Financial Audit:

Federal Deposit Insurance Corporation's 1986 and 1985 Financial Statements

AFMD-87-58: Published: Aug 12, 1987. Publicly Released: Aug 12, 1987.

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GAO examined the financial statements of the Federal Deposit Insurance Corporation (FDIC) for the years ended December 31, 1986 and 1985.

GAO found that: (1) FDIC was not following internal control procedures that required it to reconcile certain accounts monthly, but took action to ensure that reconciliations were completed in a timely manner; (2) the financial condition of certain sectors of the economy adversely affected the banking industry and, in turn, required FDIC to increase its expenditures for appropriate regulatory action; (3) FDIC net income exceeded $1 billion each year between 1982 and 1985, but declined to less than $300 million in 1986; (4) although the FDIC deposit insurance fund totalled $18.3 billion at the end of 1986, an increase of $4.6 billion since 1982, the ratio of the fund to insured deposits declined and could continue to decline in 1987; and (5) the financial statements presented fairly the financial position of FDIC, and the results of its operations and the changes in its financial position, in conformity with generally accepted accounting principles applied on a consistent basis.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The reconciliation project was completed in late 1987, and the Director, DACS, reported this fact to the Chairman of the Board of Directors. The revised reconciliation policies and procedures ensures that the imbalances between the accounts are corrected on a timely basis and all personnel understand the importance of timely reconciliations.

    Recommendation: The Chairman of the Board of Directors, FDIC, should instruct the Director of the Division of Accounting and Corporate Services (DACS) to report monthly on the status of the current reconciliation project until it is completed and, after the project is completed, to report any additional major unreconciled differences and reiterate to personnel responsible for the reconciliations the importance of timely completion of the reconciliations.

    Agency Affected: Federal Deposit Insurance Corporation

  2. Status: Closed - Implemented

    Comments: In February 1988, the Director, OCAII, reported to FDIC that the DACS reconciliation project was complete and that DACS had implemented new and revised policies and procedures that would ensure timely reconciliations in the future. OCAII stated that it will review the reconciliation process through regularly scheduled audits to ensure that policies and procedures are being followed.

    Recommendation: The Chairman of the Board of Directors, FDIC, should instruct the Director, Office of Corporate Audits and Internal Investigations (OCAII), to monitor and report on the progress and effectiveness of the reconciliation project.

    Agency Affected: Federal Deposit Insurance Corporation

 

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