GAO's 1984 Financial Audits of the FDIC and FSLIC

GAO discussed its financial audits of the Federal Deposit Insurance Corporation (FDIC), the Federal Savings and Loan Insurance Corporation (FSLIC), and the National Credit Union Administration's (NCUA) Share Insurance Fund. GAO noted that it qualified its opinions on the financial statements of FDIC and FSLIC because of its concern about the value of certain assets acquired during default prevention or liquidation activities. While FDIC followed generally accepted accounting principles in accounting for a major bank failure, it did not establish an allowance for loss related to the loans it acquired from the bank, many of which were of dubious quality. GAO believes that FDIC: (1) will experience substantial losses from the loan portfolio it acquired as a result of the failure; (2) could and should have estimated the amount of the loss in its financial statements; and (3) should have included the GAO audit opinion in the statements. GAO also noted that: (1) FSLIC established an allowance for loss based on a preliminary estimate that did not include all of the possible costs of liquidating claims against assets it acquired in failures of savings and loan institutions; and (2) inventory audits to establish the assets of the failed institutions are being hampered by such problems as poor recordkeeping and personnel changes at the failed institutions, unresolved litigation, and unresolved allegations of questionable practices by financial institution officers and employees. In addition, GAO noted that an independent audit showed that the Share Insurance Fund's financial statements fairly presented the financial position of the Fund, except for: (1) a departure from accepted principles in accounting for the effects of providing for estimated losses from supervised credit unions; and (2) a lack of sufficient data in support of the provision for losses from supervised credit unions. GAO believes that the financial statements of federal corporations like FDIC, FSLIC, and NCUA are more useful from an auditing perspective than those of other federal agencies which do not have corporate-type financial statements.