Financial Audit:

Bank Insurance Fund's 1991 and 1990 Financial Statements

AFMD-92-73: Published: Jun 30, 1992. Publicly Released: Jun 30, 1992.

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GAO examined the Federal Deposit Insurance Corporation's (FDIC) Bank Insurance Fund's financial statements for the years ended December 31, 1991 and 1990.

GAO found that: (1) four consecutive yearly losses resulted in the Bank Insurance Fund reporting a $7-billion deficit; (2) FDIC expects significant additional financially troubled banks to require resolution; (3) depending on economic conditions, adequate Bank Insurance Fund funding, receivership asset recovery and total resolution cost of troubled banks remain uncertain; (4) recapitalization of the Bank Insurance Fund is needed to avoid further borrowings from taxpayers; (5) data integrity problems result from weak FDIC controls and an inability to rely upon the Liquidation Asset Management Information System; and (6) FDIC fails to adhere to time and attendance accounting and reporting procedures.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: FDIC agreed to conduct a quarterly analysis of its collections experience in order to evaluate the reasonableness of its loss reserves established for the Bank Insurance Fund and the FSLIC Resolution Fund.

    Recommendation: In addition to the actions recommended by the Inspector General to address the weaknesses in the FDIC asset management system, the Chairman, FDIC, should direct the heads of the Division of Accounting and Corporate Services and Division of Liquidation to conduct, on a quarterly basis, an analysis of collection experience as a compensating control for evaluating the reasonableness of aggregate loss reserves on an ongoing basis.

    Agency Affected: Federal Deposit Insurance Corporation

  2. Status: Closed - Implemented

    Comments: While FDIC has established procedures to verify the accuracy of certain large quarterly adjustments to the allowance for losses based on each receiving estimates generated from its asset management system. These procedures would fail to identify significant adjustments that may be needed to asset carrying values.

    Recommendation: In addition to the actions recommended by the Inspector General to address the weaknesses in the FDIC asset management system, the Chairman, FDIC, should direct the heads of the Division of Accounting and Corporate Services and Division of Liquidation to implement procedures to ensure that the estimated recovery values of all assets acquired from failed financial institutions are promptly and continually updated to reflect current events, such as actual appraisal results, and asset sales.

    Agency Affected: Federal Deposit Insurance Corporation

 

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