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GAO-11-23R 1 (2010-11-30)

handle is hein.gao/gaobaanvl0001 and id is 1 raw text is: AGA ~GA 0 4 .. Accountability Integrity * Reliability United States Government Accountability Office Washington, DC 20548 November 30, 2010 The Honorable Steven 0. App Deputy to the Chairman and Chief Financial Officer Federal Deposit Insurance Corporation Subject: Management Report: Opportunities for Improvements in FDIC's Internal Controls and Accounting Procedures Dear Mr. App: In June 2010, we issued our report on the results of our audit of the financial statements of the Deposit Insurance Fund (DIF) and the FSLIC Resolution Fund (FRF) as of, and for the years ending December 31, 2009, and 2008, and on the effectiveness of the Federal Deposit Insurance Corporation's (FDIC) internal control over financial reporting as of December 31, 2009. We also reported our conclusions on FDIC's compliance with selected provisions of laws and regulations.1 During our 2009 financial audit, we identified several control deficiencies2 over FDIC's process for deriving and reporting estimates of losses to the DIF from financial institution resolution transactions involving loss-sharing agreements. These deficiencies led to misstatements in the draft DIF financial statements, which were ultimately corrected through adjustments to achieve fair presentation in the final financial statements. Although the net adjustments were not material to the DIF's financial statements, the nature of the control deficiencies we identified were such that a reasonable possibility existed that a material misstatement of the DIF's financial statements would not be prevented, or detected and corrected on a timely basis. Thus, these control deficiencies collectively represented a material weakness3 in FDIC's internal control over financial reporting related to estimated losses from loss-sharing agreements. During our 2009 financial audit, we also identified control deficiencies with respect to FDIC's information-systems security that increased the risk of unauthorized modification and disclosure of financial and other sensitive information, and disruption of critical operations. 'GAO, Financial Audit: Federal Deposit Insurance Corporation Funds' 2009 and 2008 Financial Statements, GAO-10-705 (Washington, D.C.: June 24, 2010). 2A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. 3A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. GAO-11-23R FDIC Management Report 2009

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