Financial Audit: Federal Deposit Insurance Corporation Funds'	 
2006 and 2005 Financial Statements (13-FEB-07, GAO-07-371).	 
                                                                 
GAO is required to annually audit the financial statements of the
Deposit Insurance Fund (DIF) and FSLIC Resolution Fund (FRF),	 
which are administered by the Federal Deposit Insurance 	 
Corporation (FDIC). GAO is responsible for obtaining reasonable  
assurance about whether FDIC's financial statements for DIF and  
FRF are presented fairly in all material respects, in conformity 
with U.S. generally accepted accounting principles, and whether  
FDIC maintained effective internal control over financial	 
reporting and compliance. Also, GAO is responsible for testing	 
FDIC's compliance with selected laws and regulations. Created in 
1933 to insure bank deposits and promote sound banking practices,
FDIC plays an important role in maintaining public confidence in 
the nation's financial system. In 1989, legislation to reform the
federal deposit insurance system created three funds to be	 
administered by FDIC: the Bank Insurance Fund (BIF) and the	 
Savings Association Insurance Fund (SAIF), which protect bank and
savings deposits, and FRF, which was created to close out the	 
business of the former Federal Savings and Loan Insurance	 
Corporation. In accordance with subsequent legislation passed in 
2006, FDIC merged the BIF and SAIF into the newly established DIF
on March 31, 2006.						 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-07-371 					        
    ACCNO:   A65930						        
  TITLE:     Financial Audit: Federal Deposit Insurance Corporation   
Funds' 2006 and 2005 Financial Statements			 
     DATE:   02/13/2007 
  SUBJECT:   Deposit funds					 
	     Financial statement audits 			 
	     Information security				 
	     Internal controls					 
	     Reporting requirements				 
	     Bank Insurance Fund				 
	     FSLIC Resolution Fund				 
	     Savings Association Insurance Fund 		 

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GAO-07-371

   

     * [1]Report to the Congress

          * [2]February 2007

     * [3]Financial Audit

          * [4]Federal Deposit Insurance Corporation Funds' 2006 and 2005
            Financial Statements

     * [5]Contents

          * [6]Opinion on DIF's Financial Statements
          * [7]Opinion on FRF's Financial Statements
          * [8]Opinion on Internal Control
          * [9]Compliance with Laws and Regulations
          * [10]Objectives, Scope, and Methodology
          * [11]FDIC Comments and Our Evaluation

     * [12]Deposit Insurance Fund's Financial Statements
     * [13]FSLIC Resolution Fund's Financial Statements
     * [14]Comments from Federal Deposit Insurance Corporation
     * [15]Staff Acknowledgments

www.gao.gov/cgi-bin/getrpt?GAO-07-371 .

To view the full product, including the scope
and methodology, click on the link above.

For more information, contact Steven J. Sebastian at (202) 512-3406 or
[email protected].

Highlights of [17]GAO-07-371 , a report to the Congress

February 2007

FINANCIAL AUDIT

Federal Deposit Insurance Corporation Funds' 2006 and 2005 Financial
Statements

GAO is required to annually audit the financial statements of the Deposit
Insurance Fund (DIF) and FSLIC Resolution Fund (FRF), which are
administered by the Federal Deposit Insurance Corporation (FDIC). GAO is
responsible for obtaining reasonable assurance about whether FDIC's
financial statements for DIF and FRF are presented fairly in all material
respects, in conformity with U.S. generally accepted accounting
principles, and whether FDIC maintained effective internal control over
financial reporting and compliance. Also, GAO is responsible for testing
FDIC's compliance with selected laws and regulations.

Created in 1933 to insure bank deposits and promote sound banking
practices, FDIC plays an important role in maintaining public confidence
in the nation's financial system. In 1989, legislation to reform the
federal deposit insurance system created three funds to be administered by
FDIC: the Bank Insurance Fund (BIF) and the Savings Association Insurance
Fund (SAIF), which protect bank and savings deposits, and FRF, which was
created to close out the business of the former Federal Savings and Loan
Insurance Corporation. In accordance with subsequent legislation passed in
2006, FDIC merged the BIF and SAIF into the newly established DIF on March
31, 2006.

In GAO's opinion, FDIC fairly presented, in all material respects, the
2006 and 2005 financial statements for the two funds it administers--DIF
and FRF. GAO also found that FDIC had effective internal control over
financial reporting and compliance for each fund. GAO did not find
reportable instances of noncompliance with the laws and regulations it
tested.

On February 8, 2006, the President signed into law the Federal Deposit
Insurance Reform Act of 2005 (the Act). Among its provisions, the
Actcalled for the merger of the BIF and SAIF into a single deposit
insurance fund. In 2006 the former BIF and SAIF were merged. The merger
resulted in a new reporting entity, and financial results of the newly
formed DIF were retrospectively applied as though they had been combined
at the beginning of the reporting year as well as for prior periods
presented for comparative purposes.

In our prior year audit, we identified a reportable condition related to
FDIC's information system controls. Specifically, FDIC had implemented a
new financial system and, in doing so, did not ensure that controls were
adequate to accommodate its new systems environment. During 2006, FDIC
corrected many of these weaknesses and implemented mitigating or
compensating controls. We concluded that the remaining issues related to
information systems controls did not constitute a significant deficiency
as of December 31, 2006.

However, continued management commitment to an effective information
security program will be essential to ensure that the corporation's
financial and sensitive information will be adequately protected. In light
of the evolving nature of information security with new exposures and
threats continuing to develop, the corporation's information security
program will need to dynamically adapt to address changing information
security challenges. As FDIC continues to enhance its new financial
system, which is based on an integrated financial management software
package, the corporation's reliance on controls implemented in the single,
integrated financial system will increase.

GAO noted other less significant matters involving FDIC's internal
controls, including information system controls, and will be reporting
separately to FDIC management on these matters.

References

Visible links
  17. ://www.gao.gov/cgi-bin/getrpt?GAO-07-371
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