Financial Audit

Savings Association Insurance Fund's 1991 and 1990 Financial Statements Gao ID: AFMD-92-72 June 30, 1992

This report presents GAO's opinion on the 1991 and 1990 financial statements of the Savings Association Insurance Fund. The fund was created in 1989 to provide deposit insurance to all federally insured savings associations and to thrift deposits acquired by banks. GAO finds that the statements present fairly, in all material respects, the fund's financial position and the results of its operations and cash flows. GAO discusses the fund's resolution responsibility, its financial condition, and its exposure to insurance losses from the failure of thrifts and banks holding deposits insured by the fund. GAO also notes two material internal control weaknesses regarding (1) the Federal Deposit Insurance Corporation's (FDIC) process for estimating the fund's potential insurance losses and (2) FDIC's time and attendance reporting, which is FDIC's main way of determining payroll expenses for each of its funds.

GAO found that: (1) the financial statements presented fairly, in all material respects, the SAIF financial position for the years then ended, in conformity with generally accepted accounting principles; (2) as of December 31, 1991, SAIF reported an $87-million fund balance; (3) SAIF financial statements reflected a $21-million loss attributable to the failure of Oakar banks, or banks that acquired thrifts' deposits; (4) the financial condition of the thrift industry improved in 1991, but economic uncertainties will continue to affect SAIF exposure to potential insurance losses; (5) it is uncertain whether insurance assessments and Treasury payments, the two primary revenue sources for SAIF, will be sufficient to enable SAIF to carry out its responsibilities and achieve its net worth goals; (6) the Federal Deposit Insurance Corporation (FDIC), which administers SAIF, proposed an assessment rate increase to help SAIF reach its designated reserve ratio of 1.25 percent of its insured deposits; (7) FDIC lacks an adequate process for estimating potential insurance losses for SAIF, particularly those posed by failures of smaller Oakar banks; and (8) FDIC does not consistently follow its policies and procedures for time and attendance reporting.

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.

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