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Federal Deposit
Insurance Corporation

Each depositor insured to at least $250,000 per insured bank

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2002 Annual Report

V. Appendix C

Office of Inspector General's Management and Performance Challenges Facing the FDIC


The following chart shows the FDIC's most significant management and performance challenges as identified by the Office of Inspector General (OIG):

  Challenge Brief Description
1 Adequacy of Corporate Governance in Insured Depository Institutions A number of well-publicized announcements of business failures, including financial institution failures, have raised questions about the credibility of accounting practices and oversight in the United States. These recent events have increased public concern regarding the adequacy of corporate governance and, in part, prompted passage of the Sarbanes-Oxley Act of 2002. The public's confidence in the nation's financial system can be shaken by deficiencies in the adequacy of corporate governance in insured depository institutions.

2 Protection of Consumer Interests The FDIC is legislatively mandated to enforce various statutes and regulations regarding consumer protection and civil rights with respect to state-chartered, nonmember banks and to encourage community investment initiatives by these institutions.

3 Security of Critical Infrastructure To effectively protect critical infrastructure, the FDIC's challenge in this area is to implement measures to mitigate risks, plan for and manage emergencies through effective contingency and continuity planning, coordinate protective measures with other agencies, determine resource and organization requirements, and engage in education and awareness activities.

4 Management and Analysis of Risks to the Insurance Funds A primary goal of the FDIC under its insurance program is to ensure that its deposit insurance funds do not require resuscitation by the U.S. Treasury. Achieving this goal is a considerable challenge, given that the FDIC supervises only a portion of the insured depository institutions.

5 Effectiveness of Resolution and Receivership Activities One of the FDIC's most important corporate responsibilities is planning and efficiently handling the franchise marketing of failing FDIC-insured institutions and providing prompt, responsive and efficient resolution of failed financial institutions. These activities maintain confidence and stability in our financial system.

6 Management and Security of Information Technology (IT) Resources As corporate employees carry out the FDIC's principal business lines of insuring deposits, examining and supervising financial institutions, and managing receiverships, they rely on information and corresponding technology as an essential resource. Information and analysis on banking, financial services and the economy form the basis for the development of public policies and promote public understanding and confidence in the nation's financial system. IT is a critical resource that must be safeguarded.

7 Assessment of Corporate Performance The Corporation has made significant progress in implementing the Results Act and needs to continue to address the challenges of developing more outcome-oriented performance measures, linking performance goals and budgetary resources, implementing processes to verify and validate reported performance data, and addressing crosscutting issues and programs that affect other federal financial institution regulatory agencies.

8 Transition to a New Financial Environment Although the New Financial Environment (NFE) offers the FDIC significant benefits, it also presents significant challenges. These challenges will test the Corporation's ability to (1) maintain unqualified opinions on the FDIC's annual financial statements through the system implementation and associated business process reengineering; (2) manage contractor resources, schedules and costs; and (3) coordinate with planned and ongoing system development projects related to NFE.

9 Organizational Leadership and Management of Human Capital The Corporation must also work to fill key vacancies in a timely manner, engage in careful succession planning, and continue to conserve and replenish the institutional knowledge and expertise that has guided the organization over the past years. A significant element relates to organizational leadership at the FDIC Board of Directors level. In order to ensure that the balance between various interests implicit in the Board's structure is preserved, the Board should operate at full strength, with all five presidentially appointed positions filled.

10 Cost Containment and Procurement Integrity The Corporation must continue to identify and implement measures to contain and reduce costs, either through more careful spending or assessing and making changes in business processes to increase efficiency. Also, the Corporation has taken a number of steps to strengthen internal controls and oversight of contractors. However, the OIG's work in this area continues to show that further improvements are necessary to ensure effective acquisition planning, fair and reasonable prices, and delivery of best value goods and services.

Last Updated 03/31/2003

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