Management Report: Opportunities for Improvements in FDIC's Internal Controls and Accounting Procedures: GAO-05-553R.

In February 2005, we issued our opinions on the calendar year 2004 financial statements of the Bank Insurance Fund (BIF), the Savings Association Insurance Fund (SAIF), and the FSLIC Resolution Fund (FRF). We also issued our opinion on the effectiveness of the Federal Deposit Insurance Corporation's (FDIC) internal controls as of December 31, 2004, and our evaluation of FDIC's compliance with significant provisions of selected laws and regulations for the three funds for the year ended December 31, 2004. The purpose of this report is to discuss issues identified during our audits of the 2004 financial statements regarding accounting procedures and internal controls that could be improved, and to recommend improvements to address these issues. Although these issues were not material in relation to the financial statements, we believe they warrant management's attention. During 2004, we identified several internal control issues that affected FDIC's accounting for the funds it administers. Although the amounts would not have been material to the financial statements taken as a whole, these issues would have resulted in reporting errors had they not been detected by our audit and corrected by FDIC. Specifically, we found that FDIC made errors in calculations supporting its allowance for losses on receivables from thrift resolutions. These errors would have led to misstatements in SAIF's and FRF's financial statements. Further, FDIC did not have effective compensating controls in place to ensure the accuracy of pay computations related to the National Finance Center's (NFC) Thrift Savings Plan (TSP). Other payroll expenses could have been misstated in the funds' financial statements. Finally, FDIC did not detect billing errors made by a contractor, resulting in overpayments to the contractor. The lack of effective invoice review procedures increases the risk of overcharges for goods and services and that they may not be detected and recovered. [ABSTRACT FROM AUTHOR]