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AFMD-87-31 1 (1987-09-30)

handle is hein.gao/gaobabopu0001 and id is 1 raw text is: GAO United States General Accounting Office Washington, D.C. 20548 Comptroller General of the United States B-2 06830 iIlliiIIII 134319 To the President of the Senate and the Speaker of the House of Representatives This report presents our unqualified opinion on the Federal Financing Bank's financial statements for the years ended September 30, 1985 and 1984, and our reports on the bank's system of internal accounting controls and on its compliance with laws and regulations. The opinion emphasizes the uncollectibility of a portion of the bank's loan and interest receivable amounts by the federal government and the existence of significant weaknesses in the bank's internal accounting control-system. The bank has reported $153.5 billion of loans receivable and $4.8 billion of interest receivable on its balance sheet. A portion of the loans receivable and accrued interest receivable are not fully collectible by the federal government. Because these amounts are guaranteed by federal agencies, collectibility by the bank is assured even when the borrowers default. However, when an agency must write off a loan, that agency obtains an appropriation to pay the bank, which subsequently must pay the Department of the Treasury for the corresponding amount borrowed. In these instances, the federal government is repaying the defaulted loans. During fiscal year 1985, the bank's system of internal accounting controls had significant weaknesses, with the corresponding risk that errors or irregularities in amounts material to the financial statements could occur and not be detected within a reasonable time period. To compensate for control weaknesses, we used alternative audit procedures to test and verify the reasonableness of amounts reported in the fiscal year 1985 financial statements. Our report on internal accounting controls and appendix I provide details on our findings and our--recommendations for improvement. In commenting on a draft of this report, the Treasury Fiscal Assistant Secretary agreed with our general findings and the applicability of most of our recommendations. In a Written response, the Assistant Secretary outlined a series

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