Management Report:

Opportunities for Improvements in FDIC's Internal Controls and Accounting Procedures

GAO-04-677R: Published: Jun 16, 2004. Publicly Released: Jun 16, 2004.

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In February 2004, we issued our opinions on the calendar year 2003 financial statements of the Bank Insurance Fund (BIF), the Savings Association Insurance Fund (SAIF), and the FSLIC Resolution Fund (FRF). We also issued our opinion on the effectiveness of the Federal Deposit Insurance Corporation's (FDIC) internal controls as of December 31, 2003, and our evaluation of FDIC's compliance with significant provisions of selected laws and regulations for the three funds for the year ended December 31, 2003. The purpose of this report is to discuss issues identified during our audits of the 2003 financial statements regarding accounting procedures and internal controls that could be improved and to recommend improvements to address these issues. Although these issues were not material in relation to the financial statements, we believe they warrant management's attention. We conducted our audits in accordance with U.S. generally accepted government auditing standards.

During 2003, we identified several internal control issues that affected FDIC's accounting for the funds it administers. These weaknesses would have resulted in reporting errors had they not been detected and corrected. Specifically, we found the following: (1) FDIC erroneously accounted for funds it received related to securitizations that terminated in prior years, which would have caused the related FRF account balances to be misstated, (2) FDIC did not always follow its procedures relating to time and attendance reporting, which would have resulted in an improper allocation of operating expenses among the funds, and (3) FDIC made errors in calculations supporting its allowance for losses on receivables from thrift resolutions. These errors would have led to misstatements in FRF's financial statements. At the end of our discussion of each of these issues in the following sections, we make recommendations for strengthening FDIC's internal controls. Implementation of these recommendations is intended to bring FDIC into conformance with the internal control standards that federal agencies are required to follow.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: FDIC has reminded timekeepers of their responsibility to receive and safeguard time and attendance data.

    Recommendation: FDIC management should formally remind timekeepers of their responsibility to receive all approved time and attendance documents and reports from supervisors and to file all original documents in a locked file cabinet.

    Agency Affected: Federal Deposit Insurance Corporation

  2. Status: Closed - Implemented

    Comments: FDIC has reminded supervisors of their role in the review process for time and attendance data.

    Recommendation: FDIC management should formally remind supervisors of their responsibility to verify the accuracy of the employee's time and attendance data by signing and dating each employee's Report for Certification.

    Agency Affected: Federal Deposit Insurance Corporation

  3. Status: Closed - Implemented

    Comments: FDIC has reminded timekeepers of their duties regarding the time and attendance data input process.

    Recommendation: FDIC management should formally remind timekeepers of their responsibility to compare the Report for Certification to each employee's CTAW to ensure data was entered completely and correctly.

    Agency Affected: Federal Deposit Insurance Corporation

  4. Status: Closed - Implemented

    Comments: FDIC has reminded staff of their responsibilities regarding securitization transactions.

    Recommendation: FDIC management should formally remind staff responsible for recording activity associated with securitization transactions of the need to obtain input and approval from the individual responsible for administering the securitization deals prior to recording the activity in FDIC's accounting records.

    Agency Affected: Federal Deposit Insurance Corporation

  5. Status: Closed - Implemented

    Comments: FDIC has strengthened its procedures over loan loss reserve estimation.

    Recommendation: FDIC management should examine its current review procedures and controls related to its loan loss reserve estimation process and revise them if necessary to ensure the review guidelines are properly implemented.

    Agency Affected: Federal Deposit Insurance Corporation

 

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