Freddie Mac 2010 Annual Report Download - page 291

we are limited in our ability to design, implement, operate and test the controls and procedures for which FHFA is
responsible. For example, FHFA may formulate certain intentions with respect to the conduct of our business that, if known
to management, would require consideration for disclosure or reflection in our financial statements, but that FHFA, for
regulatory reasons, may be constrained from communicating to management. As a result, we did not maintain effective
controls and procedures designed to ensure complete and accurate disclosure as required by GAAP as of December 31, 2010.
Because of this material weakness, we have concluded that our internal control over financial reporting was not
effective as of December 31, 2010 based on the COSO criteria. PricewaterhouseCoopers LLP, an independent registered
public accounting firm, audited the effectiveness of our internal control over financial reporting as of December 31, 2010 and
also determined that our internal control over financial reporting was not effective. PricewaterhouseCoopers LLP’s report
appears in “FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA — Report of Independent Registered Public
Accounting Firm.”
Mitigating Actions Related to the Material Weakness in Internal Control Over Financial Reporting
As described under “Management’s Report on Internal Control Over Financial Reporting,” we have not remediated the
material weakness related to our disclosure controls and procedures as of December 31, 2010. Given the structural nature of
this weakness, we believe it is likely that we will not remediate this material weakness while we are under conservatorship.
However, both we and FHFA have continued to engage in activities and employ procedures and practices intended to permit
accumulation and communication to management of information needed to meet our disclosure obligations under the federal
securities laws. These include the following:
• FHFA has established the Office of Conservator Affairs, which is intended to facilitate operation of the company with
the oversight of the Conservator.
• We provide drafts of our SEC filings to FHFA personnel for their review and comment prior to filing. We also
provide drafts of external press releases, statements and speeches to FHFA personnel for their review and comment
prior to release.
• FHFA personnel, including senior officials, review our SEC filings prior to filing, including this annual report on
Form 10-K, and engage in discussions regarding issues associated with the information contained in those filings.
Prior to filing this annual report on Form 10-K, FHFA provided us with a written acknowledgement that it had
reviewed the annual report on Form 10-K, was not aware of any material misstatements or omissions in the annual
report on Form 10-K, and had no objection to our filing the annual report on Form 10-K.
• The Acting Director of FHFA is in frequent communication with our Chief Executive Officer, typically meeting (in
person or by phone) on a weekly basis.
• FHFA representatives hold frequent meetings, typically weekly, with various groups within the company to enhance
the flow of information and to provide oversight on a variety of matters, including accounting, capital markets
management, external communications and legal matters.
• Senior officials within FHFA’s accounting group meet frequently, typically weekly, with our senior financial
executives regarding our accounting policies, practices and procedures.
In view of our mitigating activities related to the material weakness, we believe that our consolidated financial
statements for the year ended December 31, 2010, have been prepared in conformity with GAAP.
Changes in Internal Control Over Financial Reporting During the Quarter Ended December 31, 2010
We evaluated the changes in our internal control over financial reporting that occurred during the quarter ended
December 31, 2010 and concluded that there were no matters that materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting. Subsequent to year end, Bruce M. Witherell resigned from his position
and responsibilities as our Chief Operating Officer effective February 9, 2011.
ITEM 9B. OTHER INFORMATION
Election of Directors
Upon the appointment of FHFA as our Conservator on September 6, 2008, the Conservator immediately succeeded to
all rights, titles, powers and privileges of Freddie Mac, and of any stockholder, officer or director thereof, with respect to the
company and its assets, including, without limitation, the right of holders of our common stock to vote with respect to the
election of directors and any other matter for which stockholder approval is required or deemed advisable.
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