Washington, D.C. – Armando Falcon, Jr., Director of the Office of Federal Housing Enterprise Oversight (OFHEO), has announced a second agreement with the Board of Directors of Fannie Mae to address deficiencies in internal controls, corporate governance and accounting systems.
“While the special examination continues, we must put in place all necessary reforms not just to correct the problems of the past, but to also safeguard against problems emerging in the future,” said Falcon.
The agreement requires action in a number of areas including:
Internal Controls
The implementation of controls surrounding accounting ledger journal entries, including policies that prohibit the falsification of signatures; require due diligence by approving officials; and require proper documentation.
The development and implementation of a plan to address deficiencies in the portfolio accounting systems, such that the systems are able to properly calculate amortization and properly account for certain assets.
The adoption of internal controls that limit the ability of personnel to overwrite database records.
Corporate Governance
Separation of the positions of Chairman of the Board and CEO.
Review of legal and regulatory compliance structures.
Creation of an Office of Compliance and Ethics at Fannie Mae to review internal complaints, whistleblower reports and other ethics matters.
Require the General Counsel to report directly to the Board actual or possible misconduct.
Accounting
Conduct a restatement of prior period financial statements as necessary, and focus attention on issues raised by OFHEO related to SFAS 115, 140, 65, 149, and FIN 46.
The agreement was signed on March 7, 2005, and further states that it does not preclude additional actions in the ongoing review of the Enterprise by OFHEO.
Corinne Russell (202) 649-3032 / Stefanie Johnson (202) 649-3030