Financial Audit: Federal Deposit Insurance Corporation's 1996 and 1995 Financial Statements
AIMD-97-111
Published: Jun 30, 1997. Publicly Released: Jun 30, 1997.
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Highlights
GAO audited: (1) the financial statements of the Bank Insurance Fund and the Savings Association Insurance Fund (SAIF) for the years ended December 31, 1996 and 1995, and the financial statements of the Federal Savings and Loan Insurance Corporation (FSLIC) Resolution Fund for the years ended December 31, 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, 1996; (2) FDIC's compliance with laws and regulations during 1996; and (3) the impact of legislation in 1996 on the capitalization of SAIF and the status of the FSLIC Resolution Fund's liquidation activities and funding.
Recommendations
Recommendations for Executive Action
| Agency Affected Sort descending | Recommendation | Status |
|---|---|---|
| Federal Deposit Insurance Corporation | To address weaknesses identified in this year's audits in the process for calculating the allowance for losses on receivables from resolution activities and investment in corporate-owned assets, the Chairman, FDIC, should direct the heads of the Division of Resolutions and Receiverships and the Division of Finance to implement formal procedures for reviewing data used in the allowance for losses calculations. Such procedures should provide for a clear designation and assignment of review responsibilities to ensure that all major sources of data used in the calculations are reviewed and verified. |
Closed – Implemented
FDIC's actions on the previous recommendation also satisfy this recommendation. See previous recommendation for action taken.
|
| Federal Deposit Insurance Corporation | To address weaknesses identified in this year's audits in contracted asset servicer oversight, the Chairman, FDIC, should direct the heads of the Division of Resolutions and Receiverships and Division of Finance to enhance their contractor oversight program to ensure that their procedures for overseeing contracted asset servicers are followed. Such procedures should ensure routine monitoring of contracted asset servicers' controls over daily collections, such as opening mail containing monetary items under dual control, the preparation and maintenance of control totals, and the reconciliation of collections processed and deposited to the control totals. |
Closed – Implemented
During 1997, FDIC implemented a contractor visitation program which includes oversight procedures addressing contracted asset servicers' controls over daily collections. The new procedures include contractor controls over opening mail containing monetary items, the preparation of related control totals, and the reconciliation of collections processed to control totals. FDIC also developed guidelines to more clearly define the contractor oversight roles and responsibilities for the FDIC divisions involved. During GAO's 1997 audits, it found that FDIC's new procedures improved FDIC oversight of collections made by contractors on behalf of FDIC. As a result of the improvements, FDIC had adequate assurance that contracted asset servicers properly safeguarded assets.
|
| Federal Deposit Insurance Corporation | To address weaknesses identified in this year's audits in contracted asset servicer oversight, the Chairman, FDIC, should direct the heads of the Division of Resolutions and Receiverships and Division of Finance to enhance their contractor oversight program to ensure that their procedures for overseeing contracted asset services are followed. Such procedures should ensure routine review of contracted asset servicers' bank reconciliations to ensure no unresolved differences exist between the servicers' reported cash balances and those reflected on the servicers' bank statements, and to ensure that funds collected are remitted to FDIC in accordance with contractual requirements. |
Closed – Implemented
During 1997, FDIC implemented a contractor visitation program which includes routine review of contracted asset servicers' bank reconciliations and remittances of funds to FDIC. FDIC also developed guidelines to more clearly define the contractor oversight roles and responsibilities for the FDIC divisions involved. During GAO's 1997 audits, it found that FDIC's new procedures improved oversight of funds held by contracted asset servicers and the remittances of funds owed to FDIC. As a result of the improvements, FDIC had adequate assurance that contracted asset servicers were properly remitting funds to FDIC.
|
| Federal Deposit Insurance Corporation | To address weaknesses identified in this year's audits in contracted asset servicer oversight, the Chairman, FDIC, should direct the heads of the Division of Resolutions and Receiverships and Division of Finance to enhance their contractor oversight program to ensure that their procedures for overseeing contracted asset servicers are followed. Such procedures should ensure routine verification of the validity, accuracy, and completeness of contracted asset servicers' fees and reimbursable expenses. |
Closed – Implemented
FDIC implemented procedures that included routine verification of the validity, accuracy, and completeness of contracted asset servicers' fees and reimbursable expenses. FDIC also developed guidelines to more clearly define the contractor oversight roles and responsibilities for the FDIC divisions involved. During GAO's 1998 audits, it found the new review and validation procedures for verifying contractor fees and expenses were properly followed and reduced the risk that errors and omissions may occur and go undetected and that remittances of funds to FDIC may not be accurate.
|
| Federal Deposit Insurance Corporation | To address weaknesses identified in this year's audits in contracted asset servicer oversight, the Chairman, FDIC, should direct the heads of the Division of Resolutions and Receiverships and Division of Finance to enhance their contractor oversight program to ensure that their procedures for overseeing contracted asset servicers are followed. Such procedures should ensure verification that contracted asset servicers are accurately applying loan payments between principal and interest. |
Closed – Implemented
During 1997, FDIC implemented procedures which include verification that contracted asset servicers are accurately applying loan payments between principal and interest. FDIC also developed guidelines to more clearly define the contractor oversight roles and responsibilities for the FDIC divisions involved. During GAO's 1997 audits, it found that FDIC's new procedures improved FDIC's controls over the accounting for receivership assets and the related income. As a result of the improvements, FDIC has adequate assurance that contracted asset servicers provide accurate financial reporting information for serviced assets and the related income.
|
| Federal Deposit Insurance Corporation | To address weaknesses identified in this year's audits in the process for calculating the allowance for losses on receivables from resolution activities and investment in corporate-owned assets, the Chairman, FDIC, should direct the heads of the Division of Resolutions and Receiverships and the Division of Finance to implement formal procedures for reviewing data used in the allowance for losses calculations. Such procedures should provide for a thorough review of all data elements used in the allowance for loss calculations to ensure that the data are accurate, current, and reliable. |
Closed – Implemented
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.
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Accounting proceduresAuditing standardsBank failuresFederal corporationsFinancial statement auditsFund auditsInternal controlsReporting requirementsFinancial statementsDeposit insurance