Federal Asset Disposition Association:

No Economic Basis for Reported Fee Income Under 1988 Letter Agreement

AFMD-91-15: Published: Jul 29, 1991. Publicly Released: Jul 29, 1991.

Contact:

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

GAO reviewed a 1988 letter agreement for asset management services between the Federal Asset Disposition Association (FADA) and the Federal Savings and Loan Insurance Corporation (FSLIC), focusing on: (1) the justification for FSLIC paying FADA for services performed under the letter agreement; and (2) whether FADA fairly presented the FSLIC payments in its December 31, 1988, financial statements.

GAO found that: (1) except for advisory services, the services FADA performed did not justify FSLIC paying any additional asset management fee under the letter agreement; (2) the letter agreement served primarily as a means for FSLIC to transfer $13.2 million to FADA to make up for losses FADA incurred, rather than to provide payment for additional services; (3) FADA accounted for substantially all of the additional fees it received under the letter agreement as income in its financial statements for the year ended December 31, 1988; (4) although its accounting procedure followed the legal requirements of the letter agreement, the FADA financial statement of $3.3-million net income did not fairly present its actual $9.9-million loss; (5) an independent auditor failed to follow general accounting principles that require the evaluation of the economic substance of related party transactions; and (6) FADA 1988 financial statements were misleading and did not reflect the economic substance of all of the funds FADA received under the 1988 letter agreement.

Mar 27, 2014

Mar 13, 2014

Mar 12, 2014

Feb 27, 2014

Dec 23, 2013

Dec 16, 2013

Dec 12, 2013

Dec 11, 2013

Looking for more? Browse all our products here