Management Report:

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

GAO-09-943R, Sep 15, 2009

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In May 2009, we issued our opinions on the calendar year 2008 financial statements of the Deposit Insurance Fund (DIF) and the FSLIC Resolution Fund (FRF). We also issued our opinion on the effectiveness of the Federal Deposit Insurance Corporation's (FDIC) internal control over financial reporting (including safeguarding assets) as of December 31, 2008, and our evaluation of FDIC's compliance with provisions of selected laws and regulations for the two funds for the year ended December 31, 2008. The purpose of this report is to present issues identified during our audit of the 2008 financial statements regarding certain internal controls and accounting procedures and to recommend actions to address these issues.

During our audits of the 2008 financial statements, we identified four internal control issues that affected FDIC's accounting for the funds it administers. Although we do not consider them to be material weaknesses or significant deficiencies,3 and thus do not consider them to be material in relation to DIF's and FRF's financial statements, we believe that they warrant management's attention and action. These issues concern the following: (1) Written policies and procedures were not updated to document FDIC's new methodology used to determine the estimated cash recovery of receivership assets. (2) Controls did not ensure that correct amounts were paid for services provided by contractors and that operating expenses were appropriately allocated among the funds FDIC administers. (3) Oversight of contracted lockbox operations did not provide adequate assurance that controls were effectively designed to minimize the risk of loss, theft, and misreporting of receivership receipts. (4) Controls over the processing of receivership receipt transactions did not result in transactions being timely applied to the appropriate receivership accounts.

Status Legend:

More Info
  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: The Chief Financial Officer should revise procedures to obtain assurance--through such means as SAS 70 reports, internal audit reports, and other monitoring processes--that internal controls over receivership receipts are in place and functioning properly at the Dallas lockbox facility.

    Agency Affected: Federal Deposit Insurance Corporation

    Status: Closed - Implemented

    Comments: FDIC's lockbox service provider does not engage a SAS 70 audit. However, to address this recommendation FDIC conducted an internal control site visit of the lockbox facility and implemented check deposit tests to verify that the lockbox accurately deposited checks into FDIC's account.

    Recommendation: The Chief Financial Officer should document and implement the procedures to be followed for entering data into the fund distribution schedule.

    Agency Affected: Federal Deposit Insurance Corporation

    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Chief Financial Officer should (1) document procedural guidance for estimating failed financial institution receivership asset recoveries to derive the allowance for losses on the DIF's receivables from resolutions, (2) disseminate the guidance to appropriate staff, and (3) effectively implement the guidance.

    Agency Affected: Federal Deposit Insurance Corporation

    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Chief Financial Officer should document and implement a policy regarding a time frame, such as the current target of 90 days, by which receivership receipts are to be applied to the appropriate receivership accounts.

    Agency Affected: Federal Deposit Insurance Corporation

    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.