WASHINGTON (4/23/12)--Some of the Federal Deposit Insurance Corporation's (FDIC) processes for deriving and reporting estimates of losses to its deposit insurance fund are deficient, but, overall, that agency's controls over financial reporting are effective, the Government Accountability Office (GAO) said in its audit of the FDIC's 2011 financial statements.
The GAO audit specifically found issues in the FDIC's loss estimate reporting of resolution transactions involving shared loss agreements.
Under shared loss agreements, the FDIC absorbs a portion of the loss on a specified pool of assets. This approach maximizes asset recoveries, minimizes FDIC losses, and reduces immediate cash needs, the agency said. This approach is used in selected purchase and assumption transactions.
The audit said these deficiencies resulted in undetected errors in draft 2011 insurance fund financial statements. These errors were flagged and ultimately corrected by the FDIC. "While these deficiencies, individually and collectively, do not constitute a material weakness in internal control over financial reporting, they nevertheless increase the risk of additional undetected errors or irregularities in the DIF's financial statements," the GAO said.
The GAO also reported other less significant matters involving FDIC's internal control over financial reporting. The GAO did not make any recommendations in the report, but did say it would produce a separate report on the issues identified in the audit, and provide recommendations on how the FDIC could strengthen its own internal controls.
For the GAO report, use the resource link.