The FDIC uses several means to maintain comprehensive 

internal controls, ensure the overall effectiveness and 

efficiency of operations, and otherwise comply as necessary 

with the following federal standards, among others:

♦ Chief Financial Officers’ Act (CFO Act)

♦ Federal Managers’ Financial Integrity Act (FMFIA)

♦ Federal Financial Management Improvement Act 

(FFMIA)

♦ Government Performance and Results Act (GPRA)

♦ Federal Information Security Management Act (FISMA)

♦ OMB Circular A-123

♦ GAO’s Standards for Internal Control in the Federal 

Government

As a foundation for these efforts, the DOF Corporate 

Management Control Branch oversees a corporate-wide 

program of relevant activities by establishing policies and 

working with management in each division and office in 

the FDIC. The FDIC has made a concerted effort to ensure 

that financial, reputational, and operational risks have been 

identified and that corresponding control needs are being 

incorporated into day-to-day operations. The program also 

requires that comprehensive procedures be documented, 

employees be thoroughly trained, and supervisors be held 

accountable for performance and results. Compliance 

monitoring is carried out through periodic management 

reviews and by the distribution of various activity reports 

to all levels of management. Conscientious attention is 

also paid to the implementation of audit recommendations 

made by the FDIC Office of the Inspector General, the GAO, 

the Treasury Department’s Special Inspector General for 

the TARP program, and other providers of external/audit 

scrutiny. The FDIC has received unmodified/unqualified 

opinions on its financial statement audits for 22 consecutive 

years, and these and other positive results reflect the 

effectiveness of the overall management control program.

The year 2013 was a continuation of our efforts over 

the past few years. Considerable energy was devoted 

to ensuring that the FDIC’s processes and systems of 

control have kept pace with the workload, and that the 

FDIC’s foundation of controls throughout the FDIC 

remained strong. Enhanced metrics, process mapping, 

and monitoring activities were put in action, particularly 

regarding the continuing effort to reduce hiring timeframes. 

In 2014, among other things, program evaluation activities 

will focus on human resources, process mapping, the 

continuation of activities associated with the Dodd-Frank 

Act, and closing of the Jacksonville temporary satellite 

office. Continued emphasis and management scrutiny also 

will be applied to the accuracy and integrity of transactions, 

the expansion of performance metrics, and oversight of 

systems development efforts in general. 

MANAGEMENT REPORT ON 

FINAL ACTIONS

As required under amended Section 5 of the Inspector 

General Act of 1978, the FDIC must report information on 

final action taken by management on certain audit reports. 

The tables on the following pages provide information 

on final action taken by management on audit reports for 

the federal fiscal year period October 1, 2012, through 

September 30, 2013.

CORPORATE MANAGEMENT CONTROL 109

Corporate 

Management 

Control

V.
ANNUAL REPORT 2013

110 CORPORATE MANAGEMENT CONTROL

TABLE 1: 

MANAGEMENT REPORT ON FINAL ACTION ON AUDITS WITH DISALLOWED COSTS

FOR FISCAL YEAR 2013

Dollars in Thousands

Audit Reports Number of 

Reports

Disallowed 

Costs 

A. Management decisions – final action not taken at beginning of period 2 $3,794

B. Management decisions made during the period 1 $741

C. Total reports pending final action during the period (A and B) 3 $4,535

D. Final action taken during the period:

1. Recoveries: 

(a) Collections & offsets 1 $741

(b) Other 0 $0

2. Write-offs 1 $34

3. Total of 1 & 2 2 $774

E. Audit reports needing final action at the end of the period* 1 $3,760

*

Total may not foot due to rounding.

TABLE 2: 

MANAGEMENT REPORT ON FINAL ACTION ON AUDITS WITH RECOMMENDATIONS TO PUT 

FUNDS TO BETTER USE FOR FISCAL YEAR 2013

Dollars in Thousands

Audit Reports Number of 

Reports

Funds Put To 

Better Use

A. Management decisions – final action not taken at beginning of period 0 $0 

B. Management decisions made during the period 0 $0 

C. Total reports pending final action during the period (A and B) 0 $0 

D. Final action taken during the period:

1. Value of recommendations implemented (completed) 0 $0

2. Value of recommendations that management concluded should not or 

could not be implemented or completed

0 $0

3. Total of 1 and 2 0 $0

E. Audit reports needing final action at the end of the period 0 $0
CORPORATE MANAGEMENT CONTROL 111

TABLE 3: 

AUDIT REPORTS WITHOUT FINAL ACTIONS BUT WITH MANAGEMENT DECISIONS 

OVER ONE YEAR OLD FOR FISCAL YEAR 2013

MANAGEMENT ACTION IN PROCESS

Report No.

and Issue Date OIG Audit Finding Management Action Disallowed Costs

AUD-12-009

04/05/2012

The OIG recommended that the FDIC should 

review the manner in which management 

fees are calculated under structured asset 

sale agreements and determine whether it is 

in the FDIC’s best interest for management 

fees to be paid on nonaccrual and 

capitalized interest. Based on the results of 

this review, revisit prior management fees 

billed by ST Residential, LLC, to ensure 

they were allowable and clarify the terms 

of future structured asset sale agreements 

to more clearly define the manner in which 

management fees are calculated.

The FDIC should disallow $6,258,151 in 

servicing expenses that were deducted 

from the collections of funds received 

from the liquidation of assets during the 

period covered by the audit. (Questioned 

Costs of $3,754,891, which is 60 percent of 

$6,258,151.)

The FDIC should request that ST Residential 

discontinue the practice of deducting 

expenses from the collection of funds 

received from the liquidation of assets 

pertaining to the Managing Member’s 

Servicing Obligation and Overhead expenses.

The FDIC should request that FDIC’s CMC(s) 

assess whether unallowable expenses 

pertaining to services provided by real 

estate development firms and travel, meals, 

and entertainment were deducted from 

the collection of funds received from 

the liquidation of assets subsequent to 

September 30, 2010. If such expenses had 

been deducted, they should be disallowed.

The FDIC should disallow $8,929 in 

management fees paid to the Managing 

Member. (Questioned Costs of $5,357, which 

is 60 percent of $8,929.)

The FDIC will review Corus Construction 

Venture’s (CCV) monthly reports in 

determining principal balances and the 

calculation of management fees. If the FDIC’s 

review determines improper management 

fee amounts, the FDIC will disallow the 

amounts and request reimbursement; 

send CCV notification that clarifies how 

management fees are to be calculated going 

forward; and ensure that future asset sale 

agreements include a clear description of how 

management fees are calculated. 

Completed: 11/04/2013

The FDIC engaged a Compliance 

Monitoring Contractor (CMC) to conduct a 

comprehensive review of servicing expenses 

(as part of its quarterly compliance review) 

to determine the amount to be disallowed. 

Upon completion of the CMC review, the 

FDIC will request a reimbursement of the 

disallowed amounts. 

Completed: 11/04/2013

The FDIC will issue written notification to 

ST Residential to discontinue the practice of 

deducting expenses from the collection of 

funds for servicing obligation and overhead 

expenses and to comply with the transaction 

documents.

Completed: 11/04/2013

The FDIC engaged a CMC to conduct a 

comprehensive review of servicing expenses 

to determine the amount to be disallowed. 

Upon completion of the CMC review, the 

FDIC will request a reimbursement for all 

disallowed amounts.

Completed: 11/04/2013

The specific request is that ST Residential 

reimburse CCV the disallowed amount of 

$8,929. The FDIC will receive 60 percent of 

the amount reimbursed to CCV. 

Completed: 11/04/2013

$0 

$3,754,891

$5,357