	Background

The federal government began with a public debt of about $78 million in  1789. Subsection (k) of 5 U.S.C. Objectives, Scope, and Methodology

develop a chronology of significant events related to the debt issuance  suspension periods during April 2002 and May/June 2002,  analyze the financial aspects of Treasury’s actions taken during the 2002  debt issuance suspension periods and assess the legal basis of these  actions, and  analyze the impact of the policies and procedures used by Treasury to  manage the debt during the 2002 debt issuance suspension periods. Actions Related to the Civil Service Fund

During the second 2002 debt issuance suspension period, the Secretary of  the Treasury redeemed Treasury securities held by the Civil Service fund  earlier than normal and suspended the investment of Civil Service fund  receipts. On May 16, 2002, Treasury redeemed about $4 billion of the Civil Service  fund’s Treasury securities using this authority. Each day from April 4 to  April 16, 2002, and from May 16 to June 28, 2002, Treasury determined the  amount of funds that the G-Fund would be allowed to invest in Treasury  securities and, when necessary, suspended some investments and  reinvestments of the G-Fund receipts and maturing securities that would  have caused the debt ceiling to be exceeded. Documented Policies and Procedures Needed during a Debt Issuance Suspension Period

The basic actions taken during the 2002 and the 1995/1996 debt issuance  suspension periods were similar–-G-Fund and Civil Service fund receipts  were not invested and Civil Service fund securities were redeemed earlier  than needed to pay fund benefits and expenses. Our review disclosed  some cases in which the lack of documented policies and procedures  contributed to some confusion and errors that had to be corrected, as  necessary. Although some of the stated policies and procedures Treasury used to  implement the actions it took on the Civil Service fund during the second  2002 debt issuance suspension period differed from those used in the  1995/1996 debt issuance suspension period, they were adequate to ensure  that the Civil Service fund did not incur any losses after the debt issuance  suspension period had ended and Treasury was able to take the necessary  restoration actions. Debt Ceiling Options.
Why GAO Did This Study

In connection with fulfilling our requirement to audit the financial statements of the U.S. government, we audit the Schedules of Federal Debt Managed by the Bureau of the Public Debt, which includes testing compliance with the debt ceiling. To assist us in this testing and because of the nature of and sensitivity towards actions taken during a debt issuance suspension period, we (1) developed a chronology of significant events, (2) analyzed the financial aspects of Treasury's actions taken during the debt issuance suspension periods and assessed the legal basis of these actions, and (3) analyzed the impact of the policies and procedures used by Treasury to manage the debt during the debt issuance suspension periods.

What GAO Found

In April and May 2002, the Department of the Treasury announced two debt issuance suspension periods because certain receipts could not be invested without exceeding the statutory debt ceiling of $5.95 trillion. The first debt issuance suspension period occurred from April 4 to April 16, 2002, and involved use of the Government Securities Investments Fund (G-Fund). The second debt issuance suspension period occurred from May 16 to June 28, 2002, and involved the use of the Civil Service Retirement and Disability Trust Fund (Civil Service fund) and the G-Fund. During both debt issuance suspension periods, Treasury suspended some investments and reinvestments of the G-Fund's receipts and maturing securities. During the second debt issuance suspension period, Treasury also took the following actions related to the Civil Service fund: (1) it redeemed about $4 billion in Treasury securities held by the Civil Service fund before they were needed to pay benefits and expenses, and (2) it suspended the investment of about $2 billion of trust fund receipts. These actions were consistent with legal authorities provided to the Secretary of the Treasury. Although the actions that are allowed during a debt issuance suspension period are well defined in law, the policies and procedures needed to implement such actions are not documented, Our review disclosed some cases where the lack of documented policies and procedures contributed to confusion and errors that had to be corrected.