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 any significant estimates   evaluated the overall presentation of the Schedules of Federal Debt;  obtained an understanding of the entity and its operations, including its  internal control over financial reporting relevant to the Schedule of   Federal Debt as of September 30, 2009;  considered BPD’s process for evaluating and reporting on internal  control over financial reporting relevant to the Schedule of Federal Debt  based on the criteria established under FMFIA;  assessed the risk that a material misstatement exists in the Schedule of  Federal Debt and the risk that a material weakness exists in internal  control over financial reporting relevant to the Schedule of Federal  Debt;  evaluated the design and operating effectiveness of internal control over  financial reporting relevant to the Schedule of Federal Debt as of  September 30, 2009, based on the assessed risk;  tested relevant internal control over financial reporting;  tested compliance in fiscal year 2009 with the statutory debt limit (31  U.S.C. As of September 30, 2009 and 2008, outstanding gross federal debt managed by the bureau totaled $11,898 and $10,011 billion,  respectively. The increase in gross federal debt of $1,887 billion during fiscal year 2009 was due to an increase in gross  intragovernmental debt holdings of $144 billion and an increase in gross debt held by the public of $1,743 billion. Debt held by the public primarily reflects how much of the nation’s wealth has been absorbed by the Federal Government  to finance prior federal spending in excess of total federal revenues. Intragovernmental debt holdings represent balances of Treasury securities held by over 230 individual federal government  accounts with either the authority or the requirement to invest excess receipts in special U.S. Treasury securities that are  guaranteed for principal and interest by the full faith and credit of the U.S. Government. Section 1604 of this law increased the statutory debt  limit by $789 billion from $11,315 billion to $12,104 billion. Federal debt outstanding is one of the largest legally binding obligations of the Federal Government. Federal debt held by the public increased by 51.2 percent from fiscal year 2002 to fiscal year 2007. This increase is primarily a result of the  federal government's response to the financial market crisis and the economic downturn. Managed by the Bureau of the Public Debt  For the Fiscal Years Ended September 30, 2009 and 2008  (Note 2) (Note 3) (Discounts) (Discounts) ($39,441)

	Notes to the Schedules of Federal Debt

Notes to the Schedules of Federal Debt Managed by the Bureau of the Public Debt  For the Fiscal Years Ended September 30, 2009 and 2008  Note 1.
Why GAO Did This Study

GAO is required to audit the consolidated financial statements of the U.S. government. Because of the significance of the federal debt held by the public to the governmentwide financial statements, GAO audits the Bureau of the Public Debt's (BPD) Schedules of Federal Debt annually. The audit of these schedules is done to determine whether, in all material respects, (1) the schedules are reliable and (2) BPD management maintained effective internal control over financial reporting relevant to the Schedule of Federal Debt. Further, GAO tests compliance with a significant provision of law related to the Schedule of Federal Debt (statutory debt limit). Federal debt managed by BPD consists of Treasury securities held by the public and by certain federal government accounts, referred to as intragovernmental debt holdings. The level of debt held by the public primarily reflects how much of the nation's wealth has been absorbed by the federal government to finance prior federal spending in excess of federal revenues. Intragovernmental debt holdings represent balances of Treasury securities held by federal government accounts, primarily federal trust funds such as Social Security, that typically have an obligation to invest their excess annual receipts over disbursements in federal securities.

What GAO Found

In GAO's opinion, BPD's Schedules of Federal Debt for fiscal years 2009 and 2008 were fairly presented in all material respects, and BPD maintained effective internal control over financial reporting relevant to the Schedule of Federal Debt as of September 30, 2009. GAO found no instances of noncompliance in fiscal year 2009 with the statutory debt limit. As of September 30, 2009 and 2008, federal debt managed by BPD totaled about $11,898 billion and $10,011 billion, respectively. During the last 4 fiscal years, managing the federal debt has continued to be a challenge as evidenced by the growth of total federal debt by $3,980 billion, or 50 percent, from $7,918 billion as of September 30, 2005, to $11,898 billion as of September 30, 2009. The increase to the federal debt has become particularly acute since the onset of the recession in December 2007. Federal government actions in response to both the financial market crisis and the economic downturn have added significantly to Treasury's borrowing needs. The fiscal year 2008 increase in total federal debt of $1,018 billion was the largest annual dollar increase in history; only to be surpassed by the fiscal year 2009 increase of $1,887 billion. During fiscal years 2008 and 2009, legislation was enacted to raise the statutory debt limit on three different occasions. During this period, the statutory debt limit went from $9,815 billion to its current level of $12,104 billion, an increase of 23 percent.