Financial Audit: Accounting and Internal Control Issues Identified During GAO's 2000 FDIC Financial Statement Audits
Highlights
In May 2001, GAO issued its opinions on the calendar year 2000 financial statements of the Bank Insurance Fund, Savings Association Insurance Fund, and FSLIC Resolution Fund. GAO also issued its opinion on the effectiveness of the Federal Deposit Insurance Corporation's (FDIC) internal control as of December 31, 2000, and its evaluation of FDIC's compliance with selected provisions of laws and regulations for the three funds for the year ended December 31, 2000. This report reviews the internal control weaknesses identified during GAO's audits of the 2000 financial statements, and recommends improvements to address those weaknesses. GAO found that FDIC has several internal control weaknesses related to financial reporting, including the execution of transactions. The weaknesses concern its asset valuation process and its allocation and recovery expenses. Specifically, GAO found that (1) errors in valuing receivership assets caused both overstatements and understatements in determining the allowance for loss related to receivables; (2) a calculation error in valuing equity partnership assets caused an overstatement in the allowance for loss related to other assets; and (3) incorrect operating expense amounts were allocated and recovered, which resulted in the incorrect distribution of operating expense charges among FDIC's funds. FDIC has instituted new control procedures to address these weaknesses.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Federal Deposit Insurance Corporation | FDIC officials should develop procedures for verifying that all appropriate FDIC organizational components are informed of any changes in the Asset Loss Reserve process so that all appropriate changes can be incorporated into the existing process or systems. |
Closed – Implemented
During its 2001 financial statement audits, GAO's follow-up work found that FDIC had fully implemented the prior year recommendation.
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| Federal Deposit Insurance Corporation | FDIC should examine its current review controls, and revise them or add new ones if necessary. |
Closed – Implemented
During its 2001 financial statement audits, GAO's follow-up work found that FDIC had fully implemented the prior year recommendation.
|
| Federal Deposit Insurance Corporation | To ensure that the allocation and recovery of operating expenses is proper, FDIC should review its calculations, as well as the percentage updates to its accounting system, prior to entering the updates to the system. |
Closed – Implemented
During its 2001 financial statement audits, GAO's follow-up work found that FDIC had fully implemented the prior year recommendation.
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