FDIC:

Loan Sales Jeopardized by Systems and Other Internal Control Problems

IMTEC-91-61: Published: Aug 21, 1991. Publicly Released: Aug 21, 1991.

Additional Materials:

Contact:

Howard G. Rhile, Jr
(202) 512-6418
contact@gao.gov

 

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

GAO provided information on loans purchased from the Federal Deposit Insurance Corporation (FDIC), focusing on whether: (1) the automated system used to account for the loans and provide information to investors accurately reflected information stored in the manual loan files; and (2) such manual loan files were accurate.

GAO found that: (1) 23 of the 25 loans reviewed had serious errors in the manual loan files or the automated records; (2) 5 loans valued at $183,000 were worthless, and the remaining 18 loans, valued at about $1.8 million, were worth less than represented because either they were not totally owned by FDIC, they were not backed by collateral as claimed by FDIC, or they were subject to borrowers' judgment or bankruptcy proceedings not disclosed by FDIC; (3) weaknesses in loan information maintenance and review included the use of asset management systems that did not accurately track loan amounts and the failure of FDIC managers to ensure that procedures for maintaining manual and automated loan records were followed; (4) FDIC attributed such weaknesses to staff not following FDIC loan records maintenance procedures, the large number of assets in the sale, and inexperienced staff; and (5) FDIC noted similar weaknesses at six other offices.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: A new Managing Liquidator was appointed for the Denver Consolidated Office. The Managing Liquidator directed department heads to periodically review loan records to ensure that loan status information is accurate and complete.

    Recommendation: Given the importance of accurate asset information, the Chairman, FDIC, should take immediate action at the Denver Consolidated Office to ensure that loan records are periodically reviewed to verify the status of the loans.

    Agency Affected: Federal Deposit Insurance Corporation

  2. Status: Closed - Implemented

    Comments: A new Managing Liquidator was appointed for the Denver Consolidated Office. The Managing Liquidator directed department heads to ensure data accuracy. Site-specific procedures have been developed to monitor the accuracy and currency of loan records at the Denver office.

    Recommendation: Given the importance of accurate asset information, the Chairman, FDIC, should take immediate action at the Denver Consolidated Office to ensure that procedures are strengthened to continually maintain accurate and current loan records.

    Agency Affected: Federal Deposit Insurance Corporation

  3. Status: Closed - Implemented

    Comments: The Denver Consolidated Office reviewed manual and automated records to ensure the information is accurate and complete. Additionally, FDIC issued a directive in the second quarter of 1992 requiring consolidated offices to certify the accuracy of critical data elements in their manual and automated systems.

    Recommendation: Given the importance of accurate asset information, the Chairman, FDIC, should take immediate action at the Denver Consolidated Office to ensure that the manual and automated loan records are corrected to provide accurate and current information.

    Agency Affected: Federal Deposit Insurance Corporation

  4. Status: Closed - Implemented

    Comments: Internal controls for cash receipts accounting have been strengthened. A logging procedure is in place to ensure that cash receipts and loan balances are accurately reflected on both the manual and automated systems.

    Recommendation: Given the importance of accurate asset information, the Chairman, FDIC, should take immediate action at the Denver Consolidated Office to ensure that cash receipts are properly accounted for in the manual and automated loan records.

    Agency Affected: Federal Deposit Insurance Corporation

  5. Status: Closed - Implemented

    Comments: Effective July 1, 1992, the Director of the Division of Liquidation issued a directive requiring each account officer to review the assets in their portfolio, make appropriate corrections to data elements in LAMIS, and certify that the record is accurate. This action is to compensate for any internal control weaknesses.

    Recommendation: The Chairman, FDIC, should take steps to ensure that the internal control weaknesses discussed in this report do not exist at other FDIC offices.

    Agency Affected: Federal Deposit Insurance Corporation

 

Explore the full database of GAO's Open Recommendations »

Sep 29, 2016

Jul 25, 2016

Jul 5, 2016

May 6, 2016

Apr 21, 2016

Apr 18, 2016

Apr 12, 2016

Mar 28, 2016

Mar 8, 2016

Feb 16, 2016

Looking for more? Browse all our products here