IV. Financial Statements and Notes
Management’s Response
March 14, 2011 Mr. Steven J. Sebastian Director, Financial Management and Assurance U.S. Government Accountability Office 441 G Street, NW Washington, DC 20548
Re: FDIC Management Response on the GAO 2010 Financial Statements Audit Report
Dear Mr. Sebastian:
Thank you for the opportunity to review and comment on
the
U.S. Government Accountability Office’s
(GAO’s) draft report titled, Financial Audit: Federal Deposit
Insurance Corporation Funds’ 2010
and 2009 Financial Statements, GAO-11-412. We are pleased that
the Federal Deposit Insurance
Corporation (FDIC) received an unqualified opinion for the nineteenth
consecutive year on the
financial statements of its funds: the Deposit Insurance Fund (DIF) and
the FSLIC Resolution Fund
(FRF). Also, GAO reported that the FDIC had effective internal control
over financial reporting and
compliance with laws and regulations for each fund, and there was no
reportable noncompliance with
the laws and regulations that were tested.
During the audit year, the FDIC management and staff
worked
diligently to resolve the material
weakness and significant deficiency internal control issues that were
reported in the 2009 audit. We
took significant steps to strengthen controls over the loss share
estimation process and the information
systems security and will continue to make improvements in these areas
in the coming audit year. Our
dedication to sound financial management remains a top priority.
In complying with audit standards that require management to
provide a written assertion about the
effectiveness of its internal control over financial reporting, the
FDIC has prepared Management’s
Report on Internal Control over Financial Reporting (see attachment). The
report acknowledges
management’s responsibility for establishing and maintaining internal
control over financial reporting
and provides the FDIC’s conclusion regarding the effectiveness of its
internal control.
We want to thank the GAO staff for their professionalism
and
dedication during the audit and look
forward to a productive and successful relationship during the 2011
audit. If you have any questions or
concerns, please do not hesitate to contact me.
Sincerely, Steven O. App Deputy to the Chairman and Chief Financial Officer
Managements Report on Internal Control over Financial Reporting
The Federal Deposit Insurance Corporations (FDICs) internal control over financial reporting
is a process effected by those charged with governance, management, and other personnel,
designed to provide reasonable assurance regarding the preparation of reliable financial statements
in conformity with U.S. generally accepted accounting principles (GAAP), and compliance
with applicable laws and regulations. The objective of the FDICs internal control over financial
reporting is to reasonably assure that (1) transactions are properly recorded, processed and
summarized to permit the preparation of financial statements in accordance with GAAP, and assets
are safeguarded against loss from unauthorized acquisition, use, or disposition; and (2) transactions
are executed in accordance with the laws and regulations that could have a direct and material
effect on the financial statements.
Management is responsible for establishing and maintaining effective internal control over
financial reporting. Management assessed the effectiveness of the FDICs internal control over
financial reporting as of December 31, 2010, through its enterprise risk management program
that seeks to comply with the spirit of the following standards, among others: Federal Managers
Financial Integrity Act of 1982 (FMFIA); Chief Financial Officers Act (CFO Act); Government
Performance and Results Act (GPRA); Federal Information Security Management Act (FISMA);
and OMB Circular A-123. In addition, other standards that the FDIC considers are the
framework set forth by the Committee of Sponsoring Organizations of the Treadway Commissions
Internal Control Integrated Framework and the U.S. Government Accountability Offices (GAOs) Standards for Internal Control in the Federal Government.
Based on the above assessment, management concluded that, as of December 31, 2010, FDICs
internal control over financial reporting is effective based upon the criteria established in FMFIA.
Federal Deposit Insurance Corporation March 14, 2011
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