Financial Audit:

Federal Financing Bank's 1993 and 1992 Financial Statements

AIMD-95-4: Published: Dec 6, 1994. Publicly Released: Dec 6, 1994.

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Pursuant to a legislative requirement, GAO reviewed the Federal Financing Bank's (FFB) financial statements for fiscal years ended September 30, 1993 and 1992.

GAO found that: (1) the financial statements fairly presented the FFB financial position as of September 30, 1993 and 1992, in conformity with generally accepted accounting principles; (2) FFB filed a management report for fiscal year 1993 disclosing its internal control weaknesses in compliance with applicable laws and regulations; (3) FFB accumulated a $2-billion deficit due to borrowers' loan prepayments; (4) it is likely that FFB will carry its debt indefinitely because its net interest income will not be sufficient to liquidate its prepayment liability; and (5) although FFB has made some improvements to its overall internal control structure, material control weaknesses still persist.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: A reorganization is being initiated under which the functions of the accounting and policy staff will be centralized beginning in early FY 1997.

    Recommendation: Because of the long-standing internal control weaknesses reported by the independent certified public accountants (IPA), the Secretary of the Treasury should implement the IPA recommendation to appoint an individual with the responsibility and authority to oversee both the credit accounting and administrative functions of FFB.

    Agency Affected: Department of the Treasury

  2. Status: Closed - Not Implemented

    Comments: This issue is still a problem which would require legislative action to correct. The liability in question still exists but is not increasing. However, FFB does not view this as a control problem and did not interpret the report as having reported it as one. No action has been taken on this issue and, at present, no action is planned.

    Recommendation: Since FFB will not be able to repay its liability to Treasury associated with loan prepayments under its current operating scenario, Treasury should consider actions to eliminate this liability as well as the related account receivable on its books, including, if necessary, requesting appropriate legislation.

    Agency Affected: Department of the Treasury

 

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