Financial Audit:

Federal Deposit Insurance Corporation's 1994 and 1993 Financial Statements

AIMD-95-102: Published: Mar 31, 1995. Publicly Released: Mar 31, 1995.

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GAO audited the financial statements of the Bank Insurance Fund (BIF), the Savings Association Insurance Fund (SAIF), and the Federal Savings and Loan Insurance Corporation Resolution Fund for the years ended December 31, 1993 and 1994.

GAO found that: (1) the financial statements were reliable in all material respects and presented fairly the funds' financial position and results of operations and cash flows for the years ended December 31, 1994 and 1993; (2) the Federal Deposit Insurance Corporation's (FDIC) internal controls provided reasonable assurance that fund assets were safeguarded from unauthorized use, transactions were executed in accordance with management authority, and transactions were properly recorded, processed, and summarized in accordance with generally accepted accounting principles; (3) FDIC internal controls were effective in ensuring compliance with selected laws and regulations; (4) although material weaknesses existed in the FDIC asset valuation process, these weaknesses did not have a material effect on the funds' 1994 financial statements; (5) there were no instances of noncompliance with laws and regulations; and (6) although FDIC has taken actions to address internal control weaknesses in its recovery process, it needs to ensure that sound methodologies are used, clarify guidance to ensure that sufficient criteria are applied, and further implement prior recommendations that address control weaknesses.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: During 1995, the Division of Finance and the Division of Depositor and Asset Services fully implemented the provisions of the October 1994 letter of understanding that requires quarterly verification of servicer activity to source documents and reconciliation of total monthly servicer activity to servicers' accounting records. GAO's 1995 audit found that, during 1995, FDIC verified the accuracy of reported asset activity to supporting documentation and to servicers' detailed accounting records.

    Recommendation: To address weaknesses identified in this year's audits in the area of safeguarding and reporting contracted asset servicers' activity, the Chairman, FDIC, should direct the heads of the Division of Finance and the Division of Depositor and Asset Services to implement the provisions of the October 1994 letter of understanding that require quarterly verification of servicer activity to source documents and reconciliation of total monthly servicer activity to servicers' accounting records.

    Agency Affected: Federal Deposit Insurance Corporation

  2. Status: Closed - Implemented

    Comments: During 1995, FDIC's contracted asset servicers effectively improved daily collection procedures designed to ensure that collections are properly safeguarded and completely and accurately reported. One servicer effectively implemented procedures to verify collections received and to reconcile collections processed and deposited to daily collections. Another servicer implemented dual controls over daily collections and instituted aggressive procedures for collecting delinquent payments.

    Recommendation: To address weaknesses identified in this year's audits in the area of safeguarding and reporting contracted asset servicers' activity, the Chairman, FDIC, should direct the heads of the Division of Finance and the Division of Depositor and Asset Services to establish dual controls over the opening of collections and establish control totals for daily collections.

    Agency Affected: Federal Deposit Insurance Corporation

  3. Status: Closed - Implemented

    Comments: During 1995, FDIC's contracted asset servicers effectively improved daily collection procedures designed to ensure that collections are properly safeguarded and completely and accurately reported. One servicer effectively implemented procedures to verify collections received and to reconcile collections processed and deposited to daily collections. Another servicer implemented dual controls over daily collections and instituted aggressive procedures for collecting delinquent payments.

    Recommendation: To address weaknesses identified in this year's audits in the area of safeguarding and reporting contracted asset servicers' activity, the Chairman, FDIC, should direct the heads of the Division of Finance and the Division of Depositor and Asset Services to reconcile collections deposited or processed to daily collection control totals.

    Agency Affected: Federal Deposit Insurance Corporation

 

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