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2010 Annual Report

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

Managementís Report on Internal Control over Financial Reporting

The Federal Deposit Insurance Corporationís (FDICís) 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 FDICís 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 FDICís 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 Managersí 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 Commissionís Internal Control Ė Integrated Framework and the U.S. Government Accountability Officeís (GAOís) Standards for Internal Control in the Federal Government.

Based on the above assessment, management concluded that, as of December 31, 2010, FDICís internal control over financial reporting is effective based upon the criteria established in FMFIA.

Federal Deposit Insurance Corporation
March 14, 2011


Last Updated 5/5/2011 communications@fdic.gov