United States Government Accountability Office
Washington, D.C. 20548
To the Board of Directors The Federal Deposit Insurance Corporation
We audited the assets, liabilities, and fund balance as of December 31, 2007, and 2006, for the two funds (the Deposit Insurance Fund (DIF) and the FSLIC Resolution Fund (FRF)) administered by the Federal Deposit Insurance Corporation (FDIC), the related statements of income and fund balance (accumulated deficit), and the statements of cash flows for the years then ended. In our report dated February 4, 2008, we expressed an unqualified opinion on those statements.
In that report, we stated that we found
the financial statements of each fund are presented fairly, in all material respects, in conformity with U.S. generally accepted accounting principles;
FDIC had effective internal control over financial reporting and compliance with laws and regulations for each fund; and
no reportable noncompliance with the laws and regulations we tested.
In addition, we referred the reader to note 6 in DIFís financial statements that discussed increased challenges in 2007 faced by FDICís insured financial institutions. The downturn in housing markets led to asset-quality problems and volatility in financial markets, which hurt banking industry performance and threatened the viability of some institutions that had significant exposure to higher-risk residential mortgages. It is uncertain how long the effects of this downturn will last. In addition to a recorded estimated liability of $124 million as of December 31, 2007, for the anticipated failure of some DIF-insured institutions, FDIC has identified additional risk that could result in a further estimated loss to the DIF of $1.7 billion should potentially vulnerable insured institutions ultimately fail. FDIC continues to evaluate the risks to affected institutions in light of evolving economic conditions, but the impact of such risks on the DIF cannot be reasonably estimated at this time. Actual losses, if any, will largely depend on future economic and market conditions and could differ materially from FDICís estimates.
In our opinion, the information set forth in the accompanying condensed financial statements is presented fairly, in all material respects, in relation to the financial statements from which it has been derived.
We performed our work in accordance with U.S. generally accepted government auditing standards.
David M. Walker Comptroller General of the United States