Financial Audit:

Other Matters Identified During GAO's 1997 Financial Statement Audits

AIMD-98-249R: Published: Aug 14, 1998. Publicly Released: Aug 14, 1998.

Additional Materials:


Robert W. Gramling
(202) 512-3000


Office of Public Affairs
(202) 512-4800

Pursuant to a legislative requirement, GAO provided information on the internal control and accounting policies and procedure weaknesses identified during GAO's audit of the 1997 financial statements of the Federal Deposit Insurance Corporation (FDIC).

GAO noted that: (1) to estimate the recovery values for failed institution assets in liquidation, FDIC uses the standard asset valuation estimation methodology; (2) during 1997, GAO found internal control weaknesses in data input and processing in the loss reserve estimation (LOREN) automated database; (3) the data entered from the asset data sheet (ADS) to LOREN for performing loans had not been reviewed; (4) as a result, data entry errors occurred and were not detected by FDIC; (5) data from the ADS represent a significant portion of the data being processed in LOREN for performing loans; (6) regarding the processing of data within LOREN, GAO found that: (a) programming changes made to LOREN were not independently reviewed and tested; and (b) LOREN did not automatically recalculate estimated recoveries when new data were entered or when data were changed; (7) as a result of these control weaknesses, some individual asset recoveries were misstated; (8) for its 1997 financial statements, FDIC planned to incorporate the estimation of its representation and warranty liability into the automated portion of its loan loss reserve (LLR) process; (9) GAO found that FDIC did not recognize the full amount of its estimated liability for representations and warranties in its December 31, 1997, financial statements; (10) during GAO's review of FDIC's contractor oversight program, it found instances in which FDIC procedures were not followed; (11) specifically: (a) some servicer expenses and fees netted from remittances to FDIC were not reviewed for validity and accuracy and the related memos of certification, to document approval of these transactions, were not prepared; and (b) some securitization residual income included in remittances was not reviewed for validity and accuracy; (12) the lack of review and validation of servicer transactions increases the risk that errors and omissions may occur and go undetected and that the related remittance of funds due to FDIC from servicers may not be accurate; (13) the FDIC Field Financial Operations Accounting Manual states that FDIC business centers should not hold checks, but may request that FDIC's Field Finance Center (FFC) hold them; however, GAO found that the Northeast Business Center held some checks rather than forwarding them to FFC to be held; and (14) GAO's 1997 audit of the estimated liabilities for anticipated failures and litigation revealed that FDIC did not have procedures in place to review events occurring subsequent to its December 31, 1997, financial statements but before issuance of the yearend financial statements.

Oct 13, 2020

Oct 7, 2020

Sep 30, 2020

Sep 9, 2020

Aug 25, 2020

Aug 6, 2020

Jun 17, 2020

Jun 10, 2020

Jun 8, 2020

Looking for more? Browse all our products here