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November 2005
Supplement to Audit Report No. 05-025
Dated July 14, 2005
The FDIC’s Investment Policies
| This supplement contains copies of correspondence between the Office of Inspector General (OIG)
and other corporate officials subsequent to the issuance of Audit Report No. 05-025, dated July 14, 2005.
The intent of this supplement is to show resolution of recommendations that were unresolved at the time
the OIG issued the final report. |
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Table of Contents
| I. | OIG Assessment of the FDIC Chairman’s Final Action and DOF Corrective Action |
| Memorandum, dated November 8, 2005, from the Assistant Inspector General for Audits to the Chief Financial Officer and Director, Division of Finance |
| II. | Report of Final Action of the Audit Follow-up Official |
| Memorandum, dated November 3, 2005, from the Chairman, FDIC, to the Deputy Inspector General |
I. OIG Assessment of the FDIC Chairman’s Final Action and DOF Corrective Action
| DATE: |
November 9, 2005
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| MEMORANDUM TO: | Steven O. App |
| Deputy to the Chairman and Chief Financial Officer
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| Frederick S. Selby, Director |
| Division of Finance
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| FROM: |
Russell A. Rau [Electronically produced version; original signed by Russell A. Rau] |
| Assistant Inspector General for Audits
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| SUBJECT: |
OIG Assessment of Final Action of the FDIC Chairman and DOF
Corrective Action Related to OIG Report Entitled, The FDIC’s
Investment Policies (Report No. 05-025, dated July 14, 2005) |
On October 24, 2005, the Audit Committee heard presentations from the OIG and FDIC management regarding the findings and recommendations contained in the subject audit report. The Committee reached conclusions on the merits of two unresolved and open recommendations and provided its conclusions to Chairman Powell for consideration, in his role of designated “Audit Follow-Up Official” for disputed OIG report findings and recommendations.
With respect to the disputed portion of recommendation 1 – establishing a dollar limit on overnight investment holdings in the Bank Insurance Fund and Savings Association Insurance Fund in excess of the limit requiring approval – the Audit Committee was not persuaded that the additional control was needed. The Chairman concurs and declined to adopt our recommendation. While we continue to assert this control has value, management has given the recommendation sufficient consideration and provided adequate support for its position. Accordingly, we consider the recommendation resolved and closed.
With respect to disputed recommendation 5 – retention of outside experts to conduct periodic reviews – the Audit Committee recommended and the Chairman concurs that such a review would be appropriate and requests that the OIG conduct an independent audit of the corporate investment program every 3 years and include the investment policies applicable to the National Liquidation Fund. We support the FDIC’s position and consider the recommendation resolved and closed.
One other recommendation was unresolved at the time we issued our final report. This recommendation concerned comparing the FDIC’s short-term market forecast to subsequent movements in yields and actual returns with those of hypothetical portfolios based on rigid investment rules. At a meeting with FDIC representatives subsequent to issuance of our final report, we were provided additional information concerning fund performance management and reporting. This information, together with the audit results that DOF generally performed well in managing the FDIC investment portfolio, supports the FDIC’s position that sufficient action is taken to measure investment returns. As a result, we considered this recommendation resolved and closed prior to the October 24th Audit Committee meeting.
cc: James H. Angel, Jr., OERM
II. Report of Final Action of the Audit Follow-up Official
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