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Insurance Corporation

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2003 Annual Report

III. Financial Statements and Notes - Management's Response

Appendix 1

Federal Deposit Insurance Corporation
550 17th St. NW Washington, DC, 20429                  Deputy to the Chairman & Chief Financial Officer

February 9, 2004

Mr. David M. Walker
Comptroller General of the United States
U. S. General Accounting Office
441 G Street, NW
Washington, DC 20548

Re: FDIC Management Response on the GAO 2003 Financial Statements Audit Report

Dear Mr. Walker:

Thank you for the opportunity to comment on the U. S. General Accounting Office’s (GAO) draft audit report titled, Financial Audit: Federal Deposit Insurance Corporation Funds’ 2003 and 2002 Financial Statements, GAO-04-429. The report presents GAO’s opinions on the calendar year 2003 financial statements of the Bank Insurance Fund (BIF), the Savings Association Insurance Fund (SAIF), and the Federal Savings and Loan Insurance Corporation Resolution Fund (FRF). The report also presents GAO’s opinion on the effectiveness of FDIC’s internal controls as of December 31, 2003 and GAO’s evaluation of FDIC’s compliance with applicable laws and regulations.

We are pleased to accept GAO’s unqualified opinions on the BIF, SAIF, and FRF financial statements and to note that there were no material weaknesses identified during the 2003 audits. The GAO reported that: the funds’ financial statements were presented fairly and in conformity with U. S. generally accepted accounting principles; FDIC had effective internal control over financial reporting (including safeguarding of assets) and compliance with laws and regulations; and there were no instances of noncompliance with selected provisions of laws and regulations.

GAO identified the need to improve internal control over FDIC’s information systems (IS) and issued a reportable condition. Although GAO identified weaknesses in FDIC’s IS controls, the audit team noted that significant improvements had been made during the past year, and that the weaknesses did not materially affect the 2003 financial statements. We acknowledge GAO’s assessment of both the status and the substantial progress made in addressing the IS control environment. During 2003, FDIC’s accomplishments included implementation of a recurring IS controls self assessment program, implementation of more stringent contractor personnel clearance and site security policies and procedures, and establishment of an aggressive patch management program. The FDIC will continue efforts to strengthen its ongoing, comprehensive information security program during 2004.

If you have any questions or concerns, please let me know.


Steve O. App

Steven O. App
Deputy to the Chairman and Chief Financial Officer


Last Updated 3/01/2004

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