Financial Audit

GAO examined the Federal Financing Bank's (FFB) financial statements for the year ended September 30, 1988, its system of internal accounting controls, the related statements of income and changes in retained earnings, and the changes in its financial position for the year then ended.

GAO found that the financial statements presented fairly the FFB financial position. GAO also found that FFB: (1) incurred a net loss of $1.15 billion during fiscal year (FY) 1988, due to a $1.29-billion prepayment premium it owed to the Department of the Treasury; (2) was legislatively prohibited from collecting any related prepayment premiums from borrowers who prepaid their debt, enforcing loan provisions that required borrowers to prepay loans at their current market value, or repaying its Treasury borrowing in any other way than under the terms of the agreement between it and Treasury; and (3) had $146.3 billion in loans receivable and $4.3 billion in accrued interest receivable, although 3 agencies which were experiencing significant numbers of problem loans held 64 percent of the agency-guaranteed loans. In addition, GAO found that, although FFB improved some of the internal control weaknesses identified during FY 1985, it: (1) recorded cash transactions in the general ledger 30 to 60 days after transaction; (2) could not correctly compute accrued interest on loans it purchased from the Small Business Administration (SBA) or on its Treasury debt; (3) remitted a 1986 loan it took from the Civil Service Retirement and Disability Fund (CSRDF) to Treasury without identifying which Treasury loans it was repaying; and (4) did not complete the required interest accrual verifications for FY 1988 accruals.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: Team: Phone: