because they represent significant deficiencies in t he design or operation of internalcontrol tha t could adversely affect the organization’s ability to meet the objec tives of reliable financialreporting and compliance with applicable laws and regulations.



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

Compliance With Lawsand Regulations

Our test s for compliance in fiscal year 1998 with Statutory Debt Limits,31 U.S.C. 3101(b), as amended, disclosed no instances of noncompliancethat would be reportable under generally accepted government auditingstandards or OMB Bulletin No. 98-08. However, the objec tive of our auditof the Schedule of Federal Debt for the fiscal year ended September 30,1998, was no t to p rovide an opinion on overall compliance with laws and

regulations. Accord ingly, we do not express such an opinion.

Year 2000 DateConversion

The Year 2000 date conversion poses a challenge for many organizations,including federal agencies. The Year 2000 problem is rooted in the waydates are recorded and calculated in many computer systems. For the passeveral decades, systems have typically used two digits to repres ent the

year in order to conserve on electronic data storage and reduce operatingcosts. With this two-digit format, however, the year 2000 isindistinguishable from the year 1900. As a result, system or applicationprograms that use dates to perform calculations, comparisons, or sor tingmay generate incor rect results when working with years after 1999.

Because many of BPD's core business areas and processes involveinformat ion systems, it is critical that BPD ensures that its mission-criticaland other key systems a re Year 2000 compliant. BPD officials stated tha tBPD has completed actions and has actions planned to ensure that it isYear 2000 compliant. A review of such ac tions was not included in thescope of our aud its of the Schedules of Federa l Debt. We are working withthe Congress and the executive branch to monitor the progress being madeby federal agencies and to identify specific recommendations for re solvingthe Year 2000 problem.

Object ives, Scope, andMethodology

Management is respon sible for

• preparing the Schedules of Federal Debt in conformity with federalaccounting standards;

• establishing, maintaining, and assessing internal control to providereasonable assurance that the broad control objectives of the FederalManagers' 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 Federa l Debt are reliable (free of material misstatementand presented fairly, in all material respect s, in conformity with federalaccounting standards as described in note 1) and (2) management'sasser tion about the effectiveness o f related internal contro l is fairly statedin all material respects, based upon criteria established under the FederalManager s' Finan cial Integrity Act of 1982 and OMB’s Circular No. A-123,Management Accountability and Contro l. 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 anddisclosures in the Schedules of Federa l Debt;

• assessed the accounting principles used and significant estimates madeby 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 en ded September 30, 1998, andrelated to financial reporting, including safeguarding asset s, as re flectedin note 5 to the schedules, and compliance with laws and regulationsincluding execution of transactions in accordance with budgetauthority;

• tested relevant internal controls over financial reporting, includingsafeguarding assets, as reflected in note 5 to the schedules, andcompliance, and evaluated management's assertion about theeffectiveness o f internal control related to the Schedule of Federal Debfor the fiscal year ended September 30, 1998;

• considered the process required by the Federal Managers’ Financial

Integrity Act o f 1982 for evaluating and repor ting on internal control andfinancial management systems; and

• tested compliance in fiscal year 1998 with Statutory Debt Limits, 31U.S.C 3101(b) , as amended.

We did not evaluate all internal controls re levant to operating objectives asbroad ly defined by the Federal Managers' Financial Integrity Act of 1982,such as those controls relevant to preparing statistical reports and ensuringefficient operations. We limited our internal control testing to those

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



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controls necessary to achieve the objectives outlined in our opinion onmanagement'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 alsocaution that p rojecting our evaluation to future periods is subject to therisk that contro ls may become inadequate because of changes in conditionsor that the degree of compliance with controls may deteriorate.

We did not test compliance with a ll laws and regulations applicable to BPDWe 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 cau tion that noncompliancemay occur and not be detected by these tests and that such testing may notbe sufficient for other purposes.

We did our work in acco rdance with generally accepted governmentauditing standards and applicable OMB guidance .

Agency Comments We requested comments on a draft of this report from BPD. On February18, 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. WalkerComptroller General

of the United States

January 29, 1999




Schedules and Notes

Schedules of Federal Debt



Schedules and Note s


Notes to the Schedules of Federal Debt




Appendix I

Comments From the Bureau of the PublicDebt




Appendix II

Major Contributors to This Report

Accounting andInformationManagement Division,Washington, D.C.

J. Lawrence Malenich, Assistant Directo rWilliam E. Boutbol, Senior Audit Manager

Dawn B. Simpson, Senior Audit ManagerDean D. Carpenter, Audit ManagerDaniel G. Mesler, AuditorMichael S. Wetklow, Auditor

Boston Field Office Leslie V. Mahagan, Audit Manager

Kevin F. Murphy, Auditor

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

San Francisco FieldOffice

John M. Lord, Audit Manager

Yola C. Lewis, Auditor

(919204) Letter



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