Financial Audit:

Federal Deposit Insurance Corporation's 1997 and 1996 Financial Statements

AIMD-98-204: Published: Jun 29, 1998. Publicly Released: Jun 29, 1998.

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Pursuant to a legislative requirement, GAO audited the financial statements of the Bank Insurance Fund, the Savings Association Insurance Fund, and the Federal Savings and Loan Insurance Corporation Resolution Fund for the years ended December 31, 1997, and 1996. GAO also reviewed: (1) the Federal Deposit Insurance Corporation (FDIC) management's assertions regarding the effectiveness of its internal controls as of December 31, 1997; (2) FDIC's compliance with laws and regulations during 1997; and (3) FDIC's progress in correcting internal controls.

GAO noted that: (1) the financial statements of each fund were reliable in all material respects; (2) although certain internal controls should be improved, FDIC management fairly stated that internal controls in place on December 31, 1997, were effective in safeguarding assets from material loss, assuring material compliance with relevant laws and regulations, and assuring that there were no material misstatements in the financial statements of the three funds administered by FDIC; and (3) there was no reportable noncompliance with laws and regulations GAO tested.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In 1998, FDIC implemented standard, consistent valuation methodologies for assets previously valued outside of its Standard Asset Valuation Estimation process. FDIC also clearly designated responsibility for valuing those assets and for reviewing completed valuations. During GAO's 1998 audits, it found these new methodologies helped ensure that these value estimates were accurate and reliable.

    Recommendation: The Chairman, FDIC, should direct the heads of the Division of Resolutions and Receiverships and the Division of Finance to implement an improved process for estimating recoveries for securities and other assets currently being valued outside its Standard Asset Valuation Estimation process. The process should have the objectives of producing valid and defensible estimates for financial statement purposes.

    Agency Affected: Federal Deposit Insurance Corporation

  2. Status: Closed - Implemented

    Comments: FDIC's actions on the previous recommendation also satisfy this recommendation. See previous recommendation for action taken.

    Recommendation: FDIC should reemphasize the importance of the review and certification procedures for the estimated recoveries on assets valued outside of its standard asset valuation process.

    Agency Affected: Federal Deposit Insurance Corporation

 

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