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2003 Annual Report

V. Appendix C Ė Office of Inspector Generalís Assessment of the Management and Performance Challenges Facing the FDIC

The following chart shows the FDICís most significant management and performance challenges as identified by the Office of Inspector General (OIG):

  Challenge Brief Description
1 Adequacy of Corporate Governance in Insured Depository Institutions Corporate governance is generally defined as the fulfillment of the broad stewardship responsibilities entrusted to the Board of Directors, Officers, and external and internal auditors of a corporation. A number of well-publicized announcements of business failures, including financial institution failures, have raised questions about the credibility of accounting practices and oversight in the United States. These recent events have increased public concern regarding the adequacy of corporate governance and, in part, prompted passage of the Sarbanes-Oxley Act of 2002. The publicís confidence in the nationís financial system can be shaken by deficiencies in the adequacy of corporate governance in insured depository institutions.

2 Protection of Consumer Interests The FDICís mission is to maintain public confidence in the nationís financial system. The availability of deposit insurance to protect consumer interests is a very visible way in which the FDIC accomplishes this mission. However, the FDIC also serves as an advocate for consumers through its oversight of a variety of statutory and regulatory requirements aimed at protecting consumers from unfair and unscrupulous banking practices. The FDIC is legislatively mandated to enforce various statutes and regulations regarding consumer protection and civil rights with respect to state-chartered, nonmember banks and to encourage community investment initiatives by these institutions.

3 Management and Analysis of Risks to the Insurance Funds A primary goal of the FDIC under its insurance program is to ensure that its deposit insurance funds do not require resuscitation by the U.S. Treasury. Achieving this goal is a considerable challenge, given that the FDIC directly supervises only a portion of the insured depository institutions. The identification of risks to non-FDIC supervised institutions requires effective communication and coordination with the other federal banking agencies. The FDIC engages in an ongoing process of proactively identifying risks to the deposit insurance funds and adjusting the risk-based deposit insurance premiums charged to the institutions.

4 Effectiveness of Resolution and Receivership Activities One of the FDICís most important corporate responsibilities is planning and efficiently handling the franchise marketing of failing FDIC -insured institutions and providing prompt, responsive and efficient resolution of failed financial institutions. These activities maintain confidence and stability in our financial system.

5 Management of Human Capital Human capital issues pose significant elements of risk that interweave all the management and performance challenges facing the FDIC. The Corporation must work to fill key vacancies in a timely manner, engage in careful succession planning, and continue to conserve and replenish the institutional knowledge and expertise that has guided the organization over the past years.

6 Management and Security of Information Technology (IT) Resources Information technology (IT) continues to play an increasingly greater role in every aspect of the FDICís mission. As corporate employees carry out the FDICís principal business lines of insuring deposits, examining and supervising financial institutions, and managing receiverships, they rely on information and corresponding technology as an essential resource. Information and analysis on banking, financial services and the economy form the basis for the development of public policies and promote public understanding and confidence in the nationís financial system. IT is a critical resource that must be safeguarded.

7 Security of Critical Infrastructure To effectively protect critical infrastructure, the FDICís challenge in this area is to implement measures to mitigate risks, plan for and manage emergencies through effective contingency and continuity planning, coordinate protective measures with other agencies, determine resource and organization requirements, and engage in education and awareness activities.

8 Management of Major Projects The FDIC has engaged in several multi-million dollar projects, such as the New Financial Environment, Central Data Repository, and Seidman Center Phase II Construction. Without effective project management, the FDIC runs the risk that corporate requirements and user needs may not be met in a timely, cost-effective manner.

9 Assessment of Corporate Performance The Corporation has made significant progress in implementing the Government Performance and Results Act of 1993 and needs to continue to address the challenges of developing more outcome-oriented performance measures, linking performance goals and budgetary resources, implementing processes to verify and validate reported performance data, and addressing crosscutting issues and programs that affect other federal financial institution regulatory agencies.

10 Cost Containment and Procurement Integrity As steward for the Bank Insurance Fund and Savings Association Insurance Fund, the FDIC seeks ways to limit the use of those funds. Therefore the Corporation must continue to identify and implement measures to contain and reduce costs, either through more careful spending or assessing and making changes in business processes to increase efficiency. The Corporation has taken a number of steps to strengthen internal control and effective oversight. However, the OIGís work in this area continues to show that further improvements are necessary to reduce risks such as the consideration of contractor security in acquisition planning, incorporation of information security requirements in FDIC contracts, oversight of contractor security practices, and compliance with billing guidelines.



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Last Updated 3/09/2004 communications@fdic.gov